4 October 2012

The academy remains Western-dominated, but emerging markets are rising. Traditional universities must future-proof themselves by tapping new players' demand for old-fashioned values, argues Karan Khemka

The top 25 universities in the world are situated in the West, according to the Times Higher Education World University Rankings 2012-2013. Half of all Nobel prizes won can be attributed to scholars or graduates of just 12 institutions, all of them European or North American. The predominance of Western institutions in research has driven the cycle of attracting the brightest doctoral students, who in turn settle in the West to become leading professors, who then educate and attract bright undergraduates from around the world.

The consensus, however, is that emerging-market universities, increasingly featured in the World University Rankings, will chip away at the historic dominance of Western universities.

An analysis of research funding (crucial for supporting academic output and attracting researchers) in the West compared with emerging markets is indicative of the trend.

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In 2010, such funding for universities in China reached $12 billion (£7.6 billion), surpassing the UK at $11 billion, and the figure is growing at 15 per cent a year, according to Eurostat and the Organisation for Economic Cooperation and Development. Similarly, Brazil spends $13 billion a year on research funding for academic institutions.

Related to research funding, the number of US patents granted to inventors from emerging markets is growing by 20 per cent a year, compared with 3 per cent overall (2000 to 2010). The equivalent UK figures show a decline of 3 per cent in the same period compared with growth in emerging-market patents of 13 per cent a year.

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So have we reached the tipping point already? What can Western institutions do to stay relevant in a world where growth and innovation increasingly originate in emerging markets? And is this trend a threat to or an opportunity for the majority of institutions in the top 200 of the World University Rankings?

Until recently, China's higher education budget focused on infrastructure, not innovation. Then, in 2000, the Chinese government encouraged investment in private higher education institutions. As a result, the proportion of college students enrolled in private higher education has gone from close to zero to 20 per cent of total enrolment in a decade. Private enrolment in China is growing at 17 per cent a year, while the public equivalent is growing at 6 per cent. The Chinese government has consciously created a private higher education sector to expand capacity and infrastructure so that state funding can be used to upgrade the quality and research output of public institutions.

Government funding is focused squarely on jump-starting the calibre and prestige of selected public higher education institutions. State programmes such as 1,000 Foreign Experts are designed to attract globally renowned researchers to China in fields designated as crucial for national development. Researchers attracted by the programme receive high salaries, housing and advanced standing within the institutions they join. Interestingly, the 1,000 Foreign Experts programme is an initiative started by the Ministry of Commerce rather than the Ministry of Education. Contrast this with the difficulties faced by researchers in emerging markets who are trying to emigrate to the UK or the US with their increasingly restrictive visa regimes.

Funding is not the only thing on the rise in the emerging markets. Increasingly, students who study abroad are returning home for employment, bringing with them knowledge, prestige and connections to universities in the West. Rajika Bhandari, deputy vice-president of research and evaluation at the Institute of International Education (IIE) in New York, attributes this trend to depressed economies in the West and incentives that students' home countries have put in place to attract them back.

According to Dongmin Chen of Peking University's Academy for Advanced Interdisciplinary Studies, foreign-born and foreign-educated academics of Chinese descent are heading to China to help build its academic research community. "These researchers see an opportunity to make an impact on the sector that they would not have had at their labs in the US or the UK. In China, the funding of research has increased drastically in recent years, and young researchers can build up their lab and research group much faster than in the West."

However, while universities in emerging markets are on the rise (evident in the changing composition of the World University Rankings' top 200), we have not yet reached the tipping point.

In 2010, 1.5 million international students went to the US, the UK and Australia to study, and the figure continues to rise.

Analysis by business advisers The Parthenon Group of its International Student Mobility Survey shows that the proportion of students who can afford to study in the West and choose to do so has increased in China (from 8 per cent in 2001 to 10 per cent in 2011) and remained steady in India (25 per cent) over a decade.

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Chen says that leading Western institutions are still the first choice for Chinese doctoral students.

Even though research funding is on the rise in emerging markets, spending per student in higher education in the West remains higher.

In the US, institutions spend $30,000 annually, more than six times the spend per student in China ($4,500), according to the OECD. Researchers in Brazil, India and China cite a number of impediments to the growth of cutting-edge research prowess in those countries, including poor school- level education and the lack of prestige associated with teaching and research as professions.

Research funding levels and growth in emerging markets may be indicative of a trend, but Western institutions have adequate momentum to continue to attract the brightest for some time.

But the question remains - is the growing level of support for research in emerging markets a threat or an opportunity for world-class Western institutions?

University funding in the West is declining. Budget cuts and other austerity measures are hallmarks of the current US and UK higher education landscapes. However, despite the decreased funding, the perception of Western university quality remains, and institutions there are still in high demand.

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To put matters in perspective, educating international students generates 7.4 per cent of Australia's "export" income compared with 2.5 per cent in the UK, according to the Australian Department of Education. If the UK increased its intake of international students to match Australia's as a percentage of exports, it would generate an extra $40 billion in recurring annual revenue. The additional funding would more than offset operating cost shortfalls at UK universities and any decrease in the $11 billion spent on academic research in the country at present.

Western governments should consider the potential of higher education as an export industry, including the education of students from emerging markets. There are four clear areas for further opportunities here.

According to the IIE, more than 723,000 international students study in the US. According to the Higher Education Statistics Agency, the figure for the UK is 420,000. International enrolments have grown at a rate of 4 per cent in the US and 8 per cent in the UK since 2008, bringing funds from emerging economies to the West at a staggering rate.

As a leading US public university administrator says: "International undergrads are paying the lighting bills for most public schools in the US right now."

Currently, most Western universities pursue international student recruitment as an ad hoc or low-investment activity. Further opportunities remain to build pathway programmes (pre-university courses designed to improve foreign students' academic, linguistic and cultural knowledge), to increase engagement with emerging markets, to access government scholarship programmes (Saudi Arabia's scheme, started seven years ago, funds 66,000 students a year and has cost $5 billion since its inception), and to treat international student recruitment strategically.

Another approach is to systematically increase and improve collaboration with emerging market institutions. Peter Jeffries, honorary professor of microbiology at the University of Kent, observes that "partnerships are often forged via proactive individuals and are fragmentary rather than strategic. The challenge is to get a more systematic national approach or even sometimes (an) institutional (one)."

Organisations such as the IIE serve as a connector, working closely with US university cohorts and countries such as India, China and Indonesia to forge research links and partnerships. In these partnerships, emerging- market governments or universities fund the research while benefiting from the expertise of Western institutions.

In April 2012, Australia's Monash University was granted a licence to open a foreign graduate campus near Shanghai through a partnership with China's Southeast University. Monash views the development as a competitive advantage.

Its vice-chancellor Ed Byrne says: "China has one of the fastest-growing economies in the world, with an impressive record of innovation. This makes it an ideal location for a progressive university such as Monash."

The structure adopted by Monash avoids the infrastructural and operational commitment of starting a full branch campus while accessing extra funding for research in emerging markets.

Western universities are also setting up branch campuses in emerging markets to offer degrees to local or regional students.

Branch campuses offer the opportunity to target students who prefer to study for "Western" degrees while remaining at home. In Malaysia, Singapore and the United Arab Emirates, thousands of local and regional students earn Australian, Canadian and Irish degrees at universities that are growing quickly in popularity.

For example, enrolment at branches of private Western universities in the UAE has risen 18 per cent a year for the past three years.

In addition to generating revenue through tuition fees, these campuses take advantage of government incentives, favourable tax structures and research funding.

Each of these opportunities carries risk and should be evaluated against data and in the context of the holistic development of each university and its goals.

Western universities should use the fact that they are still in the lead and in demand in emerging markets: this may not be the case a decade from now. Investing now in forging meaningful research and teaching relationships with emerging markets could turn a potential threat into an opportunity to overcome funding shortfalls at home and build brands in the higher education markets of the future.

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Karan Khemka is head of The Parthenon Group's International Education Practice. Alana Rush, director of business development in the Education Practice, and Matt Robb, senior principal in the UK Education Practice, contributed research for this article