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140 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA constraints to meet the country’s educational needs. In order to meet the challenge the Pakistan government’s education sector reform (ESR) plan relies heavily on the participation of the private sector and the international donor community to fill this gap (ICG 2004: 26). In 2002, the higher education commission (HEC) was created which developed a medium term development framework (MTDF), which has provided a vision for the reformation of the sector. It has pointed out the twin challenges of access and excellence by focusing mainly on teaching staff, which is the weakest link in the chain. It points out that the most important factor for this poor quality is the acute shortage of qualified university faculty linked both to low initial credentials and to limited opportunity for skill upgrade. A variety of initiatives have been financed in the area of faculty development including both short term and long-term initiatives and indigenous and foreign programs. All academic institutions are the responsibility of the provincial governments. The federal government mostly assists in curriculum development, accreditation and some financing of research. However the authority over higher education is divided. The federal government controls the federal universities. It also provides funding for provincial universities which are under the control of provincial governments. The private sector already is active in higher education (World Bank 2006). Private rates of returns to higher education stand substantially higher in Pakistan than in neighbouring countries (World Bank 2006). There is potential for an even larger contribution by private higher education institutes (HEIs) to broaden access, improve quality, and enhance relevance, while alleviating some of the burden on public institutions. In addition, the public sector and private institutions would mutually benefit from reinforcing their partnership: they would respond better to the growing demand, and would make the entire higher education subsector more responsive to market expectations. To reap these benefits, the World Bank suggests, several regulatory and financial steps must be taken to even the playing field, and assure that the quality of services supersedes institutional borders. Stimulated by burgeoning demand that the public sector is unable to meet, private sector institutions currently serve almost one-fourth of HEI enrollments (World Bank 2006). Private institutions are particularly active in the areas of business administration, computer science, and IT-areas where employer demand is high. Improving the regulatory environment for the private higher education sector should be a priority. To illustrate this, the World Bank explains, the minimum land and endowment requirements currently imposed to private HEIs to establish a campus are unnecessarily tight and could be loosened without risk to the quality of teaching. According to the World Bank study, mode wise demand of education suggests that Pakistan has import interest in education through all modes. The online delivery of programmes has potential where Pakistani residents wish to enhance their skills, but are not able to undertake long-term study out of the country. Hospitality is one area where distance education is a preferred option. Similarly, though there are approximately 74 colleges and universities based in the major cities of Pakistan, the demand for places exceeds their availability. While the private sector has had some impact in soaking up the excess demand for places, there are a significant number of people for whom studying abroad is the preferred option. Approximately 10,000 Pakistani students travel overseas for further studies every year. In response to increased trade competition and need for a high performing workforce, the government of Pakistan is strongly emphasising vocational training. Australia’s vocational education and training (VET) system delivers training that is practical and career-oriented could service some of this demand. Private institutions are seeking affiliations with universities abroad to ensure they offer information and training that is of international standard. The World Bank suggests that foreign institutions both public and private can operate in Pakistan (The World Bank 2006). The government encourages collaboration between foreign institutions and local providers. Different types of collaboration came with different regulatory requirements related to infrastructure, accreditation and inspection depend on the nature of the collaboration and the quality of the foreign institution. Top ranked foreign institutions such as the London school of economics are allowed to run degree programmes with local partners with only minimal regulation. Currently eight foreign universities/ institutions have been approved to run collaborative degree programmes in Pakistan (not including programmes from ‘top ranked’ universities). There is no exact information as to what extent Pakistan needs education via Mode 4 that is through the movement of teachers, researchers, experts, etc. But there is enormous demand for teachers in Pakistan. Overall, it could be suggested that Pakistan should allow 100% foreign equity in education services. The Pakistani education system would, in fact, immensely
H IGHER EDUCATION SERVICES 141 benefit from a liberal FDI regime under the GATS given the vast gap between the demand for and supply of higher education. In addition, Pakistan ought to undertake sectoral commitments for the entry of teachers/ researchers and other experts under Mode 4. Pakistan offers an important market for education in South Asia. Thousands of students leave Pakistan every year for study in foreign countries and hence a huge amount of foreign exchange is spent on the import of education by Pakistan. A lot of such amount could be saved if Pakistan encourages foreign institutions to open their branches in the country. Pakistan is also a market for import of education through Mode 1. Distance education is one example in this regard. Education via internet could be many times cheaper than the conventional mode and students are free from a number of associated problems such as hostel, library, etc. Mode 4 is another window through which Pakistan could gain immensely. Summary of Restrictions in the Sector • Foreign equity cap of 60% for commercial presence • No sectoral Mode 4 commitments • No national treatment with regard to subsidies • The minimum land and endowment requirements imposed to private educational institutions to establish a campus • Multiplicity of educational systems. Nepal Like Pakistan, Nepal has also undertaken commitments in all three sub-sectors of education services – higher education (CPC 923), adult education (CPC 924), and other education (CPC 929) – for which usually commitments are sought in the sector. Nepal has not inscribed any limitations under Modes 1 and 2 in the Market Access column and under Mode 3 access is subject to incorporation in Nepal with a maximum foreign equity ceiling of 51%. However, foreign equity participation will be increased to 80% after five years from the date of accession of Nepal and since Nepal would be completing five years of its accession in April 2009 the ceiling of 51% would by then become a past restriction. Unlike other modes, Mode 4 is unbound and refers to the horizontal section where there does not seem to be any commitments for education services. Therefore, this mode, at best, is closed for the movement of teachers and other related professionals who can provide education services. In the National Treatment column while there are no limitations under Modes 1 and 2, under Mode 3 national treatment has been accorded to foreign education providers and Mode 4 is once again unbound except as in the horizontal section where too this mode remains unbound. In the horizontal section under Mode 3 in the Market Access column there is a provision stating that the conditions of ownership, operation and juridical form and scope of activity as set out in a license or other form of approval authorising the operation and supply of services by an existing foreign service supplier will not be made more restrictive than they existed as on the date of Nepal’s accession to WTO. This is a sort of assurance to those companies that were providing services prior to Nepal’s accession and the rules and regulations applied to them owing to Nepal joining WTO will not be more restrictive. Thus the rules and regulations, in a way, will be grandfathered and the interests of the concerned companies will be protected. The Mode 4 provisions as given in the horizontal section do not specifically apply to education services because the categories of persons allowed to enter Nepal to deliver services are service sales persons, persons responsible for setting up a commercial presence and ICTs. These categories of persons are primarily meant to cater to the needs of commercial presence. Under Mode 1 in the horizontal section, national treatment has not been accorded with respect to foreign exchange provided to foreigners to pay for any crossborder services. This may be considered a substantial barrier to the transaction of educational services via this mode. Unlike Mode 1, Mode 2 is without any limitations. However, there are quite a few limitations on Mode 3. The first is that a foreign investor reinvesting earnings is required to obtain the permission of the Department of Industry. The second limitation being that all foreign investments except financial services require approval of the Department of Industry. Finally, incentives and subsidies are available only to enterprises wholly owned by Nepalese nationals. Mode 4 is unbound except for measures concerning the categories of natural persons referred to in the Market Access column which incidentally do not cover education services. In the education sector the gross enrollment ratio at the tertiary was only 9.7% in 2006 implying that Nepal requires substantial amount of investment in order to provide education to a larger number of students at this level (Summary Education Profile: Nepal, World Bank). Nepal is a labour-surplus country and exports unskilled, semi-skilled and highly skilled (e.g. engineers) labour to various labour-importing countries (UNCTAD-ICC 2003). This is so despite the
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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10 QUANTIFICATION OF BENEFITS FROM
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2 Literature Review and Rationale f
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4 Effective Additional Market Acces
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6 Impact of SAFTA on Member Countri
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7 Revenue and Welfare Implications
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8 Impact of SAFTA on Inward and Out
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9 Quantification of Benefits from T
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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