Chapter 2 - Issues raised in evidence
2.1 Evidence presented to the Committee ranged from support
for the cessation of the Education Services for Overseas Students (Registration
of Providers and Financial Regulation) Act on 1 January 1999, for a 12 month or
three year extension of the Act, to the continuing operation of the Act. A
number of perceived problems with the Act in its present form were raised with
the Committee along with proposals for greater self-regulation of the
international education services industry.
2.2 The Committee heard that while the education and
training industry contributes in excess of $3 billion a year to Australia's
economy it also brings a number of intangible benefits that cannot be measured
such as developing contacts for future trade, progressing ideas and
contributing to Australia's international standing.
2.3 The education and training industry is an important and
valuable industry for Australia, and the Committee heard it requires the
continuing support that the existing cooperative framework between the
Commonwealth, state/territory governments and industry affords. The Committee
heard that the ESOS Act is the key national element in this cooperative
framework.
2.4 The Committee also believes there is still some risk that
a small number of unscrupulous providers may undermine the integrity of the
education services provided by all Australian providers, including public
institutions.
2.5 While there were calls for greater deregulation of the
sector the Committee also heard an opinion that the industry is not yet able to
provide the universal protection necessary to protect Australia's international
reputation.
2.6 DEETYA advised the Committee that in the absence of the
regulation provided by the Act there is a risk of a return to the environment
which existed before the introduction of the Act, including the financial
collapse of providers and the potential use of taxpayers money to refund
overseas students. DEETYA also advised that the national register, known as the
Commonwealth Register of Institutions and Courses for Overseas Students, and
the financial and tuition guarantee provisions in the ESOS Act ensure that
Australia's international reputation is not damaged.
2.7 DEETYA is of the view that in the absence of the national
register there could be a risk to the integrity of Australian education which
could impact on student demand for places. Accordingly, education services for
overseas students cannot solely be viewed in terms of markets or by analogy to
other industries. The provision of education services involves complex
interactions and is not a simple commodity exchange.
2.8 The Australian Council for Private Education and
Training (ACPET), and several other witnesses, referred to the factors
currently impacting on Australia's education export industry which they predict
will result in an estimated 40 per cent downturn in the overseas market.
However, Government figures show that the number of overseas students studying
in Australia in 1998 is 1.4 per cent less than in 1997. These factors include:
- the recent Asian economic currency crisis;
- publicity given to the statements emanating from One National
Party;
- the lack of a coordinated national marketing promotion; and
- continual changes and additions to regulatory compliance.
2.9 The Committee notes that in addition to these issues, a
number of matters raised in evidence and in submissions are beyond the scope of
this inquiry and will be referred to in point form at the end of this chapter
as items for further consideration. The Committee would, however, like to
comment on each of the following issues:
Regulation of the education export industry
2.10 In past inquiries, the Committee has heard evidence
that the education export industry was too regulated. While the Government has
addressed this issue, several witnesses still expressed concern about the
extent of industry regulation. The Committee heard that regulation of
education services was a key factor amongst overseas students, with some 70
percent of students saying that levels of protection afforded by government was
a factor of which they were aware. DEETYA advised that not only was the level
of protection offered important but that if it became widely known that the
government was thinking of removing those protections it could have an adverse
effect on the reputation of Australia's education and training industry
overseas.
2.11 ACPET, which represents some 80 per cent of all
Australian private education services providers, noted that while publicly funded
providers, consisting primarily of all universities, TAFEs and schools, were
exempt from the regulatory provisions of the ESOS Act , its member had to
comply with a plethora of different state and Commonwealth regulations,
including
- mandatory compliance with multiple variations of competency
based training curricula;
- mandatory compliance with an internationally unrecognised
Australian qualifications framework;
- mandatory state/territory and Commonwealth charges for CRICOS;
- mandatory TAS or insurance cost;
- mandatory annual trust account audits;
- mandatory compliance with revised quality registration;
- changes in the export market development grant;
- increasing Australian Vocational Educational Education and
Training Management Information Systems Statistics compliance and multiple
other government agency statistical returns; and
- mandatory compliance with training packages.
2.12 Private providers who operate across Australia are
required to comply with nine different government regulatory frameworks and
interpretations of policy. Furthermore, in the Commonwealth sphere, providers
are subject to policy directives from not only the Schools and Vocational
Education and Training Minister and the Higher Education Minister, but also
from the Immigration and Multicultural Affairs Minister and Trade Minister.
2.13 The Committee recognises that few providers operated in
more than one state at the time when much of the regulatory framework was being
devised, and that the increasing burden of compliance has arisen with the
growth of the industry across State boundaries over the past decade.
The education export industry and its Asian markets
The recent currency crisis
2.14 Various figures were provided to the Committee about
the probable impact of the current Asian currency crisis on the education
export industry. The Committee notes that much of the decline is in the ELICOS
and schools sector, with an increase in numbers being experienced in higher and
vocational education.
2.15 One witness advised that there had been evidence of a
decline in overseas student numbers from some Asian countries, including Taiwan
and Korea, before the emergence of the currency crisis. While it was felt that
the decline may have bottomed out with respect to some countries, various
estimates were provided on the expected downturn in other markets, including an
annual drop of around 20 per cent from Malaysia, 17 per cent from Thailand, 10
per cent from Hong Kong ; 22 per cent from South Korea, 3.9 per cent from
Indonesia, combining in an overall reduction from the Asian region estimated at
5.5 per cent.
2.16 The Committee recognises that the relationship between
economic circumstances and fluctuations in overseas student enrolments are
complex and worthy of more comprehensive research and analysis.
The 'One Nation factor'
2.17 Several witnesses spoke of the impact of One Nation
Party statements on Asian source markets, particularly their potential to
affect Australia's image as an attractive study destination. While potential clients
from some countries appear to have responded in an immediate and negative way
to the 'One Nation factor', this does not appear to be the case for several
other Asian countries.
2.18 The Committee heard evidence that during a recent IDP
information day in Hong Kong, one in five students considering studying in
Australia specifically asked not to receive information on Queensland. ACPET
estimates that as a result of recent political events in Australia, a downturn
in overseas students in the order of 20 per cent could be expected.
2.19 Witnesses from the ELICOS Association also stated that
the 'One Nation factor' did not draw the same response from all Asian
countries, observing that while the 'Taiwanese market went off almost
immediately', the 'Japanese market tends to not take much notice of the actions
of a One Nation party'.
2.20 Another witness concurred with this assessment, stating
that while the 'One Nation factor' had had an adverse impact in Taiwan, Hong
Kong and to a lesser extent Thailand, Indonesia and South Korea were more
affected by economic factors.
2.21 The Committee believes that in order to counteract any
negative images of Australia that may result from the coverage of certain
political viewpoints in the Asian media, relevant government authorities should
be prepared to present a much broader picture of Australia, its institutions
and culture to markets in Asian countries. A failure to do so may result in
overseas students opting for alternative study destinations at great loss to Australia's
economic, academic and social circumstances.
New export markets
2.22 The Committee also notes that there are a number of
potential markets which are presently subject to restrictions, including China
and South America. The Committee believes that, given the obvious economic,
social and cultural benefits, the opening up new education export markets
should be urgently addressed.
2.23 While the small increase in students from northern
Europe choosing Australia as a study destination is welcome, the Committee
believes that more efforts should me made to encourage students from the
Asia/Pacific region to study in Australia.
2.24 The Committee believes that these factors all point to
a climate of increased cost pressures and exposures to trading difficulties
that increase the possibility of default on behalf of providers.
2.25 The Committee heard that during the current volatile
period in many of Australia's major source markets it is important to maintain
confidence in Australia's international education and training industry by
maintaining a stable domestic environment.
The effectiveness of Notified Trust Accounts (NTAs)
2.26 While some witnesses expressed support for the
maintenance of NTAs, particularly in the current climate , some criticism was
levelled at the ability of trust accounts to provide sufficient financial
protection to overseas students. Several witnesses also identified other
problems associated with the administration of trust accounts.
2.27 Circumstances surrounding the collapse of several
education service providers were detailed to the Committee, including instances
where trust accounts were found to be empty following a collapse.
2.28 Witnesses indicated that there were a number of
problems with the way in which trust accounts were managed. Problems which make
the trust accounts an ineffective way of providing financial security, include
- the infrequent auditing of accounts;
- inadequate coverage of costs other than tuition fees that may
be incurred by a student in the event that a provider closes (with the TAS
having to cover the difference);
- the tendency of operators to dip into the account when in
financial difficulties with the result that no funds remain should the provider
subsequently close; and
- the impact of scholarships and half-scholarships for providers
who have to take on students from a college that has closed.
2.29 Trust accounts can also place extra administrative
burdens on education providers through
- the difficulty in determining how much money should be in the
trust account at any one time;
- the difficulty in getting overseas agents to deposit the
correct amounts into the fund; and
- the current requirement to deposit 80 per cent of prepaid fees
into the account which leaves an insufficient amount left to cover agent fees.
2.30 The Committee considers that the continued use of NTAs
in their present form warrants further examination in the light of matters
outlined above. Some Senators felt that consideration should be given to a
centrally administered Notified Trust Account that would both remove the
ability to inappropriately remove funds and relieve some of the administrative
burdens placed on providers.
Administration of the ESOS Act
2.31 Concerns were raised about the costs of administering
the ESOS Act. ELICOS expressed the view that the examination of a full
breakdown of administration costs may reveal areas where savings could be
achieved. This could enable other more effective regulatory mechanisms, such as
spot audits, to be implemented without placing an additional financial burden
on the government or the industry.
2.32 ACPET raised concerns that some colleges discounted
fees below that of the CRICOS registered fee, and that the quality of the
tuition provided may become questionable. ACPET submitted that the Act was
flawed in this regard. ACPET submitted that the level of collapses in the
industry was hidden, as it is common for providers on the brink of collapse to
be taken over by another college.
2.33 The impact of staffing cuts on DEETYA's ability to
properly monitor compliance with the Act was a matter raised with DEETYA at the
public hearing. While one witness expressed the view that 'the effectiveness of
DEETYA...has changed in the last few years, no doubt due to funding aspects' ,
other witnesses indicated that they had observed no change in the quality of
service provided by the department.
2.34 Officers from DEETYA gave assurances to the Committee
that they had been able to compensate for an almost 50 per cent reduction in
staff responsible for the administration of the ESOS Act by operating more
efficiently. Some members of the Committee remained unconvinced that the same
level of service could be maintained by the department.
Issues for further consideration
2.35 The Committee notes that, in addition to those briefly
examined above, a number of issues which were raised in evidence and
submissions also warrant further consideration by the Government in
consultation with States and industry. These include:
- lack of funding for research into the education export
industry;
- the current cost of student visas and its impact on the
international competitiveness of the Australian education export industry;
- lack of communication between regulatory authorities and
Tuition Assistance Schemes on the continuing viability of providers;
- the proposed removal of the exempt status from the Act;
- the need to increase international student awareness of CRICOS;
- the continuing need to address unethical marketing practices;
- provision for easier alternative methods for students to
recover debt;
- the need to allow for students to be represented in debt
recovery proceedings;
- the proposal that courses run overseas by providers or
providers in partnership with overseas agents be subject to CRICOS; and
- the provision of clear guidelines for international students on
how to raise complaints about providers for misleading or deceptive conduct.
2.36 In the light of these matters which require further
consideration by the Government, the Committee sees some value in its continued
oversight of this legislation. This oversight would include a progress report
(in the year 2000) on the continuing need for regulation of the industry in its
current form.
The Committee's recommendations
Recommendation 1
2.37 That the Senate passes the Education Services for
Overseas Students (Registration of providers and Financial Regulation)
Amendment Bill 1998 without amendment.
Recommendation 2
2.38 That, as a matter of priority, the issues raised in
this report be the subject of consultations between the Commonwealth, State and
Territory governments and representatives of the education export industry,
addressing in particular, the need for greater conformity between states on the
issue of registration requirements.
Recommendation 3
2.39 That the Senate refer to the Senate Employment,
Education and Training Legislation Committee for inquiry and report by no later
than the last sitting day of the Autumn sittings 2000, matters relating to the
operation of the Education Services for Overseas Students (Registration of
Providers and Financial Regulation) Act 1991.
John Tierney
Chair
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