[OUTLOOK]Private Universities in a Money Crunch

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[OUTLOOK]Private Universities in a Money Crunch

Today's society is called a knowledge-based society. That means knowledge is the basis for creation of values. If we accept such statements as undisputable, we don't need to take the trouble to explain why universities are so important: They are where knowledge is created and intellectuals are reared. How many people know that 80 percent of the important task of university education in South Korea is done by private universities?

The competitiveness of universities is closely related to their financial condition. However, the university with the largest annual budget among private universities in South Korea spends less than a quarter of what a representative university in Japan is able to spend. When compared with a renowned private university in the United States, the budget of the Korean private university amounts to only 10 percent of the American one. A Korean university was harshly criticized by the press for saving 100 billion won for its development fund, while Stanford University keeps 10 trillion won ($7.7 billion) for the same purpose without making much fuss over it. Under the circumstances, we can hardly expect the competitiveness of private universities in this country to improve much.

The revenue sources of universities are tuition payments, government funding, contributions and income from endowments. In broader terms, that income can be called contributions, too, because the funds were initially formed with the donor money that established the university.

In American private universities, on average the revenue from contributions and endowment income amounts to 35 percent of the total budget. In Korean private universities, however, the comparable figure is less than 9 percent. In Japan, contributions alone (not including endowment income) fund approximately 9 percent of the budget. If endowment income is subtracted from the Korean figure, contributions fund only about 4.5 percent of the budget.

Why do Korean private universities attract such a low rate of contributions? Partly because the culture of contribution has yet to take roots in our society. But it is also true that private education gained a black eye from several notable embezzling cases. In the information society, however, where the institutions' transparency can be guaranteed, we no longer need to look squint-eyed at private education. Granting preferential college entrance to descendants of contributors to universities should be regarded positively, so long as open criteria can be assured.

Education by private universities not only benefits their students but also brings in huge interest to the country. So it is natural that private universities should have financial subsidies from the government. Some 20 percent of annual budgets for American private universities and 15 percent for Japanese ones come from central government coffers. In Korea the figure is less than 4 percent. I expect the current government to expand its financial assistance to education in general and to private universities in particular, since it publicly pledged to increase the budget for education to 6 percent of gross national product.

The composite rate of government subsidy and donor contributions for Korean private universities is lower than that for foreign universities. Thus Korean private universities must depend more on tuition payments than the others do. Only 40 percent of the budget for American universities comes from tuition payments, while for Korean private universities it is more than 70 percent. Neverthe-less the tuition at Korean private universities is not greater than those in other countries. It is no more than one sixth of an American private university's (Stanford University) and one third of a Japanese University's (Waseda University).

In the United States it would take four years for a college graduate to earn the amount of money that was paid for college tuition. In South Korea it would take only one year. That indicates that tuition at Korean private universities is relatively cheaper.

Nonetheless, every year private universities in South Korea have to put up with the usual conflicts with students over tuition increases. I wonder if there is a country in the world where universities set their tuition in consultation with their students. The Ministry of Education recently announced a plan to require universities to set their tuition in consultation with students and their parents. It is highly likely that under such a plan the students' protests against tuition rises would become even fiercer, with the support of the Ministry of Education.

"You cannot reward contributors. We cannot financially support you up to your expectations. You cannot raise your tuition as much as you want."

These are the regulations saddled on private universities by a Ministry of Education that has talked about guaranteeing the autonomy of private universities. Can the competitiveness of our universities possibly be improved under these circumstances? Can they properly play their roles as universities in a knowledge-based society?


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The wirter is a professor of economics at Yonsei University.



by Lee Young-sun

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