The presentation by Akiyoshi Yonezawa examined the past ...



State, Institution and Market:

The Changing Relationship Between Public and Private Higher Education in Japan

Akiyoshi Yonezawa

Associate Professor

National Institution for Academic Degrees and University Evaluation (NIAD-UE)

Japan

A paper for presentation in CHER 2004 at Cheps. This paper is also aimed for a draft of the Prophe Working Paper ()

Abstract

Private higher education in East Asia has experienced a rapid expansion. Most countries in the region, including those with transitional economies such as China and Vietnam, have utilised the private higher education sector to absorb the demand for higher education, relying heavily on family contributions. On the other hand, neo-liberal policies and the introduction of new public management to public university systems have changed the status of ‘public’ universities. Malaysia, Thailand and Indonesia have incorporated some public universities, while Singapore established the Singapore Management University as a ‘publicly-funded private’ institution.

Kim (2001) indicates that some South Korean private universities have a prestigious status. Japan is also a country that has a relatively long and continuous history of modern private universities in Asia. Some of these have longer than 100-year histories, having already become equally prestigious with public institutions by the end of the 1970s (Geiger 1986). Since April 2004, all national and most local public universities in Japan have been incorporated, with some having diversified their financial resources to complement basic public funds. Nowadays, the distinction between institutional behaviours and functions of the public and private sectors is unclear. The incorporation of the public sector may stimulate direct market competition among public and private institutions. The changing relationship between public and private higher education will, in turn, affect relations between the state, higher education institutions and the market. In certain aspects, state controls over the private sector have become stronger, while financially, the role of the state has been replaced by (sometimes quasi-) market mechanisms.

This paper aims to examine the past, current and future relationship of public and private higher education in Japan. Historically, distinctions of social function and organisational behaviour between the sectors had been clear, with the public sector catering mainly to elites or experts, while private institutions operated mostly to absorb market needs, especially mass higher education. This distinction became obscure, however, especially after the legal recognition of the public function of the private sector in the 1970s, while the process has not been monotonous. [can kill the last 7 words or AY would have to find a different term so monotonous isn’t clear here] The “corporatization” [right word?]incorporation of public institutions and allowance of for-profit entities at the Special Districts for Structural Reform from 2004 will further confuse traditional public-private boundaries. Public universities have become more ‘private’ than ever, whereas some private institutions increases ‘privateublic’ aspects upon bypassing receiving project base public funds distributed through competition with public institutions on an equal footing (Yonezawa, 2000; 2003).

the “public” mission generally claimed by private nonprofit organizations.[Delete what’s in []? enhance such overlap between functions of public institutions and those of private ones.] [I don’t follow the for-profit side. I see how corp of publics makes them more private, but I don’t see how creation of f profits makes the private sector more public.] Through an analysis of policy changes and their financial impact, the author examines the development process of private higher education in Japan. The focus of the discussion is on the changing role of the private sector, from a complementary role of compensator for public higher education’s limited access to a role of significant competitor with public higher education. Differences in current-fund expenditures between the national and private sectors are no longer absolute, while the private sector continues to rely heavily on income from tuition fees. In certain fields such as engineering, however, there still exists a wide gap between the sectors.

Except for the new for-profit pilot schools starting from 2004, private higher education institutions are operated by non-profit organisations in Japan. A nominal part of private sector finance is supported by public funds as a part of ‘public education’. It is unlikely that the incorporation of public universities from 2004 will lead to a drastic redefinition between public and private higher education. However, the role of public institutions and prestigious private institutions are clearly overlapping, mainly due to the continuous upgrading of the status of private institutions through inconsistent policy and market changes. Based on the gradual change in the social and financial conditions of public and private universities, the new relationship between public and private higher education appears to develop through continuous but fluctuating interactions between the state, higher education institutions and the market.

Introduction

Private higher education in East Asia has experienced a rapid expansion. Most countries in the region, including those with transitional economies such as China and Vietnam, have utilised the private higher education sector to absorb the demand for higher education, relying heavily on family contributions. On the other hand, neo-liberal policies and the introduction of new public management to public university systems have changed the status of ‘public’ universities. Malaysia, Thailand and Indonesia have ‘incorporated’ limited number of public universities, while Singapore established the Singapore Management University as a ‘publicly-funded private’ institution.

Kim (2001) indicates that some South Korean private universities have prestigious status. Japan is also a country that has a relatively long and continuous history of modern private universities in Asia. Some of these have longer than 100-year histories, having already become equally prestigious with public institutions by the end of the 1970s (Geiger 1986). However, top universities in Japan and Korea, such as University of Tokyo of Seoul National University, are public institutions which receive concentrated financial investment from the national government. Therefore, prestigious universities in Japan have to compete with top public universities in the higher education market. This market structure is quite different with the market for top private universities in the United States, where the top public universities do not compete directly with those private institutions, especially in the Eastern states and California.

In April 2004, all national and most local public universities in Japan were incorporated. The Japanese government has limited increase of basic formula based funding, and increased project based funds and targeted funding in the last two decades (Asonuma 2002). The competitive national universities have already highly diversified their financial resources, and the incorporation will accelerate the financial independency of those top public institutions.

Nowadays, the distinction of institutional behaviours and functions of the public sectors from those of private sectors is unclear. The incorporation of the public sector may stimulate direct market competition among public and private institutions. The changing relationship between public and private higher education will, in turn, affect relations between the state, higher education institutions and the market. In certain aspects, state controls over the private sector have become stronger, while financially, the role of the state has been replaced by (sometimes quasi-) market mechanisms.

This paper aims to examine the past, current and future relationship of public and private higher education in Japan. Historically, distinctions of social function and organisational behaviour between the sectors had been clear, with the public sector catering mainly to elites or experts, while private institutions operated mostly to absorb market needs, especially mass higher education. This distinction became obscure, however, especially after the legal recognition of the public function of the private sector in the 1970s. The incorporation of public institutions and allowance of for-profit entities at the Special Districts for Structural Reform from 2004 will further confuse traditional public-private boundaries. Public universities have become more ‘private’ than ever, whereas some private institutions will seem much more ‘public’ upon receiving project base public funds distributed through competition with public institutions on an equal footing (Yonezawa, 2000; 2003).

Through an analysis of policy changes and their financial impact, the author examines the development process of private higher education in Japan. The focus of the discussion is on the changing role of the private sector, from a complementary role of public higher education with limited access to a role of significant competitor with public higher education. Differences in current-fund expenditures between the national and private sectors are no longer absolute, while the private sector continues to rely heavily on income from tuition fees. In certain fields such as engineering, however, there still exists a wide gap between the sectors.

Except for the new for-profit pilot schools starting from 2004, private higher education institutions are operated by non-profit organisations in Japan. A nominal part of private sector finance is supported by public funds as a part of ‘public education’. It is unlikely that the incorporation of public universities from 2004 will lead to a drastic redefinition between public and private higher education. However, the role of public institutions and prestigious private institutions are clearly overlapping, mainly due to the continuous upgrading of the status of private institutions through inconsistent policy and market changes. Based on the gradual change in the social and financial conditions of public and private universities, the new relationship between public and private higher education appears to develop through continuous but fluctuating interactions between the state, higher education institutions and the market.

Framework and Context of Japanese higher educaiton

a) system

Japanese higher education has three sectors—national, local-public and private. The national higher education institutions which have been operated directly by the national government became independent from Ministry of Education (MEXT) as ‘national university corporations’ or other types of ‘independent administrative corporations’ from April 2004. National higher education institutions still posses the status as public organisations directly supported mainly by national budget. The Minister of Education take a final response of their mid-term goals, while in reality, the Ministry respects the autonomous decision-making by the institutions. The staff of the national institutions changed its status from national civil servants to university employees.

The local prefectures and city governments have established local-public institutions. When current education system started under US occupation government around 1949, at least one national university was set in each 47 prefecture, influenced by American university model. However, it was the national government who operates those national universities, and the prefecture do not have direct administrative and financial relationship with those national universities.

Some of the prefectures and cities have established universities and other higher education institutions adding to the national university system. The number of those local public institutions has increased based on the local demands for higher education closed to the local community.

The private sector has got the equal academic status with national and local public sector from the beginning of current post-war higher education system. In 1918, the national government set up an ordinance to recognise private universities. When the new system started in 1949, the official differentiation among the university system especially between ‘imperial’ ones and other ones were abolished. At the same time, most of the public and private Senmongakkos (polytechnics) were integrated or upgraded into universities which offer in principle four year undergraduate, two year master and three year doctorate courses, or junior colleges which offer two year associate degree programs. Most of the junior colleges later have functioned as women’s short cycle higher education.

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Figure 1. Education system in Japan (source: MEXT)

b) distinctive role

It has been said that the function of the national universities is clearly different from that of private ones. The national government has concentrated its financial investment into the national institutions in order to train the elites and experts necessary for national development, while private institutions have contributed to absorb the social demands for training high skilled employees mainly of the private enterprises, relying on the tuition fees (Amano 1986).

The origins of the private universities are various. Kaneko (1997) mentions the existence of many political leaders outside of new Meiji restoration government entrepreneurs who supported the establishment of non-governmental higher education institutions. Some of them were started by the intellectuals who had direct experiences in the western world, or some expert groups such as medical doctors or engineers. Others relied on the networks of retired and acting academics in the public higher education sectors.

The demands for higher education graduates in the private industrial sector already started to expand in 1920s. The governmental recognition of the private sector is understood as one of the outcomes of the emergence of parliament based cabinets and wider participation to the election (Itoh 1999). However, it is 1960s that the Japanese private sector formed clear characteristics as demand-absorbing sector for mass higher education.

With the limited resources allowed in the recovery from the fatal damage of World War Second, Japanese government did not have a choice to provide public mass higher education as US did in 1950s and 1960s. Public resources were intensively invested to the limited number of students in the public sector. Therefore, it was the private sector which absorbed the demand for the access of the increasing number of secondary education graduates which achieved almost 100% participation until mid 1970s.

The demand-absorbing function of private higher education is regarded as one of the major types in private higher education research. Based mainly on his Latin American study, Levy (1986) developed a typology of private higher education institutions; religious institutions, secular elite institutions, and demand absorbing institutions. Through the comparative study of public-private relationship of higher education in North America, Europe and East Asia, Geiger (1986) developed a typology of higher education institutions especially for understanding complex American system; private research universities, liberal arts colleges, and urban service universities. ‘Demand absorbing’ institutions and ‘urban service’ universities appear to have similarity in terms of their reliance on the social demand for mass higher education, and tendency to be located in large city areas where the high demand could be expected.

In his comparative study, Levy also made a typology of public-private relationship; homogeneous (Chile), dichotomously distinctive (Mexico), qualified distinctive (Brazil). Japan is categorised as a type of qualified distinctive higher education. In Japan, the private higher education sector has a clear distinction with public sector, while a small share of the public subsidies are given to private sector. Geiger categorised countries into; mass private (Japan, Philippines), parallel public and private (Belgium, Netherlands), peripheral private (France, Sweden, UK), and Japan is categorised as a type of mass private higher education.

Two types of the models could be shown for understanding the ongoing global trends of ‘privatisation’ in higher education. The figure 2 is the model developed by Umakoshi (1999). He tries to understand the dynamics of privatisation observed in East Asian countries. This figure explains the positive correlation between the expansion of higher education system and increasing share of private sector. Most of the East Asian countries which developed mass private higher education sector such as Japan, Korea and Philippines experienced the domination of demand-absorbing private institutions with limited provision of public higher education. This model in principle relies on two critical assumptions; (1) public and private higher education is distinctive between each other; and (2) the countries transform its higher education from ‘private higher education as periphery’, ‘private higher education as compensation’ and then, ‘private higher education as dominance’ through the expansion process of mass higher education.

However, there is no clear evidence that all of the countries go through this process, as Umakoshi himself has cautiously denied his intention to use it as a ‘development stage’ model.

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Figure 2. Dynamics of the developing private sector in East Asian higher education

He argues that the increasing share and role of private higher education sector is positively correlated with the development of mass higher education in East Asia. However, the nature of the distinction between public and private sector is not discussed is not discussed in the Umakoshi model, or its clear distinction is rather taken for granted. He also tries to explain that the development of private sector is somewhat inevitable for realising mass higher education with limited public financial resources and high social demand for higher education typically observed in East Asian countries.

Some unsolved questions are remaining. First, the definition of public-private distinction is not always clear, especially in the current various trends of ‘privatisation’ or ‘marketisation’ in many higher education systems. Second, even within the private sector, different types of institutions such as religious, secular elite, demand absorbing, urban service institutions are co-existing in a large and complex higher education system, as Geiger showed in his chapter of American higher education. Third, the increasing share of revenue from tuition fees in the public sector typically observed in UK, Australia, Vietnam and China since 1990s may indicate another pathway for the development of private aspect of higher education. In these countries, the expansion of participation for higher education are mainly realised through the introduction of private financial contribution to the public sector.

An alternative model could be developed as shown in figure 3. This model indicates the pathways of ‘privatisation’ without clear distinction between public and private sector. The left white circle represents the ‘pure’ public higher education, fully supported by public funds, and with no tuition fees. It is very difficult to maintain qualified higher education in this purely public condition, as most of the European public higher education systems have introduced some kind of financial contribution schemes from the students in the realisation process of mass higher education from mid 1980s. Therefore, the expansion of public higher education, especially without protection by the demand-absorbing private sector, goes through the process of ‘privatisation’ at least financially. Even in Japan which has large private higher education, the national sector relies on more than 20% of the revenue from the tuition fees. Among diversified incomes from industrial sectors, affiliated hospitals and research grants, it is almost common to have at least some public universities which rely on public basic fund as only a minor part of the total revenue in every public higher education system.

The figure 3 should not be treated as an entire developmental stage model. However, the public higher education sectors in most of the countries appear to experience the increase of private aspects in finance and governance.

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Figure 3. Alternative model of privatisation in higher education

In short, those two types of ‘privatisation’ should be distinguished, while those two dynamics are working in a parallel way in many Asian countries.

Increasing complexity between public and private

Japanese higher education policies until the mid-1970s basically aimed to secure enough higher education graduates and to realise equality of access to higher education given limited financial resources. The policies for this very difficult task were based on a clear distinction of the function between the private and public sector. The public investment in higher education has been heavily concentrated in the public (national) sector since the establishment of the modern higher education system in the latter half of the 19th century (Amano, 1986). Unlike the U.S., this public investment was not spent for the provision of large public sector in order to meet the direct public demand for public higher education. The ‘intensive investment’ of Japanese government means making use of the limited resources to the limited number of students of the national higher education sector that is expected to train the required human resources for national development and to implement research activities. Both of these two aims were regarded as necessary for the development of the national system of Japan. On the other hand, the private higher education sector ensured the equality for access by absorbing the demand for higher education as a by-product of the realization of universal attendance in secondary education. Umakoshi (1999)’s arguments mentioned above indicate that this policy structure is not unique in Japan, but a typical model that is seen widely in Asian countries. The private institutions in Japan have large educational programmes of social sciences such as law, economics and business. The tuition fee of these courses has been set relatively inexpensively in order to compete with public sectors, and the teaching style with large classes has enabled its low price policy (Yonezawa and Baba 1988).

However, the differences in financial allocation between public and private sector became smaller under the welfare state policies since 1970s. Geiger (1986) pointed out that the private sector gained its characteristics of ‘public’ education in some countries including Japan. From the beginning of the 1970s, the public aid to the operational cost for Japanese private higher education institutions began. At the same time, the number of students became strictly controlled by the national higher education plan.

The local government also started to be involved in this complexity of public and private relationships. For long time, the national institutions were not allowed to get direct financial aid from local government. On the other hand, the local governments, especially in the rural area have demanded increase of higher education institutions within their region, in order to assure the access of local high school graduates and attract younger generation for activating the local community. The number of local public institutions has increased in last two decades. However, the direct operation of higher education institutions is in most cases costly. The local governments in general have higher pressure from the tax-payer, and the local public universities and other higher education institutions are not protected by the bureaucrats of Ministry of Education who have high expertise and incentives for supporting academic logic.

The idea of new public management is highly influential in many local communities. Therefore, it is not rare that the arguments of privatisation and outsourcing dominate the local government and assemblies even in the case that the needs of local public higher education are highly recognised. On the other hand, private higher education institutions in Japan are operated by School Corporations, a special non-profit legal entities aiming for public purposes. Therefore, the public support to the local private institution is regarded as an effective public policy to increase the access opportunity to the local community. At the same time, the local governments participate or even lead the governing boards of those publicly supported private higher education institutions.

Japanese higher education has already faced with limitation of growth in the beginning of 1970s, when the first baby boomer generation finished their higher education. The new institutions established in the rural communities have already started to rely on the financial support from the local communities, because they were not successful to get enough student market in the rural areas. In many cases, the heads or senior staff of local communities participated to the governing board of those private institutions when they support the institutions..

In the 1980s, many newly started private higher education institutions received facilities and properties from local public governments. Some local governments provide all facilities needed, send their administration staff for operating those institutions with the salaries covered by the public funds, and sent members to the governing boards. This type of public involvement for setting up new institutions is categorised first as ‘public-private co-operation models’ and then new category called ‘publicly founded-privately operated models’ was developed in cases that the local government provide the starting facilities and sometimes administrations almost fully..

The domination of neo-liberalism ideology and its replacement of welfare state policy became clear in 1980s, and the national government set the budgetary ceiling aiming for a small government. These neo-liberalism trends weakened the boundary between the public and private sectors in the different direction from welfare state policies. Those who believed the importance of market competition advocated equal competition among national, local-public, and private sectors in the principle of equal-footing. The strict regulation of student number under the higher education plan was deregulated from 1986, when the second baby boomer generation started higher learning. Even after the passing of the baby boomer generation, the government continued to loosen the student number regulation. Amano (1997) describes it as a critical policy change as transformation from a planning model to a market model. In other words, the market factor became more critical than national planning on the determination of the higher education volume.

The two factors gave influences on this policy change. First, the government set up the equal legal treatment between male and female workers in 1986, and this stimulated the participation of female students into four year higher education. This led to the increase of female undergraduate market, and the shrink of female junior college market. Many junior colleges faced difficulty to attract enough number of students against the allocated quota by the national government. In 2000, actually almost 60% of junior college faced such shortage. Significant number of junior colleges tried to upgrade themselves into the four year universities and colleges, and the national government had to admit them for rescuing those institutions from bankrupt.

Second, the neo-liberalist ideology itself gave a great influence towards the governmental policy. Almost all kind of ‘regulation’ became a policy target for reform, and the higher education in not exception. The regulation of student number became highly weak one in the new market led system. Japanese higher education market experienced drastic change from over-demand market condition to over-supply market condition by the end of 20th century. The latest estimation of the national government reveals that the total supply of the student places in four-year universities will be equal with the total demand in 2007. The rapid decrease of the number of high school graduates from the beginning of 1990s and long standing economic recession is accelerating these trends.

The strong belief in the market competition had an impact also to the policy for national higher education institutions. This argument finally led to the discussion of possible privatisation or incorporation of national universities (Yonezawa 1998). After sever power struggles between the cabinet and Ministry of Education, the Minster of Education finally admitted to ‘incorporate’ all national universities within the logic of education reform. The then Minister Akito Arima, the former President of the University of Tokyo, stressed that the incorporation is necessary for the autonomous development of Japanese national higher education. However, many observe that this incorporation is a process of administrative reform. The inconsistency of those two reform logic continuously influences the complexity of the policy trends.

The Ministry of Education published guidelines for the introduction of corporate style management to the national university system as ‘independent administration corporation’ scheme in September 1999 (Yonezawa 2000). Since September 2000, the ministry has continued the discussion by the representative and expert committee on this issue. The focus of the discussion has been on the degree to which national universities should remain as the public administrative system. The emergence of the Koizumi cabinet in May 2001 revitalised the discussion of ‘privatisation’ of national universities. At the least, some sort of restructuring of the public and private functions of higher education in Japan has become a realistic political issue.

In 2002, the special law for the National University Corporations was enacted, following the new guideline developed by experts group including university leaders. On the other hand, this legal system is basically following the model of ‘independent administration corporation’ scheme, which was established for administrative reform in general, using the model of ‘agencies’ in the British administration system.

Ichikawa (2000) identified the tendency towards unclear division of national, regional and private sectors, and saw it as an evidence of the emergence of ‘borderless’ structures in the higher education system. He pointed out that the quantitative increase and qualitative improvement of the private sector changed the status of private sector in the direction of the public sector. He also argues that it is not possible to justify the use of public budget to the national sector for the core research activities and training of human resources.

Sector level data shows that there are no major differences between public and private sectors as to the expenditure structure. Yonezawa and Baba (1998) argued that the highly selective prestigious universities set their level of tuition fee relatively lower in order to compete with national universities. Actually, such kind of structural changes started long before the current discussion. In the next session, the author will compare the operational expenditure of national and private institutions, and analyze the financial structure of mass higher education in Japan[1]. The author tries to analyse the characteristics and historical change of the financial structure in Japan. First, the procedure to estimate the current-fund expenditure per student will be identified. Second, the distribution of financial revenue of national and private sector will be compared. Third, longitudinal analyses of the financial situation will be used to demonstrate the changing structure of finance in national and private sectors[2].

Unit Cost: operational expenditure per students in national and private sector

The discussion on the unit cost of the higher education in Japan is not new. Kaneko (1989) reported educational expenditure per student, showing that there is a big variation among different fields. He also pointed out that the average unit cost of the national university is higher than that of private university in general, because private sector has large social science courses whose educational expenditure is relatively inexpensive. Adding to that, Kaneko (1994) argued that students pay the full operational cost in some fields in national universities. On the other hand, there still exists a big gap in the student-teacher ratio between national and private sector. What are the implications of these two phenomena?

The author focuses first on the educational expenditure per student in national and private institutions, and second on the condition of education. The data used for the analyses is the Basic Education Statistics and Financial Survey of Private Schools published by the Ministry of Education of Japan. The local-public sector is omitted, because most of local public institutions are small and in specific fields only.

There are several technical issues to be clarified when we compare the financial data of national and private universities; First, national university finance is a part of national budget. There is a special budget for school education and general budget. The revenue of the national universities does not have a clear correspondence with the expenditure. On the other hand, in the school accounting system for the private institutions, revenue and expenditure clearly correspond with each other at the level of School Corporation that sometimes operate more than one institution. Second, when we analyse the annual budget at institutional level, the items for the investment such as buildings and facilities change drastically. Private institutions manage their assets, and this will influence the education and research activities indirectly. Third, the budgetary items of national universities in the Basic Education Statistics and those of private universities in Financial Survey of Private Schools do not correspond one to one.

Finally, the analyses should be done by the academic schools or faculties, because there is a large variation in the unit cost among different academic fields. However, at comprehensive universities, there are some items that cannot be divided into faculties and schools. In the national universities, the share of the cost for ‘headquarter, library and others’ amounts to 19.7% of operational expenditure, and 26.7% of total expenditure. This category includes the cost for facilities for education and research activities of the university as a whole, and expenditure for the books for the university library. On the other hand, in the revenue of the private university, there is a category of ‘library and agriculture forestry’, which comprises only 3.0% of expenditure. Adding to that, however, there is the category for the expenditure of school corporation, which comprises 20.4% of operational expenditure, and 22.3% of total expenditure. As many school corporations operate more than one university or school, it is impossible to extract the pure expenditure for these universities. One of the resolutions for this problem is to divide this into respective faculties proportionally, as Kaneko did. However, the personnel expenditure of these categories cannot be regarded as being used fully for the educational activities. If those categories are inserted, the current-fund expenditure per student will be 217,000 JPY higher in national universities, and 331,000 JPY higher in the private universities.

As it is very difficult to achieve the proper division of these expenditures, these categories in the comparative analyses between national universities and private universities are excluded. Therefore, the analyses to follow may underestimate the expenditure of national and private institutions. However, the possibility of estimation error will be under 100,000 per student at the maximum, and the degree of the underestimation will be bigger in the private universities.

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The focus of the comparison here is the difference of the academic environment for the students between national and private institutions. Therefore, the analyses here will be limited to the current-fund (operational) expenditure, which influences those conditions directly. Respective budget items are grouped into the three categories, i.e., (1) personnel expenditure, (2) expenditure for education and research, (3) expenditure for operation.

Figures 4 and 5 show the differences of the amount and share of the operational cost. Three points can be pointed out.

1) The operational cost per student in national universities is clearly more than that of private universities in the fields of humanity, agriculture, engineering, natural sciences, pharmacy.

2) The differences in the operational expenditure per student between national universities and private universities are small in the fields of education, economics, and law.

3) The operational cost per student in private universities is evidently more than that of national universities in the fields of medical science and dentistry.

This shows that the structure of the unit cost between national sector and private sector is different among the fields. However, it does not mean that the way those financial resources are used is the same between national and private sector. Figure 6 shows the salary per teaching staff, cost for education and research activities, and student-teacher ratio of national and private sector in the different fields. From this, we can see that the personnel expenditure per teaching staff is higher in the private sector than in the national sector in almost all fields except for medical science and dentistry. Adding to that, the bigger the gap in student-teacher ratio is, the bigger the difference in the unit salary is. One of the reasons for this tendency is that the class size tends to be large in the private sector, and the private institutions tend to employ senior professors rather than research oriented young staff members.

This indicates that the private universities in general do not utilise the operational expenditure which could compete with public universities, for improving quality of education and research activities by introducing small-sized classes or hiring young research oriented staff. Most of the resources are utilised for the relatively high salaries on the full time professors.

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The overlapping hierarchy

Both the national sector and private sector of higher education in Japan have hierarchical structure. Here, we need to examine whether the distribution of financial conditions of national institutions are overlapping with that of private institutions or not. Figure 7, 8 and 9 show the distribution of unit current-fund expenditure of each institution in the field of economics, engineering and medical sciences. In the field of economics, the distribution of the national universities is almost completely overlapping with that of private universities. In the field of engineering, the distribution of national institutions is concentrate in the upper half or so of private institutions. At the same time, there are some institutions with extremely high unit cost, and most of these are national ones. In the field of medical sciences, the distribution of national sector and private sector is completely separated, and the distribution of private universities surpasses that of national universities. Analysing the data, we found the tendency as follows; (1) The distribution of the unit expenditure of national universities surpasses that of private universities in the fields of humanity, education, engineering and pharmacy; (2) The distribution of the unit cost of national sector and private sector is overlapping in the fields of law, economics, natural sciences; and (3) The distribution of the private sector surpasses the national sector in the field of medical science and dentistry.

The structure of unit expenditure reflects the hierarchical structure of the higher education system itself. The unit expenditure of prestigious research-oriented universities with large amount of graduate students will be higher than that of the education-oriented universities. In Japan, the share of graduate students is high in the national sector, especially in the fields of natural sciences, engineering, medical science, and dentistry. The former imperial national universities are among the institutions with the largest shares of graduate students.

There is no clear correlation between unit expenditure and the share of graduate students in the fields of humanity, economics and law study. At the same time, the unit cost of the private institutions is, in general, higher than that of national institutions in those fields. On the other hand, there is an apparent positive correlation between unit operational cost and the share of the graduate students in the fields of natural sciences, engineering and agriculture. At the same time, the institutions with highest unit expenditure are dominated by the national sector. In the fields of pharmacy, dentistry and medical sciences, there is no clear correlation between unit cost and research orientation. We have to notice that there is a difference in the accounting system between national and private sector related to the financial revenue for research. The research fund from national government (Japan Society for the Promotion of Science) are included in the accounting system for the private sector, but excluded in the budgetary system of the national sector. Because of this, we should note that the unit expenditure of the research-oriented national institutions can be underestimated. However, this does not change our conclusion that several prestigious national universities have distinguished status in regard to unit current-fund expenditure, especially in the fields of natural sciences and engineering.

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Changing Structure

The question to be raised here is when and how these changes began. Figures 10 to 12 is the longitudinal change of current-fund operational expenditure from 1975 to 1996 in the field of economics, engineering and medical sciences.

From 1976 to 1985, the national government set a strict quota of student number both in public and private sector under higher education plan. At the same time, the public universities started to raise the tuition fee standard drastically from 1970s; first, based on the idea to decrease the gap of financial load between students in public sectors and private sectors, and later based on the neo-liberalist idea for requiring appropriate contribution by the beneficiaries. The over-demand market through the restriction of the total student number and tuition rising in the public sector made it easier for the private institutions to increase its revenue per student by raising tuition fees.

The figures clearly indicates that the operational expenditure per student increased drastically in private institutions, while that of the national institutions has been relatively stable.

The findings of analyses among the different fields are summarised as follows;

1) There is still large gap in the unit cost between national sector and private sector in the fields of humanity, natural sciences, engineering and agriculture. However, this gap has become smaller within the past 25 years. This is mainly because the unit expenditure of the private sector increased significantly. In the field of agriculture, this gap is still large.

2) In the fields of economics and education, this gap has tended to diminish, mainly because of the continuous increase in the unit expenditure of the private sector.

3) In the field of dentistry, the unit cost of the private sector surpassed in the former half of 1980s, and the surplus of the private sector has increased, because of the increase of unit expenditure of private sector. In the field of medical science, the unit cost of the private sector had already surpassed that of national sector in 1970s. This gap has continuously increased since then.

These changes in the financial structure between the private and national sectors proceeded especially in the 1980s. In these years, the tuition fees of private institutions increased quite rapidly (Yonezawa and Urata 1994). Japanese private universities faced financial crises around 1970. In the 1980s, their financial situation improved considerably. The financial structure of national and private institutions became similar, and overlapping in some fields. However, the student-teacher ratio is still very different between the national and private sector.

It is worthwhile to notice that the unit expenditure of the national sector has decreased substantially in the 1990s, especially in the field of engineering, which experienced the rapid increase of the number of graduate students. However, the research fund from national government that is not included in the unit expenditure also increased in the 1990s.

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Overlap in Education and Research

The previous section revealed that the difference of operational expenditure per student between public and private universities became smaller, or almost meaningless in some academic fields. At the same time, if we examine the aspects of financial resources, there is a still big gap between public and private sector. In other words, the public, especially the national institutions receive much bigger funds from national government than private institutions.

In the context of privatisation argument in higher education, this gap of financial allocation between public and private higher education will give a serious question; how to justify the concentration of public expenditure into public institutions under the circumstances that majority of higher education students can not access to the public education?

The next step should be the examination of Amano’s arguments that the public higher education has different social function as fostering elites and experts necessary for the national development, and the other way of justification that the high-level research is only possible in the public sector.

As to the elite education function, Geiger (1986) has already pointed out the overlapping structure of public and private hierarchy, buy using the selectivity of students in social science majors by using the data of 1980. This structure is not changing basically, although the private sector is less selective in the field such as engineering, medical and natural science majors because the private universities have to set higher tuition fees based on higher education and research expenditure in those areas.

Therefore, it is quite difficult to argue that elites are only fostered in national universities, especially in the field of social sciences. As to the experts such as engineers or medical doctors, it is also very difficult to argue that national sector take a dominating status on this. In 2003, 66% undergraduate, 32% master and 17% doctorate students in the engineering fields were enrolled into the private sector, while 63% undergraduate, 40% master and 26% in health sciences (medial, dentist, pharmacy and others).

The domination of public universities is not clear even in the research activities. Yonezawa (2003) argued that education and research expenditure per students has a hierarchical structure correlated with the number of graduate students in the field of engineering and natural sciences, but not clear in other fields. Yonezawa also indicated that two top private universities –Waseda and Keio—are ranked among the top national universities in the league table based on the acquired number of Centres of Excellence in research (COE21) which is a project based fund for excellent research units across public and private institutions.

Figure 14 shows the correlation between student selectivity in natural sciences and engineering majors in 2004 and number of Centres of Excellence in research (COE21) in top universities. This indicates that the prestige of education and research is highly correlated, and top private universities are actually competing with top national universities not only in student selectivity but also in the research activities.

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Figure 13 Overlapping public and private hierarchy in 1980 (by Geiger 1986)

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Figure 14 The correlation between student selectivity in natural sciences and engineering majors in 2004 and number of Centres of Excellence in research (COE21) in top universities.

*Hitotsubashi University’s student selectivity is in the field of social sciences (it does not have natural science and engineering courses)

Concluding discussion: towards new relationship

Japanese higher education system is categorised as a typical example of qualified distinctive model in terms of public private relationship (Levy 1986). If we focus on the difference of public financial resource allocation, there is certainly a very clear gap between public and private sector. However, the difference in the current-fund expenditure between the national and private sectors is no longer absolute.

In the specific fields such as engineering, there still exists a wide gap between the sectors. However, even those fields, a limited number of private institutions are demonstrating their potential competitiveness. Except for the new for-profit pilot schools, the private higher education institutions in Japan are operated by non-profit organisations. They are supported by public funds, and are regarded as a part of ‘public (formal) education’.

It is unlikely that the incorporation of public universities from 2004 leads to drastic redefinition between public and private higher education. However, the role of the public institutions and prestigious private institution are clearly overlapping, mainly due to the continuous upgrading of the status of private institutions through several inconsistent policy and market change.

There is a big gap of the revenue from public fund between public and private sector, not only for the basic operational fund but also for the project based research funds (Takeuchi 2002). In that sense, qualified distinctive model could be applied to current Japanese higher education. However, the financial data shows that the education in the national universities is no longer privileged compared with private ones. At the same time, the big gap in the student-teacher ratio except for medical schools suggests that the organisational structure is still very different between the national and private sectors.

Based on the gradual increase of overlap in the social function and financial structure in public and private universities, the new relationship between public and private higher education appears to be developed through continuous discussion and policy change.

As a final conclusive discussion, the author tries to develop a comparative framework for understanding this new situation.

If we try to examine the state policies for public and private higher education, we could argue that main policy focus is always on public sector in every (nation) state. In Western Europe, private higher education is treated as exception, such as the University of Buckingham in UK. The Netherlands, in reality, has integrated the religious private higher education into the public system. Complementary existence of private higher education is allowed in transition economy such as East Europe, Austria, China, and Vietnam. The United States mainly utilise the private sector for special needs including elite education. In East Asia, some countries give significant role to the private sector as demand-absorbers based on limited public resources, but still the governmental policies mainly are focusing on public higher education including Japanese case.

The idea of New Public Management, privatisation and marketisation started to dominate the policy debate under the strong influence of neo-liberalism. Transitional economies such as East Europe, China and Vietnam experienced the establishment of new private or non-governmental higher education sector after 1980s. British Commonwealth countries such as Malaysia, Singapore (publicly-funded private) and African countries also started to admit and develop private sector, highly linked with cross-border education providers.

At the same time, ‘incorporation’ and increasing ‘autonomy’ of public sector has proceeded in many countries. Expanded institutional autonomy and increasing ‘private’ aspects in public sector have been observed in US, New Zealand, Netherlands, UK and Australia. Incorporation in limited number of public institutions has occurred in Malaysia, Thailand, Indonesia and Korea. China (in 1992) and Japan (in 2004) experienced the incorporation of all public institution. The incorporation process of Japan is in some aspects, highly linked with the introduction of institutional management system in German states and Austria. Public institutions such as Temple (US), Monash (Australia), Nottingham (UK) are acting as ‘private’ in foreign countries.

Those changes in the public higher education are certainly requiring a new framework for understanding relationship between state and higher education institutions.

Figure 15 shows the traditional relationship between state government and higher education institutions. State governments regulate and guide the higher education institutions, and the institutions report and make feedback to the state government. In the typical evaluation state model, external evaluation organisations intervene or ‘buffer’ the interaction of those two actors. Using mainly a peer review system, the evaluation organisation will try to translate the different languages in the academic institutions and state governments.

Figure 16 shows the relationship between state government and higher education institutions through the market. Higher education market tends to be highly segmented and structured as typically observed in Japanese private higher education. In most of the cases, the state government maintain the direct channel to guide and regulate those institutions in the market, and the institutions give report and feedback in the legal and sometime financial support system. However, the main relationship between state government and institutions here is not though the direct channels or systematic buffer body system, but the interaction mechanism through the higher education market.

As indicated in Figure 17, a state government set the higher education policies, but these policies are not aimed for controlling higher education institutions directly. The state government tries to control and give influences to the structured market, and by utilising market mechanism, give an indirect impact to the behaviours of higher education institutions. The institutional behaviours certainly give impact to the structural change of the market, and this will require the policy change.

Through these interactions, both state government and higher education institutions accumulate the information on the market mechanism. State government can estimate the impact of a policy, and implement it, some times, targeting to the specific groups such as tope market leaders etc…

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Figure 15 Relation between state government and higher education institutions without market

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Figure 16 Relation between state government and higher education institutions through market

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Figure 17. Interaction between higher education policies and institutional behaviour through higher education market.

The relationship though the market is not new in the highly developed large private higher education system such as Japanese one. The new tendency is that this relationship is now becoming expanded to the public sectors. By doing so, the main part of the higher education policies is facing with the qualitative transformation in many countries. The overlapping of public and private higher education is not only occurring as phenomena, but indicates a critical transformation and integration of public and private higher education policies.

The emergence of this new relationship among state, institutions and market across public and private higher education may go further, namely to the integration of the higher education policies to the industrial policies for knowledge economy (Yonezawa 2004). The rapid development of for-profit, cross border higher education and e-learning is stimulating the overlap of higher education ‘market’ and ‘the knowledge industry market’.

Higher education research should identify not only the phenomenal issues but a qualitative transformation in the debate of public and private relationship in higher education.

References

Amano I. (1986), Koto Kyoiku no Nihon teki Kozo (Structure of Higher Education in Japan), Tokyo: Tamagawa Univ. Press.

Geiger, R.L, (1986) Private Sectors in Higher Education, Ann Arbor. University of Michigan.

Ichikawa S., (2000) Koto Kyoiku no Henbo to Zaisei (Transformation of Higher Education and its Finance), Tokyo: Tamagawa University Press.

Itoh, A. (1999). Senkanki nihon no kotokyoiku (Higher Education in Inter-War Japan). Tokyo: Tamagawa University Press. [in Japanese]

Kaneko, M., (1989) Financing Higher Education in Japan－Trends and Issues, Research Institute for Higher Education, Hiroshima University.

Kaneko, M. (1994) “Kokuritsu Daigaku Jugyoryo no Rinen to Genjo (Ideology and Current Status of Tuition Fees in the National Universities”, Yano, M. ed., Koto Kyoikuhi no Hiyo Futan ni Kansuru Seisaku Kagaku teki Kenkyu (Policy Study on Cost Sharing of Higher Eduation), Tokyo Institute of Technology.

Kim, T. (2001). Forming the academic profession in East Asia: A comparative analysis. New York: Routledge.

Levy. D. (1986) Higher Education and the State in Latin America: Private Challenges to Public Dominance. Chicago: University of Chicago Press, 1986.

Umakoshi T. (1999), “Asia no Keiken – Koto Kyoiku Kakudai to Shiritsu Sector –(Higher Education Expansion in Asia and its Private Sectors)“, Japanese Journal of Higher Education Research, No.2, Tokyo: Tamagawa University Press.

Yonezawa, A. (1998)"Further Privatization in Japanese Higher Education?", International Higher Education, Fall, Boston: Boston College.

Yonezawa, A. (2000). Changing higher education policies for Japanese national universities. Higher Education Management, Vol. 12, No. 3, OECD, pp. 31-39.

Yonezawa, A. (2003). Making ‘world-class universities’: Japan’s experiment. Higher Education Management and Policy, Vol. 15, No. 2, pp. 9-23.

Yonezawa, A. (2004). ‘National policies for higher education ‘industry’ in global economy: using cases of Malaysia, Singapore and Japan’ paper presented at General Conference of OECD/IMHE, Paris.

Yonezawa, A. and Baba, M., (1998) "The market structure for private Universities in Japan", Tertiary Education and Management, Vol.4, No.2, pp.145-152.

Yonezawa A. and Urata H., (1994), “Shiritsu Daigaku Jugyoryo No Kitei Yoin (Facotors of Tuition Feea of the National Universities)”, Yano, M. ed., Koto Kyoikuhi no Hiyo Futan ni Kansuru Seisaku Kagaku teki Kenkyu (Policy Study on Cost Sharing of Higher Education), Tokyo Institute of Technology.

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[1] The date analyses part below is highly owing to the active contribution by Kana Yoshida (Yamaguchi University) as co-researcher.

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Social context

Institutional behaviour behaviour\

HE market

HE policies

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