Chapter 1 - Introduction
Progress and referral
of the bill
1.1
The Education Services for Overseas Students
(Registration of Providers and Financial Regulation) Amendment Bill 1998 was
introduced into the House of Representatives on 24 June 1998. The second
reading debate on the bill was adjourned on the same day.
1.2
On 1 July 1998, the Senate referred the
provisions of the Education Services for Overseas Students (Registration of
Providers and Financial Regulation) Amendment Bill 1998 to the Senate
Employment, Education and Training Legislation Committee for inquiry and report
by 13 August.
Background to the bill
1.3
The 1980s was a growth period for Australia’s
international education program with many overseas students choosing Australia
as an alternative study destination. Australia’s reputation as a reliable
provider of quality education services was threatened, however, during the late
1980s and early 1990s after the closure of a number of private educational
institutions whose providers were unable to refund prepaid course fees to
overseas students who had been refused student visas. Concerns were also
expressed during this period about the emergence of unscrupulous private
education providers and evidence of unevenness in the quality of education
services on offer. The Government sought to address these concerns by
introducing, in 1991, the Education Services for Overseas Students
(Registration of Providers and Financial Regulation) Act (ESOS Act).[1] The ESOS Act was designed to
provide assurance of education quality and financial protection to overseas
students studying in Australia.
1.4
The objectives of the ESOS Act are to ensure
that overseas students are able to:
- access reliable providers and receive the high quality education
for which they have paid; and
- prevent taxpayers’ funds from being used to compensate students
for course fees that individual education and training providers are unable to
repay.
1.5
To meet the first objective, the ESOS Act
requires that international education and training providers must be registered
in accordance with State or Territory approval and accreditation. Details of
accredited institutions are provided to the Department of Employment,
Education, Training and Youth Affairs (DEETYA) which administers the
Commonwealth Register of Institutions and Courses for Overseas Students
(CRICOS).
1.6
International students must provide evidence
that they have enrolled in a CRICOS course before they will be issued with a
student visa. The ESOS Act thus facilitates quality assurance for education
services. The responsibility rests with States and Territories through their
accreditation procedures to ensure that standards are upheld.
1.7
In addition, the Act also imposes certain
financial conditions on private education providers. Where providers receive
recurrent funding from the Commonwealth or where they are administered by a
State or Territory education authority, the providers must abide by the
relevant Commonwealth or State audit requirements. These providers are exempt
from certain financial requirements under the ESOS Act. Providers that do not
fall into these categories—non-exempt providers—are bound by the financial and
tuition guarantee requirements of the ESOS Act, which include the maintenance
of a Notified Trust Account (NTA), membership of a Tuition Assurance Scheme
(TAS) as well as other tuition guarantee arrangements.[2]
1.8
Non-exempt providers are required to deposit 80
per cent of prepaid course fees from overseas students into a NTA, which is
subject to annual auditing requirements. Under the ESOS Act, moneys may be
refunded to students where a provider has defaulted.
1.9
Providers, who do not have grounds for
exemption, must also belong to a TAS. The TASs, which are operated by peak
industry bodies, must
- cover any administrative costs associated with placing students,
who are affected by the closure or default of a provider, with an alternative
member-provider;
- ensure students are placed in a course which is equivalent to the
course they were originally enrolled in;
- ensure that students are not required to pay for any part of a
course for which they have already paid.
Provisions and
objectives of the bill
1.10
The purpose of the Education Services for
Overseas Students (Registration of Providers and Financial Regulation)
Amendment Bill 1998 is to extend the operation of the principal Act by a
further three years from 1 January 1999 until 1 January 2002.[3]
1.11
Recent changes in the economic circumstances of
several Asian countries, which are source markets for Australia’s international
education industry, have led to expectations of a significant downturn in the
number of overseas students pursuing studies in Australia in the short to
medium term. The Government’s decision to seek an extension to the sunset clause
of the ESOS Act is based on the need for ‘continued confidence and maintained
stability in Australia’s international education industry’[4] during this period of
uncertainty.
1.12
This inquiry is a response to industry concerns
following requests from the sector providers that the Government extend the
sunset clause.
Previous Committee
inquiries
1.13
The Committee has had a continuing interest in
the education export industry having examined matters relating to the
regulation of education services on five previous occasions.
1.14
The Committee has tabled the following reports
on these matters:
- Education Services (Export Regulation) Bill 1990 (tabled 7
May 1991)
The main recommendations were:
that the term
‘trust account’ be replaced with ‘special account’ to better reflect the nature
of the account to be established;
to substitute
bonding arrangements for insurance;
to vary the
conditions applying to the withdrawal of funds from special accounts; and
that the operation
of the bill, if passed as an Act, be referred back to the Committee within 12
months.
- Operation of the Education Services for Overseas Students
(Registration of Providers and Financial Regulation) Act 1991 (ESOS Act)
(tabled 1 December 1992)
The main recommendations were:
that the sunset
clause be extended by one year so that the Act would cease on 1 January 1995;
that the
Commonwealth Education department undertake consultations to determine the most
appropriate form of regulation for the industry;
that financial
reporting continue on a yearly basis; and
the provision of a
28 day time limit on the repayment of fees to students
- The Efficacy of the Education Services for Overseas Students
(Registration of Providers and Financial Regulation) Act 1991 in the light of
the collapse of the Australian Business College in Perth in January 1993
(tabled 19 August 1993)
The main recommendations were:
that the sunset
clause be extended to 1 January 1997;
that proposals to
amend the Act be referred to the Committee as soon as they were tabled in the
House of Representatives;
that the ‘draw
down’ limit from trust accounts be limited to 45 per cent of tuition fees;
that relevant
providers of education services must belong to a Tuition Assurance Scheme and
the principles of such a scheme be outlined in the Act; and that providers be
allowed to nominate the date for the provision of annual returns.
- Overseas Students Tuition Assurance Levy Bill 1993 and
Education Services for Overseas Students (Registration of Providers and
Financial Regulation) Amendment Bill 1993 (tabled 9 December 1993)
The main conclusions were:
that the Act
provides the necessary protection for overseas students’ pre-paid fees through
measures including the trust accounts and draw down limits; and
that, despite early
difficulties in devising a suitable regulatory framework, Tuition Assurance
Schemes were an essential part of these protections.
- The Nature, Implementation and Effects of the Statutory Rules
1994 Nos 146 and 154 – Being Regulations Pertaining to the Education Services
for Overseas Students (Registration of Providers and Financial Regulation) Act
1991 (tabled 28 June 1994)
The main conclusions were:
that regulations
should be comprehensive enough to cover all overseas students and all
non-exempt providers;
that in
establishing regulations aimed at securing the required comprehensive level of
protection, sufficient flexibility, cost-minimisation and exemptions be made
available; and
that providers only
be required to deposit 80 per cent of pre-paid fees into trust accounts to
avoid ‘topping up procedures’.
The Committee’s current
inquiry
1.15
The Committee advertised its current inquiry on
Saturday, 11 July 1998. The Committee received six submissions and held one
public hearing in Canberra on Thursday, 16 July. Details of submissions
received and witnesses who appeared at the hearing are listed at Appendix 1.
1.16
The international education and training
industry is Australia’s fifth largest export industry[5] with an annual return of over
$3 billion dollars. In addition to its economic return, the industry has many
other benefits including
- fostering an understanding of Australian culture, law,
institutions and business practices overseas;
- benefits from the exchange of international perspectives; and
- diversification of fields of study in response to international
demand.[6]
1.17
The Committee, in undertaking this brief
inquiry, recognises the importance of this industry to Australia’s economic and
social well being. It is hoped that this inquiry will serve as a catalyst for
further consultations on the most effective way to manage this industry.
1.18
The Committee notes that the Government has
proposed seven alternative regulatory and non-regulatory measures for achieving
the stated objectives of the ESOS Act. A table summarising these options, which
was included in the bill’s Explanatory Memorandum, is attached at Appendix 2
for information.
1.19
While these proposals are not within the scope
of the current inquiry, the Committee foreshadows that these options will be
considered in any future reference undertaken by this Committee in relation to
the operation of the ESOS Act.
Acknowledgment
1.20
The Committee would like to record its
appreciation for those organisations and individuals who were, at short notice,
able to provide submissions or appear at the public hearing.
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