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I N T E R N A T I O N A L G R O U P
Structural change and growth in the
international education industry
2002-2012
I N T E R N A T I O N A L G R O U P
Economic impact
value to Australia of education exports and associated income flows 2002 around $5 B comprising: •student spending in Australia on tuition fees and related charges, and accommodation, food and travel of some $4.67 B; •returns from student spending offshore of some $262 M; •income to teachers and consultants working overseas of some $190 M;•business to business revenue of some $53 M; •at least 42, 600 jobs, and •additional household consumption spending of $1.84 B.
I N T E R N A T I O N A L G R O U P
Modes of Supply
• Consumption abroad – student moves
• Commercial presence – institution moves
• Presence of natural persons – teacher moves
• Cross-border supply – nobody moves
I N T E R N A T I O N A L G R O U P
Emerging new paradigm
We are seeing a paradigm shift with 6 dimensions:
1. a horizontal shift to diversification of students from a wider range of source countries into a wider range of fields of study;
2. a vertical shift up the quality and price ladder and to a betterbalance of postgraduate with undergraduate students, including research students;
3. an intensity shift, with increasing numbers of students having shorter durations of Australian experience;
I N T E R N A T I O N A L G R O U P
New paradigm shift (cont)
4. a mode of supply shift towards growth offshore through commercial presence, cross-border supply and consulting services;
5. a business model shift from provider- to- student towards business- to- business commerce, involving various forms of partnering and segmentation of services and with varying pricing and revenue sharing arrangements; and
6. a shift to more professional management of the business of international education.
I N T E R N A T I O N A L G R O U P
• Different institutions will deploy different strategic modal mixes to meet demand
– Including partnering in diverse ways with various providers
– Including partners that may be competitors in other areas
I N T E R N A T I O N A L G R O U P
Approach
• We derived some simple growth projections based on historical data and our understanding of developments in the industry
• We revised our projections in consultation with the industry– Industry’s plans for growth– What to count when estimating student
numbers and revenue
I N T E R N A T I O N A L G R O U P
Data sources and issues: student numbers
• Began with statistics from OSS (sectors for which comprehensive admin data exist; plus industry estimate of short stay ELICOS)
• Added estimates of student numbers in areas/sectors not covered in OSS– Offshore VET and foundation studies– Continuing and professional education
(CPE)
I N T E R N A T I O N A L G R O U P
Data sources and issues: revenue• Derived a per student impact in 2000 for each sector, based on
OSS 2000 statistics• Expenditure estimates for other sectors:
– Short stay ELICOS: based on English Australia survey– Offshore VET/Foundation: assumed to be half of offshore
higher education– Onshore CPE: assumed to return less per student than
student visaed ELICOS but more than short stay ELICOS– Offshore CPE: Fees assumed to be the same as on
onshore CPE; no spending on goods and services• Offshore sectors for which estimated revenue is not based on
student numbers:– ABS figure for ‘earnings to individuals’ (GATS Mode 4)– Estimate for business to business (B2B) education exports
I N T E R N A T I O N A L G R O U P
What are exports?
• Appear in the Balance of Payments as service credits
– Students in Australia $4.68 bn 2002 (data provided to ABS by DEST)
– Lecturers/consultants travelling overseas $195m 2002 (estimate by ABS from survey of institutions)
– Distance education $42m 2002 (DEST higher education data)
– B2B $55m 2002 (ABS survey data)
I N T E R N A T I O N A L G R O U P
Income credits
• Income to the economy (net of payments to offshore partners and agents’ commissions) are not export earnings and appear in the Balance of Payments as income credits.– Higher education $215m in 2002 (DEST
data)– Other sectors $50m in 2002 (based on a
survey in China)
I N T E R N A T I O N A L G R O U P
Industry structure: sectoral composition (%)Sector 2002 2012 Students Revenue Students Revenue Higher ed 44 52 43 53 VET (onshore) 16 15 9 13 Schools 5 6 4 5 ELICOS 27 18 30 21 Offshore VET/Foundation 7 1 7 1 CPE
7 3 8 3
I N T E R N A T I O N A L G R O U P
Industry structure: onshore/offshore
2002 2012Student numbers:
Onshore 76% 71%Offshore 24% 29%
Revenue:Onshore 90% 88%Offshore 10% 12%
Offshore courses have lower yield. Offshore students do not spend money on goods and services in Australia.
Offshore students numbers growing fast; revenue from offshore operations and B2B growing more slowly.
I N T E R N A T I O N A L G R O U P
Growth scenarios, 2002-12: conservative
• Growth follows moderate linear trend based on recent historical data
• 15% capacity constraint for onshore higher education
• Rate of growth in offshore higher education increases from 2006 (change in providers’ behaviour)
• Fees increase by 3% per year
I N T E R N A T I O N A L G R O U P
Conservative scenario
0
20000
40000
60000
80000
100000
120000
140000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Higher Ed Onshore
Higher Ed Offshore
Voc Ed
Schools
ELICOS (student visa)
ELICOS (short stay)
Other offshore
CPE
I N T E R N A T I O N A L G R O U P
Growth scenarios, 2002-12: intermediate
• Ameliorates the negative impact of the Asian economic downturn (1996-97) on long-term growth patterns
• 20% capacity constraint for onshore higher education
• Rate of growth in offshore higher education increases from 2004 (rather than 2006)
• Fees increase by 4% per year
I N T E R N A T I O N A L G R O U P
Intermediate scenario
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Higher Ed Onshore
Higher Ed Offshore
Voc Ed
Schools
ELICOS (student visa)
ELICOS (short stay)
Other offshore
CPE
I N T E R N A T I O N A L G R O U P
Growth scenarios, 2002-12: optimistic
• Growth in 2002-12 returns to rates observed before the Asian economic downturn
• 20% capacity constraint for onshore higher education
• Rate of growth in offshore higher education increases from 2004
• Fees increase by 5% per year, except in offshore higher education where fees increase by 6% per year
I N T E R N A T I O N A L G R O U P
Optimistic scenario
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Higher Ed Onshore
Higher Ed Offshore
Voc Ed
Schools
ELICOS (student visa)
ELICOS (short stay)
Other offshore
CPE
I N T E R N A T I O N A L G R O U P
Projected student numbers and revenue at 2002 and 2012
Projection scenario 2002 2012 Conservative No. of students 305,016 561,464 Avg annual growth
rate (2002-12) 6.5%
Earnings ($m 2000 dollars)
5141 9596 (12,906)
Intermediate No. of students 311,642 692,172 Avg annual growth
rate (2002-12) 8.6%
Earnings ($m 2000 dollars)
5255 12,877 (17,318)
Optimistic No. of students 320,812 834,163 Avg annual growth
rate (2002-12) 10.4%
Earnings ($m 2000 dollars)
5418 16,146 (21,715)
I N T E R N A T I O N A L G R O U P
Study in Australia 2025 (‘000)
2000 2012 2025
Higher Ed 73 169 300
VET 31 81 150
Schools 13 35 70
ELICOS 64 270 450
CPE 20 63 150
TOTAL 208 618 1,120
I N T E R N A T I O N A L G R O U P
caveats on demand side only view
• Mainly ‘consumption abroad’ (student moves)
• HE (universities) only: pathways?
• Different durations of study
• Yield
– we should not merely go for numbers or assume the numbers will come to us
-need to raise net revenue per student
I N T E R N A T I O N A L G R O U P
Global Student Mobility 2025 Stages 2 and 3
• Stage 2 and Stage 3 a joint project of AEI and IDP Education Australia
• Examine Australia’s share of international education markets and issues associated with likely future demand and capacity to supply
I N T E R N A T I O N A L G R O U P
Stage 2 Global Demand for Australian Education
Phase 1: Global competition
Outcome: Scenarios depicting Australia’s future share of the global market
Phase 2: Composition of demand
Outcome: An analysis of demand by field, level, period and type of study
I N T E R N A T I O N A L G R O U P
Stage 3 Meeting the Demand for International Education
• Phase 1: Capacity modelling
• Phase 2: Institution survey, analysis of historical capacity and providers’future intentions
• Phase 3: Case studies across all sectors to explore ability to meet demand, including cross-sectoral linkages
I N T E R N A T I O N A L G R O U P
Stage 3 Meeting the Demand for International Education
Outcomes:• Identify fields, levels, modes and types of study
likely to have increased demand• Outline the capacity of Australia’s education
sectors - modes of delivery, alliances, emerging sectors such as CPE
• Develop scenarios for future supply
I N T E R N A T I O N A L G R O U P
KEY MESSAGE
• The large scale and changing shape of demand for international education presents Australia with opportunities to develop new, more diversified and more selective supply strategies
