International Institute
for Educational Planning
N.V. Varghese
Globalization, economic
crisis and national
strategies for higher
education development
Research papers IIEP
Globalization, economic crisis and
national strategies for higher education development
Globalization, economic crisis and national strategies
for higher education development
N.V. Varghese
International Institute
for Educational Planning
The views and opinions expressed in this book are those of the authors and do not necessarily
represent the views of UNESCO or IIEP. The designations employed and the presentation of material
throughout this review do not imply the expression of any opinion whatsoever on the part of
UNESCO or IIEP concerning the legal status of any country, territory, city or area or its authorities,
or concerning its frontiers or boundaries.
The publication costs of this study have been covered through a grant-in-aid offered by UNESCO
and by voluntary contributions made by several Member States of UNESCO, the list of which will
be found at the end of the volume.
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adequate resources to fi nance the higher education sector. The state needs to take responsibility
for developing rules for establishing private and cross-border institutions, for putting in place
mechanisms to ensure quality and regulations to ensure equity. Given the limited resources at
its disposal, the state may better target its limited resources to disadvantaged groups to improve
overall equity in higher education.
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6
Contents
Abstract 5
Contents 6
List of abbreviations 7
1. Introduction 8
2. Globalization and demand for skilled labour 11
3. Globalization and market orientation in higher education 14
4. Globalization of higher education and cross-border mobility 16
4.1 Cross-border institutional mobility 16
4.2 Cross-border teacher mobility 17
4.3 Cross-border student mobility 18
5. The economic crisis and its implications for higher education and employment 22
6. National strategies for the development of higher education 25
7. Concluding observations 28
References 30
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7
List of abbreviations
AICTE All India Council for Technical Education
DFID Department for International Development
EFA Education for All
FDI foreign direct investment
GATS General Agreement on Trade in Services

and money in education now than in the past. Although all levels of education have experienced
expansion, the rate of growth has, perhaps, been greatest at the higher education level. Between
1991 and 2005, the number of students enrolled in institutions of higher education worldwide
more than doubled from 68 to 137.9 million students (UNESCO Institute for Statistics – UIS, 2007).
Gross enrolment ratio (GER) increased from 13.8 to 24 per cent in the same period. The GER
varies between 5 per cent in the African region to 70 per cent in North America and Western
Europe. While the target of the member countries of the Organisation for Economic Co-operation
and Development (OECD) is to achieve the goal of universalizing tertiary education (OECD, 1998),
many countries, especially in sub-Saharan Africa, still remain at a higher education enrolment level
of less than 5 per cent and are concentrating their efforts in the struggle to universalize primary
education.
While all regions are benefi ciaries of the expansion of higher education, expansion has been uneven
as shown in Table 1.1. Between 1990 and 2005, GER almost doubled in the Arab region, increasing
from 11 to 21 per cent, and in South and West Asia from 6 to 11 per cent; in East Asia and the
Pacifi c, GER tripled from 7 to 24 per cent. In Latin America, the increase from 17 to 29 per cent
was moderate. However, expansion of higher education in Africa was slow – an increase from only
3 to 5 per cent. Since higher education grew more quickly in other regions, inter-regional disparities
increased.
Table 1.1 Higher education enrolment in 2005
Regions
Enrolment in
millions
Enrolment
share
GER 1990 GER 1999 GER 2005
Arab States 6.8 4.9 11.0 19.0 21.0
Central and Eastern Europe 19.4 14.1 39.0 57.0
Central Asia 2.1 1.5 19.0 27.0
East Asia and the Pacifi c 41.6 30.2 5.9 13.0 24.0
Latin America and Caribbean 15.3 11.1 17.0 21.0 29.0

ability to maximize economic output (World Bank, 2002). As noted earlier, the OECD countries are
moving towards the universalization of tertiary education (OECD, 1998) while countries in Africa
are taking steps to expand higher education to ‘accelerate catch-up’ (World Bank, 2009).
Third, recent trends in expansion also indicate the fast growth of private and cross-border education.
The number of students pursuing studies in domestic and private institutions has increased and,
in cross-border institutions, it has almost doubled to 2.7 million in the last decade. Although better
job opportunities and higher salary expectations can be important reasons, the growth also refl ects
changes in the provision of higher education facilities.
This paper addresses issues related to the globalization of higher education, focussing on cross-
border education – the cross-border mobility of students, of teachers and of institutions. The
expansion of cross-border education refl ects the increasing demand for domestic degrees in the
employment market in the developed world, and for foreign degrees for migrant workers in the
employment market in the developing world. The cross-border education market seems to have the
propensity to attract good brains from the developing world to meet the requirements of the global
labour market, both domestic and foreign. Private individuals are willing to pay a higher price for
cross-border education since the returns from their investment are high. Private agencies are also
willing to invest in cross-border education since such an investment is profi table. This paper argues
that higher education in the context of globalization has become a market-determined process,
replacing the near monopoly position previously enjoyed by the state. Therefore, there is a need
to review and revise public policies for promoting higher education. The state needs to redefi ne
its role in facilitating expansion with equity and in ensuring quality. The current fi nancial crisis has
underlined the need for public intervention to regulate market processes. National strategies for
the development of higher education need to focus on developing regulatory measures to promote
equity and quality as the system expands. These regulations are equally or even more needed in
the cross-border segment of higher education.
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10
Introduction
The paper is organized as follows: Section 2 discusses the increasing demand for higher skills in
the global labour market. Section 3 analyses the way in which market principles have permeated

2000) or a ‘global hunt’ for talent (Kapur and McHale, 2005) to maintain the technological edge
and the economic competitiveness of the host countries.
Many developed countries changed their visa rules to accommodate skilled and information and
communication technology (ICT) workers from other countries. For example, the introduction of the
H-1B visa in the USA has helped attract skilled workers from other countries, and helped the infl ow
of highly educated Asians. Nearly one million highly skilled workers entered the USA under the H-1B
visa scheme between 2000 and 2003. The European Union is introducing the ‘Blue Card’ visa to
attract skilled workers from developing countries. It is also noted that the average qualifi cation
level of the migrant population is higher than that of the indigenous population. For example, while
9 per cent of all Americans born in the USA possess a university degree (Master’s level), 38 per cent
of Indians born in the USA possess the same. This shows how the visa rules and immigration
policies are biased in favour of the highly skilled (Kapur and McHale, 2005). Countries such as
Australia, New Zealand and the United Kingdom (UK) have introduced point-based emigration
policies which give preferential treatment to candidates with higher level qualifi cations.
The second aspect, namely domestic employment opportunities in developing countries, has
also increased in the context of globalization. Liberalization policies, introduced during the
structural adjustment period, have helped attract foreign direct investment (FDI) and multinational
corporations (MNC) to developing countries. Outsourcing became an attractive strategy for large
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12
Globalization, economic crisis and national strategies for higher education development
fi rms in developed countries and it became an avenue for lucrative jobs in some developing
countries. One of the reasons for the expansion of FDI and outsourcing activities is the intellectual
environment created by the network of universities and the highly skilled labour pool in benefi ciary
countries. A very good example of this phenomenon is the emergence and rapid expansion of
outsourcing fi rms in countries such as China or India.
As can be seen from Table 2.1, FDI approached the trillion US dollar (US$) mark and generated
a total of 2.87 million jobs in 2007. The largest benefi ciaries of FDI have been in the Asia-Pacifi c
region, followed by North America and Europe. The Middle East remained the region with the least
FDI infl ow which may partly be due to the availability of domestic resources in the region.

The share of software in India’s exports increased from 4.9 per cent in 1997 to 20.4 per cent in
2002-2003 and software accounted for US$28.5 billion of export earnings in 2004-2005. The
sector is expected to create another four million jobs in the future. Countries such as China, India,
the Russian Federation and Vietnam are the largest benefi ciaries of FDI infl ows and subsequent
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Globalization and demand for skilled labour
13
employment generation. Although the jobs generated by FDI or by outsourcing may not form a large
share of total national employment, these jobs are associated with high-level skills, high salaries,
and attracting university graduates.
With liberalization policies, multinational corporations (MNCs) increased their presence in developing
countries through the expansion of existing fi rms and the entry of new fi rms. These fi rms look for
highly skilled workers though, initially, the MNCs were generally engaged in activities which required
less skilled workers than their parent companies. This trend is changing and these companies,
located in many countries such as China, India, the Republic of Korea, Malaysia, Singapore, and
Taiwan, have entered into activities that require highly skilled personnel. They welcome talents from
national universities, graduates with foreign degrees or degrees awarded by foreign universities in
the countries hosting these companies.
The domestic private sector – outsourcing and others – also grew appreciably in the last two
decades or so. Many of them adopted new technologies, aligned with knowledge-based production
and the globalization process. Public policy, too, was conducive in promoting these initiatives. These
technology-intensive fi rms have generated employment which also demanded high-level skills and
higher education qualifi cations. The skill requirements in many of the knowledge-intensive domestic
enterprises have been similar to the MNCs operating in the country or similar fi rms operating
abroad. This was also a process of economic integration of the less developed countries to global
transactions and networks.
One of the important contributory factors in attracting FDI is an easily available pool of highly skilled
workers. The attraction of FDI to the USA is because “the American workforce ranks as one of the
best educated, most productive and most innovative in the world”, and the “USA higher education
system is unparalleled” (USDC, 2008: 4). This is also the case with regard to the fl ow of FDI to other

between providers of education. In the past, competition was, in many countries, between public
universities, but today the competition is between public and private universities on the one hand,
and national and trans-national institutions on the other hand. Knowledge and the production of
knowledge are becoming a contested terrain left open to the market process.
Knowledge is universal, although the institutions producing knowledge, namely universities, are
very often national. Universities maintain a dual characteristic – international in content and
discourse, and national in ownership and operation. Internationalization implies the imparting
of knowledge, skills and values that have universal application. It can imply either cross-border
activities or changes in the orientation of courses offered in domestic universities, referred to as
‘internationalization at home’ or ‘campus-based internationalization’ (Knight, 2008). Globalization,
on the other hand, assumes a blurring of borders and national systems of education (Teichler,
2004).
Economic and educational activities have traditionally been dominated by the public sector.
The expansion of the private sector in economic activities led to the criticism that public-funded
education did not address the needs of industry and the economy, the argument being that the
corporate world knows what the market needs are and, therefore, can be a reliable provider of
education. This provided an opportunity for the corporate sector to operate in education and apply
market principles to the management of education institutions.
The provision and promotion of education activities under the market framework of operation are
based on the demand for and supply of educational services. While the demand for education
refl ects the paying capacity of households, the supply of educational services refl ects the capacity
and willingness of public or private agencies to invest in education. Globalization actively promotes
market ideology as a unifying force, linking economic activities at the national and cross-national
levels. With globalization, market operations are extended to social sectors and across borders.
Consequently, education in the context of globalization becomes yet another profi table venture,
cultural activities become commercial products, the public is defi ned as a customer, the university
becomes a provider, and the learner becomes a customer or purchaser of services (Yang, 2005).
Within the education sector, higher education becomes an eligible candidate for incorporation
into the market framework. Given the role of research and development (R&D), activities in the
knowledge economy investing in knowledge production (research) became rewarding economic

on Trade in Services (GATS) (Knight, 2002). GATS covers all internationally traded services and
overall covers 12 different service sectors including education. Within the education sector, GATS
covers fi ve categories of education services: primary, secondary, higher, adult, and others.
Cross-border trade in education under the GATS framework takes place in four modes. They are:
1. Cross-border supply of the service where consumers remain in their country. E-learning-based
distance education programmes are good examples of this type of cross-border education.
2. Consumption abroad where the consumers (students) cross the border. This includes full-time
study for a degree, part of the study at home and the remaining part in a foreign country, and
exchange and joint degree programmes.
3. The commercial presence of the provider in another country in the form of branch campuses
or twinning and franchising arrangements between universities from the developed and
developing world, but also between universities of the developed world as a whole.
4. The presence of persons in another country to provide the service. The most visible form of
this mode is the mobility of professors from one country to another as an employee of a foreign
university, as part of an academic partnership, or to teach in a branch campus.
This paper will discuss cross-border education manifested through the mobility of institutions,
teachers and students (modes 2, 3 and 4) since reliable information on mode 1 is not easily
available.
4.1 Cross-border institutional mobility
Institutional mobility takes place in different forms – through branch campuses, franchising or
twinning arrangements. A branch campus denotes the delivery of the programme entirely by the
foreign institution; franchising denotes the in-country delivery by an authorized domestic institution;
and twinning denotes joint ownership and delivery by institutions in the home country and the host
country. Although franchising and twinning are less visible than branch campuses, they constitute,
quantitatively, larger segments of institutional mobility (Martin, 2007).
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Globalization and cross-border mobility
17
Universities from Australia, the UK and the USA are more commonly found in other countries.
Malaysia has, for example, branch campuses from Nottingham University of the UK, and Monash

profession in the developed world becomes a very attractive position for migrant teachers from
the developing world. The cross-border mobility of teachers is primarily due to two reasons: (a) to
meet quantitative shortages; and (b) to enhance the prestige of the institution and the quality of
instruction. Teacher shortages can be due either to the non-availability of qualifi ed persons or to
the unattractiveness of the profession (Varghese, 2009b). The former is the case in many African
countries, while the latter seems to be the case in some developed countries. Another reason for
cross-border teacher mobility, in the context of globalization, may be to attract foreign students.
The globalization process has provided new employment opportunities, especially in the private
sector. These jobs offer higher salaries. Teaching jobs have traditionally not been fi nancially very
attractive and, with new avenues of employment opening up, the appeal of the teaching profession
has been further eroded. A study on teacher shortages in the UK has shown that salaries and working
conditions for teachers have not kept pace with those of other sectors (Robinson and Smithers,
1998). To overcome teacher shortages, the UK and USA governments (New York) have engaged
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18
Globalization, economic crisis and national strategies for higher education development
in the large-scale recruitment of teachers from Caribbean countries such as Jamaica, and from
African countries such as South Africa. This has led to teacher shortages in the sending countries,
which have accused the host countries of ‘raiding their resources’ (Appleton, Morgan and Sives,
2006) and have demanded compensation from the recruiting countries. Bilateral discussions have
resulted in the development of a strategy of ‘managed migration’ (Morgan, Sives and Appleton,
2006) and a Commonwealth protocol on teacher recruitment following the discussions at the
Commonwealth Education Ministers’ Conference held in Edinburgh in 2003. It needs to be noted
that teacher migration is not always from developing to developed countries. Teachers also move
within developed countries and among developing countries. Teachers from Australia, Canada and
New Zealand are found in the UK. Teachers from India, Kenya, Zambia and Zimbabwe are found
in Botswana. However, large-scale migration still continues to be from developing to developed
countries.
Teacher mobility in higher education takes different forms. Some universities have departments
specializing in regional studies and these departments attract teachers from those respective

(UIS, 2007), North America and Western Europe continue to be the favourite destinations for most
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Globalization and cross-border mobility
19
students from any region, except for students from Central Asia who tend to go to the Russian
Federation or to other Eastern European countries. Nearly three fourths of mobile students from
all regions, except Central and East Asia and the Pacifi c, seek higher education in OECD countries.
Nearly 90 per cent of mobile students from North America and Europe cross the border to study
in another country of the same region; 80 per cent of students from Latin America travel to North
America and Western Europe for their studies.
The USA attracts the single-largest share of foreign students (Table 4.1) followed by the UK,
Germany, France, Australia, and Japan. There has been a decline in the relative share of the USA
from 25 per cent in 2000 to 21.9 per cent in 2005. Australia, France and Japan have improved
their relative position while the share of others has declined. The nine countries shown in Table 4.1,
together, receive 72 per cent of all students studying outside their home country. Australia
experienced a rapid expansion in foreign student numbers in the 1990s and New Zealand in the
present decade. There was a dip in the share of foreign students in New Zealand between 2004
and 2005, but the government changed its immigration policy to attract more foreign students.
Accordingly, students who have completed their studies can prolong their stay by one year to search
for a job and, if they secure a job, as is very often the case, they can eventually apply for nationality
or residence permits.
Table 4.1 Distribution of foreign students by host countries (per cent)
Host country 2000 2004 2005
USA 25.0 22.0 21.9
UK 12.0 11.0 11.8
Germany 10.0 10.0 9.6
France 7.0 9.0 8.7
Australia 6.0 6.0 7.7
Canada 6.0 5.0 4.9
Japan 4.0 4.0 4.7

France 13.1 22.5 12.5 11.7 59.8 52.2
Morocco 16.2 58.9 75.1 50.6
Turkey 25.8 50.4 76.2 50.4
USA 31.1 7.1 5.2 8.5 15.6 67.5 46.3
Malaysia 14.2 25.3 41.1 4.2 80.6 45.1
Russian Federation 13.5 30.1 43.6 39.4
Hong Kong 21.6 30.9 39.0 91.5 34.7
Iran 12.2 9.1 22.9 7.7 51.7 19.3
Total number of students (000) 590.1 318.4 259.8 236.5 207.3 133.0 125.9 849.1
Notes:* The percentages in the rows do not add up to 100 because all host countries are not included in the
table.
indicates that the number is insignifi cant
Source: UIS (2007).
Asia dominates among the sending countries and a majority of Asians study in three English-
speaking countries – Australia, the UK and the USA. These countries generate income from
hosting cross-border students. For example in 2005, the USA, which hosts the largest number of
cross-border students, earned US$14.1 billion; the UK earned US$6.1 billion and Australia earned
US$5.6 billion (Bashir, 2007).
Cross-border education is not a very signifi cant component of higher education in the Central Asian
Republics. Of these countries, Kazakhstan sends the largest number of students abroad (29,071),
followed by Uzbekistan (23,170). Students from these countries travel to the Russian Federation or
other countries in the region. For example, in 2005, 71.5 per cent of the cross-border students from
Kazakhstan and 41.8 per cent from Tajikistan went to the Russian Federation, while 68.9 per cent
of cross-border students from Uzbekistan and 29.2 per cent from Tajikistan went to Kyrgyzstan.
Turkey and Germany are also other countries hosting students from the Central Asian republics.
Why do people seek cross-border education?
One of the important motivations for seeking cross-border education is its capacity to enhance
employment opportunities and obtain higher returns to investment. Foreign degree holders enjoy
a premium in the labour market in developing countries. They are also preferred in their countries
of study. Therefore, during periods of skill shortages, students are a reliable way of recruiting

22
5 The economic crisis and its implications for higher education
and employment
Many countries affected by the economic crisis are struggling to develop strategies to arrest the
adverse effects of job and income loss on their citizens. How does the crisis affect the development
of higher education in general, and that of cross-border education in particular? Many crises in
the past emanated from public sector investment/savings defi cits, leading to large-scale budget
defi cits and borrowing. The East Asian economic crisis was different from the earlier crises. Private
sector borrowing and fi nancial companies and their lending were responsible for the East Asian
economic crisis of 1998-1999 (Stiglitz, 1998). The current crisis has many similarities with the
East Asian economic crisis: It started from the fi nancial system and it has affected fi rst professional
and white collar jobs. However, it is different from the past crisis in that the fi nancial systems of
the developed countries are responsible for the crisis, which is global in its reach, as it spreads
to both middle- and low-income countries (World Bank, 2008). Some of the manifestations of the
crisis give scope for speculation, which is attempted below.
The leading economies of the world are experiencing the most severe crisis since the great
depressions of the 1930s and the crisis is changing the economic and employment outlook.
According to the International Monetary Fund (IMF), global growth has come to a virtual halt, with
the developed economies expected to shrink by 2 per cent in 2009. The World Bank President
and IMF Managing Director said that “the crisis has become global and no country could escape
it” (Education International, 18 January 2009).
The crisis, although felt more severely in the USA in the initial stages, is slowly but steadily spreading
to all countries. Income and job losses have been the visible forms of the crisis directly affecting
people. Many companies have declared losses and bankruptcy, and their employees are out on
the street. Those companies struggling to survive do so by downsizing and job cuts. A recent report
has shown that jobs are drying up around the world as the global economy enters the downturn.
“From lawyers in Paris to factory workers in China and bodyguards in Columbia, the ranks of the
jobless are swelling rapidly” (Schwartz, N. 2009: 1).
Employers are preparing for what many fear will be a long and painful recession, moving to
aggressively cut jobs and reduce costs to face the economic crisis. In one week in October

to counter the job losses. B.G. Srinivas, Senior Vice-President and member of Infosys’ Executive
Council, told the Times of India (TOI) that although there was a 5 per cent budget cut by European
companies, more European companies were outsourcing jobs to lower-cost countries such as India
to beat the recession, though the contracts were not large. Infosys and other Indian outsourcers
are expanding to Africa, Europe, the Middle East, and elsewhere to lower their dependence on the
United States, their biggest market (Srinivas, 2009 ). This may perhaps help arrest the job losses,
at least partly.
Some of the measures taken to counter the crisis at times reverse some of the aspects considered to
be promoting globalization, namely the cross-border movement of capital and people. For example,
job losses led to street protests in many countries and some of the protesters in the UK re-invented
the slogan of ‘British jobs for British workers’. Some of the responses by national governments took
the form of protectionist policies to protect local workers from foreign workers. The USA stimulus
plan, too, has shown protectionist trends when it stipulates that fi rms receiving an amount of the
stimulus plan should not recruit foreign workers under the H-1B visa, replacing USA citizens. These
policies go against the very concept of globalization that was based on opening up markets and
encouraging the liberalization policies, strongly propagated by those very same countries.
The crisis has affected education in several ways. First, the crisis has affected the job prospects
of graduates. A survey of 250 companies in the UK shows that vacancies are expected to decline
by 5.4 per cent and salaries by 8 per cent. Consequently, many employers are suggesting that
students take a year off (Spencer, 2009). This may have a negative effect on the demand for
higher education.
Second, the fi nancial crisis will lead to reduced funding for education. Governments may fi nd it
diffi cult to extend the same level of funding in real terms. The private corporations which used to
invest and contribute to education funds may not be able to do so. The capacity of households to
invest in the education of their children will be reduced in the context of job losses and reduced
income levels.
Third, many universities have lost their investments. For example, many universities had invested
their savings in banks which have become bankrupt. Universities, such as Oxford and Cambridge,
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24

income groups; the urban population more than the rural; and fi rm-based more than farm-based
workers. Therefore, it can be argued that the impact of the crisis will be more severe on higher
education, especially in the initial stages, and, within higher education, the private and cross-border
education segment will be more severely affected by the crisis.
Lack of regulation and inadequate state action are cited as reasons for the crisis. This gives us
an opportunity to think and review the impact of unregulated markets on economic growth and
educational progress. Deregulation was considered a virtue and a panacea during the height of
market-friendly reforms and the globalization process. It has become one of the unacceptable
policies in the present context.
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6 National strategies for the development of higher education
Universities and institutions of higher education traditionally were public institutions. The state
invested resources to set up universities and was responsible for funding and controlling their
activities. When governments were in fi nancial diffi culty in the 1980s, the state could not extend
adequate funding to cope with the increasing demand for higher education. This was an era of
low state funding and slow expansion of higher education. This encouraged market operations in
higher education that helped the process of globalization of higher education.
The options open to governments in the context of globalization were: (a) to continue the policy of
providing higher education through public institutions only, leading to limited access; (b) to expand
access to higher education through public and private domestic providers only; or, (c) to expand
access through domestic public and private providers as well as cross-border providers. Given the
fi scal state of the economies of the developing world, it was not possible to expand access through
public institutions. Therefore, most countries opted for option (b), and this encouraged market
operations in higher education and multiple providers. The choice of this option promoted the
private sector in higher education. With the expansion of the private sector and market operations
in higher education, cross-border higher education became a new and viable option (option c).
Many countries reformed their rules and regulations to encourage transnational providers. All of
these providers are operating simultaneously in many of the developing countries. Government,
which enjoyed a monopoly in the sector, needs to play more of a facilitative role than simply a