Universities key to building export education industry

By Professor Roy Crawford, Chair, NZVCC International Policy Committee

The importance of export education’s annual $2.3 billion contribution to the New Zealand economy, including the industry’s support of 32,000 full-time equivalent jobs, has been highlighted by a number of recent commentators.

Education earns this country far more than some of the better known export industries such as wine ($902 million a year), underlining the importance of international students to New Zealand’s future. By comparison, New Zealand’s traditional export industries, meat and dairy, earn around $4.7 billion and $7 billion a year respectively.

Universities have a 32 per cent share of export education’s contribution to GDP and for the eight universities, export education is a vital source of income. With their main revenue streams of per student funding and tuition fees restricted by government, the universities rely on income from international student fees to help meet the essential costs of maintaining a quality system.

With export education, universities are able to fully meet the cost of provision through fees charged to international students. However, as far as domestic students are concerned, when government adjusts both its student achievement component funding rates and fees maxima policy for inflation, it uses a forecast of the Consumer Price Index for that purpose. But the actual annual cst increases that universities face are 1.6 times the CPI. Sixty per cent of university costs are in salaries, in the face of a highly competitive international market for academic appointments.

This raises the issue of the need for greater public investment in universities to ensure their teaching and research remains of sufficient quality on an international basis to continue to attract students from overseas.

Much has been made in recent years of the continuing “brain drain” the country faces from its university graduates going abroad for work or study opportunities. This is, of course, not a new trend and after decades of “OE” New Zealand is second only to Ireland amongst OECD countries in the size of its diaspora.

What receives less publicity is universities’ contribution to the “brain gain” through international students who come here to study at doctoral level, attracted by the policy which sees them charged tuition fees at domestic rates.

The brain gain effect is further amplified by international students who graduate from our universities, at both first-degree and postgraduate level, and who enter the New Zealand workforce, using the knowledge and research skills they have gained through university education.

The added value aspects of export education in the university sector do not stop with the students themselves. Tourism earnings are boosted through family members’ visits to international students, while international graduates returning to their home countries provide valuable networks for the advancement of New Zealand’s trade and diplomatic interests. In fact one survey showed that a typical international student generated 11 visitor nights during the course of their study, implying a million visitor nights in total and additional foreign exchange earnings of $130 million.

The export education industry also contributes to improving collaboration between secondary schools and universities. Schools have been active in recent years in marketing to international students and their ability to attract such students is heightened by drawing attention to students’ opportunity to “staircase” to university study. International students who succeed at secondary school then have access to New Zealand university education.

About 13 per cent of international students who come here to attend secondary schools go on to study at a New Zealand university. That number increases when international students who start off with English language study are taken into account and rises still further through international students who gain permanent residency.

The number of international students coming here has fallen in recent years through a combination of economic, social and political factors. However, the basic underpinning for the export industry remains intact – the demand for English language education and degrees from top quality English-based universities. For the emerging middle classes in China and India, two of the industry’s major markets, education is viewed as an essential family investment. Further, growth is now returning to export education through the development of new markets and the expansion of mature markets such as Korea.

A new research report based on the opinions of some 2400 people from more than 100 countries suggests that the number of students travelling abroad for study may increase in 2009 despite the global financial crisis. Prospective, current and past international students, as well as education agents and education professionals, were asked if more, fewer or the same number of students from their country would travel abroad for study in 2009 compared with 2008.

New Zealand’s nearest competitor in the export education industry is Australia, a country with a formidable record in market share growth backed by direct and dedicated government investment and support. That market share will only increase because the Australian government is making massive public investment in universities an infrastructural priority.

In this context it is interesting to note that export education contributes 1.13 per cent of New Zealand’s GDP, compared to 1.06 per cent in Australia. In the United Kingdom and the United States – home to the world’s most prestigious universities – the export education contribution to GDP is less than 0.5 per cent. Competing jurisdictions may have better resourced university systems but New Zealand enjoys a larger economic return from export education.

A number of studies have shown that international students are influenced in their choice of destination by institutional reputation as well as opportunities and the environment that exist in the country where that institution is based. Hence the growing media and public interest in the recognised university ranking systems (“league tables”) where positions frequently have a direct correlation to the amount of resourcing an institution has access to.

It is clear that quality counts in export education. New Zealand is well placed in this regard because its universities have both external and internal quality assurance systems in place and deliver research-led teaching through a unified system. The appearance of New Zealand institutions in a ranking of the world’s top 200 universities makes it clear that the country is punching well above its weight in university education.

One recent analysis showed that on a per- head-of- population basis, New Zealand is the second most efficient producer of “top 500 universities” through the two most widely recognised ranking systems (Times Higher Education Supplement-QS and Shanghai Jiao Tong).

As a result, the New Zealand government has an opportunity to both expand the country’s export education industry and add to the nation’s human capital through increased public investment in education infrastructure, particularly universities. As the commentators have noted, export education is deserving of public and government support – it delivers economic and social dividends.