Global Trends and Relevant Issues in Chinese Education

Global Trends and Relevant Issues in Chinese Education

Beijing, China

1st November, 2005

``

Ron PerkinsonRon Perkinson

Principal Education SpecialistPrincipal Education Specialist

International Finance CorporationInternational Finance Corporation

(World Bank Group) (World Bank Group) www.ifc.orgwww.ifc.org

Carl DahlmanCarl Dahlman

Professor of International Relations and Professor of International Relations and Information Technology Information Technology

Georgetown University, Washington DC, USAGeorgetown University, Washington DC, USA

Public Private PartnershipsPublic Private Partnerships

Structure of PresentationStructure of PresentationStructure of PresentationStructure of Presentation

1.1. Challenges for ChinaChallenges for China2.2. The Knowledge and Education ChallengeThe Knowledge and Education Challenge3.3. Global Trends in Education and TrainingGlobal Trends in Education and Training4.4. Broad Overview of Education and Leaning Broad Overview of Education and Leaning

System in ChinaSystem in China5.5. Key Challenges of Life Long Learning for ChinaKey Challenges of Life Long Learning for China6.6. Greater Partnership between Government and the Greater Partnership between Government and the

Private Sector Private Sector 7.7. Getting More Private Sector Participation in Getting More Private Sector Participation in

Education and Training in ChinaEducation and Training in China

Challenges to Chinese DevelopmentChallenges to Chinese Development Challenges to Chinese DevelopmentChallenges to Chinese Development

• Increasing Globalization and International CompetitionIncreasing Globalization and International Competition

• Limited Natural ResourcesLimited Natural Resources

• Need for a more knowledge intensive growth strategyNeed for a more knowledge intensive growth strategy

• Providing productive employment for Providing productive employment for – Migrants from rural to urban – Migrants from rural to urban – Workers laid off as result of China’s economic – Workers laid off as result of China’s economic restructuring restructuring – New entrants to labor force – New entrants to labor force

• Increasing InequalityIncreasing Inequality

• Need to turn abundant human resources into Need to turn abundant human resources into strategic advantagestrategic advantage

An Increasingly Globalized and Competitive World Economy

An Increasingly Globalized and Competitive World Economy

• Increasing GlobalizationIncreasing Globalization– Rapid reduction of transportation and communications costsRapid reduction of transportation and communications costs– Increasing global information (political, cultural, socio Increasing global information (political, cultural, socio

economic)economic)– Strong trends towards regional integration (NAFTA, EU, Strong trends towards regional integration (NAFTA, EU,

ASEAN+3)ASEAN+3)• Increasing CompetitionIncreasing Competition

– Significant trade liberalization is creating larger global Significant trade liberalization is creating larger global market and increased competitionmarket and increased competition

– Share of exports and imports to GDP has increased from Share of exports and imports to GDP has increased from 38% in 1990 to 52% in 200238% in 1990 to 52% in 2002

– Value added directly controlled by MNCs is 27% of global Value added directly controlled by MNCs is 27% of global GDP in 2002GDP in 2002

[Underestimate: doesn’t include backward supply linkages or [Underestimate: doesn’t include backward supply linkages or forward linkages to marketing, distribution, service, etc.]forward linkages to marketing, distribution, service, etc.]

Education and Innovation as Key Elements for Competitiveness and Growth

Education and Innovation as Key Elements for Competitiveness and Growth

• Education and Innovation are becoming more important – the Education and Innovation are becoming more important – the increase in speed of the creation and dissemination of increase in speed of the creation and dissemination of new new knowledgeknowledge

• Education is the fundamental enabler of the knowledge economy and Education is the fundamental enabler of the knowledge economy and a key to long term competitiveness and growtha key to long term competitiveness and growth

– Not just basic and secondary education, but higher education and the constant upgrading of skillsNot just basic and secondary education, but higher education and the constant upgrading of skills– This is a challenge for all countries of the worldThis is a challenge for all countries of the world– There is also increasing competition for people with high level skillsThere is also increasing competition for people with high level skills

• Innovation is becoming a more important element of competitiveness Innovation is becoming a more important element of competitiveness and growth – there is greater mobility of products, services and and growth – there is greater mobility of products, services and knowledge.knowledge.

– A larger percentage of a country’s economic growth can be attributed to more effective use of A larger percentage of a country’s economic growth can be attributed to more effective use of knowledge, even in developed countriesknowledge, even in developed countries

– Countries behind the global frontier can dramatically increase their performance by improving Countries behind the global frontier can dramatically increase their performance by improving their ability to innovatetheir ability to innovate

– Expenditures on R&D globally have been increasing, particularly the share contributed by the Expenditures on R&D globally have been increasing, particularly the share contributed by the productive sectorproductive sector

Key Challenges for Education & Training Key Challenges for Education & Training • Increasing globalization and competitionIncreasing globalization and competition

– Need higher level education to keep up with and make effective use of rapidly Need higher level education to keep up with and make effective use of rapidly changing knowledgechanging knowledge

– Also need high level scientific and technical manpower to create new knowledgeAlso need high level scientific and technical manpower to create new knowledge– But also need system of continuous training in order to constantly up-skill or re-But also need system of continuous training in order to constantly up-skill or re-

skill people who have already passed through the formal educational systemskill people who have already passed through the formal educational system

• Therefore need to move to system of life long learningTherefore need to move to system of life long learning– Needs to cover all levels of formal education as well asNeeds to cover all levels of formal education as well as– Enterprise based trainingEnterprise based training– Plus all kinds of specialized training to re-skill peoplePlus all kinds of specialized training to re-skill people– As well as education and training for persons who have already left labor forceAs well as education and training for persons who have already left labor force

• This system will need to haveThis system will need to have– Multiple public and private providers of education and trainingMultiple public and private providers of education and training– Multiple pathways to different levels of competenceMultiple pathways to different levels of competence– Coordination among many suppliers/accreditors/regulatorsCoordination among many suppliers/accreditors/regulators

Key Issues that Need to be Addressed for An Effective System of Life Long Learning

Key Issues that Need to be Addressed for An Effective System of Life Long Learning

• Assessment of peoples education and skillsAssessment of peoples education and skills– Not just years of education or raw ability scoresNot just years of education or raw ability scores– Also functional ability such as measures by OECD adult literacy tests, PISAAlso functional ability such as measures by OECD adult literacy tests, PISA– Plus specific job related skillsPlus specific job related skills

• Certification and accreditationCertification and accreditation– Not just in countries but also across bordersNot just in countries but also across borders– And not just for physically present universities, but also for distance learning programsAnd not just for physically present universities, but also for distance learning programs

• Financing education and trainingFinancing education and training– Government, vs firm, vs. individualGovernment, vs firm, vs. individual– Full market vs. grants and loansFull market vs. grants and loans

• Effective use of information technologies in general and distance educationEffective use of information technologies in general and distance education– In classrooms: computer based instruction, internet materials, video, etcIn classrooms: computer based instruction, internet materials, video, etc– Radio, TV, Interactive video, internet based courseware and simulations, etc.Radio, TV, Interactive video, internet based courseware and simulations, etc.

• Information on Information on – Needs of market,Needs of market,– Quality of different providers,Quality of different providers,– Quality and skills of students/workersQuality and skills of students/workers

Implications for Role of Government and Structure of Education and Training Systems

Implications for Role of Government and Structure of Education and Training Systems

• Implies rethinking the role of governmentImplies rethinking the role of government– What does the government need to provide? What can be provided by the What does the government need to provide? What can be provided by the

private and non-government sector?private and non-government sector?– Who can best set the standards and do the accreditation? What should be Who can best set the standards and do the accreditation? What should be

compulsory and what voluntary?compulsory and what voluntary?– What should be the financing role of government versus that of parents or What should be the financing role of government versus that of parents or

corporations?corporations?– What role does government have in ensuring equity as there is a growing What role does government have in ensuring equity as there is a growing

private system?private system?– How can government promote development of an education loan market?How can government promote development of an education loan market?

• Implies rethinking and improving structure Implies rethinking and improving structure and content of education and training systemsand content of education and training systems

– Major challenges in what content and skills should be given at different Major challenges in what content and skills should be given at different levels of formal educationlevels of formal education

– How to do this in the most cost effective way?How to do this in the most cost effective way?– We are moving to system of just in time learning for whatever is the We are moving to system of just in time learning for whatever is the

relevant needrelevant need

Global Trends in Education and Training Global Trends in Education and Training

• Increasing educational attainmentIncreasing educational attainment• Continued high returns to higher levels of education until Continued high returns to higher levels of education until

very recentlyvery recently• Increasing contribution of education to GDP growthIncreasing contribution of education to GDP growth• Increasing globalization of educationIncreasing globalization of education• Increasing tendency for adults to go back to school or to get Increasing tendency for adults to go back to school or to get

new skillsnew skills• Growing amount of training provided on the job or by going Growing amount of training provided on the job or by going

back to formal educationback to formal education• Increasing private provision of education Increasing private provision of education • Increased need to approach education and training as life Increased need to approach education and training as life

long process from cradle to gravelong process from cradle to grave

Changing the Education & Training ParadigmChanging the Education & Training Paradigm

Traditional ModelTraditional Model

Information basedInformation based

Rote learningRote learning

Teacher directedTeacher directed

Just in case Just in case

Formal education onlyFormal education only

Directive based Directive based

Learn at a given ageLearn at a given age

Terminal educationTerminal education

Knowledge Economy ModelKnowledge Economy Model

Knowledge creation/applicationKnowledge creation/application

Analysis and synthesisAnalysis and synthesis

Collaborative learningCollaborative learning

Just in timeJust in time

Variety of learning modes Variety of learning modes

Initiative basedInitiative based

Incentives, motivation to learnIncentives, motivation to learn

Lifelong learningLifelong learning

Three Challenges for Three Challenges for Education and Training in Education and Training in

ChinaChina

Three Challenges for Three Challenges for Education and Training in Education and Training in

ChinaChina• Stock Challenge Stock Challenge

– upgrading skills of people already out of the formal school system– upgrading skills of people already out of the formal school system

• Flow Challenge Flow Challenge – – expanding formal educational enrolments and increasing qualityexpanding formal educational enrolments and increasing quality

• Dynamic Challenge Dynamic Challenge – – adjusting education and training to rapidly and constantly changing needsadjusting education and training to rapidly and constantly changing needs

Stock Challenge in ChinaStock Challenge in ChinaStock Challenge in ChinaStock Challenge in China

• Rapid creation and diffusion of knowledge means Rapid creation and diffusion of knowledge means adults constantly have to learn. China has to upgrade adults constantly have to learn. China has to upgrade the skills of 700 million workersthe skills of 700 million workers

– Improve training to millions of rural migrantsImprove training to millions of rural migrants– Retrain millions of laid off workersRetrain millions of laid off workers– Upgrade skills of hundreds of millions of employed personsUpgrade skills of hundreds of millions of employed persons– Provide education and training to hundreds of millions of Provide education and training to hundreds of millions of

adults outside the labor forceadults outside the labor force

• China needsChina needs– Multiple mechanisms for continuous training beyond formal Multiple mechanisms for continuous training beyond formal

education systemeducation system– Effective system for skills assessment and certificationEffective system for skills assessment and certification– To exploit potential of information and communications To exploit potential of information and communications

technologies to expand training opportunitiestechnologies to expand training opportunities

Flow Challenge in ChinaFlow Challenge in ChinaFlow Challenge in ChinaFlow Challenge in China

• China need to continue to expand access and improve China need to continue to expand access and improve the quality of its formal education systems which has the quality of its formal education systems which has more than 240 million students more than 240 million students

• Education system must teach students how to learn Education system must teach students how to learn through their lifetime regardless of when they leave it: through their lifetime regardless of when they leave it: implies need forimplies need for

– Better teaching and learning pedagogies for core skillsBetter teaching and learning pedagogies for core skills– Broader interdisciplinary approachesBroader interdisciplinary approaches– Financing mechanisms to expand access and improve qualityFinancing mechanisms to expand access and improve quality

• China need to address both stock and flow China need to address both stock and flow challenges, though severely financially constrainedchallenges, though severely financially constrained

Enrollments – Tertiary SectorEnrollments – Tertiary Sector

India China

*Developing Peers includes: Angola, Argentina, Bangladesh, Bolivia, Brazil, Bulgaria,Chile,Colombia, Dominican Republic, Ecuador, Egypt, Ghana, Guatemala, Hungary, Indonesia, Jamaica, Jordan, Kenya, Madagascar, Malaysia, Mauritius, Mexico, Mozambique, Pakistan, Peru, Philippines, Poland, Romania, Russia, Senegal, South Africa, Thailand, Trinidad & Tobago, Turkey, Uganda, Uruguay, and Vietnam

Sources: World Bank Development Indicators; World Bank Edstats; UNESCO Global Education Digest; OECD Education at a Glance; IFC calculations

50

100

150

200

250

300

350

400

450

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Index

(19

90 =

100

)

China, India's Developing Peers*

11% India

Sources: World Bank Educational Statistics Database

1980 1990 1992 1994 1996 1998 1999 2000 2001 2002 2003 2004*

0

10

20

30

40

50

60

70

80+

Ind

ex (

% G

ross

En

roll

men

ts )

18% ChinaChina

56% France51% Japan

64% UK

81% USA85% Korea

China’s Gross Enrollment RatesChina’s Gross Enrollment Rates . . . still some . . . still some

challenges aheadchallenges ahead

Dynamic Challenge in ChinaDynamic Challenge in ChinaDynamic Challenge in ChinaDynamic Challenge in China• In designing system need to take into account the In designing system need to take into account the

changing population structurechanging population structure– Because of one child policy, school age population is already starting to Because of one child policy, school age population is already starting to

decrease at primary school leveldecrease at primary school level– But still need to expand enrollments at higher levelBut still need to expand enrollments at higher level– And need to plan for different mix of students - more adult learners at And need to plan for different mix of students - more adult learners at

higher levelhigher level

• Need to take into account changing economic structure Need to take into account changing economic structure resulting from rapid growthresulting from rapid growth

– Decrease in agriculture, increase in industry and especially in servicesDecrease in agriculture, increase in industry and especially in services– Changing occupational structure and skill requirements - especially of Changing occupational structure and skill requirements - especially of

higher value knowledge skills in service sectorhigher value knowledge skills in service sector

• Need to update the content of curriculum and training to Need to update the content of curriculum and training to be relevant to changing needsbe relevant to changing needs

Overview of China’s Formal SystemOverview of China’s Formal System

2.1 Million

52.4 Million

130 Million

20 Million (2005)

Higher Education

Secondary Education

Basic Education

90.3 Million

130 Million

1990 2001

2% inc

72% inc

950% inc

Beyond Retirement Age

Training for the unemployed

Adult learners

Government Failure – students out of

school

Basic Education

Secondary

Higher Ed

Labour Force (750m)

Remedial/ Updating/

Upskilling the Participating Workforce

Formal Education

(244m)

China’s Learning Needs Beyond Formal EducationChina’s Learning Needs Beyond Formal Education

Key Challenges for LLL for China – (1) Key Challenges for LLL for China – (1)

• Fragmentation and Lack of Coordination of SystemFragmentation and Lack of Coordination of System– Many ministries involved controlling different partsMany ministries involved controlling different parts– Growing private universities and training programsGrowing private universities and training programs

• Need for a More Integrated and Coordinated ApproachNeed for a More Integrated and Coordinated Approach– Need system that allows for multiple providers and multiple pathways Need system that allows for multiple providers and multiple pathways

to different levels of education and skillsto different levels of education and skills– This requires broad set of general rules and standards and This requires broad set of general rules and standards and

coordination and mutual recognition among multiple systemscoordination and mutual recognition among multiple systems

• Great Needs, Limited Finance, Imply Need for Innovative Great Needs, Limited Finance, Imply Need for Innovative ApproachesApproaches

– Govt cannot afford to finance increase in access and qualityGovt cannot afford to finance increase in access and quality– Need to tap potential for private financingNeed to tap potential for private financing

Education expenditures from public and private sources as share of GDP (1980-2001)

Education expenditures from public and private sources as share of GDP (1980-2001)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

1980

1983

1986

1989

1992

1995

1998

2001

Year

Sh

are

of

GD

P

Private education fundingas share of GDP

Public education fundingas share of GDP

Source: Angang Hu 2003

Funding ComparativesFunding Comparatives . . . the most populous examples

Sources: UNESCO 1999 & 2000; World Bank 2001; US Department of Education 2001; Department of Education & Skills UK, 2002; China National Center for Education, 2002/3; OECD 2002

* All Sth & East Asian countries without China & India

IndiaIndia ChinaChina S&E S&E Asia*Asia*

LACLAC UKUK USAUSA

Total PopulationTotal Population approxapprox

10001000 12601260 600 600

520520 6060 280280

Public Expenditure Public Expenditure on Education ($B) on Education ($B)

1616 4545 1818 9494 7272 480480

% Global Budget% Global Budget 0.7%0.7% 2.0%2.0% 0.8%0.8% 4.2%4.2% 3.2%3.2% 22%22%

Per 10 million Per 10 million PopulationPopulation

0.160.16bb $0.36$0.36bb $0.3$0.3bb $1.8$1.8bb $12$12bb $17$17bb

Financing Challenge of LLL: Increasing Resources for and Productivity of Education

Financing Challenge of LLL: Increasing Resources for and Productivity of Education

• Increase public resources for educationIncrease public resources for education• Increase students contributions to cost of delivering Increase students contributions to cost of delivering

public education, including loans public education, including loans • Increase private provision of education and trainingIncrease private provision of education and training• Develop student loan and education finance marketDevelop student loan and education finance market• Improve the productivity of educationImprove the productivity of education

– Improve the incentive regime and management of education Improve the incentive regime and management of education systemssystems

– Improve knowledge management in the education sectorImprove knowledge management in the education sector– Reduce the time it takes to get different levels of educationReduce the time it takes to get different levels of education– Improve the pedagogy of educationImprove the pedagogy of education– Use new ICT technologies more extensivelyUse new ICT technologies more extensively

Key Issues in LLL for China – (2)Key Issues in LLL for China – (2)Key Issues in LLL for China – (2)Key Issues in LLL for China – (2)

• Poor Demand Supply Links of Education and Training Poor Demand Supply Links of Education and Training to Labor Marketto Labor Market

– Mismatch between skills supplied and needs of marketMismatch between skills supplied and needs of market– Poor information on career options, income streams, quality Poor information on career options, income streams, quality

of different providersof different providers

• Need for Massive Upgrading of SkillsNeed for Massive Upgrading of Skills– Require innovative ways to reduce skills gaps of population Require innovative ways to reduce skills gaps of population

already in labor forcealready in labor force– Need to put in place system to continuously upgrade skillsNeed to put in place system to continuously upgrade skills

• Need to Improve Quality and ContentNeed to Improve Quality and Content– Quality at all levels lowQuality at all levels low– Need to improve assessmentsNeed to improve assessments– Need toNeed to reform curriculum and teaching pedagogiesreform curriculum and teaching pedagogies

Key Issues in LLL for China – (3)Key Issues in LLL for China – (3)Key Issues in LLL for China – (3)Key Issues in LLL for China – (3)

• Need to Realize Potential of ICT Need to Realize Potential of ICT Technologies to Expand Access and Quality Technologies to Expand Access and Quality of education and trainingof education and training– Need to develop more providersNeed to develop more providers– Need to help create more contentNeed to help create more content

• Need for Accreditation, Vocational Need for Accreditation, Vocational Qualification and CertificationQualification and Certification– Need better accreditation of education and training Need better accreditation of education and training

providersproviders– Need effective system for assessing and certifying Need effective system for assessing and certifying

vocational qualificationsvocational qualifications (and not necessarily just (and not necessarily just by government)by government)

Need for Greater Partnership between Need for Greater Partnership between Governments & Private Sector in EducationGovernments & Private Sector in Education

Need for Greater Partnership between Need for Greater Partnership between Governments & Private Sector in EducationGovernments & Private Sector in Education

• Government has key role as architect and coordinator of life Government has key role as architect and coordinator of life long learning systemlong learning system

– Legislation / Regulations and standards / Quality assuranceLegislation / Regulations and standards / Quality assurance– EquityEquity– FinanceFinance– Information on needs of dynamic and rapidly growing systemInformation on needs of dynamic and rapidly growing system quality of different education and training providers, and quality of different education and training providers, and

qualifications and competencies of peoplequalifications and competencies of people– Encouragement for development of specialized intermediary Encouragement for development of specialized intermediary

institutions to fill gapsinstitutions to fill gaps

• Key private sector roleKey private sector role– Increasing tuition payments by students in public systemIncreasing tuition payments by students in public system– Increasing provision of education at all levels, but especially higher Increasing provision of education at all levels, but especially higher

education and trainingeducation and training– Helping develop the education market: financeHelping develop the education market: finance, , information, content, information, content,

standards, qualifications, accreditationstandards, qualifications, accreditation

Spending Per Student – Tertiary SectorSpending Per Student – Tertiary Sector

Sources: World Bank Development Indicators; World Bank Edstats; UNESCO Global Education Digest; OECD Education at a Glance; IFC calculations

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

USD

per

Stu

dent

(C

onst

ant 19

95 U

SD) China, India's Developing Peers*

OECD

$5,7371990

OECD

$7,712200134% increase

*Developing Peers includes: Angola, Argentina, Bangladesh, Bolivia, Brazil, Bulgaria,Chile,Colombia, Dominican Republic, Ecuador, Egypt, Ghana, Guatemala, Hungary, Indonesia, Jamaica, Jordan, Kenya, Madagascar, Malaysia, Mauritius, Mexico, Mozambique, Pakistan, Peru, Philippines, Poland, Romania, Russia, Senegal, South Africa, Thailand, Trinidad & Tobago, Turkey, Uganda, Uruguay, and Vietnam

$856$856$816$816

5% decrease5% decrease

$327$3272% decrease2% decrease

$334$334

India

$342$34210% increase10% increase

$312$312

China

China

>$8002004

OECD

$124002004

US$ per Student (in Constant 1995 US$)

Education Expenditure Comparatives - 2003Education Expenditure Comparatives - 2003

China needs around 50% increase on current public expenditure to exceed world average

4.8% of GDP4.8% of GDPTotal (Public & Private) =Total (Public & Private) =

1.6% of GDP1.6% of GDPCurrent Private ExpenditureCurrent Private Expenditure

3.2% of GDP3.2% of GDPTotal Public ExpenditureTotal Public Expenditure

ChinaChina

Public education spending = 5.9% of global GDP

Global GDPGlobal GDP

Projected Projected EnrollmentsEnrollments

20002000 20052005 20102010

宽口径高等教育Higher Education

1111 2020 2525

其中：研究生Postgraduates

0.30.3 0.60.6 1.01.0

高中阶段Senior Secondary

22.522.5 4040 4343

初中阶段Junior SecondaryJunior Secondary

6262 6363 6363

小学Primary Primary

130130 ~130 ~ 130 130

20202020

>30>30

>1.0>1.0

~ 46 46

~ 63 63

~130

China – Projected Enrollments China – Projected Enrollments 2000 to 2020 2000 to 2020

Source: 张 力 Zhang Li – December 2004 - 中国 · 国家教育发展研究中心 - 中国 · - 家教育发展研究中心- National Center for Educational Development Research, MOE, China

Millions

Three things that attract Three things that attract private sector investment ! private sector investment !

• Positive regulatory environments

• Financial incentives and returns

• Opportunities for good corporate citizenship

Private Investors Will Avoid . . .Private Investors Will Avoid . . .• Ineffective regulations and frameworks – commercial uncertainty

• Political instability

• Revenue controls / capping tuition fees – can heighten commercial risk where marginal returns exist – can jeopardize commercial objectives, including capability to invest in higher quality inputs – can cause insufficient financial returns for servicing debt, or to provide fair returns to shareholders

• Uneven playing fields – where loans to Govt. hybrids & SOE’s are made on ‘soft’ / ‘favored / not-real-profit basis – where vested interests are impervious to change

• Inefficient / inconsistent / uneven approval processes – where private investors are disadvantaged

Public Private Partnerships Public Private Partnerships Success FactorsSuccess Factors

Public Private Partnerships Public Private Partnerships Success FactorsSuccess Factors

• No revenue controls (eg. capping tuition fees) • (Foreign) – no limiting equity & ownership• Even treatment of public and private providers• Meets market demand – (eg. growing demand for

skilled labor)• Incentives for private investment and participation

– financing and provision• Positive regulations for private investment

– more ‘enabling’ and less ‘controlling’

Examples of Risk Sharing Examples of Risk Sharing StructuresStructures

First Level

Mezzanine Level

Third Level

– University 5% – Local Bank 6%

Total 11%

– University 10% – Foundation 10% – Local Bank 10% Total 30%

– IFC 10%

Local Bank 79% Local Bank 50%

– IFC 10% – Foundation 10%

Examples

Scenario 2Scenario 1

Eduloan - South AfricaEduloan - South Africa private financing for students attending public private financing for students attending public

institutionsinstitutions• Started Yr 2000/01 – initial IFC investment US$2.8 million

• Loan amounts per student are small - est. up to US$ 500 range – repayable within 12 months

• EO 2003 there were 49,000 students being financed – expected to reach US$ 40 million portfolio (est 97,000 students) by EO 2006

• Delinquencies – have been low (less than 2%)

• Access to public University & Technikon programs – soon extends to professional training including nursing and other programs

• Students are working – bank/employers share the risk

• Payroll-based lender – collections through payroll deductions

New innovations for donors . . .New innovations for donors . . . Donors are beginning to look for other options Donors are beginning to look for other options – how to better optimize the use of available – how to better optimize the use of available

fundsfunds

Traditional modelTraditional model

$25 million = 5000 FTE studentsFTE students @ $5000 tuition fees

1

Bank or possible strategic partner (administrators)

5% Risk Education Institution

Loan Facility (assume) US$40.5m

Investors / Banks participate

The Advent Of Donor Interest In Partnering The Advent Of Donor Interest In Partnering With Local Banks & Investors?With Local Banks & Investors?

Example Example OnlyOnly

30%

40%

Loan Facility securitized through

risk sharing structure

Other $15m = 3000 FTE

Student ScholarshipsOptimize use of $25m

First Level Risk

Cash Reserve/ Trust Fund

Eg First $10m

Less $0.5m

$40m = 8000 FTE

Students

25% Risk

Examples only

Mezzanine RiskIFC

10 %

Senior Risk

Local Bank/

Investors 60%

Previous vs. NewPrevious vs. New

$15m = 3000

FTE

Students

+

Total 5000 FTE Students

Total 11000 FTE Students

= 2.2 times the coverage using the same $25m

$25 million = 5000 FTE Student Scholarships

@ $5000 ea

PreviousPrevious

$40m = 8000 FTE Students

NewNew

= =

1

Bank or possible strategic partner (administrators)

5% Risk Education Institution

Loan Facility (assume) US$40.5m

Investors / Banks participate

The Advent Of Donor Interest In Partnering The Advent Of Donor Interest In Partnering With Local Banks & Investors?With Local Banks & Investors?

Example Example OnlyOnly

30%

40%

Loan Facility securitized through

risk sharing structure

Other $15m = 3000 FTE

Student ScholarshipsOptimize use of $25m

First Level Risk

Cash Reserve/ Trust Fund

Eg First $10m

Less $0.5m

$40m = 8000 FTE

Students

25% Risk

Examples only

Mezzanine RiskIFC

10 %

Senior Risk

Local Bank/

Investors 60%

Other Donors

Donors are interested in risk sharing initiatives to leverage private sector financing

What about governments?

The Next Wave The Next Wave . . . myth or reality?. . . myth or reality?

13131313335522Other education *Other education *

15152525434330302020Tertiary education Tertiary education including teacher trainingincluding teacher training

7799272733332424Vocational post-Vocational post-secondary educationsecondary education

151515158819195252Secondary EducationSecondary Education

505038381919131322Primary EducationPrimary Education

00 - 0200 - 0290 - 9990 - 9980 - 8980 - 8970 - 7970 - 7963 - 6963 - 69

PercentPercentCategory - Category -

Fiscal YearFiscal Year

By Education LevelBy Education Level

* = Projects supporting more than one level of education or projects such as those supporting lifelong learning that do not fit well into one of the other categories

World Bank Group 4 decades of education lending

22%

65%

IFC’s Growing Education PortfolioIFC’s Growing Education PortfolioIFC’s Growing Education PortfolioIFC’s Growing Education Portfolio

• UniversitiesUniversities

• CollegesColleges

• Technical & Vocational Education & TrainingTechnical & Vocational Education & Training

• Education Communications Technology PlatformEducation Communications Technology Platform

• SchoolsSchools

• Education financing facilities Education financing facilities – student financing – student financing – smaller institutions – smaller institutions – special purpose funds – special purpose funds

PPP’s – today’s examplesPPP’s – today’s examples

1. Private provision – supplementing delivery to remote / distance settings

2. Private sector technology and communications solutions for public institutions

3. Private foreign providers internationalizing curriculum with local public providers

4. Foreign private investors partnering with public institutions in local joint private/commercial initiatives

5. Private medical school partners with a public hospital – to become a teaching hospital

6. Private agency establishes degree granting institute and provides programs on behalf of a public regulatory body

7. Private institution establishes information centers / libraries

for public institutions 8. Private banks establish student financing facility for public

and pvt institutions

PPP’s – today’s examplesPPP’s – today’s examples

““It doesn’t matter if a cat It doesn’t matter if a cat is black or is black or white . . . . white . . . .

as as long as it catches mice.”long as it catches mice.” Deng Deng

XiaopingXiaoping

学到老 学到老

. . . . . . 用到老用到老 !!