Planning for self-financing at the Open Learning Institute of Hong Kong
G. Dhanarajan, D.F. Swift, and A. Hope

Context:
In this case study the authors describe the expectations of the Open Learning Institute in Hong Kong (now the Open University of Hong Kong) for self-financing and the development of its financing model.

Source:
Dhanarajan, G., D.F. Swift, and A. Hope. 1994. "Planning for Self-Financing at the Open Learning Institute of Hong Kong." In G. Dhanarajan, P.K. Ip, K.S. Yuen, and C. Swales, ed., Economics of Distance Education: Recent Experiences. Hong Kong: OLI Press, pp. 171-83.

Copyright:
Reproduced with permission from the Open University of Hong Kong Press.

Introduction

In June 1989, the Government of Hong Kong formally established the Open Learning Institute of Hong Kong based on recommendations of the Planning Committee of the Open Learning Institute (PCOLI). Among the many recommendations of the PCOLI accepted and adopted by the Government was one which required the new Institute to be financially self-supporting within four years of its establishment. In April 1993, this self-financing status was achieved; the paper describes how financial self-sufficiency was achieved without risking either quality or accessibility.

Background

Hong Kong has been a British Crown Colony for the past 140 years, and it will remain so until June 1997, when its sovereignty will be passed back to the People's Republic of China (PRC). For the subsequent 50 years, the governance of the territory will be conducted according to the terms of an agreement reached between the governments of the UK and of the PRC. Under these terms, Hong Kong becomes a Special Administrative Region (SAR) of China but will be allowed to continue with its present system of government and life under a changed sovereignty.

The territory covers about 410 square miles and is made up of the Island of Hong Kong, the Peninsula of Kowloon and the New Territories. There are also about 230 outlying islands; the largest, Lantau, is the site of the new airport.

By 1991, the population of Hong Kong was about 6 million people. It is perhaps one of the most densely populated places in the world. Roughly 90% of the population is Chinese, mostly of Cantonese ancestry. The ratio of mates to females has been changing from the previous decade. In 1990, there were 1,038 males to every 1,000 females while in 1980, there were 1,084. Similarly, the age distribution of the population has also been changing rapidly. In 1990, 21.5% of the population was under 15 and 8.8% above 65; in 1980, it was 25.5% and 6.4%, respectively. Between 1980 and 1990, the dependency ratio—the ratio of the young and the aged to people in the 15–64 age group—has dropped from 470 per 1,000 to 434. Hong Kong is now ageing, but slowly and from a heavily skewed demographic structure.

Since the late 1960s, Hong Kong's economy has also been undergoing rapid growth and change. From being a small entrepot and military base of the 1950s, it has become today one of the thirteen richest nations of the world. The growth in GDP has averaged around 7% over the last 30 years; per capita income in 1994 will be in excess of US$16,000 per annum. As well as benefiting from a compulsory primary and a comprehensive secondary school education, the population enjoys great personal wealth and good telecommunications, and shares a tremendous desire to learn, improve itself and exploit emerging career opportunities. About 90% of the people are literate in either Chinese or English. To all intents and purposes, there is no unemployment in Hong Kong.

Human resources surveys indicate that between now, 1994, and 1996, the manufacturing sector is expected to lose about 92,000 jobs, while the professional, technical and managerial sectors are expected to gain about 94,000 jobs. Not all of these needs will be met by the graduates coming into the job market for the first time, through schools, colleges, polytechnics and universities. Table 14.1 provides data pertaining to manpower needs and supply by educational levels by 1996.

Education System

Education in Hong Kong is a unique amalgamation of Chinese and western educational traditions; it started before World War II, and has grown with the Hong Kong community over the past 40 years (Luk 1990). Today, almost free and compulsory education up to lower secondary level is available with tremendous support from the public purse. In 1990, over 1.2 million children between the ages of 5 and 19 were attending classes in the territory's 1,500 schools. The core of the school system is the 11-year primary and secondary education divided into primary, junior secondary and senior secondary. Students move from one level to another through a series of school-based internal assessments or public examinations.

University level education in Hong Kong is made up of both public and privately funded institutions. Of the ten institutions that make up this sector, seven are completely dependent on government funding. The funds are made available to them through the University and Polytechnics Grant Committee (UPGC). The Open Learning Institute of Hong Kong received government support directly from the Secretary of Education until 1992/93, after which it began to generate its running costs through its own means. There are also a number of programmes run by small local commercial colleges and many overseas tertiary institutions. Table 14.2 summarizes data on institutions that are run with government support.

Hong Kong's concern over the lack of adequate provision for tertiary education is a recurring theme that has been expressed by community and educational leaders as long ago as the mid- 1970s. Then, less than 5% of the relevant age group was able to gain access to colleges and universities. The situation was even worse in the 1960s.

As well as this lack of previous opportunity, the society is ageing, it places a high value on education, it is in economic transition and it is eager to enhance its career mobilities through investment in training and intellectual development. Some, though not all, of this demand has been met by initiatives in the private sector and the extra-mural and continuing education departments of the two universities, first and later by two polytechnics and Baptist College (Table 14.3). Additionally, a number of overseas tertiary institutions also offer costly access to their distance education programmes especially in business education both at the undergraduate and postgraduate level.

The case for strengthening continuing education in Hong Kong was mooted by the Llewellyn Report published in 1982. The report stated:

With its small geographic size and its high technological standard, Hong Kong would be eminently suitable for a system of education by radio and TV, combined, for example, with weekend study camps and evening tutorials ... we are thinking in terms of a large scale, comprehensive alternative to institutionalized education on the school and technical education/vocational training levels as well as in higher education.

In September 1987, the Executive Council of Government approved the establishment of a Planning Committee to produce an implementation plan for setting up the Open Learning Institute (PCOLI). The PCOLI submitted its report to Government in early 1989, with the following recommendations:

• The OLI will be a new institution established by law. It will confer academic awards in its own name but will operate in a consortium with the existing tertiary institutions which are funded through the UPGC.
  
  
• The setting up and initial operating costs of OLI will be supported by the Government. The Institute is expected to become self-financing in about 4 years through income from tuition fees and other sources.
  
  
• The OLI will offer courses at sub-degree, first degree and higher degree levels. Its programmes will be subject to academic accreditation by external bodies and its awards are expected to be recognized both locally and overseas.
  
  
• The OLI will have three schools: Science and Technology, Business and Administration, and Arts and Social Sciences offering programmes in a range of disciplines to be taught in either English or Chinese.
  
  
• Entry to all OLI programmes in sub-degree and first degree studies will be open without prior academic qualifications. The courses will be structured on a credit unit system and students may broadly study at their own pace.
  
  
• The OLI will conduct its teaching/learning activities through distance education methods using a variety of media and related communication technologies to facilitate self-paced learning.

In June 1989, the Government of Hong Kong accepted the PCOLI report and established OLI with the following objective:

To provide access to higher learning to all those who may have missed or will be missing it through the conventional systems for one reason or another. (PCOLI 1989)

As a higher education institution, OLI is involved in the acquisition and transmission of knowledge. Its main aim is to make higher education available, via distance learning, to those over the age of 18 who wish to undertake study for career development or personal enrichment.

Expectations

Like many other governments around the world, the Government of Hong Kong expects its educational sector to provide more for less. Nowhere is this expectation more explicit than in the Government's provision for adult education. For a territory of nearly six million people, of which over 80% are adults, provision for education has in the last few years been less than 17% of the budget. In 1993/94, this amounted to about US$2.1 billion. In setting up OLI in such an environment, not surprisingly, the Government expected the Institute to be totally self-financing within a period of 4 years. Table 14.4 shows the target (financial) parameters set by the Planning Committee in 1989; OLI was also expected to enrol its first learners barely 4 months from its date of establishment. In order to meet the presentation deadline and the challenges of self-financing, the institution, from its very beginning, embarked on a strategy of relying on being administratively simple, small, and financially prudent. Conseque ntly:

• academic planning and curriculum development would need to use the talent not only of the Institute's limited full-time academic staff but also all available resources of the wider community;
  
  
• a high proportion of courses would need to be taken from other distance education providers around the world; that is, it had to take advantage of the investment in curriculum design made by other countries;
  
  
• precise internal validation mechanisms, protocols, exit standards and external academic auditors had to be in place to ensure that academic standards were seen to be guaranteed;
  
  
• the student support system was designed to take advantage of Hong Kong's geography, commercial and technological infrastructure and human resources; and
  
  
• provision had to be highly responsive to student demand.

Developing the Model

At the core of the model is the intention to offer access to learning to all Hong Kong residents who are willing to pay almost full cost for it. This could only be achieved by using large numbers of courses created by other institutions, at least in the early years. The basic proposition was that OLI should be organized and staffed at a level in order to offer the best courses without unacceptable changes in pedagogy and examination. However, programme requirements for Hong Kong learners meant that some courses had to be created from scratch. Inevitably, also, imported courses needed some adaptation for use in Hong Kong. Three course preparation strategies emerged: 'secondary use' (A); t secondary use with modifications' (B); and 'OLI design' (C) (Figure 14.1).

Figure 14.1: OLI course development strategies.

[Insert Figure 14.1]

The second aspect of the model relied on the use of academic and professional talent in the territory for programme planning. All six of the territory's conventional tertiary institutions have excellent academics. Through formal and informal arrangements, these academics provided advice to the OLI's small number of academic staff on the design of programme curriculum and detailed course syllabus. This then enabled the Institute to search worldwide for materials.

The third aspect of the model relied on the development of precisely defined protocols for the maintenance of standards. This requires clearly stated learning objectives, carefully constructed learning materials, well organized student support systems and explicit exit-performance standards thoroughly designed to test achievement of learning objectives by continuous assessments and final examinations. The system is then subjected to institution and government appointed external auditors to examine its performance standards at the micro (course) and macro (programme and institution) level, respectively.

The fourth aspect of the model relied on the use of contract staff and services available both in Hong Kong and offshore for many of its creative, production and delivery services. The Institute's small full-time staff ensured that appropriate designs and standards were set and monitored. For example, course writing contracts are given on an open tender basis to faculties and individuals all over the world; print and non-print media production and reproduction work is handled by commercial houses in Hong Kong; tutorial support for students is given by part-time faculty who are trained and monitored by OLI.

The fifth aspect of the model depended upon the use of office automation technology and good management information systems to conduct administration and make client-driven decisions in terms of course offerings and presentation schedules.

Performance Model

The most obvious result of using the model is that by April 1994, barely 5 years from the inauguration of the Institute, about 50,000 adult men and women of Hong Kong have studied in one or two OLI courses; over 17,000 of them are currently active and enrolled to read for one of 21 named undergraduate degree and 13 sub-degree programmes. Each semester, about 40 courses are presented and this number increases between 10 and 15% annually. Of the courses presented, about 40% have been specifically created for, and by, OLI; the remaining 60% have been acquired 'off the shelf' and adapted for use in Hong Kong. The Institute has achieved all of these with about 56 full-time academic staff, 200 administrative support staff and about 700 part-time tutorial staff.

Student completion rates have been at very acceptable levels and the Institute graduated its first group of undergraduates in December 1993. Student statistics and profiles indicate that OLI is also successfully penetrating the population that it was set out to serve. One in every 150 Hong Kong adults is an OLI student; the median age is 27–29 and the median annual income is US$14,000. Although entry is open in terms of previous academic qualification, the majority of students have completed at least 11 years of pre-tertiary schooling.

From the beginning, the Institute worked on the basis of achieving the self-financing targets set by the Government. Planning considerations included increasing income in a highly competitive market, reducing cost of production, keeping tuition fees affordable and maintaining quality. The percentage increase in the income from 1989/90 to 1993/94 was about 714 while the corresponding percentage increase in expenditure (costs) was 270. Extensive marketing and client sensitive curriculum meant that the Institute was able to increase our student enrolment by about 300% within a period of 5 years; while keeping fee increases in line with inflation. In keeping expenditure down, every effort was made to maintain a high level of student support which is an absolute necessity in assuring learner success. Tables 14.5 and 14.6 give a summary and indicators of some aspects of the Institute's income, expenditure and performance.

Up to the end of the 1992/93 financial year (the year subvention ceased), the cost to the Government has been about HK$165 million. Of this, HK$57 million was a start-up grant to cover the purchase of goods and services to start the Institute and the balance to cover recurrent expenditure not supported by income until March 1993. From April 1993, government support for both capital and recurrent expenditure ceased. This has resulted in the Institute posting a deficit balance at the end of that financial year; the Institute's management expects to continue posting a deficit annually over the next two years. This deficit may amount to as much as HK$50 million and has to be managed by a healthy cash flow in the short term, and in the long term overcome by a further reduction of at least 10% in annual expenditure. The proposed reduction in expenditure from the 1996/97 financial year onwards is definitely achievable.

Conclusions

Since October 1989, OLI has gone through two institutional reviews by external agencies: the UK-based Council for National Academic Accreditation; and the newly established Hong Kong Council for Academic Accreditation. Both groups of auditors gave favourable comments on the Institute's ability to undertake tertiary level education using multi-media distance education methods. It is obvious that the OLI strategy of delivering distance education is not only of respectable quality but also cost effective. The advantages of the strategy are many, but four stand out as critical and all are concerned with the secondary use of materials. These are:

• Speed: It is self-evident that taking courses 'off the shelf' from other institutions is much quicker than preparing them. This is much more true for the early years of an institution than when it is in its maturity. There are many important issues surrounding the use of secondary material (Dhanarajan and Timmers 1992) that must be resolved before adopting this strategy. A small in-house faculty with knowledge of content, distance education culture and pedagogy should have no difficulties in overcoming these issues.
  
  
• Breadth: The distance education institution has a staffing advantage over the traditional institution in that far fewer people can plan, design, mount and assess courses and programmes for a large number of students. This is greatly magnified when the programmes are made up of a substantial proportion of already designed courses. By the same token, a given number of academics can plan a wider selection of programmes from existing courses than if they had to have the detailed curriculum design expertise necessary to present the courses by current distance education practices.
  
  
• Quality: The quality of education in a distance education culture is multidimensional. It starts off with well designed learning environments (courses) and ends with demanding exit standards. The importation of tried and tested learning materials from institutions perceived to have high quality; careful design of assessment and provision of caring academic support together will be the determinants of successful completion rates. The OLI's performance to date has been excellent (Dhanarajan and Hope 1992). Perhaps the most important element in the cost effectiveness of the Institute is one that it shares with many of the more successful open universities. By using well-designed learning environments, OLI is liberated from the serious limitation on its ability to reduce the unit cost of education, that is, the assumption that a teacher 'teaches' his or her course, puts a fixed and low limit to the number of students that can be supported on a particular course. In OLI's pedagogical strategy t hat limit is set, not by the number of students a teacher can supervise, but by the number of tutors that can be found and supervised. And this supervision need not be made by a single teacher. Thus on a given course, if a teacher had to grade and teach on the students' assignments, student numbers per course would need to be limited to, say, 300. Theoretically, within OLI the number of students who can register on a course is only limited by practical exigencies-the number of sets of course materials that have been printed, availability of tutors and tutorial rooms and laboratory space, etc. and all of these can be solved at short notice. This ability to expand registrations is a potent force in bringing unit costs down that will be with the Institute for many years to come.
  
  
• Cheapness: Distance education institutions achieve cost effectiveness by economies of scale. This effectiveness can be further improved if the system can reduce the cost of its academic and administrative overheads. By using courses designed elsewhere, the OLI effectively reduces its course development and production costs; contracting to use the capital resources and the academic expertise of non-employees massively contributes to cost efficiency; and finally, avoiding the traditional university's obsession with minute regulations permits best use of data processing technology in administration.

OLI's establishment and performance now offers the Government of Hong Kong a wide choice of options in terms of manpower development and planning. By offering further small scale support the Government can encourage OLI to develop programmes and services it wishes to see, quickly, effectively and efficiently. In 1994/95, two such programmes have been initiated. The first is an in-service teacher up-grade programme enabling nongraduate teachers to read for a BEd; the second is a BNursing programme that provides opportunities for post-registered nurses to become graduates.

References

Llewellyn Report (1982) A Perspective on Education in Hong Kong, Hong Kong.

PCOLI (I 989) Report of the Planning Committee for the Open Learning Institute of Hong Kong, Hong Kong.

Dhanarajan, G. and Timmers, S.F. (1992) "Transfer and adaptation of self-instructional materials", Open Learning, 7(l), 3–1 1.

Dhanarajan, G. and Hope, A. (1992) "Quality assurance at the Open Learning Institute", in Craft, A., Ed., Quality Assurance in Higher Education, The Falmer Press, UK.

Lee Ngok (I 992) Opportunity Knocks: Continuing Higher Education in Hong Kong. (mimeograph)