The Australian

By Sean Gallagher and Geoffrey Garrett

Leveraging online and a multinational model aimed at China are keys

Australian universities have been big winners from the Asian gold rush of full-fee paying international students for almost two decades, turning higher education into the country's third largest export earner. With federal funding for domestic students in short supply, international student fees have cross-subsidised the education of Australians and the research output of our universities.

But this highly successful model is being battered on many fronts.

The first is lateral, from universities in other countries aggressively trying to take export market share from Australia.

Big global brand US institutions such as University of California, Berkeley, University of California, Los Angeles, and Washington are desperately seeking new revenue streams in the wake of the global financial crisis and the consequential big cuts to state funding. From the west coast to the midwest and New York, America's finest public universities are quickly becoming very Australian. The Institute of International Education's Open Doors report says the number of Chinese undergraduates on US campuses rose by a staggering 43 per cent last year alone.

At the same time, Asian universities are not only educating more of their own, they are also looking to international markets. China, for example, has set the ambitious target of doubling its international student intake to more than 500,000 by 2020.

The second threat comes from above as ambitious private US universities such as Duke and New York enter into joint ventures with Chinese partners to create new multinational universities.

These multinationals are combining Chinese cash with US cachet to create new models of universities. Their educational offerings don't look much like those on the branch campuses of Australian universities. Multinational universities also are using new infrastructure and lower cost but high-quality talent to do cutting-edge research on frontier issues vital to emerging Asia's transition into the mass middle class.

The final threat is from below and the brave new world of massive open online courses, delivering high quality but low-cost (even free) higher education by computer, iPad or smartphone to hundreds of thousands of students at a time around the world.

It's not only new private companies such as Coursera, Udemy and Udacity but also to centuries-old scions such as Harvard and Massachusetts Institute of Technology marketing their online classes under the edX banner. And the biggest market for massive open online courses seems to be emerging Asia.

No surprise, then, that the boom times for Australian international higher education have ended, with the high-water mark being reached a couple of years ago at 25 per cent of all undergraduates and 40 per cent of all postgraduates. And it isn't just the post-GFC global swoon and the high Australian dollar at work.

Chances are the global market for conventional higher education is close to saturation; demand from Asia has peaked and limits to Australian supply have been reached.

The time is now for Australia to rethink the business model of its universities, including how to best leverage online opportunities.

But the more pressing challenge is to rethink the value proposition of our traditional higher education. In our new report on the internationalisation of higher education for the US Studies Centre at the University of Sydney, we offer two pathways in increasing order of desirability, but also of difficulty.

First, Australian universities need to move upmarket by improving the on-campus, in-class experience. This could include: more residential opportunities and better integrated student life; more interactive modes of teaching and better integration between teaching and research; more experiential learning opportunities through internships; and enhanced international opportunities that are better integrated into the at-home curriculum. Second, Australia's best universities need to move closer to the global frontier by adopting the multinational university model, focusing first on China.

Australian universities were pioneers in overseas branch campuses in Southeast Asia. What they must do now is to upgrade the branch campus model through real partnerships, with Chinese institutions the likeliest targets. Multinational universities will have to tailor their teaching and research to what is in highest demand in China, currying real favour and generating real value.

Ironically, it's also likely to help Australian universities in China feed back the best students, the best research and the best organisation practices to enrich the home campus and buttress the export model.

If neither pathway is followed, Australian universities will have little choice but to move down market, by lowering prices, increasing student numbers or reducing degree requirements.

Globalisation provided the chance for Australia's universities to turbocharge their internationalisation in only two decades. Now it threatens to undermine the export model. Universities that do not quickly respond to the new global challenge will do so at their peril.