An evaluation of the contributions of private sector provision to the development of higher education in Malaysia.

The purpose of this study is to evaluate the contribution made by the private sector to the provision of higher education in Malaysia. Specifically, it analyses the nature and extent of the private sector contribution in terms of efficiency, equity and quality of provision. Private sector involvement in the provision of higher education in Malaysia is still a relatively new phenomenon and, therefore, this is so far the only attempt to undertake a comprehensive study of its contribution. Currently, since there is a gap in the provision of higher education owing to the lack of public resources, the private sector is invited to fill this gap. The private sector comprises of conglomerate colleges and, since 1997, universities which are company-owned and -focused. Because the private universities are so new, the colleges enrol most of the students in the private sector and therefore are the subject of this analysis. Since Malaysia is not untypical of the group of developing economies, the analysis is also intended to add to our understanding of the issues in higher education which confront these economies in general. From the literature, the contribution of higher education to economic growth and national development is explained through the human capital concept that views education as an investment which brings future benefits through increased productivity measured in terms of higher lifetime earnings. The benefits are so great that they, in turn, increase the demand for higher education and therefore put pressure on Government budget. The huge expansion in demand has forced many governments to search for alternative resources to fund the further expansion of higher education, especially from the private sector. However, since the benefits are shared not only by the individuals and their families but also by society at large, it raises critical issues of appropriate funding criteria if higher education is privately provided. Theoretically, private sector provision stems first, from excess demand, and second, from differentiated demand, the former indicating a general deficit in provision, and the latter, a specific deficit in provision. In this study we hypothesise that in case of excess demand, since the public sector is the first preference, the private sector emerges as a residual sector, and therefore, is likely to exhibit several deficiencies in provision. Moreover, if the private sector institutions are profit seeking rather than non- profit making, their profit maximising behaviour is likely to have a significant effect on the efficiency, equity and quality of the provision. To investigate this, we examined both the characteristics of supply and demand of private sector provision and compared them with those of the public sector. This required a considerable amount of fieldwork to provide data for analyses because of the scarcity of published information on private sector provision. Two surveys were carried out, the first of the institutions' supply of higher education and, the second, of the characteristics of student demand. The results show that although private colleges are technically cost efficient, in terms of economic or allocative efficiency, they perform less well than the public universities in satisfying demand. On the whole, our analysis shows that the private colleges offer courses that are inferior in quality and at a relatively high price compared with the public universities. The private colleges complement the public universities and deal with a substantial number of students thus providing greater opportunities for higher education. However, since the price of private higher education is relatively high, it is accessible only to wealthy students. The situation is made worse in the case of Malaysia because of the socio-economic imbalance of the distribution of wealth by race. The results also confirm that the characteristic behaviour of the private sector providers was profit maximising and this was linked to a relatively high price and a lower quality of provision. The study concluded that the main impediment to equitable access to, and better quality of, private higher education stems from the lack of governmental support both for colleges and for students. Finally, several policy measures that aim to ensure equality of access, provide and appropriate funding mechanism, and improve and maintain the quality of provision are suggested for consideration.