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Export education - blip or bust?

By Fiona Rotherham

Monday 1st September 2003

Text too small?
Foreign students are jammed en masse into the lift foyer of an inner city Auckland office building, talking loudly in a cacophony of languages. Not a word of English can be heard. Outside, students congregate at the building entrance, smoking, eating, and spitting, seemingly oblivious to others on the footpath. There's a sudden stampede for the lift, and once inside - packed like sardines - the noise instantly starts again. With your nose wedged against the door, it's easy to feel resentful of this cultural invasion.

Sound like a day in your life? Feel like an outsider in your own office building? You're not alone. A recent survey of Auckland office workers by property consultancy Jones Lang LaSalle found most wanted foreign students banned from their buildings. Some businesses have insisted on clauses allowing them to surrender their lease if the landlord rents space in the same building to educational providers.

Add this kind of backlash to recent political comments about too many Asian faces and it's easy to see why perceived anti-Asian sentiment has contributed to the current downturn in our export education industry. Explosive growth from 2000 saw the industry attract more than 82,000 foreign fee paying students last year, contributing $1.7 billion in foreign exchange and providing 20,000 jobs. But, this year, student visa applications from three key markets - China, Hong Kong and South Korea - have halved. Student numbers have plummeted by around 30%, mainly in newer English language schools reliant on the Chinese market.

The big question is whether this is a short-term correction from unsustainable growth levels - 56% last year - or a long-term decline. Industry players say the current rocky patch could last 12 to 18 months but there's no need to panic. In fact, they're claiming the downturn is good, because it will clean out the cowboys and help settle the industry. "It allows us to put more effort into deciding whether the numbers we have are sustainable or not," says Post Primary Teachers Association (PPTA) national president Phil Smith (see How many is enough).

And those numbers have been spectacular. Export education has been one of the fastest growing sectors in the New Zealand economy in recent years. The $1.7 billion in foreign exchange it made last year compares to just $85 million earned in 1990. The boom in demand from China has fuelled the industry's growth, with some 40% of our foreign students coming from that country. In the secondary school sector, for instance, the number of fee-paying Chinese students has gone from just 43 in 1996, to 3554 in 2001 and 6476 last year.

But the export education juggernaut faltered last October, when student visa applications from China began to flatten out. Applications accepted for processing by the New Zealand Immigration Service in Beijing and Shanghai peaked at 2385 for the month of April 2002, but by February this year had dropped to just 696. Applications from Seoul fell from 193 in January to 31 in May. The rate of decline in Chinese student visa applications has fuelled suspicion that government policy is the cause, rather than tighter checks by the New Zealand Immigration Service and lower quality applications. The figures show the number of Chinese applications approved in 2002-03 has dropped to 14,177 from 19,470 last year, and the number declined has gone from 3502 to 5109. Overall, foreign student numbers in schools are still higher than last year but the growth rate had slowed by March.

Why the sudden slowdown? A host of factors can be blamed:

  • the rising dollar increasing the cost of studying here

  • institutions increasing prices, especially at tertiary level

  • tougher competition, with the UK, Canada and Australia improving visa accessibility and investing heavily in promotions into China

  • new competition from Singapore, Hong Kong and Malaysia

  • confusion over New Zealand immigration policy changes

  • concerns about the welfare of students, their low level of interaction with Kiwis, and anti-Asian sentiment following negative media reports and political comments

  • SARS

  • poaching of students between schools, which has angered offshore agents who are then asked for refunds
  • Crucially, all of these, apart from Sars and possibly the high exchange rate, are long-term problems.

    Who's hurting
    Worst affected by the downturn have been English language schools and others offering short-term courses. Applications to the New Zealand Qualifications Authority (NZQA) to start up new English language schools fell from a high of 32 in the first half of last year to 24 at the same time this year. Student numbers could drop by 50% by year's end, warns Stuart Rose, marketing manager for the University of Waikato Language Institute, one of the country's biggest language schools. On the other hand, Carich, a provider of short-term IT and English training courses, says its numbers have already picked up to budgeted level after dropping 20% in the first half of this year. Half of the company's international students are from China.

    The biggest cause of the downturn has been Chinese agents, who act for both students and migrants, turning away from New Zealand after the government changed the English language requirements for immigrants late last year, Rose says. In the past the industry has relied on Chinese students coming here because it was the easiest country to get into. Now that's changed the industry needs to go to China and market our other advantages. "Long-term that is not a bad thing but there will be real pain in the short to medium term," Rose says.

    Two schools closed this year - Hamilton-based English language school, Planet English, shut its doors in May due to reduced numbers, and in July the unregistered Columbus Academy in Auckland was shut down following the alleged murder of 22-year-old intellectually disabled Japanese student Nozomu Shinozaki. English language schools have cut back teacher numbers and other closures are feared.

    Most have some form of student fee protection in place and the Association of Private Providers of English Language (APPEL) and NZQA have developed a protocol for communicating with each other within an hour of any financial difficulties involving schools. Education Minister Trevor Mallard says it's essential any closures are handled in a way that minimises adverse overseas publicity. "Clearly whenever there is a closure anxiety is caused by that, but the way we handle it and pick the kids up and put them into an alternative arrangement that is of greater quality and stability, is the big test."

    Where to from here?
    Handling the fall-out from the downturn is one thing; how to turn the tap back on in Asia is another. The current crisis prompted industry leaders to assemble in June for an unprecedented emergency roundtable meeting. On the agenda: a strategy for the survival and future growth of the sector. Participants agreed recent rapid growth has created strains in some communities, especially Auckland and Christchurch where student numbers are concentrated. The roundtable report says there is a need for "greater tolerance in terms of New Zealanders' attitudes towards diversity within their society". That's a polite way of saying, "be nice, guys", or we risk jeopardising our fourth biggest export earner. "Queen Street may be full of Asian students pouring into the streets but that doesn't mean they're taking over New Zealand," says APPEL chairman Patrick Ibbertsen.

    And the fact is, there's still massive growth to be captured in this industry - if we do it right. An Asia 2000 industry paper suggests foreign exchange earnings could rise to $4 billion-$5 billion in the next 10 years. Demand for learning English is still strong in Asia, and worldwide the number of students seeking education outside their home country is expected to grow from 1.8 million in 2000 to 7.2 million by 2025.

    The industry, keen to secure a slice of this market, now realises it needs to have the public on side if it's to achieve its ambitions. To this end, a major public education blitz promoting the industry's social and economic benefits is planned. Expect to hear more about the merits of New Zealand students being exposed to other cultures, and the opportunity for Kiwis to network with international students who have gone home with fond memories of their time here. An Infometrics study in 2000 found that for every dollar spent directly on education and accommodation needs by international students, a further 25 cents flowed through to the New Zealand economy - ranging from retailers through to the estimated 10,000 homestay providers nationwide. The government rakes in an estimated $300 million through GST and income tax annually from the sector.
    And don't forget the take up of previously vacant inner city office space. Export education accounts for 20% of Auckland CBD office tenancies.

    The industry wants the PR campaign to be politically led, but Mallard rules that out with a tacit admission of how close racial issues simmer beneath the surface in New Zealand. "It (the industry) is better getting on with the job and letting the benefits be seen rather than charging into what could turn into, if it got away, a nasty racist debate."

    Time to grow up
    The export education industry is like an unruly teenager, reluctantly maturing. You have to expect a few blemishes, some rebellion. Jim Doyle of the Association of Polytechnics says a coherent strategy is overdue in an industry notorious for its infighting. "This industry is very young and everyone has been doing their own thing. They hold the view that the competition is inside New Zealand when in fact it is outside."

    Until now, the industry has thrived on a combination of factors: a perception that New Zealand is clean, green, safe, and offers strong educational standards; and that we're cheap. A study last year by Australian education promotion agency IDP and Australian Education International found that for a bachelors degree, New Zealand had cheaper tuition and living costs than Australia, the US, Canada and the UK. But that's all about to change: tuition charges, particularly at tertiary level, are rising, and the high dollar is undermining our competitiveness. For many in the sector, that's a prompt to shift the focus to quality rather than simply chasing bigger student numbers.

    "It's important we all lift our game," says Tim Sheppard, New Zealand Trade and Enterprise education sector manager. "We already know we have excellent academic standing. We need to build on that and provide excellence in every respect." He gets no argument from the education exporter of the year, Wellington's Victoria University. The university's strategic plan to 2011 targets lifting international revenues to 20% of overall income rather than a specific number of students. "We have positioned ourselves to making a long-term sustainable business, not making hay while the sun shines," says international director Tim Fowler. Victoria has focused on delivering excellence in every aspect of the business, not just the academic side. Take enrolment applications. Offshore students usually apply to three or four universities. How quickly each institution turns around that application determines its conversion rate, Fowler says. "If you exceed their expectations and come straight back to them, possibly in their own language, you're in a good position." Borrowing a marketing idea from a local bank, the university calls every international student when they start each trimester to see if they have any problems. The students are rung twice in their first trimester to ensure they're settling in to Wellington okay. "It is just reconfirming this university is here to support them and not just a place to go to study."

    Getting the basics right
    In other words, Victoria is focused on one of the elements most critical to the long-term success of this industry - the pastoral care of its foreign students. But not every provider has been so attentive. In the rush for the easy dollar, some in the industry have been tempted to view our young foreign charges as an easy cash cow. An Education Review Office report released in July found conflicts of interest at a small number of schools involving foreign fee paying students and a member of staff or the board. In March, the New Zealand Herald revealed three senior employees of the country's largest primary school, Owairoa in Howick, east of Auckland, were running a private company arranging private board and extra tuition for children from Korea and China. The case is being investigated as part of the annual school audit by the Office of the Auditor-General. School Trustees Association president Chris France says boards don't have the authority to prevent these conflicts of interests and wants the Ministry of Education to take action. Mallard argues boards, as employers, are responsible for what's happening inside the schools. It seems everyone is ducking for cover.

    The biggest issue for foreign fee-paying students is whether they're being delivered what they're promised, says Andrew Butcher. He's carried out research on pastoral care for international students while at Massey University, and says our marketing lacks integrity. His research found many foreign students leave disappointed with the level of interaction they have with Kiwi students. "It is not necessarily that the homestay providers are doing a bad job. It is more a question of what they were led to believe in coming to New Zealand."

    Fortunately, some progress has been made on protections for foreign students following media horror stories about exploitation. The government last year introduced a mandatory code of practice for the pastoral care of international students, and, from this July, courses of less than three months must also comply. All providers must now be accredited. Other code revisions introduced this August force education providers to know where students are living, and tighten up the provisions for the care of students under 13 years. The latest revisions to the code also include requirements to report concerns about accommodation to the education ministry.

    Opponents say the change will be impossible to administer and resented by older students who frequently change address. But for other schools, the new regulations simply confirm existing practice. Christchurch's Aranui High School puts a big emphasis on the pastoral care of its 94 international students. It began chasing international students in 1996 and they now account for 10% of its roll and $1 million of its $2.4 million operating budget. Principal Graeme Pollock says there are economies of scale with the business - the more students enrolled the more full-time staff that can be hired to ensure they're getting proper care. One full-time staffer is dedicated solely to the pastoral care of foreign students. Flatting is banned - students must be in homestays, with the school maintaining constant contact with homestay families.

    Pollock says it's also essential that students from a diverse range of countries are enrolled, and the school operates its own country-by-country cap on numbers. He says if there are too many students from one country they don't mix and one of the main benefits of foreign education is missed.

    Get beyond China
    Pollock isn't the only one to have realised the importance of diversification to the industry's long term future. While the rest of the sector has hit a downturn this year, Otago University has been enjoying its biggest ever increase in international student enrolments. It has deliberately diversified over the past five years after being caught out in the 1997 Asian crisis when 750 of its 1100 international students were from just one country - Malaysia. "We have fought hard to get to the position that if anything happens to one market it won't have a significant impact on operations," says Wayne Angus, deputy director international. "Chinese students account for just 18% of our total international students, lower than any other university. We now have the population spread so we're not so concerned about the downturn."

    New markets are opening up in India, South America, the Middle East and the former Soviet republic and universities have seen a recent upsurge in US students under the short-term Study Abroad programme.

    Diversification also means offering a world-class array of highly specialised courses. For example, Air New Zealand provides aircraft maintenance engineering training in Christchurch to 35 students from Saudi Arabia and Oman. The airline also offers pilot training courses, with Chinese pilots using the airline's Boeing 737 aircraft simulators under a regular contract for nine months of the year.

    Likewise, Taranaki-based Pacific International Hotel Management School occupies a highly specialised niche. It is one of only four worldwide offering the International Hotel Tourism Training Institute (IHTTI) hotel management course. It takes 300 international students a year and has to turn many away because of capacity constraints. It's highly sought after because historically 100% of graduates end up with jobs. "We have a niche market... the standard of qualification will allow [graduates] to work anywhere in the world and they do," says school marketing manager Cyril Henderson. Instead of resting on its laurels, the school is working with Otago University to develop a masters degree in hospitality from next year, and is negotiating with polytechnics to deliver part of the diploma course, which students would then complete in Taranaki.

    Co-operate consistently
    That kind of complementary approach between providers is the answer to the current downturn, according to Caron Taurima, chief executive of Carich International. Her company is currently working with a group of providers on an offshore marketing strategy. "If we get students coming in that are not suited to us we can refer them to one of the others. The collegiate approach works." She also thinks the industry needs to build better links between English language courses and other tertiary courses, so students stay longer.

    A consistent industry-wide message is also part of the answer. A new brand, "The New World Class: educated in New Zealand" was launched two years ago with Tourism New Zealand funding. The theme is to convince students they can be born in their home country, educated in New Zealand, and work anywhere in the world. Brand manager Peter Laurenson says 260 out of 1100 education providers are using the brand in their marketing but they represent 80% of the bigger players. "Our biggest weakness is our smallness and it is our biggest strength. We have a good shot at getting true consistency." But then he adds: "Some in the English language sector have a fundamental problem with anything centrally co-ordinated or government intervention."

    The industry would like a bit more co-operation and consistency from Wellington, too. Many are incensed at the government's new export education levy, which will rake in around $2.8 million this year through a flat $185 fee from each provider together with 0.45% of student fee income. Private educators and universities condemn it as a tax, saying the government already gets a large amount from the industry through GST, income and company tax. They reckon export education should be funded in much in the same way as tourism, which gets $55 million a year from the government. In a recent Education Review article, out-going Education New Zealand head Lester Taylor argued the government should match the levy at least dollar for dollar.

    Even if Taylor's wish came true, New Zealand would still be investing considerably less than competing countries - Australia, for example, spends $21 million marketing education internationally. But Taylor shouldn't hold his breath. Despite the New Zealand industry's current vulnerability, Mallard says there's no chance of government funding. "The industry is one which is growing in numbers and quality and I don't think there is a need for a large amount of additional spending." APPEL's Ibbertsen is unsurprised at Mallard's response, saying the government has an ideological approach that education should not be a business. "The fact is, it is a business, but there is a squeamishness about that in the government's view."

    Make it unique
    So what's the message so far? Take good care of the students we attract; give them a good quality education; work together; and don't put all our eggs in one basket. And one more thing - make sure the customer cherishes the experience.

    Ask English language student Rudi Pizzol why he chose to do his one-year course in New Zealand and he shrugs. Very Italian. He loves the beautiful outdoors. He had already holidayed twice in New Zealand and once in Australia and preferred to study here. Fellow student Clauodio Carrazco studied geography at home in Argentina and was drawn to our volcanic activity. Of the students interviewed by Unlimited, all were attracted here by the reported friendliness of New Zealanders. Only one student - Chinese Liang Zhan Peng - has been hassled. He finds Kiwis friendly by day but at night finds Auckland "unsafe".

    Japanese student Asuka Kamakamoi's best memory is being taken to a North Shore sports bar by her homestay family to watch the rugby. She didn't understand anything, but that didn't worry her. It was the warmth of the gesture that mattered.

    As long as we continue to offer that unique Kiwi welcome to our young visitors, the current downturn should turn out to be little more than a blip.

    How many is enough?
    New Zealand holds less than 1% of the world export education market yet capacity constraints could stop the industry getting much bigger.

    The government has shelved plans to cap the number of foreign fee-paying students in schools next year because of the current industry downturn but Education Minister Trevor Mallard says it will be revisited if numbers rise too high.

    How high is too high? An Asia 2000 industry paper says one estimate puts New Zealand's potential capacity for international students at 120,000 places annually - 40,000 more than we currently have. Mallard won't give a definitive number. He says we are currently at the margin of what we can take in some state sector schools. "If you get 10% coming from one country or even 7-8% into a secondary school situation you begin to get quality issues."

    His concern is two-fold: that too many international students exacerbate the secondary school teacher shortage, and that overseas students don't get the interaction that they're seeking with Kiwis if there are too many of them in one class. John Zhang, a Chinese student doing a three-year bachelors course at the Christchurch Polytechnic Institute of Technology, first planned to study in Canada but decided it was too cold. He then looked at Australia but decided there were too many Chinese students. "That's bad. The reason to study abroad is to learn the culture and integrate. If you are just studying in a university surrounded by Chinese you won't improve your English or integrate with the locals."

    The PPTA is pushing for a 5% cap. President Phil Smith says some schools are doing it well and using the extra revenue to provide English language teachers or teacher aides in the classroom, but too often these students put pressure on teachers' workloads.

    Industry players say a cap is a crude way of dealing with capacity constraints. They say it's important to get the right balance in each course rather than cap overall numbers, and argue some schools are better geared to handle more students than others. Lincoln University has 1500 international students - some 38% of its total roll and the highest ratio in the country. Too high? International director Geoff Ormandy doesn't think so. Lincoln was one of the first to get involved in international education and it now makes as much from international students as domestic ones. "You can't survive in isolation in New Zealand. Universities are meant to be international and if you don't look international you're not in the real world."

    From South to East
    A boy's college established in 1900 at the top of the South Island is one of the last places you'd expect to find leading innovation in the export education industry. Marlborough Boys' College is the first secondary school in the country to be educating students offshore at a campus in China. It is one of 36 providers involved in offshore education.

    Marlborough Boys' began teaching its New Zealand curriculum to 10 Chinese year 11 students this year at the Changzhou International School, west of Shanghai, and hopes to extend the number to 200 depending on demand. Marlborough Boys already has 50 international students in Blenheim but principal John Rodgers says there was an obvious limit to how many it could take with a roll of only 1000 and a shortage of homestays in the area. "By teaching in China you increase the number of students rather than having a finite amount on site and increase the cash benefit." Rodgers says the offshore venture would have been uneconomic without a partnership with a Chinese school and the use of its existing campus.

    He dismisses criticism schools are becoming too dependent on offshore income, saying they have been forced into it because of inadequate government funding. The extra money allows schools to provide more to domestic students but if that income disappears, the only real downside is the service level dropping back to what it would have been, he says." The government is concerned if this revenue source disappears it will be asked to meet the increased quality demand the community has as a result of this additional revenue. If we ran all businesses on that concern we would never expand."

    Don't expect to see the school expand into multiple offshore sites though. The board's core focus is running a boys' college in New Zealand, Rodgers says. One site is a minimal distraction to that focus. More and the balance changes.

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