New rules squeezing private colleges of funds, says think tank

The Alliance University College of Medical Sciences (AUCMS) in Kepala Batas, Penang, which closed down to shortage of funds. The Penang Institute warns that more private colleges may have to close down. – The Malaysian Insider file pic, April 6, 2015.

The Penang Institute in Kuala Lumpur has warned that some 70% of private higher education institutions can see red this year, following changes in funding rules.

The think tank said based on data from the Companies Commission of Malaysia (SSM), 45% of private universities and university colleges have insufficient assets to cover their current liabilities.

Around 71% are below the market average in terms of sufficient assets cover while SSM data also showed that 28 private varsities, or 46% of those reported, made year-on-year losses in the 2013 fiscal year.

Penang Institute said finances were further tightened starting November last year when cuts were made to the public loans system for higher education or National Higher Education Fund Corporation (PTPTN) by Putrajaya.

PTPTN loans were cut by 5% for public universities and 15% for private universities. Loans for medical courses were unchanged.

"According to estimates by the Penang Institute using the SSM data, these changes would lead to 69.2% of private varsities falling into the red in the coming year.

"Around 76.2% of university colleges and three-quarters of the foreign branch campus could see their finances in negative territory due to these changes.

"Around 120,000 students are currently enrolled in those private varsities facing financial stress and this could rise to 215,000 students, or 44.5% of total private sector enrolment, due to funding changes according to the research," Penang Institute said in a statement today.

The think tank cited Allianze University College of Medical Sciences (AUCMS), which had around 2,000 students and 500 staff, as an example. The medical school had to close due to financial problems.

The Masterskill Education Group Berhad, which owns the Asia Metropolitan University, has also been a case of financial squeeze, it said.

The group saw its share price fall from RM4.24 in August 2010 to a low of RM0.30 in May 2014, before recovering only to RM0.62 last month following restructuring and changes in its management and share ownership.

Penang Institute's study looked into 41 private universities, eight foreign branch campuses and 27 university colleges.

At least two university colleges were upgraded to university status in recent months, but both are in the “financially stressed” group.

The revelations come as the National Higher Education Sector Blueprint 2015-2025 is set to be launched by Prime Minister Datuk Seri Najib Razak tomorrow.

Penang Institute's general manager Dr Ong Kian Ming (pic, right) said the preliminary blueprint released by the Education Ministry for public feedback appeared to largely focus on the public higher education institutions.

"The fact that the private higher education sector was largely ignored is a serious omission given that almost half of the total enrolment in post-secondary education are in private universities, university colleges and colleges.

"In our recent comprehensive study to examine the organisational structure and financial sustainability of 41 private universities, eight foreign branch campuses and 27 university colleges in Malaysia, we found serious implications on the overall health and sustainability of the private higher education sector in Malaysia," he said.

Ong, who is also Serdang MP, said the think tank would release a series of statements over the next few days to highlight some of the other important findings from the study.

"The complete report will be released at a later date at a public forum where the authors of the report will present their findings and invited panellists will be asked to comment on this report and the National Higher Education Sector Blueprint 2015-2025," he added.

- TMI