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Although many forces impinge on the dynamics that shape higher education financing, the four prominent factors are enrollments, staffing, financial effort, and graduation rates. Enrollments determine the size and configuration of the higher education system, and therefore have a major influence on costs. Staff salaries and benefits consume most of institutional budgets and heavily influence the amounts of resources available for enhancing the quality of instruction and building research capacities. Financial effort, i.e., how much the government is willing to invest in higher education, reflects the overall priority and total amount of resources that the country assigns to the sector. Finally, graduation rates provide an indication of system efficiency in the use of resources. Trends in the three focus countries for each of these four areas are now discussed.

Enrollments. Higher education enrollments grew at wildly different rates in the three countries targeted by this

study (Table 15). The large system in Bangladesh expanded by a reasonable 33% during 2000–2009, although its average annual growth rate of 4% masked severe oscillations in 2002 (–8%), 2004 (–8%), and 2008 (–13%). In contrast, higher education in Nepal exploded. Total enrollments more than tripled in slightly less than a decade, and annual increases averaged a rocketing 11%. Sri Lanka occupied the middle ground, increasing enrollments by 50% for a brisk but manageable 6% annual rate of expansion.

The uncontrolled growth of higher education in Nepal is likely to be accompanied by an array of financing problems, most notably a sharp decline in expenditure per student. Much slower growth rates in Sri Lanka and Bangladesh imply far more manageable situations.

Staffing. Trends in the numbers of academic staff show very different profiles than those for enrollments. In

Bangladesh, staff growth of 78% during 2001–2009 was more than double the enrollment growth of 33%. This

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implies a major hiring campaign during these years. Among the likely effects of this are strong upward pressure on the higher education budget as staff salaries and benefits increase much more quickly than the system as a whole; a probable squeezing out of all other types of expenditure as staff salaries claim almost all of the budget “pie”; and downward pressure on staff–student ratios, which could boost education quality by creating smaller classes. In Nepal, the gain in academic staff numbers was only half that of enrollments. This suggests that it may have been difficult to recruit qualified academics; teacher quality may have eroded if less-qualified instructors were hired to reduce the shortfall; and staff–student ratios have probably worsened, with a negative impact on quality as classrooms become more crowded. In Sri Lanka, data on public university staff numbers for 2006–2009 indicate an overall increase of 19%, or roughly 6% a year. This parallels the rise in public university enrollments during that period, indicating proportionate growth.

Financial effort and balance. The financial effort a country is willing to make to educate its citizens is indicated

by the share of gross domestic product (GDP) devoted to education. Likewise, the portion of GDP expended on higher education shows the priority that the country gives to producing highly skilled workers and research. The share of the education budget allocated to higher education also reflects the degree of balance to be found in education financing.

Historical trends for these indicators in Bangladesh, Nepal, and Sri Lanka show divergent paths. The financing effort made by Bangladesh on behalf of education and higher education has remained essentially unchanged at comparatively low levels during 2000–2009. The limited data available for Sri Lanka suggest a weak and declining national financial commitment to both education and higher education. Only Nepal appears to have strengthened its financial support to these areas since 2007.

In terms of the balance of expenditures within the education sector, Bangladesh and Nepal appear to be underinvesting somewhat in higher education, and Sri Lanka seems to be trending in the same direction. Internationally, allocating 15%–18% of the education budget for higher education is generally deemed to be more appropriate. However, remaining challenges in primary and secondary education in Bangladesh and Nepal may justify their current budgetary distribution. Even so, the 8% allocation to higher education in Bangladesh is unusually low. Efforts should be made in Bangladesh and Nepal to raise higher education’s share of the education budget toward international benchmarks as soon as circumstances allow.

Table 15 Higher Education Enrollment Growth, 2001–2009

Country 2001 2002 2003 2004 2005 2006 2007 2008 2009 Bangladesh 1,188,220 1,089,880 1,121,946 1,029,318 1,162,395 1,365,619 1,570,348 1,359,610 1,583,155 Bhutan … … … … 3,727 3,820 4,190 5,090 4,926 maldives … … … 4,550 nepal 67,890 84,000a _95,000a _119,000a _145,000a _{173,546 215,485 247,415 284,973} pakistan … 385,235 400,775 507,183 769,138 778,709 906,241 924,366 … sri lanka 49,055 52,100a _56,200a _59,300a _{63,355 65,206 69,491 71,648 73,398} … = not available.

a _{Extrapolations of trend to fill data gaps.}

Note: Sri Lanka data are for public universities only; total higher education enrollments were projected by the World Bank to be 442,753 in 2012 (including private university, open university, and external degree students).

Sources: M. Mannan. Innovative Strategies for Accelerated Human Resource Development in South Asia: Higher Education in Bangladesh. Unpublished; H. Bajracharya. Innovative Strategies for Accelerated Human Resource Development in South Asia: Higher Education in Nepal. Unpublished; University Grants Commission, Nepal. 2010. Education Management Information System Report on Higher Education 2008/2009. Kathmandu; United Nations Development Programme. Human Development Report 2010 for Pakistan; S. Chandrasiri. Innovative Strategies for Accelerated Human Resource Development in South Asia: Higher Education in Sri Lanka. Unpublished; and University Grants Commission, Sri Lanka. 2011. Sri Lanka University Statistics 2010. Colombo.

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vative Strategies in Higher Education for Accelerated Human Resource De

There is a wide range of practice in the distribution of financing within the education sector. At one end, Hong Kong, China reserves 31% of its education budget for its higher education system, which boasts 2 universities ranked within the world’s top 50 (Times Higher Education Supplement 2010). More common in Asia, however, is a relatively low allocation for higher education of 10%–14% of the education budget (Bangladesh, the Lao PDR, Nepal, the Philippines, Sri Lanka). India, Thailand, and Viet Nam are clustered near the OECD average of 23%. Similar data for other Asian countries can be used to put this public financing effort into perspective. Of 11 Asian countries for which data are available, 5 devote at least 4.0% of national income to financing education. Nepal aligns well with this group; in 2010 it boosted its education spending to 4.5% of GDP (Government of Nepal 2011). This compares favorably with the more modest South Asia regional average of 2.9%, where Bangladesh and Sri Lanka find themselves below this mean. Among the developing countries of East Asia, the average is 4.1% of GDP. Five of these countries also invest 0.5% or more of GDP in higher education, as does Nepal. By spending only 0.3% of GDP on higher education, Bangladesh and Sri Lanka are at the low end of the Asian spectrum. Appropriate future targets would be to attain education sector expenditure equal to at least 4.0% of GDP, higher education investments equal to roughly 0.7% of GDP, and higher education investments equal to roughly 0.7% of GDP

Graduation or completion rates. Ultimately, it is not how much money is spent, but what results are generated

by this expenditure that is most important. In higher education, the primary output is graduate degree holders. A higher education system that graduates a high percentage of the students who enroll is efficient and uses its public financing reasonably well. However, if doubts arise regarding the quality and/or employability of graduates, then what seems to be an efficient system may not be cost-effective. In this case, public financing is being wasted and might better be used for another purpose.

Completion rates for higher education in Bangladesh and Nepal are extremely low. Only 5% of students graduate. This puts them on a par with Cambodia and only slightly better than the Lao PDR. In Sri Lanka, the situation is seemingly much better with an estimated completion rate of about 70%, although this figure is so high that it requires confirmation.46 _{Even the most efficient higher education systems in the world, such as that of the Republic}

of Korea, only graduate about 50% of their university student intakes. In the United Kingdom, the completion rate is 40%. In the United States, it is 36%. The rates for the PRC, Indonesia, Malaysia, and the Philippines are less than 20% (World Bank 2012, 48).

The low completion rates in Bangladesh and Nepal should be cause for concern—and action. Failure to complete a degree not only is a waste of public funds, but is also frustrating for most students. From an economic efficiency standpoint, improving the completion rate may be a less costly way of boosting the numbers of graduates than physical expansion of the system (World Bank 2012, 50). Consequently, efforts to double the completion rate in Bangladesh and Nepal over the next 5 years would seem to be an appropriate first step toward remedying this problem.

In sum, it appears that the key dynamics in the higher education systems of Bangladesh, Nepal, and Sri Lanka do not bode well for financing in these countries. In Bangladesh, a reasonably paced expansion of enrollments and a significant upsurge in academic staff numbers prompted no change in the financing effort during 2000–2009. In Nepal, runaway enrollment growth outstripped the numbers of available academic staff, although public funding efforts on behalf of education increased appreciably over the same period. In Sri Lanka, enrollments have grown at a measured pace and academic staff numbers have kept in step, but the country’s funding commitments to both education and higher education have been declining. Each of these cases can be illuminated by a closer look at their higher education revenues and expenditures.

46 _{Estimates are based on best available information, which is not comprehensive. Completion rates also vary among courses of study. It was}

estimated that the percentage of students completing their degree was 60% for veterinary science, 75% for science, 77% for agriculture, 90% for

engineering, 91% for social sciences, and nearly 100% for medicine. S. Chandrasiri, personal communication.

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