My (possible, unintentional) contribution to university protectionism

I fear I may be, unintentionally, partly responsible for a minor piece of protectionism currently on its way through federal parliament.

The story started last year when I was researching for a paper on private providers of higher education (like many of my research projects, it has fallen victim to the daily bombardment of urgent tasks). These providers have been assisted by the extension of the FEE-HELP loans scheme, which lets their Australian students borrow money on similar terms to HECS students in Commonwealth-subsidised places at public universities.

However, the Higher Education Support Act 2003 requires that in order to be eligible these providers must (among other things) have their ‘central management and control in Australia’. This was always a strange provision, since there could be many benefits from having foreign higher education providers set up in Australia.

Indeed, not very long after the Act came into force the government itself came to the same conclusion, but instead of changing the law passed a special amendment permitting the students of the Adelaide campus of the Pittsburgh-based Carnegie Mellon University to get FEE-HELP. In the process, it added another strange ideological qualification, with the provision reading:

Carnegie Mellon University, a non-profit organisation established under Pennsylvania law. (emphasis added)

But I digress. In the course of researching the ownership of private providers, I came across two that had, since becoming eligible for FEE-HELP, been taken over by foreign companies. In the case of one of them, the government’s own higher education institution website is advertising this as a positive:

In 2005 the college joined the Raffles Education Corporation, Asia Pacific’s premier creative designa nd business education provider with a network of over 28 colleges across the Asia Pacific region, including locations such as Singapore, China, Thailand and New Zealand. As part of the Raffles Education Corporation, there is an exciting opportunity to study part of your degree at one of our other group locations. A big advantage in the global world of design influenced and enhanced by local cultures and ideas.

Indeed.

So what does ‘central management and control in Australia mean? This is what the Department told me:

The following are the main factors taken into account when assessing whether the central management and control of an applicant are in Australia:
* whether the persons who make significant decisions about the applicant body, such as the Chief Executive Officer and other relevant persons with the power to make significant decisions, reside in Australia;
* where the applicant is a company, whether the majority of its directors reside in Australia; and
* whether the body’s registered office is in Australia.

I’m not at all sure that Raffles meets these criteria. Its ASIC register contains these words:

Small Proprietary Company That Is Controlled By a Foreign Company (emphasis added)

However, as I observed in my original email to the Department there isn’t actually any provision permitting the Minister to revoke FEE-HELP eligibility on this ground once it has been granted. The amendment to create such a provision is in the bill now before the Parliament, I fear at least partly the result of my inquiry.

Obviously any relevant criteria should not just be required during the application process. But it is hard to see what public purpose was served by the original legislation. While it may be desirable to have some management in Australia, to ensure compliance with other requirements, there is no need to have central management here.

Last year, Raffles had 178 students in Australia, an unknown number of which could as a result of this amendment lose their right to borrow under FEE-HELP, and have to pay up-front instead. Some of them may have to drop out.

Is this the kind of education revolution we want?