The GlobalEducation

iea Industry April 1999In association withIFC Lessons from Private Education

in Developing Countries

James Tooley

S i i u i N

Studies in Education No. 7

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IEA Education and Training Unit

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The Global EducationIndustry:Lessons from PrivateEducation in DevelopingCountries

James TooleyProfessor of Education PolicyUniversity of Newcastle

Published by the IEA Education and Training Unitin association with the International FinanceCorporation, 1999

First published in April 1 999 by* The Institute of Economic Affairs

2 Lord North StreetWestminster

C____________ London SWI P 3LB

© 1999 by The International Finance CorporationA Member of the World Bank Group2121 Pennsylvania Avenue, N.W.Washington DC 20433USA

The findings, interpretations and conclusionsexpressed in this volume are entirely those ofthe author and should not be attributed in anymanner to the International Finance Corporationor the World Bank or to members of their Boardof Executive Directors or the countries theyrepresent. IFC does not guarantee the accuracyof the data included in this publication andaccepts no responsibility whatsoever for anyconsequence of their use.

IEA Studies in Education No. 7All rights reservedISBN 0-255 36475-X

Printed in Great Britain byHartington Fine Arts, Lancing, West SussexSet in Century Schoolbook and Bookman Old Style

Contents Foreword 7

The Author 9

Acknowledgements 1 0

Introduction 1 1

Background 13

1. Case Studies of Private Education 21

Profile of a Viable Institution and /or Company 25

Profitability 25

Educational Efficacy 27

Equity and Social Justice 27

Irrelevancies 28

Background and Histories 1: Education 28Companies

Brazil - Objetivo/UNIP 28

Brazil- COC 29

Brazil - Pitagoras Group 30

Brazil - Radial 31

Colombia - Education Programme of the 31Federacion Nacional de Cafeteros

India - Delhi Public Schools (DPS) 32

India - NIIT 33

Peru - TECSUP 34

South Africa - Educor 35

Romania - CODECS 36

Zimbabwe - Speciss College 37

Background and Histories 2: Stand-alone 38Schools and Universities

Argentina - Universidad de Belgrano 38

3

Colombia - Universidad de Los Andes 39

Indonesia - Trisakti University 39

Russia - MEPU 40

Thailand - New International School of 41Thailand

Turkey - Koc University 42

Summary 42

2. Factors for Success 44

Efficiency Considerations 44

Innovation 45

Research and Development 45

The Technological Imperative 46

Brand Name 48

Certification 52

Integration and Expansion 54

Horizontal Integration: Taking Over Other 54Schools

Vertical Integration: Moving into New Levels of 55Education

Lateral Integration: Synergy Between 55Education and Recruitment

Lateral and Vertical Integration: Television and 56Radio

Vertical Integration: Publishing and Multimedia 56Development

Other Expansion 57

Raising Capital 57

Franchising 58

Quality Control 59

4

Donations and Endowments 63

For-profit versus Not-for-profit 64

Leased versus Owned Property 66

Management of Risk of Non-payment of 66

Tuition Fees

Cash Colleges 67

Internal and External Debt Control 67

Smart Cards 67

Providing Employment 68

Summary 68

3. Equity Issues 70

Macro Issues 70

Range of Private Educational Opportunities 70

Costs of Public Education Relative to Private 72

Education

Inequity in Public Education Funding 74

Gender Equity 74

Company-level Issues 75

Company Student Loans 75

Cross-subsidisation 78

Public-private Partnerships 79

Social Responsibility Programmes 80

Summary 82

4. Regulation and Investment Climate 84

Regulatory Environment 95

Regulation in Argentina and Zimbabwe 96

Regulation in Other Countries 100

Investment Climate 102

5

Government Receptiveness 102

Resource Availability 104

Student Funding Possibilities 108

Thailand's Student Loan Scheme 11 3

Conclusions 116

5. Conclusions and Policy Proposals 118

A Modest Proposal 123

Informing Policy Makers 124

Encouraging Investment 124

Financing of New Campuses 124

Finance for Franchises 124

Finance of South-South Investment 125

Finance for 'the Technological Imperative' 125

Finance for a Revolving Loan Fund 126

Regulatory Changes 1 26

Encouraging Public-Private Links 128

Opening Up Funding Possibilities 130

Student Loan Schemes 131

Voucher-type Schemes 132

Lessons from the Global Education Industry 133

References 134

Summary Back Cover

6

Foreword

E ducation is clearly a critical area for developing countries,and has for some time been an area of focus of thedevelopment community. In the past, however, there waslimited attention to the role of private education in the overallmix of educational institutions in these countries. As we atthe International Finance Corporation, (the private sectorlending arm of the World Bank Group), have moved into newinvestment areas, such as infrastructure and health, we havealso become aware of the potential to participate in privatesector education investments. However, there was littleinformation to guide us on the types of investmentopportunities available in private education in developingcountries, let alone information on how best to evaluateprospective private education projects. We therefore workedwith support from education specialists at the World Bank tocommission a global study of private education in developingcountries. The study used detailed case studies of privateeducation companies to draw conclusions on the key elementsfor successful investments in these types of companies, andexamined the education sector in a number of countries toidentify types of investment opportunities in private educationappropriate for support by development institutions such asIFC.

The study contributors, from the University of Manchester,Nord Anglia PLC, and the Institute of Economic Affairs,provided a mix of academic and private sector perspectivesthat allowed them to highlight both public and private-considerations of interest to IFC.

The study presented many new insights into the world ofprivate education in developing countries, and provided agreat deal of new factual material that had previously notbeen available. We are therefore pleased to make thisinformation available to a wider audience through thepublication of this monograph, which provides the major

7

highlights from the study material. We hope that thismaterial will contribute to continued growth of understandingof this very important sector.

March 1999 BIRGITTA KANTOLAVice President, Finance and Planning

International Finance Corporation

The views expressed in this study are those of the author, notof the Institute (which has no corporate view), its Trustees,Advisers or Directors.

COLIN ROBINSONEditorial Director, Institute of Economic Affairs

Professor of Economics, University of Surrey

8

The Author

James Tooley is Professor of Education Policy at theUniversity of Newcastle, England. Prior to this he was SeniorResearch Fellow in the School of Education, University ofManchester. He is also Director of the Education Unit at theInstitute of Economic Affairs, London. Professor Tooley gainedhis PhD from the Institute of Education, University of Londonand has held research positions at the University of Oxford'sDepartment of Educational Studies and the NationalFoundation for Educational Research. He has taught at SimonFraser University (Canada), the University of the WesternCape (South Africa) and as a mathematics teacher at schoolsin Zimbabwe. He is a columnist for Economic Affairs, and isthe author of Disestablishing the School (1995), Educationwithout the State (1996), The Higher Education Debate (1997),Educational Research: A Critique (with Doug Darby, 1998),The Global Education Industry (1999) and Education: the NewContract (forthcoming, 2000).

9

Acknowledgements

Without the assistance of the educational businessesfeatured as case studies in this paper, I could not haveaccomplished much. I wish to thank all those involved, thedirectors, chairmen, finance managers, teachers, governorsand students, for their inestimable help, in allowing me or myrepresentatives into their institutions, and giving so freely oftheir time, knowledge and expertise. Thanks, too, to all of theproject consultants in a dozen or so countries who contributedto the study. Staff at the International Finance Corporationand World Bank also have my thanks and appreciation. Inparticular, I wish to thank Jack Maas, Harry Patrinos,Shobhana Sosale and, above all, Arthur Karlin, for guidanceand keen interest in the project.

I also gratefully acknowledge the support from theGovernment of Japan, through the Comprehensive JapanTrust Fund with the IFC, for a significant amount of thefunding for this study. Without this support, the researchwould not have been possible.

Finally, many thanks to the others on the project team, inManchester, Kevin McNeany, Professor Tom Christie, CalvinT. Samuel and Dr Don Taylor, and in Canada, ProfessorE. G. West.

J. T.

10

Introduction

Important developments are unobtrusively taking place inprivate education in developing countries. They have not beensparked off, by and large, by the action of governments orinternational agencies. They are not much noticed orapplauded in the media. But they have a potentially dramaticimpact on the lives of milhons world-wide. This monographaims to give a flavour of the private education sector indeveloping countries - what I call the 'global educationindustry'. I want to show how, why and where the privateeducation sector is flourishing and highlight impediments toits progress. From this evidence, I extrapolate to suggestpotential ways in which the private education sector could beharnessed and nurtured to promote equitable development.

The paper gives an impressionistic snapshot of the globaleducation industry in a dozen or so countries. The picturediscovered was surprising to the author - and I assume it willbe surprising to many readers too. Far from finding that theprivate education sector in developing countries was relative lysmall and catering predominantly only for the 61ite, I found asector which was rather large at all levels - primary,secondary and tertiary - which was expanding rapidly, andwhich featured remarkable examples of innovation. Inc6untries such as Russia and Romania, which had untilrecently banned private education, the sector was burgeoning- in Moscow, the same proportion of students attend privateschool as they do in the UK (about seven per cent). Incountries such as Colombia, 28 per cent of total enrolment inkindergarten and primary education is in the private sector,increasing to 40 per cent at secondary school level; inArgentina and C6te d'Ivoire 30 per cent and 57 per centrespectively of secondary school enrolment is in the privatesector; Indonesia has 23 per cent private primary andsecondary school students, and currently a massive 94 percent of private higher education students.

11

Not only is the sector large in the countries studied, but it isalso in places strikingly innovative. The survey identifiedmany instances of extensive innovation, including growth oflarge school chains, vertically integrated education systenms,application of innovative technology and teaching andlearning systems, and use of distance learning. I wasparticularly surprised to find the importance of brand-name -which many education companies were very keen to promc,teon billboards, and newspaper, radio and televisionadvertising. From the study, brand name seemed to beparticularly important because it helps parents and studentsovercome the 'information' problem. How do parents knowwhether they can trust the local entrepreneur who has set upschool? Because he or she is a franchisee for an establishededucational brand-name whose quality control procedures areknown and respected throughout the country. In Brazil, forexample, there are seven or eight large chains of privateschools - several of which also run universities, and a]soeducational television stations. The largest, Objetivo, based inSao Paulo, has about 500,000 students across Brazil. Each ofthe chains is convinced that in order to stay ahead of itscompetitors, it has to invest in quality improvements andinnovation in the classroom. Perhaps the most dramaticexample of this technological innovation was found in theCOC chain of schools. For fees of about £3,000 per annum, thisprovides each student with a specially-devised desk with afold-away computer terminal, networked to CD-ROM, theInternet and the teacher's 'smart-board' - which for theuninitiated, as I was before I went to Brazil, means that thestudent can take home a copy of all the teacher's blackboardwritings on a floppy disc afterwards.

In addition, demonstrating innovation within the privatesector, the research also showed how ready the supply-side isto step in when state education is perceived to be failing todeliver quality services. One example of the willingness andversatility of educational entrepreneurs comes from India,where state university computer education is in dire straits.Graduates are churned out who have learnt only Fortran andPascal, unemployable in today's computing industries. Privateenterprise in the form of NIIT - the National Institute forInformation Technology - provides parallel courses for theseundergraduates, teaching them, for a reasonable price,

12

current technology and providing them with valuable workplacements and recruitment services. NIIT has 400 campusesaround India, and is now expanding into 18 other countries,including China, Malaysia, Indonesia, Botswana and, wait forit, the USA. Employers now explicitly state in theiradvertisements that they are seeking a 'GNIIT' - a Graduateof NIIT. Significantly, because it has always been constrainedby the need to make a profit, NIIT is acutely aware of howprecious space and teaching time are, utilising both efficienl;lyand effectively to keep costs low. Visit an NIIT centre, andyou'll find all the rooms and computers constanttly in use from7 a.m. to 10 p.m., a far cry from the wastefulness which we seein western schools and universities. Perhaps mostinterestingly for those of us in these universities, NIIT hastwo research departments, one of which has 15 full-timeresearchers who are employed solely to do academic researchin education. Their performance indicators are paperspublished in research journals and conferences attended.NIIT, whose bottom line is profit, is convinced that this makesgood economic sense, and that some commercially applicableideas will emerge.

In this monograph I will build a picture of the globaleducation industry using examples like these, giving theirbackground and illustrating factors which make for theirsuccess, and also those which impede their development.

BackgroundInterest in the private education sector - in developed as wellas developing countries - is motivated by three majorconcerns:* the need to restrain public expenditure, in order to reduce

budget deficits and external debts, and the consequentneed to find alternative sources of funds for education

- doubts about state intervention in production of goods andservices, and the purported benefits of privatisation,applied to the education sector; and

- the perceived threat to equity, access and social justice byprivate education.

First, many governments in developing countries andtransition economies are under great pressure to restrainpublic spending. A combination of budget deficits and external

13

debts has led to demands for reductions in public expenditure,most conspicuously as part of the Structural AdjustmentProgrammes favoured by the IMF and the World Bank. Thesecircumstances have prompted many countries to look forsources other than the public purse for financing educationalexpansion. Advocacy of private financing (for example, WorldBank, 1986) has become increasingly common, while thesearch for effective cost recovery and private investment ineducation has become widespread (Colclough, 1997; Zidermanand Albrecht, 1995).

However, this is not the only reason why interest in anincreased role for the private sector in education is beingexplored. For, second, doubts about state involvement in theproduction of goods and services, and interest in thepurported benefits of privatisation, have been extended todiscussion of the education sector. 'Privatisation' programmeshave been increasingly adopted by governments world-wide asresponses to the perceived inadequacies of publicly controlledand financed industry and services (IFC, 1995). The questionis then raised to what extent the pubLic education sector isalso subject to such critique. Can private education improueservice and opportunity? Such deliberations were first mootedin the UK by the Institute of Economic Affairs (Peacock andWiseman, 1964; West, 1965), and are increasingly beingapplied to discussions of education in developing andtransition economies (see for example, Bray, 1996; Cowan,1990). The 'bureaucratic imperative', political influence and'rent-seeking' distort educational aims, and, just as in otherpublicly-supported industries, there is inefficiency and lack oftechnological innovation in the public education sector (Chubband Moe, 1990; West, 1975; Perelman, 1992). As developedand developing countries alike adapt to the global marketeconomy, it has been suggested that 'no education system canhope to foster choice, autonomy, and accountability' - therequirements for the global market - 'without first acquiringthese characteristics itself (World Bank, 1996 p. 126). Finally,there are debates about the importance of freedom and libertyin education, usually concentrated on developed countries, butnonetheless applicable to the case of developing nations too(for instance, Glenn, 1995).

In education, more than in any other sector of the economy,except perhaps health, there are, however, widespread

14

misgivings about private sector involvement in education. It isargued, and this is my third point, that private educationalopportunities exacerbate inequity. In the developed world,there is a huge corpus of academic literature criticising anymoves towards 'markets' in education (for example, Gewirtz etal., 1995). A fortiori these arguments are said to hold againstthe introduction of private educational opportunities indeveloping countries (for example, Tilak, 1997). Importantly,these academic debates have influence on government policyand public opinion in developed and developing countries,influencing the climate for, and acceptability of, privateinvestment in education in developing countries. Hence, oneof the key issues explored throughout this monograph is theethics of private investment in education in developingcountries. Is it possible to demonstrate in the context ofeducation 'that profit and development can go hand-in-hand'?(IFC, 1996 p. 17).

Prompted by these concerns, the International FinanceCorporation (IFC), the private finance arm of the World Bank,commissioned the study 'Investment Opportunities in PrivateSchools and Universities in Developing Countries' in mid-1997. It had become interested in becoming active in socialinfrastructure areas such as health and education, based onits perception of the very important developmental benefits tobe had from these sectors. However, with very limitedexperience and information about the private education sectorin developing countries, it first undertook a small-scale studyinvestigating the private education sector in Kenya(Karmokolias and Maas, 1997), then commissioned the largerstudy, in order to analyse in depth the investment outlook forprivate education projects in developing countries, and toevaluate the characteristics of successful private educationprojects.

The study was conducted by a team of educationalists in aconsortium consisting of the University of Manchester, theInstitute of Economic Affairs and the education company,Nord Anglia Education plc, based near Manchester. Thisbrought together a unique combination of expertise andexperience in the theory and practice of private education indeveloping, as well as developed, countries. The team wasably supplemented by experienced consultants based in 12

15

countries, who brought detailed in-country knowledge andunderstanding to the study.

The project team undertook 18 case studies of educationprojects and 12 country studies. Table 1 gives brief details ofthe case studies, while table 2 provides some backgroundinformation on the countries, using mainly standardisedinformation from earlier published sources. The countries andcase studies were chosen on the basis of extensive discussionsat the IFC and World Bank. The case studies were selected tocover the full range of primary, secondary, tertiary anddistance learning projects. Roughly half of the case studieswere of for-profit education companies or schools, the otherhalf not-for-profit foundations. Many of the educationalproject case studies were in countries featuring as countrystudies.

This monograph reports on some of the findings from thisstudy (IFC, 1998), with four aims:

First, the major aim is to present a 'snapshot' of the privateeducation sector in developing countries, arising from the IFCstudy, to inform those who know very little about thisburgeoning area - and I suspect that this will cover most ofreaders. This aim is covered, first, in chapter 1 by giving somebrief background details of the case studies in the study, andby giving in schematic form a 'profile of a viable educationcompany or institution', based on the research. In this section,I particularly highlight the large education companies - anovel finding of this study, I believe - and point to ways inwhich they may overcome some of the objections to privateeducation. I continue, in chapter 2, by discussing some of thefactors which seem to underpin the viability of these privateeducation projects.

Second, what is perhaps the most common objection toprivate education is addressed, viz., that it caters primarilyfor the 6lite, and hence has no place in the discussion ofequitable development (or, indeed, extending access indeveloped countries). It is argued in chapter 3 that thiscommon conception may in fact be a misconception. Theconsiderations there include the inequity of public provision,the hidden costs of state education, and a discussion of theway some private education companies respond to the needs ofthe disadvantaged by provision of innovative social

16

responsibility programmes, subsidised places and student loanschemes.

Third, in chapter 4, I aim to show the nature and extent ofthe private education sector in the countries studied in theIFC survey, and to point out some of the factors which impedeor facilitate the development of the private education sector atthe macro or country level. In particular, I focus on the natureand extent of the regulatory regimes which may impinge uponprivate education.

Finally, I consider ways in which the existence of thisvibrant, innovative private sector could influence educationpolicy - as practised by international agencies, and nationalgovernments. In chapter 5 I spell out a 'modest' policyproposal arising from the argument, pointing to ways in whichthe private education sector - and in particular, the largercompanies - could play an important role in promotingequitable development.

17

Table 1: Case StudiesName Iype of No of Annual Fees For Ownership Leasing vs. Loan Foreign

Education Students (X) Profit? Ownership Financing ExchangeLoans?

Argentina UJniversity 16,495 2,693-6,000 No Foundation Both Yes NoUniversidad deBelgranoBrazilCOC K to pre-U 26,000 3,600-5,400 Yes Sole prop. Own No NoObjectivo/UNIPa K to U 514,000 4,100-12,500 Yes Sole prop. Both No NoPitagoras K to pre-U 81,000 3,200-4,500 Yes Prop. Own No NoRadial Schoolsa K to U 8,500 1,750-3,875 No Foundation Own No NoColombiaUniv.de Los Andes UJniversity 7,503 3,650-9,550 No Foundation Both No NoFederacion Schools * * No Foundation Own No NoNacional ChainIndiaDelhi Public Schools 50,000 200-420 No Society Own Yes NoSchools Society* ChainN11T Computer 140,000 650 Yes Listed Lease Yes Yes

Literacy CompanyIndonesiaTrisakti University University 27,481 12,170-28695 No Foundation Own Yes No

rupK = Kindergarten; U = University; 1-IS = High School

Table 1 (cont'd)Peru TechnicalrECSUP* College 1,218 227-342 No Foundation Own Yes NoRomania Distance Joint StockCODECS- Education 2,208 500-4,000 Yes Co. Lease No NoRussiaMEPU University 3.093 330-833 No Foundation Both No NoSouth AfricaEDUCOR HS to U 300,000 65-1,830 Yes Listed Both No No

prof & voc CompanyDamelin Franchise prof& voc 373 65-1.500 Yes Sole prop. Lease No NoThailand

: New International HS 878 2,750-5.200 No Foundation Lease No Nos Turkey

Koq University University 916 5,650-13,500 No Foundation Own Yes YesUSASabis Ed. Systems K to pre- 11,000 1,400-6,750 Yes Incorporated Own * *

Inc. University CompanyZimbabweSpeciss College HS to U; 15,776 120-1,536 Yes Limited Both No Yes

prof & voc Company* Unavailable; ** Chains of schools; *** Left in local currency because of extreme currency fluctuations.

Table 2: Country Comparison Table

7Total Population Adult Gross Fnrolment Ratio Private Private ExchangePopulation Growth Literacy Secondaty University Rate, March1995 Rate (%0 % (15+) Enrolment Enrolment 1996(million) p (Wof total) (%oo total) ($1=)

Primary Secondary Tertiary

Argentina 35 1.3 96 107 73 32 30 17 0.99 peso

Brazil 159 1.5 83 99 34 12 19, 58 1.13 real

Colombia 37 1.8 91 119 63 10 40 60 1343.15cpCote 14 3.1 40 69 25 n/a 27 n/a 608.9 CFA frd'lvoireIndia 929 1.8 52 102 n/a n/a 42' 59 39.35 Rs

Indonesia 193 1.6 84 114 43 10 54 94 8850 Rp

Peru 4 5.7 87 95 53 19 7 30 0.71 dinar

Romania 23 -0.4 n/a 86 82 12 0 n/a 8090 leiRussia 148 0.0 n/a 107 88 45 <1 n/a n/a

South 42 2.2 82 110 78 13 2 n/a 4.94 randAfrica . _

'I'hailand 58 0.9 84 97 37 19 10 18 42.10 baht

Turkey 61 1.7 82 103 61 16 3 n/a 230875 lira

Sources: IIigher Education: The Lessons of Experience (World Bank, 1994); World Bank Development Report 1997 (World Bank); WorldEducation Report 1995 (JNESCO); IFC (1998). n/a: figures not available; a In Sao Paolo state; b Middle Schools including aidedschools.

1 | Case Studies of Private Education

When people think of private education in developingcountries they usually have in, mind high quality, expensiveprivate schools catering predominantly for the children of the6lite. The IFC study (IFC, 1998) revealed a completelydifferent picture.

The study undertook case studies of 181 education projects- companies, schools and/or universities - in twelvedeveloping countries, as shown in table 1 below. This chapteruses information from all 18 of these studies. However, ofparticular interest in this monograph - and, I suggest, ofparticular novelty to readers - are the twelve companies with'chains' of schools and/or colleges, marked in the table. The'potted histories' and backgrounds to these companies aregrouped together at the beginning of the next section, followedby the stand-alone universities and schools. The educationcompanies are particularly highlighted because they seem tooffer the most interesting and dramatic potential fordevelopment and for extending access. They also,interestingly, seem to have the potential to overcome some ofthe common objections to private education, (over and abovethose concerning its 6litist nature, discussed in chapter 3below), viz., that:

* Consumers of education suffer from the 'information'problem, allowing devious business people to takeadvantage of their ignorance (Barr, 1993);

* The private sector could not engage in the requisite

It also undertook one case study in the USA, of Sabis EducationalSystems Inc. Two of the 18 case studies were of the same educationcompany, Educor - one looking at head office, the other at a smallfranchise; these are reported under one heading below.

21

research and development and quality control to raisestandards, which needs the resources of government;hence any role for the private sector in education willinevitably be limited (Molnar, 1996).

On the contrary, with the larger education companies it isclear that the brand name works as it does for other consumergoods and services, reassuring parents and students that highquality is being offered and maintained. Molnar's (1996)particular criticism is with charter school managementcompanies in the US, but it would seem his criticisms could beapplicable more generally. He condemns what he calls 'store-front' charter schools run by

'quick-buck operators ... Attracted by the lack of regulations,effective fiscal controls, or academic standards and untroubled byany concern for the welfare of their students, they will be free toset up and close down over and over again, milking the systemfor as much as they can get.' (p. 166).

But if the operators are like the chains of schools found inmany developing countries, then they cannot afford to act inthis way - because if the brand name is undermined, then thecompany will go out of business. Just as the author knowsnothing about computers, but confidently purchased hiscurrent lap-top aware that the need to maintain the highquality of the brand name will keep the producers 'on theirtoes', so educational consumers attending, say, an ObjetivoSchool in Brazil or an NIIT centre in India are confident thatthey know strict quality procedures are in place to keepquality consistently high.

Moreover, it is clear that these companies are able tomarshal the resources required for research and development,as will be illustrated - and indeed, they have become involvedin R&D often precisely because of the perceived failures of thestate system within the countries to maintain high standards.

The education companies also seem to have two otherimportant advantages if we are considering potential ways inwhich developed countries can aid equitable development, or,indeed, if we are considering ways in which we can extendaccess in developed countries. It might be feared, for example,that the least risky investments for an international investorsuch as the International Finance Corporation would be those

22

high-fee schools in certain countries catering only to the elite- because only these would have sophisticated enoughmanagement and financial systems in place. But then thiswould be likely to open such an organisation to criticism, as itmay be hard to argue that investment in these types of schoolswould aid development. However, I suggest that in manydeveloping countries, the 'least risky' ventures are likely to bethe big education companties, such as Educor, South Africa;NIIT, India; TECSUP, Peru; COC, Objetivo/UNIP, Pitagorasand Radial, Brazil and Speciss College, Zimbabwe. But theseinstitutions serve not only the elite, but a wide range of socio-economic groups. Moreover, if further aspects of the modeldeveloped in chapter 5 below are followed, such as investmentin franchise funding or the creation of a student loancompany, it would seem that a low risk venture couldsimultaneously help develop entrepreneurial talent in theindigenous populations, with all its concomitantdevelopmental benefits, as well as reaching out to areascurrently less well-served by quality educationalopportunities.

A second fear might be that if an international investorwere to fund a school which should subsequently fail, then itwould be politically impossible for the investor to seek torepossess its assets, given the resulting accusation that it was"denying children their education". In the context of theglobal findings, however, the intriguing possibility presentsitself that, should an overseas-funded project fail, there couldalways be a competing brand name willing to take over theschool or institution and seek to run it more effectively!Hence, this potentially embarrassing difficulty for overseasinvestors could be neatly avoided in countries where strongcompetition between brands exists, such as Brazil, India andSouth Africa, or where such competition could be encouraged.Indeed, a similar conclusion could be drawn concerning thepermissibility of a private education company taking overfailing state schools in, say, Britain or America.

Hence, harnessing the entrepreneurial talent andeducational expertise of the education companies seems tooffer a challenging and exciting way forward for educationaldevelopment, as we shall explore below.

What are these private education companies like? In thischapter we give brief potted histories of each of the companies

23

featured as case studies in the research, together with thestand-alone schools and universities for the sake ofcompleteness. 2 We show their origins and the motivations ofthe entrepreneurs who established the businesses. In thefollowing chapter we summarise major features which relatedto their success, concerning research and development, theway they respond to 'the technological imperative', theimportance of brand name and certification, how they haveexpanded and raised capital for that expansion, and, perhapsmost significantly, their quality control procedures. We alsolook at the issues of donations and endowments, for-profitversus not-for-profit, and the management of the risk of non-payment of tuition fees.

However, rather than throw readers in at the deep end, Ibegin by providing a schematic summary the factors which,from the study, I suggest will make for a successful 3

2 It is worth pointing out that the aim in the study was not to select arepresentatiue sample of schools or universities, but to find a range ofprojects, in order to give as full a 'snapshot' of the global educationindustry as possible. Opportunism came into it too, as companies werepointed out to us which would be worthwhile investigating, and otherscame up while we were travelling. It must also be noted that much of i heinformation obtained from the education companies was proprietary,given to the project team in confidence for the express purpose ofinforming the IFC about the potential for investment. Such details have ofcourse been omitted from this paper, although they inform the context ofthe writer's policy proposals.

3 Let me clear about the limitations of what we mean by 'successful' in thismodel. The IFC was particularly concerned to know if there were privateeducational opportunities in developing countries which satisfied thefollowing criteria: (1) they are profitable (or make a surplus); (2) they arefinanced totally (or almost totally) from student fee income; (3) theycharge comparatively modest fees, and hence are accessible to many socio-economic groups, not just the 6lite.

Only if these three conditions were satisfied would the IFC be likely toconsider investing in private education. The study then set out to findsuch kinds of institutions, and all the chains of companies reported herefitted into this model, as well as the stand-alone schools and universities.The criteria for viability were the extent to which they met the abeveconditions. Hence, all of the companies described here satisfied thecondition of profitability, and so passed the quality test as far as themarket was concerned. They were able to attract customers, and, as weshall see below, to ensure that their customers were satisfied in terms ofthe quality of the education delivered, and that the courses led tosatisfactory outcomes, in particular in terms of employment prospects. We

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institution or company, to give a framework in which to viewthe ensuing discussion.

Given the diversity of companies and institutions examined,across the whole range of education sectors, and in a variety ofgeographical and political contexts, it is, of course, difficult topick out the factors that contribute to their success. Perhapsthe safest course would be to eschew such generalisationaltogether. However, a few pointers can be made which drawon the discussion in this and the next chapter, given in thespirit of tentative suggestions to this end.

Profile of a Viable Institution and/or CompanyFor education businesses, whether stand-alone universities orvocational institutions, or chains of schools and universities,the following factors are likely to be significant for success. Wecan divide these factors, roughly, into those concerned withprofitability, educational efficacy, and equity, as follows:

Profitability

In terms of maintaining or increasing market share, aneducation business is likely to:

1. be concerned with promoting its brand name, perhapsspending about 10 per cent of turnover on this, and usinga variety of methods. Stand-alone high schools anduniversities will not find this as important as chains ofschools and universities;

2. seek to be innovative, particularly in terms of technology,in order to keep and attract customers;

can say that all of the companies and institutions were successful in thesesenses. However, the study did not set out to evaluate the effectiveness ofthe schools or universities in terms of their academic excellence, orrelative excellence vis-A-vis the state sector, and no suggestions are madeto that effect here. Nor, because we used a case study methodology, are weable to point out which of the factors described below were the mostimportant in leading to success. Both of these issues, important as theyare, will have to await further research. This study itself set out todescribe a sector which research did not seem to have uncovered before.That is its importance, but the questions the study was able to answerwere limited because of its novelty.

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3. seek to expand into local, regional and sometimesinternational markets, and to benefit by integratinghorizontally (by taking over other schools), laterally(moving into new areas of education or into recruitment,television and radio) or vertically (by moving intopublishing and software development);

4. use franchising for this expansion, either throughcollecting royalties, or selling their pedagogicalmaterials, to allow for expansion. Franchising is lesslikely to occur, however, at the university level;

In terms of funrdin1g and managemnent, successful educationalbusinesses are also likely to:

5. carefully manage the risks of non-payment of tuitionfees, by employing a variety of techniques of incentivesand punishment. Even in successful companies, however,bad debt is likely to run at 5 per cent of turnover;

6. deploy successful management, with clear lines ofauthority, clearly defined roles, particularly for executiveand non-executive directors, and using sophisticatedinformation systems;

7. ensure that all resources, including space, teachers andtechnology, are used efficiently, perhaps going toconsiderable lengths to ensure this;

8. seek to employ innovative technology, in order to reducecosts;

9. employ dedicated researchers to consider more efficientways of using existing resources, in order to competeefficiently and effectively deploy innovative technology;

10. have had only very modest start-up capital, and to havefunded all their expansion through self-generated cashflow. However, given more favourable bankingcircumstances (such as lower interest rates, lowercollateral needed, and more sympathetic banks), they

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may be, or have been, keen to take out loans forinvestment and expansion;

Educational Efficacy

In terms of educational quality, the successful educationbusiness is likely to:

11. use recognised certification, and to have vocationalcertificates endorsed by relevant professional bodies.However, when institutions have a very strong brandname, they can use their own certification, although theymay persist with such endorsements or other recognisedcertification;

12. be very concerned with quality control, particularly forthose which have developed chains of operations;

13. seek to employ innovative technology, in order toenhance the learning process.

Equity and Social Justice

A successful education business, in terms of profitability andeducational efficacy, which is also concerned with equitableaccess can also:

14. organise its own student loan scheme, which could befinanced through donations, but which is likely to beself-financing in the medium term;

15. cross-subsidise some of its student places, courses orcampuses, in order to allow those on lower incomes tobe subsidised by those on higher incomes, or financedby business;

16. seek good relations with the public education sector, inpart because this is politically expedient, but alsobecause government is likely to seek the private sector'shelp in improving standards within the public sector;

17. have a social responsibility programme, helping thelocal or national community while at the same timedoing much to promote the image of the company.

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Irrelevancies

Finally, it seems to be irrelevant for a successful company orinstitution whether or not it:

18. has endowments or donations - although it may be thatdonations can undermine a company's incentives toinnovate and work efficiently;

19. is for-profit or not-for-profit;

20. owns or leases property - this very much depends onlocal circumstances.

Given these 20 factors, we now turn to brief potted histories ofthe education companies explored in the IFC research.

Background and Histories 1: Education CompaniesAll but one of the education companies studied (viz., TECSUP,Peru), have relied entirely on fee income or other generatedincome to fund their initial growth and expansion, rather thanrequiring endowments or donations. TECSUP did needdonations at first, but is now in a position where it can financeitself totally through fee income.

Brazil - Objetivo/UNIP

There are several chains of private schools and universities inBrazil, the largest of which is Objetivo/UNIP, withheadquarters in Sao Paulo. (Objetivo is the school chain,UNIP the university). The company story began in the early1960s, when Mr Joao Carlos Di Genio started a coaching classfor university entrance with about 20 private students.Finding considerable demand for his teaching methods, hefounded an intensive cramming course in 1965 with threefriends, for students to get into university. They called thiscourse 'Objetivo'. In 1967, they utilised internal televisionbroadcasting for their lessons - a revolutionary developmentat the time. Three years later they added a school, fromprimary to 2nd Grade, extended in 1974 to offer courses up touniversity entrance. In 1988 they were granted the title ofuniversity for their upper levels - after what they saw as a14 year struggle to get such recognition.

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Since then, they have continued to expand, so that nowthey have approximately 500,000 students in centres and 450franchises across Brazil, with annual turnover approximatelyUS$400 million. School students range from pre-school andprimary, through lst Grade (age 11-14 years), 2nd Grade (15-17 years), to prep (university entrance, 18 years). Theuniversity offers courses including business administration,teacher training, engineering, dentistry and veterinaryscience.

Brazil - COC

COC is perhaps the most technologically innovative of thechains of schools in Brazil. Based in Ribeirao Preto, theDirector is Dr Chaim Zaher, who is the joint owner of thecompany, with his wife. COC has three wholly-owned schools,catering to children from kindergarten to university entranceexamination. It also has 63 franchises, with the aim toincrease this to 200 by year 2001. In all, there are 26,000students in COC schools. The turnover of the company in 1997was US$30 million. It is currently seeking to expand byopening a new university in Ribeirao Preto, introducing itstechnological innovation at this level to cater for a growingmarket.

The current owner of COC, Dr Zaher, opened a crammingcollege for the 'vestibular' - the Brazilian university entranceexamination - in Aragatuba in 1970. This was namedTHATHI College (an acronym of the first initials of hisdaughters' names). He expanded this to open a high schoolfive years later. Meanwhile, in 1963, a group of students fromone of the best medical schools in Brazil, based in RibeiraoPreto, set up a similar cramming course. They named thecourse after Oswaldo Cruz, a famous Brazilian scientist.Originally the 'Curso Oswaldo Cruz' - the Oswaldo Cruzcourse - they changed the name later to Colegio OswaldoCruz, abbreviated COC. In 1972, following the success of thecramming college, a high school was added, followed in 1979by the primary and junior high schools. In 1985, spurred onby the success of his own school, Dr Zaher bought COC fromthe original founders. Finally, in 1997, COC bought EscolaMorumbi - one of the most highly respected private schools inSao Paulo, now called Escola COC Morumbi.

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Brazil - Pitagoras Group

The Pitagoras Group is a chain of schools with 80,000students, ranging from kindergarten to pre-Vestibular as wellas professional courses and adult education courses. Itsheadquarters is in Belo Horizonte, Minas Gerais, and it isknown throughout Brazil and internationally for its concernwith Total Quality Management in education. It also sponsorseducational television programmes. The current schoolnetwork extends over nine Brazilian states: Minas Gerais,Amazonas, Para, Rondbnia, Goias, Maranhao, Bahia, EspiritoSanto and Parana.

On 11 April 1966, in a Catholic college in Belo Horizonte,five young teachers held a pre-university crammer class for 35students. Evando Neiva, now the president of Pitagoras, wasthe physics teacher. The fact that 33 of the 35 students passedthe university entrance examination seems to have beennoticed, for in the second semester of 1966, 180 students tookpart in these classes; by 1969, the number had grown to 1,200,with students in three shifts. In 1970, Pitagoras formed analliance with three of the big Catholic colleges in BeloHorizonte, taking responsibility for the teaching of theiruniversity entrance courses. Inspired by its initial successhere, Pitagoras decided to diversify further, and opened itsown ist and 2nd grade schools in late 1971. To do this, itinvested its own funds in the construction of a purpose-builtschool, Colegio Pitagoras, in a prime area of Belo Horizonte.The company was granted a two-year probationary period bythe State Council of Education in 1972. To distinguish itselffrom other schools in Minas Gerais, the company designed anew curriculum and teaching model. By this time, 5,000young people between 11 and 18 were enrolled with Pitagoras,doing pre-Vestibular, lst and 2nd grade, and also free week-long courses as part of their social responsibility programme.In 1973 professional technical education was added to this list.

In 1994, the Pitagoras Network (Rede PitAgoras) wasestablished, linking other schools within their quality controlprogramme. Through this project, in 1995, PitAgoras linked inwith another business, 0 Groupo Educare, which had 1-1 and2nd grade schools; in less than a year, the network moved up to106 schools, and the figure now stands at 120 schools, with theexpectation that this will reach 400 by the year 2000.

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Brazil - Radial

Radial is a small not-for-profit educational chain based in SaoPaulo. It has five campuses, and covers the age-range fromkindergarten to post-compulsory professional and universitycourses. In total, it has about 8,500 students. It is distinctivein the Brazilian environment in that it avowedly attempts togive all high school students the benefit of a vocationallyrelevant curriculum, as well as focusing on artistic andcultural development. Its turnover in 1997 was US$17 m.

The founder of Radial was Professor Ibrahim David CuriNeto. In 1962, Professor Ibrahim founded Colegio Rui Barbosade Admissao, in Sa.o Paulo, providing secretarial courses for200 students. In 1965, Professor Ibrahim left the college underthe directorship of his brother, and started a new technicalschool, in Jabaquara. In 1970 he acquired Colegio Caramuruwith 80 students, catering for kindergarten through to highschool. In 1975, he provided technical courses in a state schoolat the request of parents.

Radial School was opened in 1976, in Santo Amaro, with600 students following courses in electronics and dataprocessing in evening classes. By 1979, Radial had a total of5,000 students. Next Caramuru School was merged with oneof the Radial colleges, providing an integrated school, fromkindergarten to post-compulsory practical and technicalclasses, and incorporating the combined academic andtechnical aspects in the curriculum throughout. This schoolwas aimed at giving young people a high school educationcombinted with vocational training. In 1989, Radial opened itsfirst university, and in 1995, Radial was renamed IREP(Instituto Radial de Ensino e Pesquisa - Radial Institute ofTeaching and Research).

Colombia - Education Programme of the Federacion Nacionalde Cafeteros

The Federacion, created in 1927, is a not-for-profit entity,currently representing more than 80 per cent of the country'scoffee cultivators, and active in scientific research, health andeducation. In the 1970s, the Federacion recognised theenormous educational needs in the rural areas. Noting thatthe rigidity of the educational system was not well suited toColombian rural society, it created a new education model, theEscuela Nueva ('New School', hereafter EN), after extensive

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curriculum research and development and teacher preparation.It then began creating EN schools, constructing more than1,100 schools in the Caldas department of Colombia, and4,000 in the rest of the country. The Federacion developsthese schools with a public or private partner; generally, theregional education departments contribute about 30 per centof total investment. The Federacion does not see itself incompetition with the public bodies, but as acting in concertwith them, to provide and support the education of the ruralpoor. Students pay US$1 a month as fees to attend school.

The programme has established that a research-basedcurriculum and organisational model for schools isappropriate in meeting the educational needs of the rur alpoor. It has also shown the usefulness of public-privatepartnerships, which utilise the management expertise andfinances of the private sector, together with educationalexpertise and some finance from the public sector. Such is thesuccess of the project that a pilot project to extend the ENmodel and methodology to other Latin American andCaribbean countries is envisaged. The replicability of themodel, however, would depend on finding an equivalentprivate company willing to donate considerable funds andgovernments willing to hand over management of publicfinances to the private sector.

India - Delhi Public Schools (DPS)

The Delhi Public School Society is a highly successful chain ofprivate schools in India, with annual turnover ofapproximately US$4 million. It prides itself on excellentacademic results and comparatively low fees. It has exhibiteddynamic growth, particularly over the past 6 years, with eachof the Society's core schools posting reasonable surplusesevery year.

The first school, DPS-Mathura Road, was established intents, in 1949, by a group of Indians displaced after Partition.As the fledgling school grew, the tents gave way to apermanent building, and then to the establishment of otber'core' schools in and around Delhi, and then in partnershipswith state governments elsewhere. Today, there are 42schools, with a total student population of around 50,000, andDPS is seeking 150 schools by 2001.

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There are four types of schools, including five core schools,wholly owned by the Society; 32 Satellite Schools, located in11 states, which have been set up and are owned by respectivepublic sector (government) undertakings (PSUs), run on theirbehalf by the Society; three Village Schools, located in Mewat,a backward area not far from New Delhi, subsidised usingsurplus resources of the larger core schools; and two overseasschools. In addition to its schools, the DPS runs, funded fromcore schools surpluses: an educational think-tank and R & Dcentre, set up in 1993, to undertake educational research onthe development of innovative teaching techniques,contemporary teaching-learning aids and courseware; and ateachers' training college, located in Delhi, offering initial andin-service teacher training - for teachers inside and outsidethe DPS system.

India - NIIl?

NIIT is the largest provider of computer education andtraining in India, with a market share of 37 per cent, annualturnover of US$73 million and profits of US$13 million. Thecompany has more than 400 centres in India, and has recentlyexpanded into overseas markets. It also provides training andsoftware consultancy for companies, and has its owneducational multimedia software production facility employ-ing 550 personnel, making it the largest in the world. With ahistory stretching back 18 years, NIIT boasts 500,000 alumniand a corporate network of over 1,000 companies.

NIIT was conceived in 1979 by Rajendra S. Pawar, nowVice Chairman and Managing Director, then a developmentofficer for a computer company in Bombay. He was aware bothof the need for trained computer staff and of theunsatisfactory nature of the computer education in Indianuniversities. With two colleagues he set up a company, whichopened its first computer education centre in a leased room ina office building in downtown Bombay, in 1982. In the sameyear it opened a second centre in Delhi. Having achievedsignificant growth, in 1993 the company was listed on theBombay and Delhi (National) Stock Exchanges. In February1996 it opened its first education centre outside India, inKathmandu, Nepal.

4 See also Mitra (1998).

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There are four strands to NIIT's business, the mostimportant part being the Career Education Group (CEG).60 per cent of N11T's education and training turnover comesfrom this. The majority - 80 per cent - of students on thiscourse are already 'full-time' students at an Indian university.Many students and employers find Indian universitycomputer courses unsatisfactory, because they use out of datetechnology and methods, and are undemanding for students.Hence NIIT works in tandem with the formal sector, andoffers students a four semester (that is, two year) course tostudents already enrolled in a state university. Allowing timefor revising for exams for both courses, at the end of threeyears students can become graduates of an Indian university,and have an NIIT Professional Diploma in Network-CentredComputing. The great majority also go on to the one year NIITProfessional Practice option. This is a one year placementwhereby students are given a mentor in NIIT and asupervisor in the company where they are employed, and paida stipend for their full-time work. This stipend is calculated tocover all the fees for the two year NIIT course. This is anextremely successful model, with over 1,000 companies takingpart, and in the great majority of cases, students find full-timeemployment with their placement company. At the end of thisprocess, provided they have satisfied their supervisor andmentor, they become a Graduate of NIIT (GNIIT).

Peru - TECSUP

TECSUP is a private, not-for-profit technological institute, setat the non-university 'superior' level in the Peruvianeducation system, with an annual turnover of approximatelyUS$7 million. It gives young people training as appliedengineers, and also offers short courses for people alreadyworking in industry. Its first centre, in Lima, opened in 1984,and the second one, in Arequipa, in 1993. Luis Hochschild. asuccessful Peruvian businessman, came up with the ideabehind TECSUP in 1980, and, with aid from the GermanState of Baden-Wurttemberg - which donated machinery andexpertise - was able to set up the Lima campus in 1984. Intotal, Baden-Wurttemberg has donated US$5 million duringthe period that TECSUP has been in operation. Two majortypes of courses offered at TECSUP are: the core programme,for the training of technicians, aimed at school leavers with a

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high level of schooling; and the conbtinuous educationprogralnme which offers short courses for people already inemployment, to bring them up to date with the latesttechnology and to develop their management skills.

The 3 year core programme leads to the 'TechnicalProfessional Diploma' - a government diploma. In thecontinuous educationt programme, short courses cater for therange of technical and managerial needs of employees alreadyin employment. Half of the short course programme aretaught in situ in the companies. As an additional part of thisprogramme, TECSUP is now offering a distance learningmodular MBA, in conjunction with the UniversidadPolitecnica de Madrid, Spain. TECSUP is also innovating intonew and profitable areas for its short course programme,including distance education, and long distance videoconferencing and education, and satellite courses.

South Africa - Educor

The Education Investment Corporation Limited (Educor) isthe largest private education group in southern Africa - witha combined enrolment of 300,000 students on more than 40campuses and in distance education, and with an estimated100,000 students graduating in 1997. Its annual turnover lastyear was approximately US$26 million, with profits of US$6million. Its education business covers the range from adultbasic education and training (ABET), through primary,secondary and tertiary education, to postgraduate andcorporate training. The Educor group comprises six maineducation subsidiaries: Damelin Education Group, MidrandCampus, Eden College, the Graduate Institute ofManagement and Technology, INTEC, the Charter Group,and two recruitment and placement divisions - RenwickGroup, and PAG Placements. The oldest of these, and the coreon which the fortunes of the company has been built, isDamelin, which is itself a group of companies.

Damelin had its roots in Damelin College, which wasfounded in 1943 by Dr Benjamin Damelin as a crammingcollege. Johann Brummer joined as a teacher in 1951, becamea partner in 1952, and today is Executive Chairman ofEducor. A key step in the development of the brand name wasin 1952, when Johann Brummer started developing distancelearning materials, which became Damelin Correspondence

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College, founded in 1955. Brummer was aware that themajority of African teachers in rural areas had not graduatedfrom high school, and he sought to improve their conditionswith a programme of high school graduation through distancelearning. He also saw an untapped and potentially lucrativemarket.

In the early 1960s, Damelin started offering evening classesfrom the Johannesburg site - this was the start of theDamelin Campus, which now offers business and degreecourses. Next, in 1968, came the Damelin ManagementSchool, offering specific training for adults, towards Damelincertificates endorsed by the professional institutes. Finally, inthe early 1980s, Damelin Computer School was started,initially only offering part-time courses. Educor was formed in1996 when the Housewares Group bought Damelin andMidrand College. In June 1996, Educor was listed on theJohannesburg Stock Exchange.

Romania - CODECS

CODECS - the Centre for Open Distance Education for CivilSociety - is a distance learning institution, based inBucharest, with 12 regional centres throughout Romania. Itprovides the UK's Open University Business School courses inbusiness management, as well as specialised consultancy andshort courses. It has been in business for 5 years, and now hasover 2,500 students on its books. Turnover in 1996 wasUS$660,000.

In 1992, the Open University Business School (OUBS), UK,organised a programme in Romania, financed by the BritishKnow How Fund. After graduation, the first 24 students,trained in competitive management, decided to found theirown distance learning company. With an initial capital of onlyUS$325, CODECS was established in 1993. It now has over2,500 students on its books and has more applicants than itcan cater for, running a waiting list.

CODECS was registered as a joint-stock company, aposition which remains the same today. It is for-profitcompany: although Romanian education law stipulates thatprivate education must be organised and function on non-profit principles, the same law allows institutions intcludingcon mercial companies to deliver professional trainingprogrammes of adults through distance learning.

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CODECS functions on a licence contract with the OpenUniversity. Formally the students enrolled are also registeredas OUBS students, hence they are considered to be Romanianstudents enrolled in a foreign university. In 1995 CODECSreceived functioning approval from the Ministry of NationalEducation, although the diplomas issued by CODECS are notyet endorsed by the Ministry.

Zimbabwe - Speciss CollegeSpeciss College is the largest, most diverse and mostcomprehensive provider of quality training and education inZimbabwe, providing high school, professional training,tertiary education, in-employment/job related training andremedial education for people with educational or learningproblems. Annual turnover is approximately US$3 million.

In 1965, George Laverdos met the principal of theInternational Correspondence College in Salisbury, Rhodesia,David Sutherland. Laverdos had been teaching a 'How toStudy' course in Greece and Sutherland asked him to spendtwo weeks writing a similar course for the Rhodesian market.When the course was written, it was suggested that Laverdosshould stay behind and teach the course; after leafletingoutside several of the major city schools, they had applicantsenough for 6 classes of 12 students. Buoyed by this success,they set up a cramming college, the National CoachingAcademy (NCA), modelled explicitly on Damelin High School,but internal disagreements prompted Laverdos to move toBulawayo, where he started a 'how-to-study' course, whichevolved into Speciss College in Bulawayo. (SPECISS is theacronym of Laverdos' study method, State, Preview, Explore,Comprehend, Inuolue, Systematise, Summarise.) After 4 years,Laverdos brought his concept to Salisbury, and NCA andSpeciss merged under the latter's name. They then bought outLobengula College (in a township of Bulawayo) and MagabaCollege (in the township of Harare - now Mbare - in thecapital) from their owners. Laverdos' motivation for all thework is quite explicit - to tap into new markets, for purelyfinancial considerations. This was particularly true of histaking over the African colleges in Magaba and Lobengula. Hewas driven by business opportunism, to address a market -black and lower income level - which was not being cateredfor.

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Since independence in 1980, Speciss has diversified intocomputers and print and mail companies, and bought theAthol Desmond College - a private college offering remedialand language enrichment classes. Under Speciss itstrengthened its psychological testing and careers advice.Speciss now has approximately 30,000 students across thesefive campuses.

Background and Histories 2: Stand-alone Schools andUniversities

We now turn to the stand-alone schools and universitieswhich were part of the IFC study. Many of the features foundin the education companies will be found in these examples, inparticular, the way in which the majority of them are fundedalmost entirely through fee income.

Argentina - Universidad de Belgrano

In 34 years, the Universidad de Belgrano (UB) has grownfrom a 90-student, 28-professor operation in a rented building,to a university with 16,495 students and 2,470 professors.Today the UB has 12 faculties, 2 schools in 28 buildingsthroughout Buenos Aires. In all, some 24,000 students havegraduated. The UB is the fifth largest private university inArgentina in terms of student enrolment, with 8.3 per cent ofthe total of students at private universities.

Dr Avelino Porto created the Universidad de Belgrano on11 September 1964 as a non-profit foundation in a rentedbuilding in the Belgrano neighbourhood of Buenos Aires. Itfeatured four schools offering degrees in law, public accounts,architecture, sociology and psychology. The newly foundeduniversity had only 90 students, 28 professors and one clerk.Dr Porto was a judiciary official then and became the firstRector, a position he still holds.

The new university received only a provisional permit tobegin operations, which became permanent by decree of theExecutive Power in 1970, six years later. Since then, growthhas been constant, with the Faculties of Law and SocialSciences, Humanities, Economics, Architecture and Urbanismadded in 1964; the Faculty of Technology in 1976; Faculty ofGraduate Studies in 1979; Faculties of Agrarian Sciences andEngineering in 1984; Faculty of Long Distance Studies in1987; School of Economics and International Business in 1988;

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School of Software Engineering in 1989; the School of HealthSciences in 1993; Faculty of Languages and Foreign Studies in1994; and Faculty of Exact Sciences in 1995.

Colombia - Universidad de Los AndesThe Universidad de Los Andes is a non profit institution,established as a pluralist, non-religious institution, analternative to the universities that existed at the time.

Undergraduate students reached 7,296 by the end of 1996;since it was founded, the University of Los Andes hasgraduated 22,000 professionals. The university now offers 26undergraduate programmes, 15 magister5 programmes, 21specialisation programmes and one doctoral programme.

On November 16, 1948 a group of academics, politiciansand influential members of Colombian society officiallyfounded the Universidad de Los Andes, under the direction ofMr Mario Laserna. The group included 52 founders, 15advisors and six directors. Initially, the university'sprogrammes were architecture, economics, languages,electrical engineering, mathematics, chemistry and the Schoolfor Advanced Studies. As the institution began to grow, otherprogrammes were offered such as civil, aeronautic,mechanical, and industrial engineering (1951). In 1955 theSchools of Engineering and Fine Arts were founded, followedby the School of Philosophy in mid-1957 and the PoliticalScience and Anthropology Department in 1959.

Indonesia - Trisakti UniversityTrisakti University, one of a thousand private universities inIndonesia, was established by a decree of the government ofIndonesia in November 1965. In the beginning Trisakticonsisted of five faculties including Engineering, Dentistry,Medicine, Economics, and Law and Social Science. In 1995,three new faculties were added including Mineral Technology,Landscape and Environmental Technology, and Arts andDesign.

The university was born out of political struggle inIndonesia, based on the site of a previous public university

5 Colombia follows the Spanish system, with undergraduate, Specialisation,magister, and doctoral degrees. The Magister degrees are the approximateequivalent of Masters degrees in the USA.

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which had been closed by government for being 'politicallyincorrect'. Initially, Trisakti had 2,328 registered students,acquired from the previous public university. A memorandumof understanding was signed between Trisakti and theUniversity of Indonesia to provide assistance to the Faculty ofMedicine because of high financial costs. In addition, becausemany students who had been involved in subversive activitieswere concentrated in the Faculty of Economics, the Universityof Indonesia was requested to assist in the development of a'new' model for the faculty.

In 1967, the Ministry of Higher Education put forth aproposal to convert Trisakti into a public university. However,it was decided that the university would remain as anexample to other private universities. In order to fulfil itsmission, the university would first remain private and secondseek funding from both domestic and foreign sources for itsdevelopment. By 1972, all Faculties had obtained fullaccreditation status. In 1996-97, the total number of studentswas 27,481, with 1,098 full-time lecturers and 1,170 part-timelecturers.

Russia - MEPU

The International Independent University of Ecology andPolitical Science, Moscow (MEPU is the Russian acronym) is anon-governmental ecological university founded in 1992. Itwas set up in response to the perceived worsening ecologicalconditions, with the approval of the Ministry forEnvironmental Protection of the Russian Federation, theState Committee for Higher Education, the Supreme SovietCommittee on Ecology and Natural resources and theGovernment of the Russian Federation.

The founders were Nikita Moiseev, an academic well knownfor his theory of the nuclear winter and President of theRussian Green Cross, and the rector Stanislav Stepanov, whopreviously worked in the Ministry of Higher Education. Theaim of the university is to provide education and training tochange attitudes towards the environment and develop'ecological literacy'. The university was granted a licence tooperate in 1992. In 1997, it was given accreditation by theAccrediting Board of the Ministry of General and Highereducation, which gave it the right to award bachelor degrees.However, it does not as yet have the right to award specialistand postgraduate degrees. The university has seven faculties:

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Ecology, Political Science, Law, World Economy and Develop-ment, Management, Finance and State Administration,Journalism and Foreign Languages. There is also adepartment of Social Psychology and Ecological Tourism(which studies the effect of tourism on the environment).

MEPU started its life with a very high enrolment, whichincreased in 1993. At the time, there were only 10 or 12private universities and the official explanation was that ofnovelty together with ease of entry and unusual courses whichseemed to address young people's concerns followingChernobyl, as well as the euphoria of Yeltsin's rise to power in1992. However, in 1994 numbers plummeted. By this timehundreds of new universities had also received a licence.

Thailand - New International School of Thailand

The New International School of Thailand (NIST) is one of thetop four international schools in Thailand, although the onlyone to be founded in the past 25 years. Founded in 1992, itprovides English-language international education forchildren aged 3-18. Located in central Bangkok, the schoolserves more than 1,000 students from approximately 40different countries. NIST has established a reputation for astrong academic programme, an unusually congenial studentatmosphere, and an extensive community action programme.This reputation and its central location has resulted in steadygrowth in enrolment. However, the school has also becomeknown for sometimes acrimonious relations among parents.With more than 40 nationalities in the school, the parentshave had difficulty working together to support the school.

In March 1989, the International School of Bangkok (ISB)decided to move to a new campus far from the centre ofBangkok where the school had been established 40 yearsearlier. Some parents objected and formed what was tobecome the 'UN International Education Committee', workingwith UNESCO backing towards the establishment of a newUN school. The Ministry granted a license in July and theNew International School of Thailand opened on 13 August1992.

Although the early years were a financial andadministrative disaster, with new management in 1994 theschool entered a period of more controlled growth and steadyfinances. This allowed the school to go ahead with the

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recruitment of a new headmaster, a new deputy headmaster,and additional staff to implement planned educationalimprovements. The most important of these advances was theestablishment of the International Baccalaureate (IB)programme in the final two years of the school.

Turkey - Kog University

Koc (pronounced Koch) University is a small, young universitystill struggling to establish itself on a sound footing. It openedin 1993 after several years of planning and preparation. It is anon-profit institution, supported by the financial resources ofthe Vehbi Koc Foundation. It is an English-mediuminstitution, with a strong foundation of liberal arts educationfor all students on the American model.

Koc University was established by the Vehbi KogFoundation, the philanthropic arm of the Koc group ofcompanies which was built up by Vehbi Koc (1901-96). TheFoundation was itself established in 1969 and channelledsubstantial resources into the building of elementary schoolsin Anatolia and student hostels in public universities, as wellas the provision of scholarships for university students. Aprestigious private secondary school was founded in 1988 andimmediately thereafter planning began for the establishmentof Turkey's second private university.

A previous group of private universities had existed inTurkey, some for many years, but these had been taken overby the state in 1971 and converted into public universities. Anew law permitting the establishment of not-for-profit privateuniversities was passed in the 1980s. Bilkent University wasestablished soon afterwards in Ankara, and Ko§ University inIstanbul was to become the second of this new generation ofprivate higher education institutions. There are now severalmore) but Bilkent University and Koc University are the onlyones which are both financially sound and academicallyreputable.

SummaryThe IFC global study revealed some outstanding examples ofeducational businesses. Of particular interest are the 11education companies described in the first part of this chapter.They represent a previously unremarked-upon part of theprivate education sector, illustrating its inventiveness and

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innovativeness. They are all the more remarkable in thatmany appear to have been started on a shoe-string, underadverse circumstances, and have grown in countries wherethere are poorly developed credit facilities from the retailbanking sector - and where education is seen as an activityscarcely worthy of credit at all.

What features have made these educational businessessuccessful? The next chapter examines the importance of theirconcern with quality control, their desire to expand in spite offinancing difficulties, and the way they conduct research anddevelopment to further educational ends and to cut costs.

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2 | Factors for Success

We have explored some fascinating examples of privateeducation companies in the previous chapter. The question israised as to what makes for a successful private educationcompany or institution. Through interviews with keypersonnel within the institutions, students, former studentsand employers of students, the study identified some keyfactors which make for a successful company in terms ofprofitability and satisfaction of the consumers. In this chapterwe highlight those factors which impact at the micro level, onthe company or institution itself. Issues concerning theregulatory, legal and investment climates - macro factors -are discussed in chapter 4.

Efficiency ConsiderationsMany of the institutions and companies examined seemedaware of the importance of keeping costs low, by efficient useof resources such as space, technology and teacher time. Forexample, NIIT, the Indian computer literacy company, goes toextreme lengths to ensure that all resources are usedproductively from 7 a.m. to 10 p.m. A key part of the NIITphilosophy is in the pursuit of teaching innovation andefficiency. Because of the economic imperatives - shortage oftrained teachers, the expense of teachers, and the shortage ofspace - NIIT from the very beginning had to be conscious ofrationing space and teacher contact time. To this end, it hasused its R&D departments to develop teaching methods whichreduce contact time and carefully utilise space. It hasdeveloped an educational model utilising three types of room -classroom, mindroom, and machine room - enabling a centrewith only 30 computers to accommodate 1,260 students perday.

Others - for example, Educor, South Africa, SpecissCollege, Zimbabwe and the Brazilian chains - use classrooms

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for high school in the morning, then the same classrooms forfurther and/or higher education once high school has finished.Finally, many, including the above, operate shifts for theirclasses.

InnovationWe can distinguish between 'process' and 'product' innovation.The former is where businesses seek to invest in cost-reducingtechnologies; the latter where adjustments are made to theeducational product on offer, to attract or keep customers.Both types of innovation were of importance to theeducational businesses surveyed.

Research and Development

It was particularly interesting to discover the great extent towhich private educational companies and institutions wereinvolved in research and development to aid innovation inboth these respects.

First, this was on the level of curriculum development. Forexample:

* COC, Brazil. The curriculum is rewritten every year, andsupplemented where appropriate, with new multimediamaterials, for instance. Fifty personnel - includingteachers and technical experts - are employed full-time inthe development of these curriculum materials, to ensurethat they are linked in with pedagogical and technologicaldevelopments.

* Radial, Brazil. A specialised team, working in thePedagogical Center, concentrates on curriculumdevelopment, bringing in professionals working inbusiness and industry - especially to ensure that what isoffered in the vocational courses is relevant to the state ofthe art of the industries concerned.

* TECSUP, Peru. In most specialities, there are annualadjustments to the curriculum, with major changes everythree to five years, depending on the specialities. Ininformation technology, however, major changes are madeevery year. The curriculum development process involvestechnical committees, with representatives from relevantindustry and commerce, and annual meetings with ex-

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students from each specialism, who give their opinions onthe relevance of the course for their work-place, and whattechniques and technology are in the work-place nowwhich need to be addressed.

Second, many of the companies engaged in R&D in allaspects of pedagogy and policy. Most notably, NIIT has tworesearch and development departments. The first is a pureresearch unit, with about 20 people, many with PhDs,employed under Dr Mitra, whose brief is simply to pursue anyinteresting ideas in education and the cognitive sciences,without any need to look for commercial application. NIITspends 0.7 per cent of turnover on this pure R&D (about $1million). In part these funds are justified in terms of brandpromotion - in the 1980s, NIIT was always thought of as acoaching class, and one remedy was that NIIT should be seento generate knowledge. Just as in a university department,the productivity of the R&D is measured in terms ofpublications in international journals, conference attendance,etc. The second R&D department - STRIDE (StrategicResearch In Development Education) - is application focused,and employs 40 researchers. It has a generic brief from seniormanagement to look for more efficient ways of teaching,learning and course development: 'if we can teach (or acompetitor) can teach this course in an hour, how can weteach it in half an hour?' Or, 'if it takes us one month todevelop this course, how can we develop it in half a month?'This uses about five per cent of turnover.

The Technological Imperative

It was found to be commonplace for the education companiessurveyed to be attempting to keep at the forefront oftechnological innovation. This imperative came for two majorreasons.First, to keep market share, and/or attract new customers -'product' innovation. Education companies and institutionswere extremely aware that if they were unable to innovate inthis way, their customers would, ceteris paribus, take theirbusiness elsewhere. Examples include:

TECSUP, Peru, is innovating into satellite courses, tokeep and enhance its share of the company training

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market. The target market for the satellite courses is themining companies outside Lima. The programme usesteachers based in Lima, in a classroom studio linked up tovideo and computers linked to the Internet. Students areconnected to video facilities and to computers linked to theInternet, so the link-up is fully interactive.

* The COC chain of schools, Brazil, incorporates the mostup-to-date technology within its schools. All classroomsare gradually being replaced by the 'classroom of thefuture', where all desks have their specially designedcomputer terminal, connected to CD-ROM and theInternet, and to the teacher's smartboard, as well as to ahigh brilliance projector.

Pitagoras prides itself on being at the forefront oftechnological innovation. It has the following on-goingprojects which promote the use of telematics in theclassroom:

a) Project Multimedia Class: a consultancy service which isavailable to all Pitagoras schools, which advises onpedagogical aspects of the introduction of multimedia,and provides educational software, training for the use ofsoftware and all equipment.

b) Project Multimedia Library: provides orientation on howto construct multimedia settings, indicating suitableeducational software, etc.

c) Project Improvement of Information Technology in theSchool Community

d) Project Internet: links schools to the Internet, providesconsultancy about pedagogical uses of the Internet, andestablishes on-line communication between school andfamily.

* Objetivo, Brazil, had the first school in Brazil to useinteractive video for teaching, and teaching throughtelephone and FM radio, it was the first to introducecomputers into the classroom, and the first to use CD-

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ROM multimedia for classroom instruction. The TarefaNet (Homework Net) allows students to do homeworkexercises in an interactive form on the Internet. Thestudent can access solutions to problems in a step-by-stepmanner, and have hypertext links to related problems andideas. Objetivo also makes use of the 'Disque-professor', aservice whereby any student who has difficulties solvingproblems in the published curriculum materials, or tests,can telephone the central computing office, code in therelevant number, and receive a commentary on questions,24 hours a day.

DPS, India, is presently in talks with ISRO (the IndianSpace Research Organisation) for the leasing of satellitetime and the creation of VSAT links, which will lead tosatellite- and Internet- based distance educationprogrammes. It is anticipated that this will be fundedthrough donations, grants and soft loans from thecorporate sector, as well as through subscriptions from themember schools.

Second, some companies and institutions are aware thatthrough technological innovation they are able to cut costs -'process' innovation. For example:

* TECSUP, Peru, is developing a 'virtual university', whichwill deliver courses to students across its campuses,enabling the same teacher and materials to be used, henceconsiderably reducing costs over the long term; it alsoaims to develop the lucrative distance learning forcorporations outside of the capital city.

* CODECS, Romania, is acquiring a satellite tele-conferencesystem, in order to transfer its British MBA program fromthe UK at considerably lower costs. Tutors will still befrom the UK, but the tele-conference system will eliminatethe significant travel costs currently incurred bringingthem to Romania.

Brand NameIt challenged some of our preconceptions about education todiscover the importance of brand name, and the promotion

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thereof, in some of the educational companies. As noted above,the desire to inform consumers through the brand name is ofgreat significance in countering one of the foremost objectionsto private education, that consumers will suffer from anintractable information problem. For example, any visitor toSouth Africa cannot fail to be struck by the ubiquity ofadvertisements for courses offered by Damelin and otherEducor subsidiaries - covering high school, university coursesand vocational and professional courses; a visitor to Brazil willsoon come across billboard advertising for Objetivo/UNIP,COC or Pitagoras - for the full range from kindergarten touniversity; In India, the brand name of NuIT is everywhere -on television, radio and in print - advertising computercourses for undergraduates, professional training and,increasingly, computer literacy courses in schools and athome.

Brand name was significant in this way for about half of thecase studies surveyed, viz. Objetivo/UNIP, COC, Pitagoras,Radial, Educor, Speciss College, TECSUP, NIIT andCODECS. Perhaps not surprisingly, for the stand-aloneschools and universities such as Los Andes, Koc, Belgrano,Trisakti and NIST it was far less significant. What factorscontribute to making brand promotion so important? A fewfactors worth noting in this regard are as follows:

* Companies concerned with brand-promotion could be for-profit or not-for-profit.

* Brand promotion covered the whole range of educationreviewed - from kindergarten, primary and high school, touniversity, as well as vocational and professional courses.

* Not all concerned with brand promotion are large chains -TECSUP has only two campuses, and Speciss College,Zimbabwe, four. Furthermore, not all large chains needbrand promotion - Delhi Public Schools (DPS) with 42schools does very little to promote itself, relying on its longestablished reputation. (The combination of having beenin the market since 1947, and in a market withconsiderable excess demand, is perhaps not replicableelsewhere.)

For those companies which are concerned to promote theirbrand names the following general comments can be made:

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* Advertising can amount to about 10 per cent of turnover.

* Companies have full-time marketing staff andmanagement to develop and strengthen brand name.

* A variety of methods and promotions is used to strengthenbrand name.

* Companies can successfully pursue a 'dual-brand'strategy.

• Independent market research shows the brand-namepromotion to have been successful for many companies,although some company-based research also shows thatthe majority of clients actually heard about the coursesthrough word-of-mouth recommendation, rather thanadvertising.

Some examples illustrate these themes.

Educor, South Africa

Educor does direct selling in private and government schools.Other brand-promoting events include careers evenings androadshows and softball and volleyball tournaments.

Speciss College, Zimbabwe

The most dramatic ranige of activities to promote brand namewere found in Speciss College, Zimbabwe. These include: thesponsoring of a basketball team and two national athletes;careers days at all state and private high schools; running offilm premiers under the Speciss banner; an elaborategraduation each year with a high media profile; giving awaycourses as prizes in charity raffles; and high profile MrSpeciss Personality and Miss Speciss contests.

It seems clear that this promotion of the brand name hassucceeded. Recent market research shows Speciss to be theleader when respondents were asked, unprompted, for theirknowledge of tertiary education institutions. It was thehighest rated for blacks and Asians/mixed race, although itcame third for whites. Combined ratings for spontaneous andprompted awareness put Speciss in third place, after theUniversity of Zimbabwe and the Polytechnic.

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NffT, India

NIIT pursues aggressive newspaper advertising, but alsosuccessfully ran its own Radio show, now replaced by anequally successful television show 'Boot It'. This is in acommercial slot, financed by selling advertising space at thebeginning, middle and end of the programme, which aims tointroduce people to the world of computing - and also acts as amarketing conduit to further NIIT courses. It is advertised asa free computer literacy programme for the masses, and is a24-episode series broadcast on metro and national channels. Itis also broadcast in Pakistan and Mauritius. This TV showwas launched in July 1997, although it had been ready forbroadcasting for the previous 18 months, but had been held upby government regulation.

Again, NIIT's brand-building seems to be highly successful.Recent Gallup research shows that, just as people use 'makinga Xerox' as synonymous with 'making a photocopy', so 'doingan NIIT' is synonymous with 'studying a computer course'.Some employers are now advertising that they are seekingsomeone 'with an Indian University Master's degree, orGNIIT'.

COC, Brazil

COC has its own publicity department - PubliCOC - whichplans and implements its media strategies, developsadvertisements and supports other developments of its brandname. Marketing techniques include advertising innewspapers, magazines, on radio and television. It alsosponsors a nationally renowned basketball team - PoltiCOC -which takes part in the highest level competitions in Brazil.Also having its own TV and radio stations, used for generalbroadcasting (not just educational material), helps promote itsbrand name all year round.

Delhi Public Schools, IndiaBy virtue of its high reputation and excess demand for itsschooling, DPS has had no need for any active marketingeffort, other than to announce the dates when it opensadmissions at its respective schools. Even as far as new schoolventures are concerned the Management has no need to go outand canvass prospective promoters for joint ventures - in fact,the members of the Working Committee are besieged with

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applications for joint venture schools. Although there are hugenumbers of other, competing, private schools, demand is suchthat their success seems to have had absolutely no impact onthe operations of the DPS. Interestingly, in the event that afamily is transferred from one location to another part of thecountry, it is an understood condition that if a DPS familyschool exists in the new location the children will be givenpreference and generally granted automatic admission intothe other DPS branch. This clearly helps strengthen brand,without advertising.

Pitcgoras, BrazilPitagoras does use normal marketing routes, such as mediaadvertising. However, a key aspect of the promotion of itsbrand name comes from its social responsibility programme:the 'Projeto Pitagoras-JB' involves the distribution of a freenewspaper, in partnership with the Jornal do Brasil,eventually aiming to reach every school in Brazil each week.Pitagoras's name appears on every page, although in anunobtrusive way.

CertificationA successful educational institution must offer respected andrecognised qualifications. Five options emerged from the casestudies. First, the institution or company can offer its owncertification:

* Educor subsidiaries, South Africa, offer their owncertification, including Damelin Certificates and Diplomasand Allenby Prestige Diplomas.

- At Speciss College, Zimbabwe, the cheapest and the mostexpensive courses offered lead solely to Speciss CollegeCertificates.

NIIT, India, offer its own certificates, leading to theGNIIT.

* Objetivo/UNIP offers its own certification at both theschool and university level.

* Universidad de Los Andes, Colombia, offers its owndegrees, as does MEPU, Russia.

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Second, the institution or company can offer qualificationsaccredited by outside, recognised institutions:

* Educor subsidiaries offer courses leading to British andUNISA degrees, and British and South Africanprofessional institute diplomas.

* Speciss offers courses leading to British, South Africanand Zimbabwean professional institute qualifications.

* NIST, Thailand, offers the International Baccalaureateand IGCSE (Cambridge, UK), as well as the NISTdiploma.

* CODECS offers British Open University degrees.

* TECSUP offers MBA courses from a Spanish university.

Third, the institution or company can offer a combination ofthese - own certificates endorsed by professional bodies, orincorporating outside certificates:

* Many of the one-year courses offered by Damelin lead toDamelin Diplomas endorsed by professional bodies.

* Speciss' Executive Secretarial Course leads to Pitman(UK) examinations and the Speciss Certificate.

Fourth, the company or institution can offer qualificationsjointly with other institutions:

Universidad Belgrano, Argentina, as well as offering itsown degrees, grants joint degrees with French, Americanand Spanish universities.

Fifth, the company or institution can offer certification whichis worth credits in other institutions:

NIIT, India has negotiated that one of its courses is worth27 credits towards a MBA in American Universities,negotiated with the American Council on Education.

* Universidad Belgrano, Argentina has mutual creditrecognition agreements with foreign universities,including 156 US universities.

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The first option, own certification, seemed to be possibleonly under three conditions:

* where a strong brand name already exists;

* where there is the backing of a strong brand name (forexample, Allenby backed by Midrand Campus, Educor); or

* where the university (only) has been granted the right toaward degrees by the government's accrediting authority.

The other four options are possible in any institution, andhave been used explicitly, we were told, by companies wishingto build up the credibility of their brand names. Interestingly,once their credibility has been established, this does not meanthat the method is abandoned. For example, Damelin, SouthAfrica, may have needed the endorsement of the professionalassociations to help establish credibility; now that it is wellknown, it maintains the endorsement.

Integration and ExpansionIntegration has been a preoccupation of many of thecompanies in our case studies. Many of the successfulcompanies studied have expanded their operations through'horizontal' integration, taking over other schools orcompanies; others have integrated 'laterally', diversifying intoother levels of educational delivery, or related trades such asrecruitment; a few firms have integrated 'vertically', by takingover the educational publishing process, including multimediadevelopment.

Horizontal Integration: Taking Over Other SchoolsThree of the four Brazilian chains studied (Objetivo/UNIP,COC and Pitagoras) began life as pre-university crammingclasses, and then developed in all three cases by expandingdownwards into high school, elementary school and finallykindergarten. Sometimes this was accomplished by takingover existing schools, although other times by opening newschools. The fourth chain, Radial, began as an eveningtechnical college, but took over an existing high school andelementary school, before opening other new schools fromscratch.

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In southern Africa, Educor, South Africa and SpecissCollege, Zimbabwe, both started as cramming colleges too,and have since taken over other colleges.

Vertical Integration: Moving into New Levels of Education

Many of the companies studied have moved into new levels ofeducation. Some examples are:* Objetivo/UNIP, Brazil, opened a university chain, while

COC, Brazil is seeking to do the same.* Educor, South Africa and Speciss, Zimbabwe, have moved

into all areas from high school, through vocational andtechnical education, to university.NIIT, India, has moved from computer training tomanaging 'edutainment' opportunities for children andparents in schools and neighbourhood centres.

Lateral Integration: Synergy Between Education andRecruitment

Many education companies have found 'synergy' betweeneducation and recruitment, both as a marketing tool and as away of enhancing the educational experience offered.

In NIIT, India, each centre has a RIIC (Regional IndustryCollaboration Cell), whose task is to keep continually in touchwith information technology CEOs and recruitment personnel,both in order to get a feel for what is needed in the market,and to help place students. It keeps a detailed database of allstudents, and matches individuals to the recruitment needs ofparticular companies.

TECSUP, Peru, has a small but specialised departmentwhich keeps in constant contact with a huge number ofcompanies, and with students placed within those companies.

Radial, Brazil, also has extensive contacts with companiesand can help in the placement of graduates in work - it has aconcordat with more than 200 companies. Moreover, many ofthe teachers, including at high school, are part-time, workingin companies, and it runs internships for its teachers to have aterm in business or industry, both in part to further promotethese contacts.

The connection between recruitment and education hasbeen realised by education companies buying recruitmentagencies (Educor, South Africa), or by recruitment agencies

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buying education companies (AdvTECH - not one of the casestudies - in South Africa).

Lateral and Vertical Integration: Television and RadioThree of the Brazilian chains studied - COC, Pitagoras andObjetivo/UNIP, have moved into radio and television, andother media, initially as a way of extending their control overeducational media (vertical integration), but also as a way ofdiversifying their portfolio. The most dramatic example isCOC, and its 'Sistema COC de Educa9do e CoinunicaCdo'. COCprides itself on being a combined system of education andcommunication. To this end it has a movie theatre, tosupplement the cultural activities of its students, and TV andradio stations. COC Cinema is based in Ribeirao Preto, andprovides film viewings for its students (and employees) free ofcharge, 'to reinforce the classroom experience'. These includeforeign and art movies which otherwise would be hard forstudents to find, Its place in the city centre also ensures thecontinued promotion of the COC brand name. COC also hastwo TV stations, one a commercial television station, whichbroadcasts programmes to a region of over five million people,the second is totally dedicated to education. It works jointlywith Fundacao Roquete Pinto (an educational foundation), tobroadcast programmes made by TV Educativa do Rio deJaneiro (one of the two educational TV stations in Brazil).

Vertical Integration: Publishing and Multimedia DevelopmentMany companies have moved into educational publishing andmultimedia development as a way of having control over theeducational process:• COC, Brazil, runs its own publishing house, Editora COC,

which publishes educational books, workbooks, supportingcharts and CD-ROMs.

* Objetivo has a similar publishing house and multimediadevelopment centre.

- CODECS, Romania, has a publishing house, translatingand printing business books in Romania, in cooperationwith foreign publishers such as Amacom, Gower, KoganPage, Crisp, Pitman.NIIT has the largest educational software developmentcentre anywhere in the world, developing multimedia CD-ROM and Internet course materials.

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. Educor (Damelin), South Africa and Speciss College,Zimbabwe publish study guides, both for their ownstudents and for others.

* MEPU, Russia, has a small publishing department, with10 full-time and three or four part-time staff. It publishesbooks for courses in law, management, foreign languagesand journalism.

Other Expansion

It is also noteworthy the way in which many educationalcompanies have expanded throughout their respectivecountries, with many expanding internationally. Notableinternational expansion includes:

* NIIT has now than 400 centres around India, andoperates in 18 countries worldwide, including Indonesia,Singapore, China, Zimbabwe, Botswana and the USA.

* Educor has more than 40 centres and franchises aroundSouth Africa, and has expanded into Namibia, Botswana,Malawi and Lesotho, with expansion into Zimbabwe andMauritius imminent.

Raising CapitalHow have the education companies financed their expansion?Surprisingly, most of the companies surveyed had neverborrowed, but had started as shoestring operations, and hadfinanced all their expansion through internal equityinvestment. Examples of companies following this route werethe Brazilian chains of COC, Objetivo/UNIP, Pitagoras andRadial, and CODECS in Romania. In other cases we foundcompanies which had also started on a shoe string, which hadfinanced all their initial expansion through internalinvestment, but which later were able to finance expansionthrough rights issues. Examples here were Educor andADvTECH in South Africa, and NIIT in India.

However, the fact that so few of the companies orinstitutions surveyed had gone the loan route should beinterpreted with some caution because it was almost alwaysfound in addition that:

Loans were avoided because internal interest rates weretoo high (with annual figures of 30-80 per cent cited).

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* Many institutions felt that they would be unattractive tobanks, at least in the early stages, because they did nothave enough collateral for loans.

* It was felt that banks were in any case unfamiliar witheducation as a business that needed investment.

* There were poorly developed capital markets in many ofthe countries surveyed.

Hence, just because many of the companies have not useddebt financing in the past, does not mean that similarcompanies would not be inclined to use it now, if the firstthree of these caveats could be overcome. Moreover, several ofthe successful company directors interviewed also agreed thatthey would not be averse to seeking debt financing now if theconditions were acceptable. 6

FranchisingFor many education companies surveyed, franchising was avery important strategy for expansion. In vocational educationNIIT franchised computer centres, as did Educor (Damelin);in school education, all the Brazilian chains had franchises -sometimes as many as 450 (Objetivo). Interestingly, Objetivoonly franchised at the school, not university level, feeling that

6 Support for the potential of the private education sector to respond tomore favourable capital markets can be seen from the experience of

education companies in the United States (see, for example, EducationSecurities Inc., Newsletter, Nos. 4-8, 1997). In the US there is an activedebt market for private education institutions and companies, both at theuniversity and school level, although debt to capitalisation ratios are

generally fairly low (in the region of 10-35 per cent). Many of the larger

non-profit US education companies, at both the secondary and university

level, use debt issuance of bonds. For instance, higher education

institutions in the US issued $9.77 billion of bonds in 1996. It is notablethat 45 private K-12 schools have received investment grade ratings from

either Moody's or Standard and Poor, while 60 per cent of private K-12schools in one survey had debt on their balance sheet. A range of factors

are used by the rating agencies in evaluating the credit of private schools,including marketing issues, diversity of their revenue sources, debt

service, profitability, current facilities and management structure. Itshould be noted, that, unlike most of the companies examined in the

current report, the non-profit US companies frequently have significantendowments, and these are considered by lenders in their appraisal ofcreditworthiness. One source suggests that, for K-12 school, maximum

debt service should be less than 10 per cent of operations.

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quality control would be too tricky at the latter level.However, MEPU, the ecological university in Russia, has afranchise agreement, to allow other universities to providetheir ecology course (only) to the specification of MEPU. Thusjust one course, not the whole university concept, isfranchised.

Two distinct ways of franchising were discovered:

* The franchisee pays a percentage of income to the mothercompany in return for use of the brand name, training anduse of materials. This was found in Educor and ADvTECHin South Africa, MEPU in Russia, NIIT and ApTECH inIndia, and FutureKids worldwide.

* The franchise buys the curriculum materials from themother company (or its publishing arm). Along with thematerials comes the package of quality controlmechanisms that make the school entitled to use thebrand name. This was the case in the Brazilian chains(COC, Objetivo and Pitagoras).

Income received from franchises as a percentage of totalincome varied considerably. NIIT received 20 per cent of itstotal income in 1996 from franchise royalties, whereas Educorreceived only three per cent.

Quality ControlIf education companies are expanding, and especially if theyare doing this through franchising, then quality controlbecomes of key concern to these companies, if the strength oftheir brand is to be sustained. How do the various head officeskeep control over their disparate sites? Some examplesillustrate the degree to which quality control - and hence themaintaining of the esteem of the brand name - are ofparamount importance to the education companies surveyed:

NUTNIIT, India, exercises tight control over its 400 franchises and30 branches. Since January 1995, it has implemented CCQMS(Crosby's Complete Quality Management System). Eachmember of staff undergoes the same initial and in-servicetraining at head office or a regional centre, and allmanagement must also have been NIIT teachers. Each course

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tutor is given a batch file, which describes in meticulous detailall the courses to be taught, the sub-units, the material to becovered, and the time to be taken on each section - this evenprescribes how long must be taken over each overheadtransparency! To complement this, each tutor follows astandardised quality control procedure, monitored initiallywithin the branch, then by quality control visits from centralor regional management. This procedure uses the followingindicators:. Aggregated mean student marks, as taken on NIIT

standardised tests twice a semester (marked by someoneother than the faculty). If students are doing badly onthese objective tests, this is seen to reflect badly on thefaculty member.

* Student feedback questionnaire, completed three times asemester, on which they rate the faculty, the NIIT andtheir own learning. Importantly, one of the questions asksfor the student's owin grasp of the knowledge. If thestudent gives a low assessment here, this reflects badly onthe individual faculty rnember.

* Student upgrades. If students are initially only registeredfor one semester (as about 50 per cent are), then if they re-register for another course, this is taken as a point in thefaculty member's favour.

- Student defaulters. If students default on payment or dropout of a course, this is taken as a negative indicator of thefaculty member.

Educor (Damelin), South Africa

All 43 branches and franchises of Damelin are subject toidentical quality control procedures. They run exactly thesame courses, with teachers following identical coursematerials, using centrally agreed assignments and assess-ments, in classrooms laid out to identical minimumspecifications, and so on. There are detailed specificationsabout who can be employed, and all lecturers are evaluatedthree times a year, using a standardised Lecturer EvaluationQuestionnaire, filled out by students. To oversee all thesequality control procedures, there is a specialised department,the National Support Office, headed by the National Directorof Studies, and a team of full-time administrators.

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Objetivo, Brazil

A key aspect of Objetivo's quality control is based on thecourse materials. It is prescribed that these are used inexactly the same way throughout the country. All teachershave to finish the same syllabus by the end of each month. Ifthey do not cover all the lessons, then they have to give extralessons during the month until they do. (Teachers do not seethis as restricting their professional autonomy - they seethemselves as presenters of material, rather than adjudicatorsof what that material should be: 'it is part of what it means tobe a teacher, to be a performer').

Pitagoras, Brazil

All Pitagoras schools have to follow common quality controlprocedures, involving their version of Total QualityManagement (TQM) involving standardised tests and surveysof parents. Pitagoras's TQM workshops have been attended byover 4,000 professionals from all over Brazil, and, with thehelp of the Juran Institute, USA, have been exported to theUSA. The Total Quality Office has now become a separatewholly-owned group company, the Pitdgoras TEC; it isinvolved in preparation of consultants for the implementationof TQM in education, benchmarking in schools, and problemsolving for continuous improvement. Broadly speaking, thequality management programme is based on the carefularticulation of a school's vision and mission, in terms of fiveobjectives:

1. high performance for all, and improvement ofinstitutions

2. enhanced competence of the teaching workforce - toenable high student performance

3. social responsibility programme4. relations of partnership - in particular between

parents and schools5. TQM

Objectives 2-5 are to enable objective 1 to be achieved.

These are then set out in more detail in the GeneralImprovement Plan, in terms of goals and measures anLd

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results, which demonstrate whether the outcomes have beenachieved.

For example, the first objective of 'raising standards' isspelled out in terms of 'specific competencies'; goals such as'each student must be able to read and understand differentkinds of materials, and apply them at the level of their ownstudy level; each student must write, read, listen and useinformation technology to communicate,' etc.. The measuresand results are specified in terms of passing externalexarninations, Vestibular examinations, and internalPitagoras evaluations.

Similarly, the second objective of 'improving the competenceof the workforce' is spelled out in terms of goals such as 'theprofessionals will be involved in making decisions which mostaffect them'; 'the opportunities for personal and professionaldevelopment must reflect the strategic directions of Pitagorasgroup'; 'the evaluation tools of the professionals must provideincentives the continual improvement'; The appropriatemeasures and results include such things as 'percentage ofprofessionals engaged in quality improvement programme';'introduction of a suggestions programme', 'perception ofprofessionals in own involvement in making decisions';,number of opportunities in education and training whichreflect the strategic directions of Pitagoras'.

The third objective of social responsibility is specified interms of goals such as students participating in social projects,and leaders participating and taking the initiative. Measuresand results include the number of projects and evaluation ofthe effectiveness of these projects, including the perceptions ofthe educative community.

The fourth objective of improving relationships is specifiedin terms of goals such as 'each school will involve in an activeway the families in order to reach the highest level of skills ofthe students'. The measures and results include the number ofinitiatives which involve families, together with evaluation oftheir effectiveness, including the perceptions of all thoseinvolved.

Finally, the TQM objective has goals such as that'information systems will be created to support the aims of thegroup and the improvement process'; The measures andresults include the number of schools and departments which

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use the integrated management system, and which haveinformation systems in place.

Donations and Endowments

A key question initially posed for the research was whetherthere are schools and universities which could make a surpluswithout endowments and donations, for only in such caseswould it be considered that private education could begenuinely self-sufficient and sustainable. Of the casesexamined, several were set up using donations, or establishedwith endowments, including the universities of Koc (Turkey),Trisakti (Indonesia) and MEPU (Russia); at school level, NIST(Thailand), and the technical vocational establishment ofTECSUP (Peru) However, the majority were not, but thesewere able to survive and, indeed, prosper, without anydonations or endowments.

Clearly, as not enough institutions in the same countrywere studied, we were not able to draw definite conclusionsabout differences between these types of institutions.Nevertheless, it is perhaps worth making a few commentsbased on the admittedly sparse evidence gained, given thepolitical importance attached in many countries to the issue ofwhether educational institutions could be allowed to be for-profit.

First, sometimes donations particularly from overseasdonors come with strings attached. This can lead to adistortion of what is offered in the educational institution. Forexample, one of the case studies revealed overseas donorsrequiring of the institution:

e fees that were artificially low - that is, lower than couldeasily be afforded by the great majority of students

* student numbers that were artificially low - that is, lowerthan could be satisfactorily (although not luxuriously)accommodated in the facilities

* scholarships to the poor that did not have to be repaid,rather than offering loans which could eventually add tothe institution's income, and to the students' sense ofresponsibility.

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Each of these, it seemed, led to unnecessary inefficiencies,and, in turn, an increased reliance on the need for externaldonations.

Second, it did not seem that such foundations werenecessarily more concerned for the disadvantaged than thoseoperating on a for-profit basis.

Third, it did not seem to be the case, as might be expected,that those foundations receiving donations and withendowments were able to offer less expensive or higherquality courses than those which did not have donations orendowments.

These three factors suggest that there may bedisadvantages to companies and institutions of seekingdonations and/or endowments.

For-profit versus Not-for-profitA related issue concerns whether companies are for profit, ornot-for-profit. As can be seen from Table 1 (pp. 18-19), roughly50 per cent of the companies or institutions surveyed were for-profit, and 50 per cent not-for-profit. What difference does thismake to educational institutions and companies? Thehypothesis that emerges from our study - in parallel with thatconcerning donations and endowments - would be that thereis not much difference between these types of companies interms of 'profitability' (or creating a surplus), educationalefficacy and equity. For example, it might be thought by somethat not-for-profit companies would be more inclined to investtheir surpluses in expansion and improvements, and the for-profit companies more inclined to pay dividends, but this didnot seem to be borne out by the evidence here. The for-profitcompanies such as NIIT, COC and Educor seem to be amongthe biggest investors in expansion and quality improvement.

Why do companies and institutions go the 'not-for-profit'route in education? There would seem to be four reasons.

* The 'moral' reason: for-profit education is seen as anoxymoron, or is, at least, less desirable than not-for-profit.

* For-profit education is illegal.

* Education companies or institutions wish to have thebenefits of being not-for-profit foundations, including not

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paying taxes, and being able to receive donations whichcompanies can set against taxation.

* Big companies wish to use their funds in a philanthropicway and avoid taxes, so set up not-for-profit educationalinstitutions.

In many of the countries surveyed, the second reason was tothe fore: for-profit education is illegal. This is true, forexample, for Indonesia, Peru (when TECSUP was set up,although this has now been relaxed), Romania, Russia andArgentina. In India, this restriction has been incorporatedinto its constitution. India's relevant constitutional guidelineis clear on this issue:

The promoting body cannot distribute its surplus, if any, at theend of a year, but must plough it back into Reserves or furtherCapital Expenditure. Surpluses can, however, be used to serviceloans or pay lease money.

The third reason probably lay behind TECSUP'sestablishment as a not-for-profit foundation, so that it couldreceive donations from other companies. Kog University,Turkey, was set up as a foundation in large part for the fourthreason.

Many analysts question whether non-profit institutions canachieve the level of benefits of full market competition.Several associated inefficiencies have been recognised byeconomists for some time. Non-profit decision-makers choosequantity-quality mixes of output, for instance, that areoptimal for them but not necessarily for society. Second thereis a strong probability of expropriation of the non-profit'ssurpluses by its agents (West, 1989). This can be done forinstance via salary increases and perks on the job.

Apparently there are some ways to 'get around' the strictregulations against educational for-profit institutions. ThusNIIT has been able to escape the restriction in India becauseit is registered under the Companies Act, rather than as aneducational institution. In Romania, while the Education Lawstipulates that education must be organised and function onnon-profit principles, the same law allows institutions,inclu.dintg commercial companties, to deliver professional

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training programmes of adults through distance learning. It isthrough this channel that CODECS has been able to operate.

Leased versus Owned PropertyAnother of the major issues for the IFC, although perhaps ofless importance to a more general reader, concerned the levelof owned facilities appropriate to different educationalopportunities. This study found that it did not seem to be aparticularly relevant criteria for success in private education,with successful education companies either leasing or owningproperty, or both. One of the suggestions was that leasedproperty may be hard to adapt for educational uses. However,we have found educational companies leasing unsuitablebuildings and drastically renovating them - even throughleases have been short. Or we found educational companiesleasing purpose-built educational buildings. In manycountries, there are inflexible planning regulations whichoften mean that any building involves considerable bribes. InIndia this situation is exacerbated by extremely high capitalgains tax, which means that buying and selling of propertymay require money laundering. NIIT aims to steer clear ofthese problems by never owning property, and so takes outleases. However, leasing buildings does not stop it extensivelymodifying them to suit its requirements. This is so eventhough may of the buildings are on leases of only three years(described as 'long leases'!).

Management of Risk of Non-payment of Tuition FeesThis is a key area which will make for the success orotherwise of a private educational institution or company,particularly one which is funded almost entirely by fees - asin the majority of the case studies considered. Annual baddebt runs at about five to six per cent of turnover in many ofthe successful companies observed. Methods of countering theproblem of bad debt include the following:

* 'cash' only collegesinternal and external debt control - including reschedul-ing terms of payment, employing internal debt controloffices and contracting external debt collectorssmart card systemsproviding employment for debtors

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* introducing student loan systems.

We outline methods for the first four of these, and explore thefifth further in the following chapter.

Cash Colleges

In southern Africa, 'cash' colleges, that is, working on cash-only terms, are a popular way of avoiding the risk of non-payment. Speciss College operates two 'cash' colleges, Magabaand what used to be Lobengula, now part of Bulawayocampus. Similarly, some of the Damelin courses (that is, notwhole campuses) are specifically 'cash only'. Students are onlyallowed in if they have paid (usually) the monthly instalmentof their fees in advance. This seems to work in practice,leading to a drop-out rate as high as 20 per cent; however,students can miss a month, then come back to class whentheir financial position improves. (There is a monthly intakeonto courses, so students can learn more or less at their ownpace).

Internal and Extemal Debt ControlMany institutions offer (usually) monthly terms of paymentfor courses. At Educor, the chief counter to the bad debtproblem is to ensure that, at registration, all students sign acontract to pay all the tuition fees even if they withdraw fromthe course. Defaulters are then referred to the Credit ControlDepartment. Similar procedures were found in a variety ofplaces, including Speciss College and NIIT.

Smart CardsMore advanced methods of avoiding bad debt include the issueof smart cards, which contain all relevant registrationinformation. At the University of Belgrano, Argentina, eachstudent must register for each class using this card. If astudent is in arrears and has not requested any specialpayment terms, he/she is not recorded as present in the class.As students are required to attend 80 per cent of their classesin order to be able to sit examinations, the incentive forpayment or rearranging terms is very strong.

A smart card scheme is also used at Midrand Campus, partof Educor, South Africa. Here students have to use their cardin order to enter and leave campus. Initially if they fall behind

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with their payments, their card will not let them leavecampus. Hence, they will be forced to go to administration,and reschedule payment of fees before being permitted to exit.After a period of time in which options are explored, the smartcard will then refuse entry to the student too. The theorybehind this is that the campus does not want to excludestudents unless all payment options have been exhausted.

However, not all places that use smart cards also use themto deter bad debts. In the Brazilian chains of Objetivo/UNIPand COC, smart cards are not programmed in this way.

Providing EmploymentWhen students or their parents are unable to pay instalmentson fees at Ko, University, Turkey (having already paid theirfirst down-payment), then students will be offered part-timeemployment within the university to help them to earn thefunds required, when this is possible to find. This couldinclude cleaning, serving or tutoring roles.

SummaryThis chapter has highlighted some of the factors at the microlevel which have led to the success of the educationalbusinesses surveyed. The IFC study was concerned withsuccess defined in terms of the companies' profitability - andfrom this we can infer that all the businesses described herewere successful in attracting and satisfying customers. Giventhe case study methodology employed, we were not able tojudge which of the factors were most significant for success.However, in the views of key personnel within the companies,as well as students, former students and employers ofstudents, we have seen that factors involving efficiency andinnovation - particularly in terms of technology to cut costsand enhance the educational experiences on offer - were ofkey importance. Research and development to these endswere also of significance, as was the promoting of the brandname and using recognised certification. Many of thecompanies surveyed were keen to expand and integrate theiractivities; successful expansion often involved franchising, andin all cases strict quality control procedures were a key part ofmaking for success.

These factors may satisfy investors and internationalorganisations such as the IFC and the World Bank that such

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investment is viable. However, some readers may beapprehensive about seeking to enhance the role of the privatesector in any development strategy, because of the paramountobjection of the perceived inequity of private education.Tackling this objection is the subject of the next chapter.

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3 | Equity Issues

A common perception of private education in developingcountries is that it caters mainly for the 61ite, and hence thatits promotion will only increase inequity. The argument of thischapter is that this may not be the case, for five reasons:

* Because the IFC study reveals a vast range of privateeducation opportunities, not just catering for the elite oreven the middle classes.

* Because public education itself is not generally free, andwhen hidden costs of schooling are introduced, thedifferences between costs of private and public educationare narrowed considerably.

* Public funding of education can also be inequitable.

* Because of impact on gender equity.

- Educational businesses can help promote equity throughcross-subsidisation, social responsibility programmes andinvolvement with the public sector, and, perhaps mostsignificantly through, student loan programmes.

The first four of these issues are grouped under the heading,macro issues', while the fifth is discussed under the heading'company-level issues'.

Macro Issues

Range of Private Educahton OpportunitiesA common prejudice against private education is that it onlyserves the M1ite. The IFC study shows this not to be the case.There are numerous examples of institutions which chargerelatively modest fees, making them accessible to a broadrange of socio-economic groups. In general, we can point to the

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existence of three types of private schools. First, there areschools which cater for very low income groups in rural orurban areas, charging very low fees, and offering education ofvariable quality - usually with high student/teacher ratios (upto 90 students per teacher), offering a basic education with nofrills. They can be run by charities or religious groups, or berun by proprietors. In India, for example, these schools chargefees ranging from Rs. 50 to Rs. 150 per month, and are usuallysponsored by local philanthropists or by religious or minoritycharitable organisations. In South Africa, there are still many'street' schools, operating in rural and urban areas, cateringfor similar groups.

Second, there are schools that are patronised by the middleclasses, including religious not-for-profit and for-profit. TheBrazilian chains of schools largely fit into this category, whilethe Delhi Public School chain caters for similar children inIndia. It must be noted, however, that sometimes extendedfamilies can pool income to enable one or more children fromthe family to attend such schools.7

Third, there are the elite private schools, found in allcountries, with fees out of the reach of all except a smallminority - although many of these schools do offerscholarships to students whose parents are too poor, or whofall on hard times while the student is at the school.

In terms of vocational tertiary education, opportunitieswere found which generally catered for lower and middlesocio-economic groups, and it is clear that many low-incomefamihes make large sacrifices to enable their children toattend secretarial courses and other job-related training

7 In many countries surveyed - for example, South Africa, India and Brazil- it was initially a puzzle as to how many of the students could afford toattend educational institutions whose fees would seem prohibitive givenreported family income. Further probing made it apparent that it may bemisleading to look at indiuidual family incomes alone. The puzzle wasresolved when it was discovered how extended families pooled income andresources to support one or more particularly talented, ambitious andindustrious children within the family. This practice was found at both

compulsory schooling and tertiary-level (academic and vocational)education. Hence, promising students from some of the poorest familiesare able to attend institutions even though the fees would seem to putthem out of reach, considering the low level of the individual's familyincome.

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courses that could provide rapid returns - as well as poolingincome as noted above.

Finally, in terms of academic tertiary education, privateuniversities generally catered for the middle and upperincome groups. Interestingly, there were some examples of thenon-elite private universities being used by lower incomegroups than the prestigious public universities - for example,in Brazil (Objetivo/UNIP), Romania and Russia.

Costs of Public Education Relative to Private Education

Public education in developing countries does not usuallycome free of costs to families, and, in particular, to poorfamilies. This is true first in terms of direct costs - for in manycountries, public schools either charge school fees (forexample, South Africa), or charge registration andexamination fees (for example, Indonesia), or 'encourage'parents to contribute additional funds, which effectively makeup de facto fees (for example, Argentina, Indonesia, andTurkey). There are also indirect costs of schooling, such astransportation, writing materials and school uniform.

When these indirect costs are taken into account, the gapbetween annual household expenditure for a public andprivate school student narrows considerably. Where figuresare available, the picture emerges of:e significant costs of public education for poor families- a large gap between the costs associated with public and

private education at the primary school level* a narrowing of the gap at secondary levels of schooling.The examples of India and Indonesia are given to illustratethese points.

In India, average household expenditure (including indirectcosts of public schooling, and full direct costs of privateschooling) on each student in the poorest 20 per cent ofhouseholds was about 60 Rs. per year for students in publicschools, but 113 Rs. per year, or 90 per cent more, for astudent in a private school. (Annual income for these familieswas Rs. 8,274; all figures for 1991.) At the secondary level,however, the average household expenditure was 230 Rs. peryear in the state sector, compared to 291 Rs., or only 26 percent more, in the private sector.

For the next poorest 20 per cent of households (annualincome Rs. 12,528), household expenditure per student in

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primary school was roughly twice as much in a private than ina public school (139 Rs. compared with 71 Rs.), but only onefifth more for private secondary school students (286 Rs.,compared with 241 Rs.). These margins were roughlycomparable throughout the socio-economic levels, except forthe top 20 per cent of the population, where householdexpenditure on primary school children was three and a halftimes as much for families with students in private than instate schools.

In Indonesia, compulsory school fees for primary and juniorsecondary schools were abolished in 1973 and 1994-95respectively. However, almost all schools receive contributionsfrom their parents' association. Some of these contributionsare 'one-off entrance fees, some are monthly fees and someare 'special assessments' for particular purposes. Such fees arenot officially compulsory, but are in fact expected in mostsituations. In primary education, the average annualexpenditure by Indonesian families per student for publiceducation is Rp 52,000, 25 per cent of which is paid directly tothe school for registration and examination fees, and theremainder is made up by indirect costs. The average total costto families for private education, however, is Rp 122,000 peryear, covering direct fees and indirect costs. Thus privateprimary education costs households roughly two and one-thirdtimes as much as public primary education.

At junior secondary education, however, the gap begins tonarrow, with average annual expenditure by Indonesianfamilies per student in public school being Rp 144,000 (ofwhich a third is paid directly to the school), whereas the costof private education averages Rp 216,000 per student peryear, or only 50 per cent more. At senior secondary education,average costs are Rp 229,000 for public (general) and RD262,000 for public (vocational) schools, with 35-40 per cent ofthis in direct costs to the school. For private (general) andprivate (vocational), annual household costs are Rp 314,000and Rp 338,000 respectively, or only 30 per cent more.Interestingly, at the Islamic schools in Indonesia, averageannual household expenditure per student for private andpublic schools is roughly comparable.

Finally, we note that in Argentina, as a result of thecontinuing crisis in public education, parents of public schoolstudents organised into 'cooperadora' to support their schools

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with voluntary contributions. This has become so embedded inthe system that it has become a de facto quota paid by allstudents. The 1994 Census shows that 90 per cent of publicschools had such a mechanism of financing. This means thatparents are paying for public education and in some casesthose payments are not much different from the quotascharged by private schools, even though the latter may giveservices (such as language and computer learning) which thepublic sector does not provide. A similar situation pertains inTurkey.

Inequity in Public Education FundingNext we consider how total public spending in education inlow-income countries typically favours the affluent, andindeed can often be a subsidy from the less well-off to thehigher income groups. Considerable research evidencesupports this claim, from developed as well as developingcountries (see, for example, Le Grand, 1987; Barr, 1993; WorldBank, 1994; Bray, 1996; Hanushek, 1995; West, 1997;Ziderman and Douglas, 1995). This situation applies becausefewer low-income children attend secondary and highereducation institutions. In this context, the benefits ofincreasing the number of students in private education as astrategy for development are twofold. For it would: (a)increase the number of students who pay for their ownschooling, thereby providing incentives and mechanisms forgovernment to begin to redirect significant proportions ofgovernment subsidies in education to those genuinely in needof them; and (b) increase the participation of higher incomegroups in private, fee-paying education, thus reducing thesubsidy by the non-users (generally those of lower incomes) tothe users (those of higher incomes) of higher levels ofeducation. These issues are taken up further in the finalchapter, when the model for development is explained indetail.

Gender Equity

Finally, it is worth remarking on another equity issue ofincreasing concern on a global scale, that of gender equality.The IFC case studies and country studies indicate that in thisrespect private education has a beneficial effect, in thatprivate educational institutions cater for male and female

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students in more equal numbers than do public ones (IFC,1998). This may reflect a higher priority accorded to girls'education amongst the higher social classes and castes, but isnevertheless highly significant in a world where the economicand social benefits of female education are known to be majorfactors in the overall process of development.

Company-level IssuesWe turn now to issues operating at the company and/orinstitutional level which have explicit implications for anydiscussion of equity. For not only are many of the educationbusinesses examined in the previous chapter concerned withprofitability and educational efficacy but they are alsoconcerned with issues which can be seen to have a bearing onequity or social justice. A commitment to student loans andscholarships, cross-subsidisation, seeking mutually beneficialrelationships with the public sector, and social responsibilityprogrammes, are all indications of their potential impact.

Company Student Loans

The existence of company student loan schemes is of greatsignificance - particularly in terms of the model of public-private partnerships developed in the final chapter - for threereasons.

First, because they encourage individual responsibility andthe overcoming of dependency - students do not feel that theyare owed education or training, only that they are beingoffered the privilege of partaking in it, that it has costs as wellas benefits, and that through receiving higher wages they willbe able to repay their debt, hence allowing others also tobenefit from more education.

SeconLd, they seem to overcome one of the major problems ofgovernment student loan schemes, that of default (see Barrand Crawford, 1996). Within the company loans, there is an'honour' system working, whereby students feel indebted tothe company, and would not wish to cheat it - or a futuretranche of students - out of its rightful funds.

Third, it is indicated by the management of the loanschemes that their models are either potentially or actuallyself-financing, and, indeed, generating a surplus. Thissuggests an implication for their role in the widerdevelopment process, discussed in chapter 5 below.

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We found three current student loan schemes in operationin our case studies, TECSUP, Peru; NIIT, India; andUniversity Los Andes, Colombia (although several educationalcompanies, including Educor and Speciss College hadoperated schemes in the past and were looking to revivethese); details of the first two are given here. We were alsoinformed from the country studies that similar schemes wereoperating in Romania, where loans are offered by individualuniversities with preferential interest rates that can cover thetuition for maximum one academic year, to be repaid in up tofive years, and in Turkey.

TECSUP's Student CreditMost of the TECSUP core programme students come from lowor middle-low income levels of Peruvian society: 54 per centhave family income below US$500 per month, 38 per centhave income between US$500 and US$1,000, and only eightper cent have family income over US$1,000 per month. This isclearly facilitated by the presence of the loan scheme, bywhich anyone who passes the entrance examination isguaranteed a place on the course. All those who pass the examare asked for details of parental income. Those who are toopoor to pay the lowest rate of fee, after further checks andparental interviews, are offered credits varying from 25 percent to 100 per cent of fees, depending on income. TECSUJPissues detailed regulations, running to eight pages, fordeciding on the level of credit to be awarded.

The credit is given by public deed, and two guarantors sign.In the event of non-payment, these guarantors would beapproached, and legal action would ultimately be taken. Butthis has never yet occurred, because of the way the loans arestructured, and the 'honour' system which emerges because ofit. Instead of interest on repayments, the amount to be repaidis linked to the level of student fees currently charged.Suppose course fees were $200 per month when the studentstudied, but when the time comes to repay, the same coursefee is $260 per month. Then $260 per month is the amountowing. The principle is that students have been given theopportunity to study for one month, so now they can givesomeone else that same opportunity. If they do not repay theirloan, they can see very practically that they are deprivingsomeone else of the same opportunities which they had been

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given by the company. This fact, which will have been stressedto the recipients of the loans throughout their course, avoidsloan defaulters.

After students finish their 3-year course, they are allowedsix months before they start paying back their loan. Clearly, ifinflation is high, then the effective interest rate is high, andvice versa. In fact, fees have increased in the last few years byabout 10 per cent per year to keep abreast of inflation.Students are expected to have paid 42 per cent of the paymentby the time six years has passed.

Non-payment of the loans is avoided in part through thenormal selection process: TECSUP tries to ensure that itsintake will be serious students, who will then be more likely toobtain employment after graduation. However, there havebeen problems of non-payment of loans from about 10-20students in total (only a couple each year). TECSUP attemptsto reschedule debts to allow them to pay back some part oftheir loan. It is suggested that the non-payers are only thosewho genuinely cannot find employment: the 'honour system'around TECSUP graduates is strong, and would inhibit peoplefrom deliberating avoiding payment. This has implications forthe way other student loan schemes could be designed to avoidthe problem of default.

Two people manage the loan scheme, including theAdministrative Director. The costs of the scheme are absorbedin general administration, so they are not accounted forseparately. Although the loan scheme started with a donationof $400,000 from the Inter-American Development Bank(IDB), the account is now in surplus, and the managementargue that had this instead been a loan, rather than adonation, it would have been possible to pay back the loan andstill have the system viable.

NfuT's Total Freedom ScholarshipNIIT have just introduced what they call the Total FreedomScholarship, to celebrate India's 50th Anniversary. Each yearit has funded scholarships for bright students from poorbackgrounds. This scheme, however, NIIT hopes will betransformed into something more. The intention is todemonstrate to other companies a working model of a studentloan system which could be replicated, and perhaps for someother company to take it over and extend its application.

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Students are selected using aptitude tests and two interviews,to find capable but poor applicants. They are then given a loanfor tuition for a one-year compressed course (instead of takingthe normal two years), followed by a one-year placement withan IT company (the personnel officer of which is normally oneof the original interviewers). While working on the placement,the company, in addition to paying a small stipend to thestudent, pays back the loan to NIIT, including interest atcurrent bank rates, in full.

Universidad de Los Andes Loan Fund

The university has created a Scholarship and Loan Fund toenable students from lower socio-economic groups to attend.Loans are offered through the fund at low interest to cover thedifference between the enrolment fee and the student'scapacity to pay. Currently 410 students (a little over five percent of the undergraduate population) benefit from this fund.

Cross-subsidisationAnother way in which the education businesses surveyedcontributed to the education of the disadvantaged includedthe practice of cross-subsidisation.

In the Brazilian chains of schools, for example, (Pitagoras,COC, Objetivo, Radial), and in TECSUP (Peru), it is normalpractice for there to be a cheaper course offered in anafternoon and/or evening shift. All on the morning coursewould pay full fees. But the facilities and tuition wereavowedly the same in all three shifts, and hence it wasapparent that the morning shift was to a certain extentsubsidising the later shifts.

TECSUP's short course programme - aimed at employeesand executives already in work, usually financed bycompanies - also charges fees which create a large surplus.This is then used in part to subsidise the 'core' programme,that is, young people taking their diplomas which will lead towork.

A fine example of cross-subsidy for less wealthy students isthe Varkey Group, based in the United Arab Emirates -although this company was not a case study for the project.This group provides education to 26,000 school age studentsfrom the Indian subcontinent, whose parents in the main areguest workers in the Emirates, where state education is not

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available to non-citizens. The Varkey schools charge feesranging from $50 per month to sums in excess of ten timesthat amount. This means that virtually all the guest workerparents can afford an education for their children, the poorestbeing subsidised by the better off.

Another model of cross-subsidy was offered by DPS, India,with their village schools in deprived areas. They are run at aloss by the company, using surplus from their core andsatellite schools. In addition, when upgrading facilities at thecore and satellite schools, old equipment is passed on to thevillage schools. For example, computer education facilitiessuch as XTs and 386 machines, had become obsolete in thecity schools, but are far ahead of anything yet available in therural areas.

Public-private Partnerships

In addition to offering cross-subsidisation of places, several ofthe private education companies were playing a significantrole in the public education sector, through management andquality control contracts. These companies have beenexplicitly contracted by the national or state governments toassist with public education, because of the perceivedinadequacies of the public system, and the perceived highquality of the private alternative. Examples included thefollowing:* Pitagoras, Brazil, has recently entered into agreements

with other big business and the Ministry of Education inMinas Gerais to introduce aspects of its quality controlprogramme into the public sector. This involves secondingstaff to work on quality control within the public schools,and advising on curriculum and management. The aim iseventually to move towards Pitagoras taking over themanagement altogether of particularly disadvantagedschools, receiving the normal per capita funding fromgovernment. Moreover, in 1994, the Bogota educationauthorities (Colombia) have contracted Pitdgoras TEC -Pitagoras's TQM programme - to help raise standards in76 public schools.

* DPS, India, has 32 satellite schools, located in 11 states,which have been set up and owned by public sector(government) undertakings (PSUs). The DPS Societymanages these schools on the governments' behalf, under

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a management contract which specifies desired standards.These schools receive all the benefits of being part of theDPS system, and are subject to its curriculum and qualitycontrol procedures. Also, DPS runs a school in Nepal,under a bilateral agreement between the governments ofNepal and India, and a memorandum of agreement willshortly be signed for a similar management contract witha school in Indonesia.Federacion Nacional de Cafeteros, Colombia, managesschools in contract with the public authorities and,usually, other business investors. About 30 per cent of thefunding generally comes from government - in terms ofper capita funds for each student - which is thensupplemented by donations from the company. Thegovernment authorities allow the company full rein to runthe schools in terms of its innovative curriculumprogramme.

Social Responsibility Programmes

Finally, many of the educational companies and institutionssurveyed are actively involved in social responsibilityprogrammes. Some key examples are as follows:

e DPS, India, and its village schools programme.Government schools in the deprived area of Mewat havebeen taken over and upgraded, subsidised using surplusresources of the larger core schools. A similar scheme isnow beginning operation in the Punjab.

* Educor has a 'black empowerment' partner, NozalaInvestments, a women's economic empowermentorganisation. Nozala has a right to acquire up to 10 percent of Educor's shares, and has one seat on the Educorboard and one seat on each of its subsidiary boards.

* Objetivo/UNIP, Brazil, has several social responsibilityprogrammes. The dentistry departments in UNIP offer afree service to ordinary people in Sao Paulo, who canmake an appointment and be used as 'models' for the finalyear students. Similarly, the law departments all offerfree advisory services for the community. The 'natureschools' in Manaus, Angra Dos Reis, and Natal showurban Brazilians aspects of the environment and thedifficulties faced by rural people. They also give advice tofishermen about environmental preservation.

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* Pitagoras, Brazil, has three key aspects to its socialresponsibility programme. The first is 'Projeto Viver',which is aimed at enabling teenage students to engage involunteer social work in their communities. The second,and perhaps most significant in terms of impact (and alsoin terms of brand promotion) is 'Projeto Pitagoras-JB'.This involves the distribution of a free newspaper, inpartnership with the Jornal do Brasil, to 150,000 studentsacross Brazil. The newspaper includes news stories ofnational, international, economic, scientific and culturalsignificance, as well as sports news. The project also hasthe financial support of Fiat. It began in September 1997with monthly circulation, and the aim is that eventually itwill be circulated free of charge in every school in Brazil,weekly. Third, Pitagoras has teamed up with Eurocentres- a company with headquarters in Zurich which runslanguage schools in Europe - to form EurocentresPitdgoras. These centres are based in Pitagoras schoolsand offer English and Spanish lessons to students,teachers, parents and workers, all free of charge.

* NIST, Thailand, has a strong programme of socialresponsibility, in part from its affiliation with the UnitedNations and in part due to the requirements of theInternational Baccalaureate programme. The schoolprovides programmes for the students to become involvedwith less advantaged students in Bangkok and in thecountryside. The school has developed a relationship witha poor school in Thailand's economically stressednortheastern region near the Cambodian border. NISTstudents have travelled to the school to meet the studentsand to teach English and conservation of the environment.Students work on community and environmental issues inBangkok. They also assist in fund-raising and informationcampaigns on such issues as the plight of internationalrefugees.Trisakti University, Indonesia, has an extensive socialresponsibility programme - although in part this ismandated by government regulation. Activities include amobile dental unit and a mobile medical unit whichservice the community free of charge. The Faculty of Lawalso provides law consultancy to the public.

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SummaryThis chapter has argued that the traditional picture of privateeducation in developing countries as elitist is misguided.Private education businesses, it was suggested, are providingcourses that cater for a wide range of socio-economic groups,including some of the poorest groups in society. To servethese groups, the businesses ensure that they are innovativeand quality-conscious, as discussed in earlier chapters, thushelping to promote the future employability of disadvantagedcustomers. Moreover, many of the businesses are alsoconcerned with ways in which the disadvantaged can beassisted, through scholarships, loans, cross-subsidisation andinnovative public-private partnerships. At the level ofbusinesses themselves, private education begins to take on anew perspective.

These are also macro level considerations. First, there arecosts - sometimes hidden - to the public of state educationand, particularly at the secondary level the differences in costsbetween public and private education may not be that severe.Second, it has been argued that public spending on educationin developing countries is frequently inequitable.Paradoxically, the most privileged classes seem to benefitmost of all from state subsidy, even if the rhetoric ofdevelopment is the opposite.

The picture emerging at both macro and micro leveltherefore lends support to the proposition that privateeducation could help promote, rather than undermine,equitable development.

For the purposes of the final chapter and policy proposals,two developments are worth highlighting here. The firstconcerns the existence of the company student loan schemes,which have the potential to serve as a model for furtherdevelopments to aid equity: many students are unable to gainaccess to private education because of lack of funds currently,even though their potential future earnings, had they beenable to access private education, would be adequate to repaytheir fees. If student loans are available, this cycle ofdisadvantage can be overcome. The second points to the waysin which some private education companies have entered intopartnership with public authorities - both at home andoverseas - explicitly because it was argued that the privatesector could offer a better service for the disadvantaged.

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Again, if this type of arrangement could be replicatedelsewhere, the potential to aid development would beenhanced.

Before drawing out policy proposals, we turn to factors atthe macro (country) level which affect private education.

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4 I Regulation and Investment Climate

The 'snapshot' of private education in developing countriesis now beginning to take shape. We have seen the existence ofprivate education companies, and how they can be innovativeand enterprising. We have also suggested that the presence ofthe private education sector does not necessarily exacerbateinequity. In this chapter we explore factors at the macro levelwhich impinge upon the private education sector indeveloping countries, in particular concerning the regulatoryregime.

I first outline the extent and nature of the private educationsector in selected countries, before pointing to factors whichaffect the sector, particularly involving government activity ininvestment and regulations. All the country evidence isgleaned from the country studies conducted for the IFC study,which covered the IFC's five geographical areas, and werecountries considered likely to be sympathetic to privateinvestment in education. The 12 countries were:

* Argentina

* Brazil

- Colombia

* Cote d'Ivoire

• South Africa

* India

* Thailand

* Indonesia

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* Russia

* Romania

* Jordan

* Turkey.

For these 12 countries information was gathered on thosefactors which influence private education sector investments,using existing datasets where possible, supplemented byinterviews with key personnel in government, internationalagencies and education businesses. 8 The following six factorsare of relevance here:

* Size of the potential market and 'maturity' of the existingprivate education market

* Regulatory environment

* Investment climate

* Resource availability

* Student funding possibilities

- Size and 'maturity' of private education market.

First, it is worth noting that in all the countries surveyed,there was a huge potential market for private education. Inmany of the countries, there was express dissatisfaction withexisting public schools, or inadequate provision in rural areas,and hence potentially untapped markets for private educationat all levels - primary, secondary and tertiary (both academicand vocational). There were also extensive waiting lists forsome of the private education establishments. It is clear that

8 The study was conducted before the current financial crises in Asia andRussia. Although it is hoped that the general findings will not in themedium to long term be unduly affected by these events, some caution atinterpreting the comments applicable to Indonesia, Thailand and Russia,and any other countries influenced by these events, would not go amiss.The case studies of educational institutions also provided information oncountries other than those in this list of 12 - for example, we gleanedinformation on Zimbabwe and Peru, discussed in this chapter, from thecase studies of Speciss and TESCUP respectively.

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the size of the potential market would not in itself be an issuewhich would lead one to look unfavourably at any of thecountries studied.

The second dimension of analysis concerned what wedefined as the 'maturity' of the existing private educationsector. This focuses on the size of the existing privateeducation market, and its innovativeness and profitability.Our research found in the great majority of countries a largeprivate education sector, of varying size at differenteducational levels. Some examples of notable private sectorsinclude:

* Colombia: 28 per cent of total enrolment in kindergarten,primary and secondary education in the private sector,increasing to 40 per cent at secondary school level

* Argentina: 30 per cent of secondary school enrolment inthe private sector

* C6te d'Ivoire: 57 per cent of secondary school enrolment inthe private sector

* India: 17 per cent of all kindergarten, primary andsecondary schools in the private sector

* Indonesia: 23 per cent of primary and secondary schoolstudents, and a massive 94 per cent of higher educationstudents, in the private sector.

The lowest proportions were found in South Africa, with2.5 per cent of primary and secondary pupils in privateeducation, and significantly less than one per cent in Romaniaand Russia. However, these figures obscure the much largerprivate sectors in major cities - and also of course must beinterpreted in the light of the illegality of private education inthe last two countries until very recently. In Guatengprovince, South Africa, which includes Johannesburg andPretoria, 11 per cent of primary and secondary students are inthe private sector; in Moscow, the figure is seven per cent(about the same as in the United Kingdom).

The extent to which the private education sector wasinnovative - particularly in terms of providing high qualityeducation, utilising information and communicationstechnology, and being profitable - was of interest in the 12

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countries studied. We identified many instances of extensiveinnovation, including growth of large school chains, verticallyintegrated education systems, application of innovativetechnology and teaching and learning systems, and use ofdistance learning.

We give examples to illustrate some of these themes withrespect to the 12 countries examined.

ArgentinaThe private sector is large, with roughly 25 per cent ofeducational institutions in the private sector. Unlike inneighbouring Brazil, large chains of schools are not present,although a few chains have started to emerge in the lastcouple of years. One of these is Vaneduc, a chain that ownseight different educational sites in Buenos Aires, four of themcovering kindergarten to university education. Another one isheaded by the university Universitas and the schoolsImmaculada Concepci6n in downtown Buenos Aires, EscuelaGeneral Belgrano in the Belgrano neighbourhood, Granaderosin the Flores neighbourhood and Martin y Omar in San Isidro.All of these have grown by buying up existing schools, and it ispredicted that their example will be replicated in the comingyears.

None of these chains has yet extended its operationsoutside Buenos Aires, although if their comparativeadvantage is managerial expertise they may do that in thefuture, even if costs of control may be higher.

Outside 'formal' education, there is also a tremendousamount of educational activity performed exclusively by theprivate sector. Almost all of them are organised as for-profitventures, and they offer educational services in such fields ascomputer training, music, secretarial work, foreign languages,support to 'formal' education (particularly at the secondaryand university levels), arts and design, hairdressing, cardriving, and technical jobs in electricity, motor repair andcarpentry. Among these there are a number of 'chains',covering not only Buenos Aires and its suburbs but the wholecountry. There is no prejudice against the profit motive inthese activities, maybe because they are considered more'training' or even 'businesses' or 'shops' than education. Someof them are even becoming franchises. A few of the larger oneswith regional or nation-wide coverage include:

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* Academias Pitman: typewriting, computers, secretarialwork, English, accounting clerk

* Academias Toil & Chat: English

* Alianza Francesa: French, tourist guide.

• CIMA Profesional: accounting, taxes

* Escuela Panamericana de Arte: design

* Flego: fashion design

* Instituto Mariano Moreno: computers, secretarial work,English

* Autoescuelas Raul: car driving

* Eurovial: car driving

* Driver's: car driving

* Berlitz: languages

BrazilThe private education sector in Brazil is remarkablyinnovative and successful, as the illustrations in chapters 1and 2 indicate. In Sao Paulo State, with 25 per cent of thecountry's population, 13.4 per cent of primary and secondarystudents are in private education, with the highest figure -19.1 per cent - in high school education. The large chains ofprivate schools operating make a significant impact on thetotal educational scene. These are chains of a regional and/ornational nature, such as Objetivo/UNIP, Anglo, Positivo,Pitagoras and COC. The biggest is Objetivo/UNIP which hasbranches all over the country. Many of these chains alsoinclude universities.

ColombiaThe private sector accounts for nearly 51 per cent ofenrolment in pre-school (total enrolment is approximately780,000), 19 per cent of primary schooling (total enrolment isapproximately 4,855,000) and approximately 40 per cent ofsecondary schooling. There is an increasing trend in Colombiafor private education institutions to enter into associations

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with foreign institutions for the development of highereducation programs. For example, the Universidad Externadode Colombia is associated with the University of Colombia inthe United States, and Universidad de la Sabana. Similarlyits Higher Management Programme is associated withUniversidad de Inalde in Spain. The foregoing programs offerjoint degrees and the exchange of teachers and classes. Theyare another sign of a vigorous private education sector.

C6te d'Iuoire

In C6te d'Ivoire at pre-primary and primary level, nearly 9 percent of schools are in the private sector, and about 12 per centof teachers. At secondary (general) level, over 57 per cent ofschools are in the private sector, and about one-third ofteachers. Currently there are 20,000 students in privatetertiary professional institutions, although there are noprivate academic tertiary institutions. The tertiary vocationalsector is particularly vibrant at present, with 20 per cent ofthe total students taking computer-assisted managementcourses, and 12 per cent taking accounting and financecourses.

India

The latest survey shows that about 54 per cent of 'recognized'Indian schools were managed by government and local bodies,39 per cent by private government-aided bodies and six percent by private bodies. A very high number of schools arelocated in rural areas, although most of these are primaryschools and only about 40 per cent are higher secondaryschools. Although the number of private schools is relativelylow at the primary level, it rises significantly at the secondaryand higher secondary levels and includes composite schools.

There are three categories of recognised private schools:private 'unaided' schools, private government 'aided' schoolsand government schools. Unaided schools are privatelyfunded and face fewer restrictions than the other twocategories. At present, for instance, they enjoy the freedom todetermine their own fees and admission criteria, which theother two categories cannot. A further sub-category,consequent upon the variety of religions that abound in India,are known as 'minority' schools and enjoy a certain latitude incurriculum design and operations.

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A huge number of vocational institutions have alsoburgeoned, either independently or in joint/collaborativeventures with foreign institutions. The case of NIIT, thelargest provider of computer education in India, isoutstanding. The climate is presently ripe for theestablishment of quality-oriented educational institutions atall levels and this is clearly evidenced by the large number offoreign institutions that are eyeing the Indian educationalmarket and testing the waters through pilot schemes.

IndonesiaIndonesia's private education sector at the primary, secondaryand tertiary levels, including vocational institutions, isextensive. While at the primary level, there are only seven percent of children in private schools, this rises to 33 per cent forjunior secondary, 54 per cent in high school and 94 per cent inhigher education.

Domestic players express strong interest in developingrelationships with outside investors. In fact, many suchendeavours are already taking place in Indonesia, particularlywith countries like Australia, the United States and Japan. Asimilar interest is also apparent in developing regions, whichhave a severe shortage of resources. Distance education isalso an area where there is great demand, and especially inthe outlying islands of Indonesia. With the help of the WorldBank and the Asian Development Bank the centralgovernment is presently engaged in providing some distancelearning opportunities, but they are still in the very beginningphases and again lack the necessary funding for expansion oneither a quality or quantity basis.

JordanThe proportion of students in the private school sectorincreased from 10 per cent in 1994 to 14 per cent of the totalschool population in 1996. There were 22,641 studentsenrolled in community colleges in 1995-96, more than half ofthem in private colleges. Private universities, the first ofwhich started operation in 1990, are growing in number andcapacity. The number of students enrolled in publicuniversities in 1994-95 was 48,900 and in private universities16,100.

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There are currently 308 private schools registered inJordan providing over 3,500 classrooms and catering forapproximately 105,000 students. There are 12 privateuniversities. There are also several chains of private schoolsoperating. Over 15 companies run two-school chains; twocompanies - the National Rosary Monastical Society and theAl-Ourouba Schools Company - have three-school chains; theIslamic Cultural Society and the Roman Catholic Archdioceserun chains of four schools each; the Orthodox Society forCulture and Education, and Yousef Al Athem & Co. havechains of five schools each; the Latin Patriarchate a chain ofsix schools; and the Islamic Center Charity Association achain of seven schools. The international Lebanese chain,International Group for Educational Services, opened the AlShwaifat International School at the outskirts of Amman in1997. It runs schools in London, Lebanon, Germany and theGulf States.

RomaniaFor the academic year 1995-96, 25 per cent of highereducation students and 12 per cent of post-high schoolstudents were in private education. However, less than fiveper cent of vocational students were in private education, andfor primary and secondary education, the official figure waszero per cent privately educated. At the pre-primary level,there were 0.06 per cent in private kindergartens.

At the higher education level, there are some 'chains' ofuniversities:

* Dimitrie Cantemir Christian University (Bucharest) has anetwork of branches that cover three cities: Bucharest(three faculties), Sibiu (one faculty), Cluj-Napoca (twofaculties) and Timisoara (one faculty).

* Spiru Haret University has a network of branches in fivecities: Bucharest, Campulung Muscel, Constanta, Craiovaand Brasov.

* Constantin Brancoveanu University with its headquartersin Braila had established a network of faculties coveringthree cities: Braila, Pitesti and Ramnicu-Valcea.

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In Romania, distance learning is a relatively new concept ineducation, introduced for the first time two to three years agoby British consultants. Two major private educationinstitutions provide distance learning courses. The first is theRomanian Banking Institute which has as a major partner theBritish Know-How Fund. The second is CODECS - the Centrefor Open Distance Education for Civil Society, mentioned inchapter 1 - which developed, in cooperation with the UKOpen University Business School, a programme of distancelearning for management.

RussiaIn Russia, there has been a large increase in the number ofprivate academic education institutions - from 368 in 1993 to505 in 1995 and to 540 in 1996. In particular, the number ofprivate primary schools increased from 112 in 1993 to 141 in1995 and to more than 160 in 1996; the number of basissecondary schools - from 36 in 1993 to 83 in 1995 and to morethan 100 in 1996; the number of complete secondary schools -from 220 in 1993 to 301 in 1995 and to about 350 in 1996.Thus, private general education institutions currently accountfor 0.85 per cent of the total number of state and municipaleducational institutions in 1996.

At the same time the number of private educationalinstitutions, licensed to provide education on programmes ofhigher-school professional education, increased from 157 in1994 (statistics have been collected since 1994) to 296 in 1996.Such institutions accounted for 51.6 per cent of the totalnumber of state institutions (without taking intoconsideration branches and other local departments). Atprimary school level, the figure is 4.2 per cent and atsecondary level 1.2 per cent of total students are in privateeducation. As noted earlier, this relatively low figure obscuresthe fact that in Moscow itself about seven per cent of allprimary and secondary students are in the private sector.

Private universities can be considered as a major factorcontributing to the expansion of continuing education. Manyprivate higher schools give opportunity to many people,especially the unemployed and military officers transferred tothe reserve, to receive higher education or re-training in areasonably short period of time. There are a number of

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federal and local programmes to re-train the unemployed andmilitary transferred to the reserve.

South AfricaInterestingly, one of the most innovative private educationsectors is also one of the smallest. In South Africa, privateschools account for only about 2.5 per cent of the total numberof students (one to two per cent at primary level and three tofour per cent at secondary level), although, as noted, thisnational figure obscures the much larger concentration inGauteng province, where about 11 per cent of all primary andsecondary students are in private education.

However, there are key players in South Africa which showthe for-profit sector in very innovative form, viz., Educor andADvTECH, as noted above in chapter 1. Damelin College HighSchool has played a path-breaking role in changing the natureof private schooling in South Africa and making for-profitschooling 'respectable'. Damelin was being imitated before theformation of the growing Educor Group, quoted on theJohannesburg Stock Exchange, but the obvious success ofEducor has drawn greater attention to education as apotential area of private investment. The company ADvTechwas recently listed on the Stock Exchange and is on a similartake-over trail to that pursued by Educor over the past fewyears. The Association of Private Colleges of South Africa(APCSA) has more than 120 members offering a range ofcourses, including business, travel/hotel, marketing/sales,public relations, human resources, secretarial, bookkeeping,legal, reception/switchboard, computer applications, graphicarts/advertising, interior decorating/architecture, paramedicaland ABET/literacy.

There are no degree-awarding private universities in SouthAfrica yet - Educor delivers courses for the statecorrespondence university, UNISA - but a draft HigherEducation Bill which is currently under discussion does makeprovision for the registration of private higher educationinstitutions in future.

ThailandIt is striking that vocational education growth in the privatesector in the period 1993-96 exceeded that in the publicsector (80 per cent private versus 44 per cent public). The

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demand for education catering for children of the middleclasses is typically met by private institutions in the academicstream and those focusing on vocational courses leading to acertificate or diploma. These students continue theireducation after finishing the lower secondary level. As forfuture expansion, there seems to be a growing demand forprivate distance learning: thus the National TechnologicalUniversity (NTU), based in Fort Collins, Colorado, USA, hasalready set up an agency in Thailand. Most clients arecorporate and most courses are in technology. There is also avigorously increasing demand for tutoring. Many privatetutoring institutions are appearing and they offer coursestailoring especially for entrance exams for students wanting toenter secondary schools and universities both in public andprivate schools. Most tutors are from prestigious schools anduniversities. One particularly strong growth sector in thetutoring market is education in languages. There are alreadyhundreds of private tutoring schools offering short courses inforeign languages.

TurkeyIn the past 15 years both the demand for, and the supply of,Turkish private schools has exploded. The number of schoolsincreased almost five-fold and the student capacity four-foldbetween 1981 and 1995. The structural changes and theliberalisation of the economy caused rapid urbanisation and arapid increase in the wealth of the upper classes who are morelikely to seek private education for their children. On thesupply side, the government eased the regulations on privateeducation and promoted private enterprise as in the rest ofthe economy.

The rapid changes in and the liberalisation of the economyduring the 1980s and 1990s have put private educationinstitutions on top of the political agenda. Growing demandhas led many investors to open private schools. By a change inthe Law of Higher Education in 1992, it was made easier fornon-profit foundations to establish private universities.

However, private schools are not utilised to full capacity.According to official figures, in 1995-96 the capacityutilisation of private schools in Turkey was a mere 57 percent. (Total capacity being 319,099 and the number ofstudents enrolled in private schools 182,352.) On the other

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hand, some prestigious private schools have always hadwaiting lists and an excess demand for places. In 1997, out ofthe 21,395 students who participated in the private highschool examinations, 6,230 were admitted directly to a privatehigh school and 1,697 were on waiting lists.

The target of the government is to increase the currentratio of private school students in general primary andsecondary education from the current 1.5 per cent, to six percent in the short term and 15 per cent in the long term,throughout the country.

The competition within Turkey will be fierce in the two bigcities. Istanbul and Ankara have most of the privateuniversities and private high schools. There will be increasingdemand for private education in the coming years, in the fastdeveloping provinces of Izmir, Bursa, Denizh, Gaziantep,Izmit, Eskisehir and Adana. Some investors have alreadybeen investing in private schools in these regions and demandis very high.

Regulatory EnvironmentThe biggest stumbling block for private education in manycountries may be the regulatory environment. This couldseverely inhibit the potential for private education tocontribute to development. Although regulations may beintended to protect consumers and maintain standards, theyoften act to inhibit and, in some cases, stifle needededucational opportunities which the private sector couldotherwise provide. There appear to be three ways in whichregulatory regimes can inhibit private educational growth andinvestment:

* Regulations are substantial, but mainly ignored; however,the threat of enforcing them inhibits and threatensoperations.

* Regulations are applied in an arbitrary or ad hoc fashion.

* Petty regulations are enforced, leading to inconvenience,inefficiency and a brake on growth.

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Regulation in Argentina and Zimbabwe

The cases of Argentina and Zimbabwe 9 provide classicexamples of these three areas, and are worth explaining insome detail, to give a flavour of the types of regulations foundin many countries which inhibit development of the privateeducation sector.

Private schools' Regulatory Requirements in the Province ofBuenos Aires (which cover the largest population), a privateschool must ask for authorisation from the provincialgovernment with regard to:

* the name of the institution (art. 4)

* staff movements (art. 10)

* the limit of students per class (art. 12)

* any religious ceremony (art. 18)

* any text in a foreign language. Two copies of a translationmust be submitted to the ministry 'in letter-size paperwritten only one side, signed by the director in each page.Any change in the text must follow the same procedures'(art. 28)

Moreover, the following also apply:

* All ceremonies are regulated down to the smallest detail.It is regulated how students will stand at a ceremony, whowill direct it, who will raise the national flag, when thenational anthem will be sung (art. 20)

* Time schedules will be the same as government schoolsand any change must be authorised by the ministry (art.30).

* Only books and texts approved by the provincial ministryof education will be used (art. 15).

The Regulatory Requirement for Secondary Schools comeswith such specific instructions as (and there are many more):

9 Information for Zimbabwe was obtained from the case study of SpecissCollege - Zimbabwe was not one of the country studies.

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* Any professor doing a scientific experiment must registerit in a specific register.

* If a professor gives a lecture at the school, the text of itmust be submitted beforehand in written form and filed atthe school (art. 57).

* Assistants to teachers must keep a book with all practicalclasses given, stating the instruments and materials used.This book will be signed by the director every month (art.58).

* administrative personnel cannot converse about subjectsdifferent from their office duties once work-time hasstarted (art. 69).

* Any sport activity must be approved by the authority. Therequest for approval must state the organising institution,the kind of exercises or gymnastics tests that will becarried out as well as the exhibition by-laws which mustbe approved by the authority (art. 172).

Similarly, in Zimbabwe, many of the most onerous of theregulations are simply ignored by the various ministriesinvolved (Education, Higher Education, and ManpowerPlaning and Development). For example, under theregulations, a for-profit college has to seek the relevantministry's clearance for each member of staff employed, andfor every fee increase and every change to, or supplement to,the curriculum offered. In many educational settings, eachyear, extensive management resources are engaged writing tothe relevant ministry seeking permission for fee increases andnew members of staff, and proposing new curriculum options.These communications are seldom answered, and theassumption is that they are simply ignored. However, thisbrings uncertainty, and would inhibit investment, because achange of heart by a government which wanted to hinderprivate education could be effected simply by enforcingexisting legislation. At the present time, such a change ofpolicy seems unlikely, as the government in Zimbabwerecognises that private education is a necessary route todevelopment; however, this is not to say that such changes

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could not occur, and the fearful atmosphere that developedaround private education in 1980 could return.

The key point is that in both these countries - and manysimilar ones - most of these regulations are not followed, noreven controlled. However, this brings us to the secontdcategory, of regulations applied in an arbitrary or ad hocmanner. For example, in Argentina, private schools getperiodic reviews from inspectors requesting them to complywith any of these or many other regulations. They may bepunished for not following them to the letter, which keeps thedirectors in apprehension of the arrival of the inspectorate.This certainly has a bureaucratic cost, and would be ofparticular concern if an institution was seeking outsideinvestment.

Similarly, in Zimbabwe, the rather arbitrary way in whichregulations are enforced - and even new ones apparentlyinvented - is shown by what took place when Speciss boughtthe Academy of Learning 1 0 franchise for Harare. Speciss triedto register this as a new college under the ManpowerPlanning Regulations, but was told that this could only bedone if the government's qualifications were offered. Not onlywas this against the ethos of the Academy of Learning, whichoffers its own qualifications, but, more importantly, is notstipulated in the appropriate Zimbabwean regulations,seemingly invented in an ad hoc way to inhibit the expansionof Speciss. Eventually, an ally from within the Ministry ofEducation pointed out that if it was announced that theAcademy of Learning franchise was an integral part of SpecissCollege, there would be no need for separate registration! Thiswas the route eventually followed. Again, this not uncommonkind of incident shows the difficulties of working underregimes with strict regulation of private education.

Regulations which are of the third type - that is,regulations which are regularly enforced, and whichundermine the initiative of private education at the primaryand secondary school level - include the following inArgentina:

10 This is a South African franchise, now operating world-wide and owned byEducor.

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* The mandatory national curriculum. This restricts theability of private schools to compete through the content ofthe curriculum or the methodology of education.

* Provisional registration and accreditation of privateeducational institutions, with the threat of withdrawal ofrecognition of education delivered. At the primary andsecondary level, education is regulated by procedureswhich only grant a provisional accreditation at thebeginning of the process, with final accreditation givenafter evaluation of its performance. If this accreditation isdenied, all education given in the meantime will not berecognised. This imposes a severe barrier to entry, makingit very difficult to attract students at the start ofoperations.

* The Teacher's Statute. This regulates the labour contractfor all teachers both at the public and private sector. Itgrants all teachers 'stability' as long as the teachermaintains good conduct. He/she cannot be fired, nortransferred or suspended without due process. Allteachers are paid according to years of service. Thisprevents private schools from implementing what theydeem to be sensible systems of incentives for goodperformance, since pay is tied to seniority and not toperformance and productivity. Teachers also enjoy severalkinds of paid leave which include not only a 30-dayvacation per year but also long periods for sickness ormaternity and up to six-months a year to study. Accordingto recent research, a comparison of average days workedin a year gives 220.7 days for a worker under the generallabour contract law but only 118.5 for a worker under theTeachers' Statute. This generous system requires privateschools to have more than one teacher on the payroll toobtain the services of a full-time teacher in the classroom.

X In private universities, contracts with professors areregulated by general labour laws affecting any other job.This brings a specific problem to all universities, state orprivately owned. Most of the professors at Argentineuniversities are part-time, having other commitmentsapart from their academic work. Regulations requestuniversities to have them contracted as 'employees',

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therefore with all the payroll taxes that both employeeand employer need to pay. This is not only very costly forthe universities, it is also unfair to the professors since, forexample, those who are already employees in their mainactivity are forced to register as independent professionalsand start a second monthly payment to social security,even if they only teach a few hours of classes each month.

Similarly, in Zimbabwe, there is a range of relatively minoradditional regulations which are regularly enforced inpractice, which inhibit the growth of private education invarious ways. These include the following:

* Marketing in schools is forbidden.

* Planning zoning regulations inhibit growth.

* Import duties lead to expensive text books and computerequipment.

* Study permits require considerable staff time and expensein order to recruit foreign students - in the Chitepo EFLdepartment there is 1/5 full-time post employed to obtainstudy permits.

- Employment of expatriate staff is extremely difficult, evenin shortage subject areas.

Regulation in Other CountriesThe situations in Argentina and Zimbabwe are not unusual.In other countries similar regulations, particularly of the thirdtype, impede the work of private educational institutions.

BrazilWhen a new course is inaugurated at the university level, 'ateam of bureaucrats from Brasilia invade'; it prescribesexactly how many books there must be in the library, howmany classrooms and laboratories must be used, the spacemade available in these, how many qualified teachers areneeded, etc. Such conditions must be met in order to have thecourse approved. Given changing technology, sometimes theseconditions seem rather archaic. However, they have to befollowed even where they make no educational sense, wastingtime and resources. Student numbers at the university arealso controlled by the Ministry of Education, and any proposal

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for increasing them has to be approved. Currently it takesapproximately one year for a university course to be approved- this is a substantial improvement over the five years thatwas common until recently.

India

There have been rumblings about fee control for privateschools, which may erupt into action by the state governmentsto limit fees and fee increases. Recently, in Delhi, the courtswere petitioned to restrict fee hikes proposed by schools, tomeet the added burden resulting from the recommendationsof the 5th Pay Commission, which has proposed hefty wageincreases for teachers. In their interim order the judgespermitted private unaided schools to raise their fees by amaximum of 40 per cent, to meet their additional emolumentsbill.

Indonesia

At the tertiary level, institutions are allowed a limit of up to40 per cent 'local content'. The other 60 per cent of thecurriculum for private education institutions is designed bythe Centre for Curriculum Development (CDC). Local contentis, however, also subject to government approval. All privateuniversities must submit a development plan every two yearsfor Ministry Curriculum Approval. For-profit institutions areillegal, as are surpluses. However, it is common practice forprivate education institutions to retain up to 50 per cent oftheir surplus on an annual basis. As this is an illegal practice,it leads to bribery being common.

Russia

The government has been very strict in controlling privateuniversities, closing many of them ostensibly because ofmismanagement, lack of suitable professors and inappropriateeducational standards. The Russian government is controllingany further expansion by setting very strict standards foraccreditation.

Turkey

For-profit higher education is also illegal. It is reported thatsome private university proprietors disguise profits through,for example, inflated personal salaries and creative

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accounting, and thereby evade this injunction, but this againleads to bribery and corruption. There are very detailedregulations relating to higher education which are frequentlyrevised. Keeping up with the regulations and revisions is amajor preoccupation of university administrators, and lengthyguidebooks are published privately to help with the process.Private universities are not required to comply with theregulations, but if they fail to do so then they will not receiveaccreditation, their students will not be able to defer militaryservice and their graduates' degrees may not be recognised byemployers. Amongst other things, the regulations provide forthe teaching of Turkish language and history to allundergraduate students and lay down detailed criteria for thegrading and promotion of academic staff.

Investment Climate

A related issue concerns the investment climate in thecountry, our third dimension of analysis. Of particular impactwill be government receptiveness to private investment ineducation.

In the various countries studied there was a very broadrange of factors affecting the investment climate foreducation. In most cases, private investment in education isfeasible, including external financing and foreign investment.However, in most countries, local capital market activities inthis sector were very limited, and in many cases - forinstance, India, Argentina, Indonesia and Romania - therewere barriers to for-profit educational institutions. In somecountries, such as Jordan, Indonesia, CMte d'Ivoire andThailand, there is a government-led effort to encourageinvestment in certain sectors of private education as a meansof alleviating capacity constraints. In many cases theinvestment climate is more favourable (more open investment,foreign investment, allowance of for-profit companies) forhigher levels of education (particularly for technical subjects)and vocational education (for example, in Romania, Turkey,Thailand and India).

Govemment Receptiveness

The climate facing potential investors is determined largely bythe willingness of national governments to tolerate or

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encourage a major role for the private sector in the provisionof education. Four dimensions are worth distinguishing:

* the principle of private (non-government) provision

* the acceptability of foreign investment

* the issue of profit-making from education, and

* the differing applicability of these factors at differentlevels of education.

First, in the 12 countries studied there is increasingacceptance of private provision, albeit with varying degrees ofenthusiasm. In some countries (for example, Argentina), thereis more encouragement of community financing, religiousschooling and other NGO involvement than of commercialprovision of education, but in all countries the non-government sector is gaining ground both in size and inacceptability. In Thailand, Colombia, South Africa andArgentina, for example, the ratio of private to public even atthe primary education level is increasing.

By far the clearest evidence for the expansion of privateand foreign-based education is in the tertiary sector. Forexample, the vocational private school enrolment in Thailandhas been increasing at a significantly greater rate than that inthe public sector, with the private sector enrolment rate of the15-17 year old cohort now being 50 per cent of the total. Inhigher education, meanwhile, there are now 36 registeredprivate universities or colleges. In Colombia over two-thirds ofhigher education institutions are currently in the privatesector while in Indonesia the figure is more than nine-tenths.

Second, government receptiveness towards privateprovision does not necessarily extend to foreign investment.Some countries (such as Turkey) which encourage privateschooling are averse to foreign involvement, usually fornationalistic or religious reasons. As a general rule it seemsthat governments are more hospitable to foreign investorswhen the investment concerns tertiary education, educationthat includes professional training and instruction in subjectsthat have a mathematical, statistical or scientific content.

Third, in many of the countries studied, for-profit educationcompanies were not tolerated. India, Romania and Turkey, for

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example, encourage private financing of schools anduniversities but only on a non-profit basis.

Fourth, each of these aspects of government receptivenessmay apply differently at different levels of the educationalsystem. Several countries (for example, Romania and Turkey)concentrate public investment on the age range of compulsoryeducation, and priuate investment is encouraged mainly atpre-school level and at post-compulsory level, in vocationaltraining and higher education. Foreign investment is oftendirected towards the top end of the system (for example, inRomania and Thailand) where foreign languages are morewidely taught and used, and where international perspectivesand practices are particularly appreciated. In some countries(for example, India) for-profit education providers tend to berestricted to short-term vocational training courses (such as,computer skills training, driving lessons) which are directlyrelated to income-earning opportunities in the labour market,and the more long-term general education of young people isstill largely provided on a non-profit basis in order to protect itfrom becoming too narrow and specialised by commercial orcompetitive pressures.

The receptiveness of national governments to private,foreign and for-profit investment in education is reflected inthe pronouncements of politicians and in policy documents,and is sometimes embodied as fundamental clauses innational constitutions (as in India, for example). Thesedetermine the overall investment climate, but at a morepractical level, it is the precise legal requirements and formalregulations with which potential investors have to be familiarand to which we now turn.

Resource AvailabilityThe fourth dimension of analysis concerns the availability ofresources for expanding the private sector. This overlaps withother dimensions here, including at its simplest level thewillingness of parents to pay for their children's schooling, orstudents to pay for their own, the availability of student loansand subsidies, and of potential providers of capital investmentin private institutions - discussed under separate headings.The country studies strongly suggest that encouragement ofprivate investment and its growth in recent years haveincreased total investment in education in many countries.

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They indicate that the private sector in education hasmobilised additional resources both for recurrent expenditureand for capital investment in education, and therefore enableda channelling of a greater proportion of national income intothe educational system as a whole.

This dimension also includes the availability of otherresources, such as water, electricity and availability of land orbuildings to lease and buy, the absence of which wouldseverely limit the investment opportunities in privateeducation. It also includes more advanced technology, such astelecommunications, satellite and Internet networks, whichare essential for many of the more innovative educationalcompanies.

In many of the countries surveyed, none of these was aproblem. In Brazil, for example, there are no indications thatthe absence of any of these factors would be an obstruction forinvestment in new private schools. In Russia, infrastructuresuitable for the creation of private secondary and higherschools (water, electricity and telephone communications) isavailable in virtually all towns. However, in some regionsthere are interruptions of heat and electricity supply.

In some countries, however, there were greater problemswith available infrastructure. In Romania, for example, theavailability of utilities is variable, even in large cities. Theavailability of such infrastructure is reflected in the price ofland. The most problematic are, in some areas, gas andterrestrial phone lines. Requests for phone line installationsare sometimes 20 years old! If a person or institution is in ahurry the only solution is to pay some 'extra costs' directlyinto the pockets of bureaucrats who can approve such requests- a phenomenon found in many other countries, such asZimbabwe and India.

In several countries the availability of suitable land for theconstruction of buildings and/or campus sites, especially at anaffordable price, would be a severe stumbling block for newprivate education facilities. Within Indonesia's urban areas,for example, such land is limited and expensive. There is moreland available in the rural areas; in these areas, however,access to adequate infrastructure is limited. In Russia, one ofthe principal obstacles to the expansion of the private sectorinfrastructure is the high price of land and buildings and highcost of renting. It is necessary to bear in mind that premises

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to be bought or rented must comply with sanitary, hygienicand construction norms, which very rarely is the case. As arule, newly established private schools rent vacant premisesthat belong to state and municipal schools, kindergartens,state technical secondary schools and higher schools. InRomania, land for building in major cities is widely availablebut at high prices. For instance, in Bucharest prices may varybetween $100 and $700 per square metre. To that must beadded construction costs of at least $300 per square metre. Bycontrast, properties to buy suitable for education purposes arenot numerous and therefore the prices they command are veryhigh. The Ministry of Education owns many educationalfacilities that are now vacant owing to the reduction ofactivities in post high-school and vocational education. Thesefacilities are sometimes rented to private institutions but atmarket prices. Other facilities available for rent are thepremises used in the past for social activities by the largesocialist enterprises (which now are privatised, liquidated orrestructured), such as clubs and residential accommodation.Usually these premises are in very bad condition,necessitating further investment in renovation. In Coted'Ivoire, the price of land is seen as a major factor in limitingexpansion of the private sector, and in keeping fees high. Thisis particularly the case in Abidjan.

Another issue raised is that in several countries foreigninvestors are unable to own or even lease land. In Indonesia,foreign investors are not allowed to purchase land althoughthey can lease for a fixed period of time. In Jordan,restrictions on land use have now been lifted except for someareas (for example, the Dead Sea) and some sectors (mining).According to the Investment Promotion Corporation, anyonecan now buy and own land in Jordan, although for non-Jordanians the approval of the Prime Minister's office isrequired. It is said that this is a simple, straightforwardprocedure.

In South Africa and Zimbabwe, a distinct problem mayarise for potential investors in certain areas. The usage ofland in tribal areas is controlled by Tribal Authorities. Thereis common ownership by the tribe and no private ownership.Members of the tribe obtain the right to use allocations ofland, almost in perpetuity, subject to the rights passing tomembers of the family. The building of a school on tribal land

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would require the allocation of a piece of land by the TribalAuthority, but would not confer title to the property.

Finally under this heading, it must be noted that in a smallminority of the countries surveyed governments themselvesoffer aid to private universities, for capital and currentexpenditures.

In Turkey, state aid is granted to private universities, foreducation, research, library, investment and other currentexpenditures. The maximum aid is determined to be 45 percent of the university's budgeted expenditures. In theacademic year 1997-98 TL 6,500 billion was granted(including to Turkish universities abroad such as Hoca AhmetYesevi University in Kazakhstan and Manas University inKirghiz Republic). Baskent University and Bilkent Universitywill be granted TL 1,750 billion each (US$8.75 million).

In Thailand, government also provides financial support forprivate higher institution in the following ways:

Revolving Fund for the Development of Private HigherEducation Institutions. This fund was established in April1990 to provide loans at 4 per cent interest for privatehigher education institutions for purchasing instructionalmaterials, equipment and facility construction. Theamount of the fund is 500 million baht (US$20 million) for10 years (1990-2000). In 1994, the fund reached 240million baht. The ceiling for each school loan is limited to30 million baht for construction and 10 million baht forpurchasing instructional materials. Very few higherprivate institutions have so far applied for this fundbecause of the limited loan ceiling and amount ofpaperwork required.

* Specific Assistantce and General Subsidies. Each year, thegovernment allocates an additional amount of 5.5 millionbaht for expenses in the academic and administrativedevelopment of private higher education institutions,categorised as follows:

- Research Development Fund: 700,000 baht/year

- Academic Development Fund for such projects as composing,translating or compiling texts: 300,000 baht/year

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- Administration and Faculty Development Fund: 500,000baht/year

- Community Service and Volunteer Work Camp Fund:4,000,000 baht /year.

Human Resource Deuelopment Loan Fund. In March 1995,the administration of then Prime Minister Chuan Leekpaiset up a low-interest loan fund of 20,000 million baht tosupport private education. A total of 10,000 million wasallocated for commodity and construction loans for privateinstitutions offering courses in the fields where there wereshortages of human resources. This fund coveredinstitutions at the secondary, vocational and highereducation levels. Another 7,000 million baht was set asidefor commodity and construction loans for institutionsoffering courses in general fields. The rest of the 3,000million baht fund was earmarked for student loans,discussed below. The Private Education InstitutionSupport Committee was established to specify criteria forprovision of financial support to existing and new privateeducation and occupational training institutes.Institutions meeting certain conditions were eligible toapply for fixed assets loans. These loans had a repaymentperiod of not more than 15 years, with grace periods of notmore than five years.

Student Funding PossibilitiesThe final dimension of analysis of opportunities for privateeducation concerns the availability of student funding. In themajority of countries surveyed, students and/or parentspaying fees accounted for the greatest proportion of fees paidfor private education. However, in half of the countriessurveyed, there were some government subsidies to privateeducation, either funding to the schools to provide teachersalaries, or on a per capita basis - either allocated accordingto particular 'deserving' students, or to particular schoolsdeemed worthy by government.

In Argentina, for example, 37 per cent of private schools(2,816 schools, figures from 1994) receive what is called 'total'subsidy from the government, that is, they receive a subsidywhich amounts to the total cost of teachers salaries plus

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payroll taxes; 29 per cent (2,191 schools) receive a 'partial'subsidy covering only a percentage of such costs; theremainder receive no subsidy at all. Such subsidies do notcover capital expenses. Note that this subsidy is directed tothe schools themselves, and is not allocated on a per capitabasis related to pupil numbers.

In C6te d'Ivoire, the government pays scholarships fordeserving students to attend private schools. The scholarshipfor such students is fixed at 120,000 CFA francs for lowersecondary and 140,000 CFA francs for upper secondary. Atprimary level, the figures are 30,000 CFA francs for schoolswhere fees are below 50,000 CFA francs, and 27,000 CFAfrancs for those whose fees are 50,000 CFA francs or higher.Such scholarships paid to private schools totalled nine percent of the 1997 government budget for the education andtraining sector.

In South Africa, the practice of subsidising private schools,which the Province of Natal had done for many years, wasextended to the rest of the country in 1986. Governmentsubsidies to private schools in Gauteng make up a relativelyinsignificant proportion of the total education budget butrepresent an important source of income for the schools.Presently, the Province of Gauteng grants 25 per cent and50 per cent subsidies (based on the per capita cost ofgovernment schooling) to approved private schools, thedifferentiation being based on the quality of schooling beingprovided by the schools as measured by matriculation results.However, the present subsidies received by private schools donot necessarily translate into lower school fees because someof the schools, fearing the possible summary withdrawal of thesubsidies (as is presently threatened), prefer to devote thesubsidies to upgrading the buildings and other schoolfacilities, whilst maintaining their fees at the level necessaryto cover all running costs. Out of a total government educationbudget of R25,120 million in 1996-97, R225.4 million, or aboutone per cent, was budgeted for private schools as these statesubsidies. It must be noted that Educor, the case studydiscussed in chapters 1 and 2, does not receive such statesubsidies for its high schools, as it is registered as a companyrather than an educational institution.

In Thailand, there are three levels of subsidy to privateschools: 40 per cent, 60 per cent and 100 per cent of the

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amount set by the government as the 'standard individualeducational expense', that is, per capita cost in governmentschools. In general, schools receiving subsidies were set upbefore 1974. Since then the government has ruled againstproviding subsidies to any additional private schools, arguingthat such schools should be self-supporting. Those schoolsreceiving the 100 per cent subsidy are usually connected withcharitable or religious foundations. Schools receiving the otherrates are generally owned by private companies orindividuals. The total annual subsidy granted for privateschools has increased from 366.7 million baht in 1977 to3,602.8 million baht in 1997.

In Turkey, government student scholarships and loans existthroughout the education system. In the pre-higher formaleducation in 1997-98, less than one per cent (91,044 students)are given government scholarships. Monthly scholarshipamounts were TL 678,000 in January 1996 and TL 1,020,000(US$10.8 and US$12.3 per month respectively at the currentexchange rates). Government scholarships in higher educationcover more students than primary and secondary education.In 1997, 222,411 university students (30 per cent of all formaleducation university students) received tuition loans and170,766 received education loans. The amount of scholarshipin October 1997 were TL 6,000,000 for undergraduatestudents, TL 12,000,000 for Master students and TL18,000,000 for PhD students (around US$35, US$70 andUS$105 if converted at the exchange rates of the time) Thenumber of scholarship recipients doubled from 1986 to 1997.There are many other government and public institutionsgiving scholarships to students. Foundations, non-governmental and non-profit organisations, state economicenterprises, companies, schools, universities, some localadministrations (for example, Istanbul municipality) are alldonors of scholarships and/or education loans. However, thenumber and the amount of such scholarships are estimated tobe rather low. Finally, private educational institutions arerequired by law to give scholarships to their students: Two percent of private high school students and 10 per cent of thefoundation university students are required to be admittedwithout payment for tuition,

Finally, in Colombia, government funds particular privateschools in exact proportion to enrolment. There is modest but

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growing evidence of similar funding in other developingcountries not surveyed here, such as Bangladesh, Belize,Chile, Dominican Republic, Guatemala, Lesotho and Pakistan(West 1996).

Two comments can be made about the viability of suchforms of funding private education.

First, an a priori argument can be made against statesubsidies of private schools which are not on the basis of percapita funding. If private schools are simply given subsidieswhatever their intake, then this would seem to encourage - orat least not discourage - inefficiencies, because there would belittle incentive for such schools to attract their customers byoffering high educational standards. If research demonstratedthat such subsidies did lead to inefficiencies, then this wouldbe an argument against the efficacy of some of the subsidiescurrently on offer to private education. However, it would notrule out the per capita funding, which, as West (1997) haspointed out, is akin in many ways to voucher schemes.

Second, in our case studies we came across some companieswhich would have been able to receive state subsidies for theirschools, but which did not seek them. Speciss College,Zimbabwe, and Educor, South Africa, were two exampleshere. The impression given was that accepting the subsidieswould bring in a whole gamut of additional regulation, and itwas considered that being subject to these was simply notworth the extra funds. Indeed, one of the suggestions wasthat the extensive regulation of private education in somecountries was in part because of the need to ensureaccountability of the public subsidies, and that if over-regulation was to be avoided, then perhaps losing thesesubsidies was a necessary price to pay.

If these comments were to be generalisable with furtherresearch, then might well suggest the undesirability of anysuch public subsidy to private education. We cannot go so farat present, however, and some suggestions about this kind ofsubsidy will be taken up in the final chapter.

In most of the countries surveyed, there were nogovernment student loan companies, and banks were notusually in the habit of lending to students either, with thefollowing exceptions:

* In Jordan, the Housing Bank has a student loanprogramme with nine per cent (inclusive) interest rate.

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There must be an account for five years with the bank.The amount of the loan depends on the amount in theaccount and collateral.

* In Romania, some commercial banks have introduced anew system of cards and accounts for students of somepublic universities. In these accounts the students canreceive their scholarships, and a student can be creditedwith a maximum amount of Lei 150,000 (approximatelyUS$ 20), that is, the average monthly level of ascholarship provided by the state. This is an experimentdesigned by the commercial banks to accustom thestudents to using credit cards and modern paymentsystems.

* In South Africa, commercial banks offer student loans foruniversity study. Typically they cover only part (70 percent) of a student's fees. The loans are repayable aftercompletion of studies and interest rates are lower thanprime rates. According to the Association of PrivateColleges of South Africa, the banks do not make loansavailable to their students.

Finally, in some countries, private associations areattempting to move into student loans. In C6te d'Ivoire, thereare no private student loan companies, and banks do not getinvolved in financing private education. Recently, however, awomen's association was set up to try and find funds for self-paying students in universities and private schools. It is tooearly to assess the outcome of this project.

As far as government student loan programmes wereconcerned, we came across three examples in our countrystudies, only one of which was of any current significance. InIndonesia, the government had introduced a system of studentloans in 1984. However, they did little to ease financingburdens or improve equity. Commercial banks lacked themechanism for loan collection. Meanwhile the rate of defaultwas very high and the fund became 'non-revolving' The resultwas the cancellation by the banks of student loan schemes. Inthe Russian Federation, the Federal Law on Education (p. 6,Art. 42) provides for the creation of a special mechanism ofproviding loans for students in secondary vocational schoolsand higher professional schools. However, until now thegovernment has not identified the terms and procedures for

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such crediting. Finally, and the only significant currentexample, in Thailand there is a student loan scheme, whichprovides many interesting lessons for discussion.

Thailand's Student Loan Scheme"'

In March 1995 the Thailand government established a low-interest Human Resource Development Loan Fund of 10billion baht ($1=31.81, as of 31 July 1997). Seven billion ofthis is allocated for commodity and construction loans iorinstitutions, while three billion baht is set aside for studentloans. This loan covers all educational expenses includingtuition fee and personal educational expenses. The fund isjointly managed by the Ministry of Finance (MOF), theMinistry of Education (MOE) and the Ministry of UniversityAffairs (MUA). It began to operate in May 1996. The fund isavailable for low-income students at high school level (bothvocational and general stream), as well as students in highereducation within the country. Of the total amount, 1,200million baht was allocated to MUA and 1,800 million to MOE.Students at private educational institution are also eligible forthe loans.

The ceilings for loans are various according to level ofeducation. They are:* for continuation in secondary school (secondary 4, 5 and 6,

in academic and vocational streams): not exceeding 62,500baht

- for junior college level: not exceeding 70,240 baht- for university: not exceeding 100,000 baht.

Although the initial impression is that the above describedloan system is a sober attempt at self-financing, a little extrascrutiny raises several questions. First, little regard seems tohave been paid to the world experience of the serious problemof student loan defaulting, a problem that has probably notfully asserted itself yet in Thailand because of the newness ofits loan programme.

Second, there seems to be a failure to recognise howsubstantially the loans are subsidised. The student's paymentof interest, for instance, starts two years after the completionof the degree. Since his/her course takes at least three years,

This section is based on West and Tooley (1998).113

the total interest free period is five years at minimum. Thetrue cost to taxpayers of providing these loans, meanwhile, isthe cost of interest foregone by them over the five years inquestion. Alternatively the true cost is the real borrowing ratefaced by government when it raises on the capital market thefunds made available (via loans) to students. This latteramount, of course, is ultimately payable by taxpayers.Remembering that this burden will be shared by low-incomefamilies who do not participate in higher education, theproblem of inequity is seriously magnified or aggravated.

The largest concealed subsidy, however, arises because,when the student borrower is eventually obliged to payinterest, it will be at the unrealistic rate of only one per centper year! Assuming levels of inflation greater than onepercent (which is well justified) this implies a negative realrate of interest (that is, another subsidy). It is no wonder thatthe number of students in Thailand seeking a loan jumped to400,000 in 1997, from 131 in 1996.

The issue of student loans is worthy of further generalcomments in view of widespread misunderstanding of thesubject. Most countries with loan schemes offer studentscredit in the form of a 'mortgage' loan, defined as one whereinrepayment is made over a relatively short specified period,usually with fixed monthly payments. Interest rates and themaximum length of repayment are used to calculate the fixedperiodic payments. At the same time, students who borrow tohelp pay for their education face risky outcomes since thefuture value of a degree is not immediately apparent and therisk is probably greatest for students from poorer backgroundsinsofar as their future job and earnings prospects are lessfavourable. For them the obligation to pay fixed futurerepayments commits the debtor to repay an open-endedproportion of his/her income. Mortgage loans may thereforeoften deter access among the very groups loans are intendedto reach.

To help meet these equity and efficiency problems, threedeveloped countries - Australia, New Zealand and Sweden -have established i71Come-contingent loan systems under whichthe debtor is not committed to repay an open-endedproportion of his/her future income. Instead, the loan isrepaid as a predetermined fixed percentage of post-graduationincome above a certain threshold. Income-contingent loans

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thus limit the extent of debt burdens in a given year andsubstantially extend the repayment period. For these reasonsthe barriers to lower-income students are significantlyreduced. Despite these advantages there is no evidence so farof the adoption of the income contingency version of loans, andthe model introduced in Thailand is no example of it.

Countries with fairly long experience of student loans of themortgage type have found that the default problem loomslarge. Because students borrowing under conventional short-term fixed-rate (mortgage-type) loan plans are unableautomatically to spread their indebtedness over a long period,and so cushion the irregularity of their income payments inthe early years, many of them are tempted to default. Theusual income-contingency programme, in contrast, can beexpected to have much lower defaults because it embraceslong and flexible periods of repayment. The informationrequirements, however, are substantial. It is here that thecoupling with the income tax process becomes crucial since therevenue authority possesses data on the current location andincome status of individuals far superior to that which can beassembled by any single company or bank. These institutionswill invariably confront the problem of 'moral hazard' wheremany student borrowers disappear without trace.

A World Bank Report (World Bank, 1991) has indeedconfirmed that experience shows reliance on tax departmentsto be 'far less costly to administer'. In developing countries theincome tax machinery is likely to be at present too primitiveto handle all the necessary tasks.

The phenomenon of 'moral hazard' in student lending isusually a positive function of the size of the studentpopulation. Such considerations make it easier to explain ourdiscovery of the three current student loan schemes inoperation described in chapter 2 above, viz., in TECSUP,Peru; NIIT, India and University Los Andes, Colombia. Theseare not attempts at national student lending, but are allconfined to relatively small student communities wherein, assuggested above, it is relatively easy to instil cooperativebehaviour. As we stated, the 'honour system' around TECSUJPgraduates is strong, and would inhibit people fromdeliberately avoiding payment. All these observations lead usto predict that the latter small scale student loan schemes will

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have a greater chance of survival than the governmentoperated national loan scheme recently launched in Thailand.

ConclusionsThis chapter has discussed various macro factors which affectthe private education sector in developing countries. Buildingon the evidence amassed for the IFC study by in-countryconsultants (IFC, 1998), the extent and nature of the privatesector in many countries was first set out. It was noted thatin all of the countries surveyed, there are likely untappedmarkets for private education - expressed in terms ofdissatisfaction with public schools, waiting lists for existingschools and inadequate state provision, particularly in ruralareas. The huge size of many of the private education marketsis also apparent - putting the small size of the market in theUK into perspective. In many of the countries surveyed, wealso pointed to the existence of the types of chains of schoolsand education companies discussed in earlier chapters. Wemoved on to examine the ways in which governments impedeor help the private sector. First, we illustrated two particularexamples of regulatory regimes which contained many factorslikely to impede the development of private education. Theimposition of substantial regulations, applied in an arbitraryor ad hoc fashion, or the imposition of petty regulations, resultin inconvenience, inefficiency and a brake on growth andinvestment. But these inefficiencies could well affect thepotential for private education companies to expand and caterfor the less affluent, and increase educational opportunitiesfor the middle classes. However, it is also clear that there aresome governments in developing countries which see it astheir role to support private education, through subsidies tostudents and/or schools. In part, indeed, it may be the verypresence 6f these subsidies which has led to the heavyregulation in the first place, to ensure accountability of publicfunds. Some of these models of public funding of privateeducation are taken further and considered in the finalchapter policy proposals.

After examining some resource constraints and governmentreceptiveness to investment in private schools, we exploredvarious other constraints on the private sector, including theavailability of resources, and student funding possibilities.The issue of student loans is a live issue in developing

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countries. The problem of access to higher education inparticular can potentially be alleviated if suitable models ofstudent loans can be developed. One particularly sophisticatedand advanced student loan scheme was found in Thailand,which created the potential for poor students to have accessnot only to university education but also to high schooleducation. However, the scheme had the manifestdisadvantage that it was not an income-contingent loan, but amortgage type loan, and hence would be likely to suffer fromthe problem of repayments default. It also represented a hugesubsidy to those who would have access to higher education,which, given the regressive taxation system, would likelymean inequity in distribution of higher education.

Given these considerations, we now turn to some tentativepolicy proposals, drawing together the ideas from the paper tocreate a possible model for equitable development involvingthe private sector in education.

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5 | Conclusions and Policy Proposals

This monograph has pointed to the extent and nature of theburgeoning private education sector in developing countries,based on the findings of the IFC's study of investmentopportunities in private education (IFC, 1998). Far fromconfirming the common stereotype of a relatively fewexpensive schools, catering only for the elite, we revealed arichly innovative and entrepreneurial sector in manycountries, catering to a wide spectrum of demand andtailoring courses for almost the whole socio-economic range. Inparticular, we provided a snapshot of a relatively unknownaspect of the sector - the private education company. Weaimed to give case studies of these companies, to give animpressionistic view of this sector, with details of their historyand background. We then showed how such companies viewedtheir success, focusing on the factors which were seen asimportant to key personnel within the company, and tostudents and staff within them, such as product and processinnovation, the security of a strong brand name, expansionusing a variety of franchising methods and strict qualitycontrol procedures.

The private education company is of particular interest, itwas argued, because it seemed to have the potential tocounter some of the more common objections to privateeducation, viz., that there will be an information problem, andthat government would be needed in order to promoteinvestment in research and development and quality control.It was suggested that private education companies couldovercome both of these issues.

We also explored the common conception that promotingprivate education would necessarily exacerbate inequality.When a variety of factors at the macro and micro level wastaken into account, it was suggested that promoting private

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education had the potential to do the opposite. In part thisargument is based on factors at the country level, showing theinequity of public education funding, and the costs, sometimeshidden, of public education. In part it was based on the waysin which many education companies and institutions had theirown methods, sometimes ad hoc, sometimes formalised, ofsubsidising poorer students.

Finally, the monograph pointed to factors at the macrolevel, which could impede or enhance the potential of theprivate education sector. Examples of the ways in whichregulatory regimes impinge on private education wereexamined, and ways in which student funding possibilitieswere being enhanced in some countries were explored, inparticular concerning the ways in which they could increaseaccess for the disadvantaged.

The tentative nature of many of the conclusions should bestressed. The IFC study sought to describe a sector which waslittle known, in particular to describe it from the point of viewof the viability of investment in it. Thus case studies wereopportunistically selected which revealed facets of theeducational market that had not been previously examined;these were looked at in the context of countries selected aslikely to be more favourable than others to investment inprivate education.

Given this context, it is clear that we cannot generalisefrom these findings without further research - and the studyhas highlighted many areas of interest for further study andexploration. However, rather than leave the issues there,until further study has been conducted to makegeneralisations possible, we conclude with some tentativepolicy suggestions based on the findings thus far.

These policy proposals must be taken in the following spirit:if the impressionistic snapshot of the private sector conveyedin chapters 1 and 2 can be shown to hold more generally thanfor the small number of companies and institutions surveyed;and if the equity considerations sketched in chapter 3 can bereinforced by further exploration; and if the extent of theregulatory regimes and the student funding possibilitiesoutlined in chapter 4 fit in with a broader picture; then thefollowing policy proposals would emerge as being favourableto help promote equitable development through privateeducation in developing countries.

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Some might feel that formulating these policy proposals isputting the cart before the horse, and that results of furtherstudies should be available before anyone endeavours toconsider possible policy proposals arising from them. On thecontrary, I suggest that these policy proposals, tentative asthey are, can serve to motivate further research and debate,and to provide one context for that debate to take place.

Finally, before moving to the policy proposals, the followingcontext needs to be noted. The author of this monograph hasmooted ideas elsewhere (Tooley, 1996), building in part on theseminal works of Peacock and Wiseman (1964), West (1965),Friedman (1955), and others, which develop the notion thatthere is a justified role for the state in education in terms ofensuring a safety net for those whose parents are too poor ortoo irresponsible to provide educational opportunities forthem. This could be in terms of funding and regulation, but itwas unlikely to be in terms of provision. The onus was then ongovernment, and the apologists for government intervention,to justify any greater intervention than these, to show how itclearly met educational needs and opportunities better thanmarket suppliers. The suggestion was always thatgovernment intervention excluded or pushed out privatesuppliers, and that these had incentives and accountabilitystructures which were better able to ensure quality than thepublic sector.

Clearly, these ideas were developed in the context oftheoretical reflection on education in developed countries - inparticular, the USA and the UK. One challenge of thisparticular study has been to see if similar ideas relate to thecontext of education policy in and for developing countries.The conclusion of this paper - offered in the tentative spiritnoted above - is that a broadly similar perspective on therespective roles of the public and private sectors in developingcountries might be highly beneficial. If our goal is to ensurehigh quality educational opportunities for all in developingcountries, then the way forward may be to base this on thesame principles. Government intervention - in terms offunding and regulation - could be there to ensure that there isa safety net for the disadvantaged. But it need not be assumedthat government intervention should be there to subsidisethose who do not need subsidising, nor that governmentintervention should be allowed to crowd out - through over-

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regulation and unnecessary supply - the private sector whichcould otherwise provide vibrant educational opportunities ifpermitted to do so. The proposals, then, are not aboutprivatisation, but about ways in which this 'mixed economy' ofpublic-private partnership in education can be extended.

Given these cautionary caveats, I suggest that a 'modestproposal' (with apologies to Jonathan Swift) emerges, whichembodies the recognition that there already exist in manycountries informal mechanisms for sharing the burden ofeducation development between the public and privatesectors. Making these mechanisms explicit and encouragingtheir adaptation and adoption in other countries could lead, itis suggested, to rather optimistic prognosis for development.

It is worth spelling out the argument supporting this policyproposal, as developed throughout this paper, in the form offive propositions.

1. In many developing countries, educational entrepreneursare able to satisfy demand, by creating educationalopportunities which satisfy the following criteria:

* they are profitable (or make a surplus)

* they are financed totally (or almost totally) from studentfee income

• they charge comparatively modest fees, and hence areaccessible to many socio-economic groups, not just the6lite. (Chapters 1 and 2)

2. Such entrepreneurs have often created educationcompanies which run chains of schools, colleges anduniversities, sometimes on a franchise basis. Theseeducational chains benefit from economies of scale, investin research and development, provide consumers with theinformational benefits of brand names and take risks toprovide for 'risky' (often the disadvantaged) customers.They overcome many of the objections to privateeducation, and hence provide the basis for the model ofpublic-private partnerships to aid development. (ChaptersI and 2)

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3. But is not private education inequitable? Someconsiderations suggest not - viz., the inequity of publicprovision, the hidden costs of state education, and adiscussion of the way some private education companiesrespond to the needs of the disadvantaged, by provisionof innovative social responsibility programmes,subsidised places and student loan schemes. (Chapter 3)

4. If private education is to be able to assist in development,then factors at the macro level, in particular theregulatory environment, need to be conducive to theirfunctioning. However, in many countries, currentregulatory regimes inhibit investment and expansion ofthe private education sector. (Chapter 4)

5. The suggested model of public-private partnershipineducation which could potentially enhance equitabledevelopment, based on the discussion of propositions 1-4has the following five dimensions:

* Policy-makers and opinion-formers need to be informed ofthe development potential of the types of educationcompanies discussed here, and their implications forequity.

* Investment from organisations such as the IFC in privateeducation projects, which satisfy conditions ofprofitability, educational efficacy and social responsibility,should be encouraged.

* The regulatory environment in countries needs to bemodified to ensure that such companies can emerge andprosper, in order to play their full role in equitabledevelopment.

* Links between education companies and institutions andthe public sector, similar to the ones found in severalcountries, should be encouraged, to enable themanagement expertise, incentive structures andinvestment potential of the private sector to inform,challenge and potentially 're-engineer' the public sector.

* The sources of finance available to allow students - and,in particular, disadvantaged student - to benefit fromprivate educational opportunities should be extended.

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This could involve at least the following: (a) facilitatingthe setting up of company student loan schemes, perhapsaided by overseas investment from bodies such as the IFC.This may be in terms of a global student loan company,channelling funds through education companies, andfinanced through international investment; (b) extendingvoucher schemes and other per capita subsidy funding ofprivate education by governments.

A Modest ProposalThe 'modest proposal' aims to describe mechanisms which:

* Extend the range of private educational opportunitiesoffered

* liberalise regulatory regimes

. bring into public education the perceived managementand investment superiority of the private sector, and

* extend the range of finance available to allow students toenter private education.

The purpose of this section is to show ways in which thosewho are at the sharp end of education policy in developingcountries - including those who finance development loans -can be made more aware of the relative merits of investmentin, and encouragement of, the private sector, and how thesetwo aspects will support development. Although demand forprivate education is extremely high in all the countriessurveyed, and although the quality of private educationalopportunities is perceived in general as being far higher thanthose on offer in the public sector, clearly many are inhibitedfrom finding private education because of the level of feescharged. Even though this is not as serious an objection asmany would feel to private education, it is nonetheless still anissue for many people. The modest proposal suggests two waysof overcoming this problem, by allowing the channelling ofexisting public funds into private education companies, and byencouraging the development of company student loanschemes and voucher or similar per capita funding systems bygovernment.

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Informing Policy Makers

Firstly, many in policy-making circles in developing countriesare likely to be apprehensive about the potential links withprivate enterprise in education in order to move thedevelopment agenda forward. Part of the process must be inpersuading such people that there are tremendous opportun-ities for the private sector, and that it need not offend equityby promoting it. Some of the arguments in this text may beuseful for this purpose, and conferences and seminars wouldneed to be arranged to this end.

Changing the hearts of policy-makers is one step. Butprivate education could be further enhanced by encouraginggreater investment.

Encouraging InvestmentConcerning the encouragement of investments, internationalorganisations such as the IFC have a clear role to play here.Such organisations are likely only to have a mandate toconsider projects which are financially and educationallyviable, and considerations of equity would also come into anydecisions. Likely candidates for investment are alreadyemerging, which are worth outlining to give a flavour of likelydevelopments:

Financing of New Campuses

Several companies would like to build and develop newcampuses, but cannot afford in-country interest rates and/orcannot find sufficient new equity. Companies in Africa, LatinAmerica and central and eastern Europe gave informationabout their expansion plans along these lines in confidence tothe author.

Finance for FranchisesA theme emerging in several countries is that a useful sourceof investment would be for those companies operatingfranchise systems to allow the franchisees to borrow money tofinance the initial building and furnishing of premises, or toexpand their campuses as demand increases. These fundswould be credit lines to the franchisees; the risks ofinvestment would be low, given the success of the companieswhich operate franchises. For example, NIIT in Indiacurrently has 400 franchises, and only three or four of these

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have failed as businesses over the last 10 years. It is seekingto open many more in the next two years, and has indicatedthat it would welcome this type of investment. Similarly,Educor in South Africa has a very strong record with itsfranchises. Such possibilities offer great potential forinvestment aimed at small-scale projects. Moreover, asalready noted, they have the additional advantage of not onlyenhancing educational development, but also of developingentrepreneurial talent at the grass roots as newentrepreneurs are encouraged into education by the existenceof sufficient seed money for their activities.

Finance of 'South-South' InvestmentSeveral of the companies studied are expanding, or seeking toexpand, into other developing countries. Such expansion couldbe assisted greatly by debt or equity finance. For example,from our case studies we found:

* Damelin (Educor, South Africa) has opened franchisesover the last two years in Namibia, Botswana, Malawi andLesotho, and is likely to be interested in further expansioninto other neighbouring countries.

• NIIT has opened centres and franchises in 18 countries,including China, Indonesia, Malaysia, Zimbabwe andSingapore. In each of these countries, they are seeking thedevelopment of many franchises.

Financefor 'the Technological Imperative'

Many of the companies and institutions examined are creatingopportunities with new technology which could easily be usedto enhance both profitability and equity. For example,TECSUP is seeking funding for its Satellite Tuition System.Under this model, the mining companies in various regions ofPeru would buy satellite teaching facilities for their workers.But once the facilities are in place, the companies could easily,if they wished, allow them to be used, either free, or verycheaply, by local people, perhaps as a PR measure. Hence thepoor as well as the companies could benefit, yet theinvestment could be very profitable.

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Finance for a Revolving Loan Fund

Although we have suggested a loan fund particularly forfranchisees of successful known education companies, it is alsoworth considering the possibility of a loan fund makinginvestment available in local currency for any educationalconcern. Such a loan fund would be riskier than the franchisemodel suggested, and would need extremely careful vetting ofapplicants; nonetheless it offers a potentially very usefulmechanism for investment aimed at small-scale ventures.

These are just some of the possibilities which emerge forencouraging investment in private education in developingcountries. Such investment could also be enhanced byconsideration of the regulatory regimes within the countriesinvolved.

Regulatory ChangesConcerning changes to the regulatory environments,organisations such as the World Bank could play a key rolehere in passing recommendations to relevant countries, inorder to enhance the educational and developmental viabilityof their private education sectors. It is clear that theregulatory regimes in many countries, although perhapsintending to protect consumers and ensure qualityeducational provision, act to inhibit and in some cases stifleneeded educational opportunities which the private sectorcould otherwise provide. From the IFC study, four generalideas have emerged, which could form the basis ofrecommendations to governments interested in extendingeducational opportunity by this route:

First, the political uncertainty of many regulatoryenvironments is likely to turn investors away. There are manyregulations in place which are not enforced; however, if theywere, then investment in private education would becomeuntenable. Or there are regulations which are enforced in anad hoc way, again extremely worrying to investors. Theexamples given of Argentina and Zimbabwe in chapter 4 -which we suggest are likely to characterise similar regimeselsewhere - graphically illustrate this problem.

Second, many countries have regulations against for-profitprivate education (for example, Argentina, Jordan, Russia,Turkey), or which restrict the amount of profit which can bereturned to investors (for example, Thailand). This could have

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a debilitating impact on investment and growth of the privatesector, and it would be useful if these regulations could bereviewed or adapted - particularly in the light of thediscussion above which suggests that there may be nothing tofear and plenty to gain, in terms of equity and investment ineducational innovation, from allowing for-profit companies toplay their part.

Third, in some liberal regimes, regulations are emergingwhich may have the effect of severely inhibiting privateeducation. South Africa is an example. Such countries appearto be following the Anglo-Saxon model of a highly regulatedqualification regime, initiated in Scotland, followed byEngland and Wales, New Zealand and Australia. Many inprivate education are in favour of these reforms, but thisendorsement should be treated with caution. It may be simplya case of existing private education providers seeking usefulbarriers to entry for competitors.

Fourth, at the simplest level, there are many regulationswhich inhibit the private education sector, and which could berepealed. For example, in Peru, import duty is charged ondonated machinery, while in Zimbabwe, import duty ischarged on textbooks. Similarly, it is very difficult for skilledexpatriate staff to obtain work permits in some countries, thusinhibiting growth in certain areas (such as India orZimbabwe).

These are general ideas for regulatory changes, and ofcourse the specifics would have to take into account theparticular situations in each country. Interestingly, there aredevelopments in the regulatory regimes in some developingcountries which give cause for some optimism. For example,the law on for-profit education was liberalised in Peru twoyears ago. The government went this route for two reasons.First, because it wanted the possibility of internationalcompanies entering the education market. Second, because itwanted mining companies and other industries which werealready operating in the rural areas to start schools in theseareas of greatest need. Although neither has happened at thetime of writing, it is significant that at least one developingcountry government has explicitly sought to encourage thedevelopment potential of for-profit education.

In combination, these first three components of the 'modestproposal' - the informing of policy makers, the encouragement

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of investment, and some regulatory changes - would seem tohave the potential for advancing educational development.They sit comfortably with many processes which are currentlyunder way in developing countries, and point to ways in whichsuch processes could be enhanced. Moreover, in the spirit ofour tentative conclusions - which need further research tosupport them more strongly - pursuing these three proposalswould allow empirical cases to develop which would furtherhelp us understand the potential role that the privateeducation sector has in promoting equitable development.

However, several of the examples found in this papersuggest the possibility for further developments which couldmore radically enhance the education system in developingcountries. These, the fourth and fifth elements of our 'modestproposal', are spelled out in more detail.

Encouraging Public-Private LinksIn the global study, we saw examples of small but nonethelesssignificant public-private partnerships involving some of theeducation companies. Examples such as DPS satellite schools,Pitagoras' involvement with management and quality controlin Minas Gerais schools and in Colombia, and the ColombianCoffee Grower's Federation model of partnership, all offer apotential model for others to follow. Each was introducedbecause of the perceived inadequacies of the state sector, andthe perceived advantages which the private sector could bring.These models seem to offer a significant potential way forwardto enhancing the management and financial expertise in thepublic sector. The keys to these developments seem to bethree-fold:

• the management contract between the public authoritiesand the private companies

* the willingness of the public authorities to fund theschools (at least in part), while allowing the private sectorto manage them

. the willingness of the private sector to invest in theschools in anticipation of a small return through efficiencysavings, or through improved public relations.

Interestingly, there are parallel developments taking placein the UK and USA which are linking public and private

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sectors in a similar way. For example, in the UK, twoproposals were set out in the 1998 Schools Standards andFramework Act which are of relevance here. The first is theEducation Action Zone model. There is a recognition that insome relatively deprived areas public (state) schools havefailed to provide quality opportunities for students. Hence,there is a proposal for action zones to be set up - initially upto 100 of these zones - which allow the possibility of privatecompanies (including for-profit companies) to take over themanagement of public schools. The companies which takethem over will be given only the funds which are currentlydevoted to public education, plus a small 'sweetener'. There isalready interest from private for-profit education companies -including, interestingly, NIIT, the Indian company outlined inthis paper. They see the potential for making their owninvestment in the public sector, following their models whichhave been so successful elsewhere, leading to improvedschooling for the disadvantaged and with the potential for aneventual return on the investment. The second aspect of thelegislation concerns individual schools which have been'failing' (in the government's definition, involving continuallow standards) for more than two years. These schools cannow be taken over by central or local government, and thenhanded over to an education company to manage (that is,nationalised in order to be privatised). Any educationcompany doing so would likely invest heavily in the school,including in training teachers, but would again be able to runthe schools so that a small return could be made throughefficiency savings. As this is being written, the first localeducation authority in England and Wales (the equivalent ofschool districts in the USA) - Surrey - has agreed to put themanagement of one of its failing schools out to tender, andthere are three private education companies suggested asbeing ready to turn in bids (Daily Telegraph, 1998).

Similarly, in the USA, for-profit education companies suchas the Edison Project and Sabis have taken over themanagement of charter schools and other schools from schooldistricts, using only the funds that would normally go intopublic schooling, but with the aim of making an eventualprofit after massive investment in the schools: in the case ofEdison, on average investing US$1-$2 million in each schoolthat is taken over. (It is of course implicit in all of these

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models that there is some waste and inefficiency within thepublic sector which could be rectified with bettermanagement.)

The examples from India, Brazil, Colombia, the UK and theUSA suggest a potential way forward for public-privatepartnerships in education in other developing countries.Consider first the case where governments are currentlyputting sufficient funds into public education at school oruniversity level, but the quality of such public education is notperceived as high, and the education system, in particular, isfailing already disadvantaged students. In such cases,transferring these funds, with suitable contractual protectionin case of failure to deliver quality education, to a knownprivate education brand could revitalise public education. Itcould bring all the benefits of efficiency, technologicalinnovation and quality control to bear on a previouslyinadequate education.

Second, in situations where governments are not able tooffer sufficient funds to provide enough incentives for aprivate company to take over the schools, then suchcompanies can still become involved, either by supplementingthe funds available from their own resources as a socialresponsibility cross-subsidisation measure (as with the DPSIndian village schools), or seek aid or philanthropic funds tosupplement them (as Edison is doing in California schools,where the per capita funds available from the state are notadequate to fund the massive investment it seeks).

If such models could be developed in some of the developingcountries surveyed, it is likely that the supply-side would beextremely eager to take part, and could greatly enhance thequality of educational provision for the poor, by providing aknown quality brand name education for them. Countriesfrom this study such as South Africa, Zimbabwe, India andBrazil would seem to be examples where this could be mostreadily accomplished. We await further research to showother countries in similar positions.

Opening Up Funding Possibilities

The final part of the model addresses the issue of fundingfrom the viewpoint of the individual student. The IFC studyshowed at least two ways in which this was beingaccomplished in developing countries, student loan schemes

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and voucher-type schemes. Both provide the basis for furtherenhancing the role of the private sector.

Student Loan Schemes

The discussion in chapter 4 suggested that there may beconsiderable disadvantages - in terms of equity and also interms of default rates - to country student loan schemes,particularly in terms of mortgage-type loans, while theillustrations in chapter 2 pointed to the potential of companystudent loan schemes to solve some of these problems. Iffurther research backed up these suggestions, then one wayforward for development would be clear - to encouragecompanies to develop such student loan schemes, and to seekways of financing these.

It has been noted that the company student loan modelsdescribed for TECSUP and NIIT are potentially not only self-financing in the medium term, but could also generate asurplus. Key aspects of each of these loan schemes seem to be:

* Initial substantial investment to ensure that the schemecan be set up. In the case of TECSUP this came fromoutside the company in the form of donations; in the caseof NIIT it came from internal investment.

- Careful vetting of students who take such loans to ensurethat they are serious about study, and hence will beemployable after graduation. Note that this vetting doesnot only have to consider academic achievement to date -which may rule out some deprived children. In the case ofNIIT, the company is exploring means of identifyingstudents with particular aptitude for courses, even ifcurrently such students, because of their deprivedbackgrounds, have not been able to demonstrate theiraptitude in terms of concrete academic achievement.

* Careful administration of the loan to ensure that an'honour system' is brought into being. Students must feelsufficient loyalty to the company to recognise that defaulton the loan is out of the question, and/or that they will bedepriving future students of opportunities if they dodefault.

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* Careful mentoring of the student to help ensure he or sheis able to gain employment after graduation, to help repaythe loan. Companies such as NIIT and TECSUP in anycase have extremely close links with potential employers;these links are deployed to assist in finding employmentfor graduates with loans to repay.

For companies or institutions not in the happy positionwhich NIIT found itself in, with the ability to provide theinitial investment for a loan fund, the possibility arises of thistype of funding being made available from outside investors.Indeed, the possibility suggests itself of the formation ofregional student loan companies - or even a global company -to provide loans while still gaining a return. Again, such aproject may become a key channel for investment from sourcessuch as the IFC. But such a loan company would have to beable, it is suggested, to fulfil the above four conditions. Thesuccess of any larger scale operation is likely only to bepossible, therefore, if funding is channelled through existingeducational suppliers, to ensure that student loyalty keepsdefault rates low.

Voucher-type SchemesThe second way of channelling funding for disadvantagedstudents to allow them to attend private schools involvesgovernment funded voucher-type schemes or direct subsidiesto private schools. We noted several examples of these inchapter 4. The key features for viable schemes, we noted,were:e Avoid funding schools irrespective of their student

numbers - in other words, per capita funding of schools isthe preferred option.

* Be careful to weigh up the benefits of public subsidy ofprivate schools with the disbenefits that excessiveregulation as a result of such subsidy could cause.

Only per capita subsidy of private schools is likely to ensurethat educational establishments are subject to marketmechanisms to keep standards high. And if public subsidy willhave to lead to excessive regulation, then it must beconsidered whether such subsidy would be worth these extraburdens to private education.

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Lessons from the Global Education Industry

Our modest proposal has highlighted ways in which privateeducation in developing countries could be enhanced. Withpolicy-makers informed of the potential of the private sector,with investment encouraged, with regulatory regimesliberalised, with private companies contracted to take overinadequate state provision, with comprehensive student loansystems or vouchers in place, the private education sectorcould be in a strong position to further the promotion ofequitable development.

But the snapshot of the 'global education industry' alsoinvites us to look again at public education in developedcountries such as the UK and the USA. Perhaps there arelessons for educational provision in these countries to bedrawn from this evidence? Travelling to Brazil and witnessingprivate education companies so willing to invest intechnological innovation and curriculum development inschools set me wondering about the paucity of innovation instate schools in England. Travelling to South Africa andfinding private education companies so concerned with thefuture destinations of their students - to the extent that theybuy up recruitment companies - raised questions about theconcerns of our state schools. Seeing in India companies soinvolved with quality control to ensure standards are high forall clients led to doubts about the lack of quality controlprocedures at home.

Perhaps there are lessons from the global educationindustry for developed as well as developing countries?

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IEA Education andTraining Unit StaffDirectorProfessor James Tooleyl e a U s Research FellowsDr Bonnie Macmillanica Stephen Hewitt

Editorial Advisers

Professor Colin Robinson(Editorial Director, IEA)Michael Solly(Editorial/Publications Consultant, IEA)

Advisory Council

ChairmanJohn Blundell (General Director, IEA)

Academic Advisors

Professor Brenda Almond Professor David Hargreaves

(University of Hull) (Un vers ty of Cambridge)Professor Robin Barrow Dr Chandran Kukathas

(Simon Fraser University, Canada) (University of New South Wales)Professor Jim Campbell (Inst tute of Dr John MarksEducation, Unversity of Warwick) (Educational Research Trust)Professor John E Chubb Professor David Marsland(Edison Project, USA) (Brunel Universty)Janet Daley (The Daily Telegraph) Professor Lal,ta Ralasingham (VictoriaProfessor Antony Flew (Professor Univers ty of We lington, New Zealand)

Emeritus, University of Reading) Professor Edwin G West (ProfessorSir Douglas Hague CBE (Temp eton E-er tus, Carleton Un versity, Canada)

College, Unversity of Oxford) Jeremy N Wh te INETTEC)

The GlobalEducationIndustryLessons from Private Educationin Developing Countries

James Tooley

Changes in private education now underway in the developing

world could have a dramatic impact on the lives of millions

worldwide.

Drawing on examples from Argentina, Brazil, Colombia, India,

Indonesia, Peru, Romania, Russia, South Africa, Zimbabwe and

other countries, Professor Tooley gives a snapshot of private

education that may surprise many readers: contrary to

expectations, the private education sector is large in the

countries studied, it is innovative, and it is not the exclusive

domain of the wealthy. The author challenges the conventional

wisdom that private education in developing countries fosters

greater social and economic inequality; he points out that such

education often provides creative social responsibility

programmes, subsidised places, and student loan schemes.

James Tooley identifies the factors that impede or facilitate the

development of the private education sector in various countries,

focusing on the regulatory regimes that may impinge upon

private education.

Finally, he considers the ways in which the existence

of an innovative private education sector could influence

education policy as practised by international agencies and

national governments. He concludes with a 'modest proposal'

for how for-profit education enterprises could play an important

role in promoting equitable development.

The Institute of Economic Affairs22 i(,rd No-1h M-reet, VVesttinsler Londo, W1IP 3LB

r oielr irOr' '01/1 79i 3/45 F.ns,w le (1111 799 2137£ 8.0I E ,t., mr norrrii Ai hternet hr,r'rw-ie,, org uk ISBN 0 255 36475-X