Loss at branch cam­pus should ‘pro­vide les­son’

Read­ing’s Malaysia deficit should ‘pro­vide salu­tary les­son’, source says. El­lie Both­well writes

THE (Times Higher Education) - - CONTENTS - El­lie.both­[email protected]­ere­d­u­ca­tion.com

The £27 mil­lion loss at the Univer­sity of Read­ing’s Malaysia branch cam­pus last year should pro­vide lessons about the chal­lenges as­so­ci­ated with open­ing over­seas out­posts, ac­cord­ing to sec­tor ex­perts.

Read­ing’s lat­est ac­counts, pub­lished in Novem­ber, re­veal that the Malaysia cam­pus’ deficit pushed the in­sti­tu­tion as a whole into the red to the tune of £20 mil­lion for the year ended July 2018. They state that a de­tailed fi­nan­cial re­view of the out­post had con­cluded that “the cur­rent loss-mak­ing po­si­tion would con­tinue for around four years” be­fore the cam­pus breaks even.

How­ever, an in­ter­nal doc­u­ment seen by Times Higher Ed­u­ca­tion sug­gests that the short­fall was far more sig­nif­i­cant than an­tic­i­pated: a re­port from Read­ing’s chief fi­nan­cial of­fi­cer in Fe­bru­ary 2017 fore­cast an £8 mil­lion loss for the cam­pus in 2017-18. It opened in 2016.

The doc­u­ment says that a re­view by KPMG high­lights that the univer­sity had al­ready in­vested £21 mil­lion and “this will get to be­tween £50 mil­lion and £70 mil­lion over the five- year pe­riod” be­tween 2016-17 and 2020-21. It adds that the cam­pus “could phys­i­cally exit/close down on 1 June 2021, hav­ing in­voked the lease break a year ear­lier”, but which­ever de­ci­sion is made “at least a fur­ther £40-45 mil­lion of fund­ing will be needed for Malaysia over the com­ing five years”.

The re­port notes that the out­post “opened later, and cost more than planned” and is lo­cated “in an area that doesn’t have the best rep­u­ta­tion in Malaysia”, close to the Sin­ga­porean bor­der, which has made re­cruit­ment dif­fi­cult.

It also high­lights Malaysia’s visa regime, eco­nomic dif­fi­cul­ties and de­gree ac­cred­i­ta­tion process as rea­sons for the loss, claim­ing that “the cru­cial law de­gree (around which much of the ini­tial busi­ness case was con­structed) [ is] now look­ing un­likely to be ap­proved”.

Min­utes of the univer­sity’s coun- cil meet­ing in Novem­ber 2017 state that the ex­ec­u­tive board rec­om­mended con­tin­u­ing with the cam­pus “sub­ject to sig­nif­i­cant con­di­tions”, in­clud­ing cap­ping the univer­sity’s to­tal in­vest­ment in the out­post.

But one source told THE that there had been “weak ac­count­abil­ity and no trans­parency over busi­ness plan­ning and fi­nan­cial pro­jec­tions” for the Malaysia cam­pus.

“Read­ing was naive in how it ap­proached Malaysia and ig­nored the warn­ing sig­nals that were there at the very early stage,” the source said. “It is a salu­tary les­son. You can’t make a quick buck open­ing over­seas cam­puses.”

Ja­son Lane, di­rec­tor of the Cross­Bor­der Ed­u­ca­tion Re­search Team at the State Univer­sity of New York Al­bany, said that Read­ing’s Malaysia cam­pus was “il­lus­tra­tive of the chal­lenges many in­ter­na­tional branch cam­puses have faced over the years”.

“These are es­sen­tially start-up or­gan­i­sa­tions that higher ed­u­ca­tion lead­ers have lim­ited ex­pe­ri­ence cre­at­ing – par­tic­u­larly in a for­eign en­vi­ron­ment. Uni­ver­si­ties tend to over­es­ti­mate en­rol­ments and un­der­es­ti­mate the dif­fi­culty in nav­i­gat­ing the lo­cal en­vi­ron­ment,” he said.

Paul Hatcher, pres­i­dent of Read­ing’s Univer­sity and Col­lege Union branch, said that the “con­tin­ual cost of Malaysia” was a “com­mon con­cern on cam­pus” and was fu­elling “re­sent­ment” among staff, par­tic­u­larly in the wake of the an­nounce­ment of a vol­un­tary re­dun­dancy scheme.

Vin­cenzo Raimo, pro vicechan­cel­lor of global en­gage­ment at Read­ing, said that “a high level of in­vest­ment was al­ways an­tic­i­pated in the start-up phase of our Malaysia cam­pus”.

“We have made no se­cret of the fact that the en­vi­ron­ment is more chal­leng­ing than orig­i­nally fore­cast and so the cam­pus has not grown as quickly as an­tic­i­pated,” Mr Raimo said. “We are fully com­mit­ted to the stu­dents en­rolled at our Malaysia cam­pus and to our po­si­tion as a global in­sti­tu­tion. As with any ma­jor in­vest­ment, we con­tinue to mon­i­tor the de­vel­op­ment of our Malaysia op­er­a­tions to en­sure that the de­sired out­comes can be achieved.”

In deep wa­ter Read­ing’s Malaysia cam­pus made a £27 mil­lion loss last year

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