Outsourcing Education

Next week marks the end of my month-long trip to India. The country underscores many challenges that the world will face in the next generation - poverty, public health, ethnic and religious conflict - but at the same time, heartens with the realization that even faced with momentous odds, people actively believe in and engage in the search for a better world.

How to advance human well-being is a daunting question that countries grapple with. Economic development, health, education and equity are important indicators. During the last month, I met with CMU alumni and business leaders from diverse industries. At a seminar at the Indian School of Business, I also had the opportunity to chat with colleagues in higher education. Like many of them, I too believe that universities have an important role to play in advancing the people's search for a better world. In India, where the dominant focus of economic reform is job growth, the role of universities and higher education, in general is more important than ever. In a dated (yet relevant) column, Nirvikar Singh, a professor at the University of California, Santa Cruz, points out that:

If labor is more productive, then the demand for it also increases. Labor productivity increases with greater physical capital, managerial ability or education and training. If domestic savings are insufficient, then foreign savings can substitute as a capital source. These have been coming into India, but cannot be fully absorbed due to institutional failures in the financial sector and government fiscal imprudence, that forces a relatively tight monetary policy. There is no shortage of managerial talent in India—much of it is being exported.

The big constraint is human capital. Currently, government jobs in India (except for the elite services and the armed forces) rarely provide opportunities for developing productive human capital. Software and BPO have shown what can be done by industry-led training. However, there is a tremendous supply bottleneck in India’s higher education.

It is in this context that the outsourcing of education assumes importance. Foreign investment in higher education can both increase available human capital by expanding education as well as raise the overall productivity of entrants to the workforce. Universities like Yale and Stanford have shown interest in establishing greenfield campuses in India. However, such investment is constrained by the government. An expert committee headed by noted scientist CNR Rao, which was set up last year to advise the Government on the entry of foreign universities into India, outlined a set of stringent recommendations for potential entrants. De-novo institutions shall not be eligible. No poaching faculty from Indian colleges. No sending profits back home to parent institutions abroad. No franchising or offshore study campuses. Nirvikar, in his column, notes that this report on foreign entry in higher education is a "grave disappointment".

Outsourcing education is but a part of intelligent reform that is required for the enhancement of human capital, job growth, and economic development. It is especially important in the context of the (unfulfilled) responsibility of the government and universities to provide higher education to all who aspire for it. The lack of political commitment of public funds and poor quality of education in some universities represent slack that the unregulated private sector takes up at considerable cost to students. So, should private foreign funds be allowed to compete in higher education? The answer is a resounding yes.

In fact, the globalization of education services should be seen as an opportunity, and a pro-active approach is required to benefit from such globalization. The stakes are huge. Reform is imperative and feasible.