The road to privatisation

Alongside the transformation of central planning into a market economy, private higher education institutions have been adopted in Vietnam since 1993 and now account for 19% of the total higher education institutions and 14% of higher education students.

At present, Vietnam has 425 higher education institutions, or HEIs, of which around 153 universities and 183 two-year colleges are public institutions. These institutions are supervised by the Ministry of Education and Training and 13 other responsible ministries, state authorities, local provinces and state corporations, which are directly affiliated to the ministries. 'Supervising' means providing funds and making decisions on rector appointments.

Given that state funding is limited and most public HEIs are under-financed, the Vietnamese government has decided to narrow down the public system by a process of 'equitisation' or co phan hoa of some public HEIs, starting with the ones which are able to cover their current expenses from their own revenues.

Equitisation involves the conversion of a state-owned organisation into a public limited company or corporation.

Evolution of ‘equitisation’ concept

The idea of equitisation first arose in 2007 as a way of implementing the ‘socialisation’ of education. The term ‘socialisation’ has a special meaning in Vietnam, referring to increasing public participation in education through investment and diversifying sources of finance. However, in reality ‘socialisation’ is perceived as transferring the finance burden from the state to the people.

The proposal of transforming public universities into shareholding companies in 2007 faced severe criticism and raised great concern among the general public. After a few years, it has returned under the guise of a proposal for the ‘equitisation of public service organisations’ approved by Prime Ministerial Decision 22/QD-TTg dated 22 June 2015.

There are 28 HEIs and two hospitals that are seen as meeting the requirements for fully transforming into shareholding businesses in this round. After their transformation, they will become business organisations regulated by the Law on Enterprises and the Law on Higher Education.

Arguments in favour and against

Advocates of equitisation see public HEIs as knowledge enterprises that are similar to hospitals, theatres, manufacturing companies or supermarkets.

In reality, state funding at present accounts for only 50% of the expenditure of public HEIs, the remainder relying on self-generated sources such as partnership programmes and in-service or long-distance programmes.

The formal salaries of the faculty members are low. HEI administrators are public servants who serve a maximum of two terms. It is difficult to carry out radical reforms as new policies need to be consistent for a long time to make a difference.

Transforming public HEIs by fully privatising them assumes that this will create the necessary motivation for improving their performance and thus relieve the state of its financial burden. In other words, privatisation of the public HEIs will put them in a competitive market and force them to become more responsive to the needs of the labour market.

It is seen as a necessary move because the state budget for higher education is unlikely to increase. The government has two options: maintaining the status quo or downsizing the public system to concentrate resources on creating excellence.

However, the equitisation proposal has caused great concern.

It is seen by many people as a step back by the government in terms of providing social benefits and as a way for it to avoid its responsibilities. The privatisation of public HEIs means throwing them into the market and letting them compete for the maximum investors’ profits.

The two main concerns are:
  • • That rocketing tuition fees will lead to increased inequity in access to higher education; and
  • • That the bottom line of such a transformation is to transfer state assets into private hands.
Questions and alternative options

Behind the privatisation question is the issue of whether we can consider universities as enterprises and what the balance is between ‘public good’ and ‘private interest’, or between the ‘social benefit’ and the ‘individual benefit’ of higher education.

Another question is whether we can see universities as training providers or if they should also have other missions directed towards both the past and the future, and whether these missions are in conflict with the profit maximisation nature of business.

In the United States, Oregon’s three largest state universities have been in the process of breaking away from the rest of the public system since 2014. Such a move will give them more freedom to hire and fire presidents, issue revenue bonds and raise tuition fees, often in return for less funding or for meeting less certain performance targets set by the state.

Obviously, this move raised concerns. “If public universities become so focused on revenue and prestige, they will minimise their commitment to the public agenda,” said Richard Novak, who was previously director of public-sector programmes at the Association of Governing Boards.

Robert O’Neil, who was president of the University of Virginia, also said: “There’s a potential for confusion, unhealthy competition, and misuse of resources.”

It is important to note that the 'semi-privatisation' above does not mean transforming public HEIs into shareholding companies. It only means that private management practices will be adopted: HEIs will develop a staffing agenda, identify tuition fee levels and set financial mechanisms on their own without regulations or control from the state.

Another example is the release of the National University Corporation model in Japan in 2002, through which national universities gained greater managerial autonomy and became independent corporations. Greater decision-making powers would shift to the central administration, with presidents becoming somewhat equivalent to private sector chief executives.

Japan’s model is similar to the American case: corporatisation of the Japanese public universities does not mean to transform state institutions into private assets. It only means that private sector management techniques, as used by professional managers, will be applied in the public sector to improve its effectiveness.

Therefore, it can be said that transforming public HEIs into private ones is a move without precedent in the world.

Is there any other option to address the issues of public resource constraints and the need for creating excellence for public universities?

Policy-makers might consider the following options:
  • • Fully privatising the majority of public HEIs, transforming them into private ones.
  • • Partially privatising public HEIs with the state remaining the biggest shareholder of the institutions and issuing new shares for capital and investment.
  • • Transforming part of the public system into ‘semi-public HEIs’ similar to the current ‘self-financed public institutions’ in Vietnam.
The second option will need to address the issue of who the shareholders will be on behalf of the state. It has been proposed that faculty members and staff might play this role. I do not think this will work because faculty and staff are only two among many higher education stakeholders; they do not represent the students and society as a whole; therefore they cannot fulfil the role of the state.

Moreover, there has been no case of a government being a shareholder in a private university anywhere in the world. This situation creates a conflict of interest and encourages unhealthy competition in the system. First, the role of a government is not to make profit. Second, local government is powerful because of its policy development authority; such power might be used to grant favourable conditions to the university where local government is a shareholder.

The third option seems to be feasible and form a compromise between reducing state financial obligations and maintaining a certain level of commitment to the public agenda.

As they are still public institutions, those HEIs have to consider issues of equity in higher education access and affordability according to targets set by the state. State representatives should not interfere in management issues but must have a strong voice on university governing boards.

Vietnam already has a legal framework for the development of private HEIs and will need to improve its policies to strengthen its private sector. But this does not mean that higher education has to be seen entirely as a free market in the name of ‘socialisation’.

‘Socialisation’ should be understood as the mobilisation of all kinds of resources and people to strengthen the participation of all stakeholders in education so that HEIs can better meet the needs and expectations of society.

Ly Pham is an education researcher from Vietnam National University, Ho Chi Minh City.