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Case Study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education”

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Case Study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” Case study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” Contents Case outline Mongolia has nothing to lose by focusing on education Worldwide education reform Where to start Concepts on educational reform and restructuring Creating legal environment conductive to privatization Reform, restructuring and privatization in the educational field Current educational restructuring accomplishments Social duties of educational organizations Conclusions Chronology of education sector privatization and restructuring References Annexes 1 Case study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” REFORM, RESTRUCTURE AND PRIVATIZATION IN EDUCATION (Case outline) Prior to 1990, the government spent 25% of the central budget and 64% of the NGP on education. Investment in the education sector was the highest and held special government protection. By 1992, education spending dropped to 33% of NGP due to an economic crisis in the former Soviet Union, Mongolia’s principal economic partner. After the economic crisis, the Government of Mongolia (GOM) could only afford to invest in larger enterprises such as the livestock and crop sectors thus ignoring crucial issues in the social sector. This dramatically shrank social sector investment pushing it into crisis as well. Before 1992, the government spent 2,000 Togrog annually for each secondary school student, and 13,000 Togrog for each student enrolled in a higher education institution. 84.4% of Mongolian citizens had a secondary school education, while only 0.4% had higher education. At that time many countries had started paying exclusive attention to educational institutions, urging reform and restructuring. Mongolia also had to produce new educational objectives, initiate fresh study curriculums and programs in demand by market-economy universities, and launch qualification certification programs. Funding deficiencies made restructuring essential. The focus of the Mongolian education sector reforms was to overcome the budget burden and to improve primary and secondary education. Under the restructuring initiative, various concepts and policies were developed, which embraced new GOM social-sector policies. The idea of privatizing institutions on a management contract was one concept developed in 1995–1997 by the World Bank social-sector privatization team. Following the proposal, Cabinet Resolution # 160, dated July 2, 1997, approved a list of organizations to be privatized through government spending. The Institute of Finance and Economics (IFE) was included in this list. The IFE became a non-profit organization, and was given the option of a 30-year no- cost property lease from the State Property Committee (SPC), contingent on the IFE’s management performance. In 2000, it was proposed that social sector organizations should be run as shareholding entities, but the proposal was rejected. In August 2000 the Government adopted a policy on cost-based privatization of social-sector organizations, according which social-sector organizations will be privatized in 3 phases, through bidding. Accordingly, a Member of Parliament, Ms. D. Oyunkhorol, submitted a Draft Law on Social Sector Privatization. It was designed to regulate the transfer of publicly owned social-sector organizations to private ownership. However, due to objections from the Government ministries, SPC, and the World Bank, Parliament rejected the draft. At its session on July 10, 2002, after amending the Law on the Properties of Central and Local Governments Parliament issued Resolution # 56 which approved the Guidelines for Social Sector Restructuring, Reform and Privatization. Cabinet Resolution # 34 on April 9, 2003, approving the list of organizations to be privatized, and enforcing restructuring, reform and privatization legislation, followed the Guidelines. As of December 31, 2003, two of the six listed educational institutions have been privatized 2 Case study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” under management contracts. Two were removed from the list and the privatization of the final two institutions has been postponed to a later date. Plans for the restructuring of nine educational organizations; merging three regional universities and liberating two branch universities under management contracts, have been suspended until 2004.The local government has promised consultancy to seven of its organizations, two of which are educational institutions. However, the promised service has yet to be delivered. Officers from the SPC and MECS have said that improvements need to be made in the educational reform procedures, taking into account the individual features of each organization. Currently, the most important reform issue is the continuation of educational services: guaranteeing high-quality education and maintaining affordable tuition fees and social security for students. 3 Case study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” REFORM, RESTRUCTURE AND PRIVATIZATION IN EDUCATION Mongolia has nothing to lose by focusing on education In the past, Mongolian citizens have been highly educated, demonstrating the success of the country’s educational system. Secondary school enrollment is a major indicator for the human resource competitiveness of any country. However, in Mongolia, this indicator has been unreliable, as the numbers have leveled off in the past several years. By 1989, literacy and primary education among adults above 15 years of age had reached a reasonable level (Annex 1). However, after 1990 the government budget for the education and health sectors dropped by 69%, and investment into those sectors receded. The Mongolian economy was dependent on the former Soviet Union, which provided loans and government aid. After the first few years of the transition period, Soviet assistance ceased and the two countries’ mutual economic assistance ended. As a result, the Mongolian Government became solely responsible for financing the education sector. 64% of the Gross National Product was invested into the sector, a serious economic burden for the government. Eventually, due to a severe economic crisis this figures to be reduced drastically. (Annex 2). Given the economic situation, the financial condition of schools deteriorated thus perpetuating the sectoral crisis. Between 1990 and 1995, the overall school enrollment went down by 13.8% (Annex 3). In 1989, only 0.8% of students dropped out of primary and secondary schools; but by 1992 this figure had increased to over 4.1%. (Annex 4). By the time the quality of education declines, the entry of private sector creates a more competitive environment in the sector. There were few private institutions in Mongolia until almost 1995, when the number of professional institutions rose to 93: 52 public, and 41 private. Despite the growing number of private universities the overall enrollment began to fall. By 1995, the enrollment in professional institutions had plunged from 64,900 in 1990 to 48,000 only 5 years later. Private universities have become very competitive, primarily in the fields of economics, business management and social sciences. However, the sector is still not as successful as in the early years (Annex 5). Worldwide education reform “Private sector involvement in educational sector improves the quality of education and the minimum quality level will be better than what it is today”. M. Freedman Addressing education sector reform in Mongolia was not an easy issue. The privatization of public universities is highly complicated, and requires knowledge, skills and proficient management. In order to ensure that recognized global approaches are used in the restructuring of the Mongolian education sector, experts from the State Property Committee (SPC) studied the social-sector reform practices of New Zealand and many European countries. A model reform plan was developed taking into account the experiences of countries such as Brazil, Jordan, Nigeria, Chili, Vietnam, Hungary, and others. (Annex 6). 4 Case study on Education Sector Restructuring and Reforms MFOS/OSF Case: ”Reform, Restructure and Privatization in Education” Brazil spends up to 60% of the state budget on public universities and colleges, while private colleges and universities are independent and self–financing. The federal government offers financial support only through student loans. Nigeria has been restructuring higher education institutions since 1980. In 1985, the management of education was completely transferred to the universities. Since 1988, 37 universities have tripled their personnel as a result of successful planning, financing and accreditation. In Chili, private college and university tuition increased in the 1970’s, resulting in the implementation of a loan system for public university students. Additional reforms in the educational sector included merit scholarships for university enrollment. By the late 1990’s, the enrollment in colleges, universities, and professional institutions doubled, and the government expenditure for education dropped to 27% of GNP. These reforms have led to the financial independence of the higher education system. The restructuring of the higher education system in Vietnam took many years. Before 1987, the Vietnamese government exclusively managed higher education issues such as financing,
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