Promoting Services Trade in ASEAN PAPER 2
SECOND PHASE (SOCIAL SERVICES)

Trade in Education Services

M A R C H

2020

For inquiries, contact ASEAN-Japan Centre(ASEAN Promotion Centre on Trade, Investment and Tourism)
1F, Shin Onarimon Bldg., 6-17-19, Shimbashi,
Minato-ku, Tokyo 105-0004 Japan
Phone/Fax: +81-3-5402-8002/8003 (Office of the Secretary General)+81-3-5402-8004/8005 (Research and Policy Analysis (RPA) Cluster)+81-3-5402-8116/8005 (Capacity Building (CB) Cluster)+81-3-5402-8006/8007 (Trade and Investment (TI) Cluster)+81-3-5402-8008/8009 (Tourism and Exchange (TE) Cluster)+81-3-5402-8118/8003 (PR)e-mail address: info_rpa@asean.or.jp
https://www.asean.or.jp

Copyright © ASEAN Promotion Centre on Trade, Investment and Tourism.
All Rights Reserved.
Second Phase (Social Services)
Paper 2 / March 2020 / Trade in Education Services

Promoting Services Trade in ASEAN PAPER 2
SECOND PHASE (SOCIAL SERVICES)

Trade in Education Services

M A R C H

2020

ii

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

NOTES
The terms country and/or economy as used in this study also refer, as appropriate, to territories orareas; the designations employed and the presentation of the material do not imply the expressionof any opinion whatsoever on the part of the ASEAN-Japan Centre concerning the legal status of any
country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers orboundaries.
The following symbols have been used in the tables:• Two dots (..) indicate that data are not available or are not separately reported.
• A dash (-) indicates that the item is equal to zero or its value is negligible.
• Use of a dash (-) between dates representing years, e.g., 2015–2016, signifies the full period
involved, including the beginning and end years.
Reference to “dollars” ($) means United States dollars, unless otherwise indicated.

List of papers under the project on promoting services trade in ASEAN by
the ASEAN-Japan Centre
The current paper is the second of a three-paper series of social services under the second
phase of the project on promoting services trade. The other papers under this project arelisted below:
First Phase
Paper 1. Trade in Professional Services (February 2017)
Paper 2. Trade in Research & Development Services (February 2017)
Paper 3. Trade in Telecommunication Services (March 2017)
Paper 4. Trade in Computer and Related Services (March 2017)
Paper 5. Trade in Courier Services (January 2018)
Paper 6. Trade in Maritime, Air, Rail and Road Transport Services (February 2018)
Paper 7. Trade in Tourism Services (March 2018)
Second Phase: Social Services
Paper 1. Trade in Health Related and Social Services (February 2020)
Paper 2. Trade in Education Services
Paper 3. Trade in Environmental Services (forthcoming)

Prepared by Dr. Zbigniew Zimny (Academy of Finance and Business Vistula, Warsaw, Poland) for
all chapters except chapter III, and by Dr. Hikari Ishido (Chiba University) for chapter III, under the
direction of Masataka Fujita (AJC). The authors wish to thank Mihoko Saito (AJC) and research
assistant Teah Heng Shue (University of Tokyo), for their contributions. The manuscript was edited
by Lise Lingo and typeset by Laurence Duchemin. Errors and omissions are only those of theauthors and should not be attributed to their organizations.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E SABBREVIATIONSAEC

ASEAN Economic Community

AFAS

ASEAN Framework Agreement of Services

AJC

ASEAN-Japan Centre

APEC

Asia-Pacific Economic Cooperation

AQAF

ASEAN Quality Assurance Framework

ASEAN

Association of Southeast Asian Nations

ATISA

ASEAN Trade in Services Agreement

AUN

ASEAN University Network

AQAN

ASEAN Quality Assurance Network

BOP

balance of payments

CPTPP

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

FDI

foreign direct investment

FTA

free trade agreement

GATS

General Agreement on Trade in Services

GDPgross domestic productGVC

global value chain

HEI

higher education institution

IBC

International Branch Campus

IMF

International Monetary Fund

M&A

merger and acquisition

MNE

multinational enterpriseMBA

Master of Business Administration

OECD

Organisation for Economic Co-operation and Development

NUS

National University of Singapore

PPP

purchasing power parity

SDGs

Sustainable Development Goals

SME

small and medium-sized enterprise

UNESCO

United Nations Educational, Scientific and Cultural Organization

WTO

World Trade Organization

iii

iv

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

CONTENTS
Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  viiIntroduction: The characteristics of Education Services. . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. State of Education Services in ASEAN: The role of private provision . . . . . . . . . 4
II. A scendancy of Education Services Trade:

Volume of trade in services by four modes of trade . . . . . . . . . . . . . . . . . . . . . . . . . .  10

1. Mode 1: cross-border supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
2. Mode 2: trade through local supply to foreign consumers:
consumption abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
3. Mode 3: supply through commercial presence: sales of foreign affiliates . . . 24
A. FDI in education services in the world and ASEAN. . . . . . . . . . . . . . . . . . . . . . . . 24

B. Primary and secondary education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

C. Tertiary education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4. Mode 4: supply through movement of professionals abroad. . . . . . . . . . . . . . . . . 37
III. Trade agreements and regulations among and in the ASEAN

Member Countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

IV. I mpacts of trade in Education Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
1. Economic impact of education: providing skilled human capitalfor economic development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

2. Impact of ASEAN trade in education services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
V. Policy options and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
1. Attracting foreign education institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
2. Benefiting from foreign education institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Annex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65v

vi

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E Svii

EXECUTIVE SUMMARY
The key economic task of education services is to build human capital to meet the skill requirementsof labour markets for increasing productivity and competitiveness and, consequently, for stimulating
economic growth. In the era of global value chains (GVCs), raising skills is an essential condition foreconomies to upgrade their positions in GVCs. Skill requirements depend on the level of economic
development and thus expectations about education systems and their tasks also differ. Although
all levels of education matter, higher education is central to building human capital for a modern,knowledge-based economy.
Education services differ from most other services, which are typically commercial in nature.
Education is considered a public good and, as a result, the public sector plays a dominant role in its
financing and provision. In recent decades, however, the private sector has rapidly gained importancein most ASEAN countries in response to a rapidly growing demand for education, especially at
the tertiary level, and for better-quality education at all levels. This has created more room forcommercial transactions and for cross-border trade in education services, complementing thelong-existing and intensive non-commercial international cooperation among ASEAN educational
institutions and policymakers.
ASEAN countries increasingly participate in most types and modes of trade in education services,but mainly as importers. Trade through Mode 2 (movement of consumers, primarily tertiary students
abroad, to study in a country other than their own) is the largest trade flow in all ASEAN countries forimports, and for some countries (Singapore, Malaysia and increasingly Thailand) also for exports. In
2017, more than 285,000 students from all ASEAN countries studied abroad, compared with 144,000
in 2000. Close to 80% of outbound ASEAN students go to developed countries, primarily to theUnited States, the United Kingdom and Australia, but some (10%) attend universities in other ASEAN
countries. Of all ASEAN students in developing countries, 41% study in ASEAN.
As regards exports of tertiary education through Mode 2, in 2017, ASEAN hosted some 200,000
foreign students, most of whom studied in one of three countries: Malaysia (100,000), Singapore(53,000) and Thailand (32,000). These exports are closely associated with the attraction of renowned
foreign universities, mostly from developed countries – called “international branch campuses”(IBCs) in education jargon – established through Mode 3. Malaysia hosts 12 IBCs, Singapore 11
and Thailand three. Among other ASEAN countries, Viet Nam and Indonesia each have attracted
two IBCs and Cambodia one. Foreign students in Singapore attend not only IBCs but also excellent
local public universities. A good part of the commercial presence of foreign universities takes theform of non-equity modes (NEMs) of investment such as franchising and twinning arrangements orvalidated programmes. On the outward side, Malaysia’s universities have invested in four campusesabroad (in Botswana, Cambodia, the United Kingdom and Yemen) and those of Singapore in two
campuses (in Malaysia and Uzbekistan). Consequently, sales of IBCs in ASEAN countries (Mode 3,
concerning higher education) are significant, but smaller than sales of international schools andmuch higher than sales of IBCs of ASEAN universities abroad.
The second largest trade flow in terms of value (and the largest in terms of volume) are salesof international schools (Mode 3, commercial presence). The number of schools in most ASEAN
countries has grown exponentially in recent years, as has enrolment (from 300,000 pupils in 2015
to 520,000 in 2019), as governments have gradually liberalized the access of local children to theseschools. In most countries, except Singapore, local children are the largest cohort of students, from
52% of total enrolment in Indonesia and Thailand to over 70% in Viet Nam. In 2019, tuition fee incomeof international schools in ASEAN exceeded $5 billion.

viii

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

ASEAN trade through Mode 4, movement of natural persons (professors, teachers and researchers
working abroad on a temporary basis), is mostly imports, which is quite significant, owing to therapid expansion of commercial presence (Mode 3) by international primary and secondary schools
and foreign branches of universities, generating demand and employment for foreign teachers andacademics. Native-speaking teachers of English are also in demand at local ASEAN schools. Some
33,000 foreign teachers in the six ASEAN countries with the largest number of international schools
generate an estimated annual salary cost (and imports through Mode 4) of almost $800 million.
Trade through Mode 1 (cross-border flow of services associated with distance and online education,
mainly for obtaining a tertiary degree or a certificate), despite having great initial promise, has nottaken off. Although internet-based technology made education services tradable across borders,the popularity of online international courses, and consequently international trade, remains low inboth the world and ASEAN. This may be due to many factors but may also simply mean that most
students who can afford international education prefer traditional face-to-face interaction in theclassroom with access to teachers, facilities, tutoring, support services and student life.
Expansion of ASEAN trade in education has been possible owing to liberalization and deregulationof these services in most countries. On average, the applied trade policy of all ASEAN countries
in education services for all modes is pretty liberal, at 23 out of 100 (which means that trade isbanned), as measured by the World Bank’s Services Trade Restrictiveness Index. This is confirmedby another measure (excluding, however, Mode 4), based on liberalization commitments underthe ASEAN Framework Agreement of Services (AFAS), the so-called Hoekman index. It takes thevalue of 0.84 (where 1 equals full liberalization) for all ASEAN countries, all modes and the entire
education sector. Most countries are fairly open to Modes 1 and 2 of trade. Mode 3 imports, which
also generate trade in other modes, is the least committed to liberalization within AFAS (with Mode 4
being outside the AFAS negotiations), lowering the overall index of liberalization of educational
trade. In Mode 3, for example, Indonesia, Myanmar, the Philippines and Thailand apply some
restrictive measures. Applied policy in education trade is more liberal than AFAS commitments, but
it is much more restrictive than was the goal of the ASEAN Economic Community (AEC) Blueprint
2025. Thus, in several ASEAN countries, there is room for further liberalization, especially of Mode 3of trade in education services. There is also room for narrowing the gap between actual policy andcommitments under the AFAS and the AEC Blueprint, and for improving investment climate for
intra-ASEAN foreign direct investment (FDI). The ongoing transition to the ASEAN Trade in Services
Agreement (ATISA), which will replace the AFAS, may facilitate further liberalization, as the ATISA
negotiations will be based on a negative-list approach, which is simpler and more transparent thanthe previous negotiations based on a positive list.
Liberalization is a necessary but not sufficient condition for attracting FDI into tertiary education.
Supplementary measures are also needed to reduce investment risks and increase chances for
attracting foreign investments, including the establishment of a clear, stable and transparent
regulatory framework for the activities of foreign higher education institutions (HEIs). Furthermore,
the experiences of ASEAN countries that have been successful in attracting IBCs show thatgovernment involvement may be necessary in selecting and attracting good-quality foreign
universities to a host country. This includes financial involvement in the form of incentives forinvestment and often subsidies for operations. The need for serious financial engagement poses
problems for less developed ASEAN countries. Examples of some low-income countries reveal,
however, that these problems can be overcome through combining government commitments with
official development assistance (ODA) and support from regional development banks. The help ofhigh-income ASEAN countries would also be useful in this respect.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

ix

Another important policy task of governments is to increase the benefits and avoid or reduce therisks of trade in education services. These differ by the mode of trade. Imports through Mode 2
enlarge human capital, if graduates return home. If they do not, they become a skilled diaspora.
Governments can facilitate graduates’ return (by, for example, recognizing foreign degrees) and can
reduce “brain drain” by encouraging highly skilled diaspora members to return or to engage inbeneficial interactions with home countries. The key benefit of international schools is that theysatisfy demand from affluent parents for better-quality education. As most graduates of ASEAN
international schools pursue higher education abroad to become university graduates, policy
issues become the same as in the case of outbound students. The key benefit of attracting IBCs ofprestigious universities is that they are a magnet for foreign students, thus stimulating exports. The
commercial presence of foreign HEIs may also reduce imports of tertiary education through Mode 2,
as it provides an option and incentives (such as lower cost) for local students to obtain valued foreign
degrees without leaving the country. It may also alleviate skills shortages, if IBCs specialize incourses not available in the country. There can also be positive spillovers to the domestic education
system from the commercial presence of foreign providers. Some countries encourage foreign HEIs
to collaborate with local ones, while others make such cooperation a condition of entry.
Opening to commercial presence may not be enough to stimulate trade, if there are restrictions
on other modes of associated delivery or constraints falling beyond trade policy. For example, if acountry wishes to attract foreign students, cumbersome visa procedures may be an obstacle. If a
country’s objective is to use foreign graduates to reduce the shortage of skilled human resources,
then immigration policy becomes very important as do such issues as the availability of scholarships
to foreign students, the possibility to work while studying and the availability of work permits after
graduation. Regional regulatory cooperation is very important to achieve progress in supplementarymeasures, which are needed to advance trade in education services, because of the diversity anddifferences in quality of national regulations in ASEAN countries. The challenges of improving
regulatory quality are particularly significant for lower-income ASEAN countries, and strong support
from other ASEAN countries and ASEAN institutions would be desirable in confronting thesechallenges.
Modes 1 and 3 of education services trade raise the issues of quality and rogue providers, for bothstudents and governments. Concerns about the quality of foreign education provision and about
the entry of “degree mills” should be alleviated by monitoring the entry of such institutions andputting in place a quality assurance infrastructure. The adoption of aspects of the ASEAN Quality
Assurance Framework (AQAF) dealing with ensuring and harmonizing the quality of qualifications inhigher education could be helpful in this respect. The attendance of international schools by local
children raises in some circles issues of access to education and equity. Bans or restrictions would
not, however, improve education outcomes of children whose parents cannot afford international
schools. Better policy would be to improve the access of talented local children to the best local
schools.
An important education policy issue relates to the success of several ASEAN countries in attracting
export-oriented FDI in manufacturing and services, and the aspiration of other countries to follow asimilar path. The skill requirements of foreign investors are typically higher than those of domestic
firms. Education, providing skills for more advanced and sophisticated industries and activities, is
key for retaining existing investors, encouraging them to upgrade and attracting new investors tomore advanced activities that rely on skilled workers and employees.

x

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

1INTRODUCTION: THE CHARACTERISTICS
OF EDUCATION SERVICES
Education services include the provision of skills, knowledge and information − through teaching,training and instruction − to children of various ages and adults. Education typically takes place
within formal educational institutions such as schools, colleges and universities and at training
centres, workplaces (on-the-job-learning, training), or non-governmental organizations (NGOs)
such as religious bodies. Institutions that offer education, especially at lower levels, are in mostcases publicly financed, owned and operated, charging no fee. They may also be privately owned
and operated, for profit or not for profit, but charging tuition. Education may also take the form ofindividual tutoring, parent teaching or self-learning. Its provision typically requires personal contact
between instructors and pupils, rendering services non-tradable across borders. This has, however,changed with the emergence of distance online learning, relying on the internet.
Education services are classified by the level of formal education and distinguish, in addition, othernon-formal education services. The World Trade Organization (WTO) lists the following categories ofthese services, on the basis of the Central Product Classification, Rev. 2 (WTO, 2010: 2-3):- 5. A. Primary education services (preschool and other primary education)-
5. B. Secondary education services (general higher secondary education and technical andvocational secondary education)- 5. C. Higher education services (postsecondary non-tertiary education, comprising a general
subclass and a specialized one, leading to qualifications that are relevant to the labour market;
and tertiary education, comprising first-stage tertiary, leading to a university degree or equivalent,and second-stage tertiary, for advanced research qualifications, such as a doctoral degree)- 5. D. Other education and training services (cultural education, sports and recreation education,and other education and training services)- 5. E. Educational support services (consulting, counselling, evaluation and testing services, andorganization of student exchange programmes).
Education has always been central to the economic, social and cultural progress of nations andto the success and well-being of individuals. Over time, its importance has increased, and its
content has become more sophisticated and ever more demanding. Education is a basis for humancapital, which has been recognized for a few decades as a key factor explaining economic growthand development. Rapid technological progress, digitalization of all aspects of human activities andthe emergence of GVCs have put new demands and strains on the content, scope and methods ofeducation. In many fields, future skill requirements have become unpredictable and several jobs andprofessions based on known skills, acquired in the past, are predicted to disappear. An increasing
premium is put on flexibility and the lifelong ability not only to acquire adequate skills, but to learn
new ones when old ones become obsolete.
The importance of education has been recognized in the Sustainable Development Goals (SDGs):“Quality education and lifelong learning opportunities for all are central to ensuring a full andproductive life to all individuals and to the realization of sustainable development”. Consequently, oneof the 17 SDGs, goal 4, addresses education issues: “Ensure inclusive and equitable quality educationand promote lifelong learning opportunities for all” (United Nations, 2017: 24). ASEAN countries
have achieved considerable progress in ensuring the universal access of children to education, andsome have also greatly improved the quality of education at all levels. ASEAN countries pay great
attention to the issue of quality, as ASEAN leaders committed to advance universal access to quality

2

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

education in the ASEAN Socio-Cultural Community Blueprint 2025.1 However, given the increasingrole of private providers and the market mechanism in education in most ASEAN countries (seechapter II), ASEAN governments have to strike the right balance between market competition andgovernment intervention for equitable access to education.
In an era in which production of goods and services are increasingly organized within GVCs, raisingskills in a country through various forms of education, training and retraining is an essential
ingredient of GVC upgrading (Gereffi, 2015:22) – that is, improving the country’s position in thesechains and, consequently, in the international division of labour. Gereffi concludes, “Therefore,
workforce development programmes should involve a combination of basic education and more
specialized training, with private companies supplementing the role played by public agencies”.
Skilled workers are needed to move up the value chain from low to higher value added industries
and activities (World Bank et. al., 2017: 125). Fernandez-Stark, Bamber and Gereffi (2012:4) pointout that “As developing countries expand their participation in the global economy, human capitalis becoming a critical factor for competitiveness. Skills and workforce development are essential
elements for upgrading in GVCs”. Countries can help ensure that their participation in global
markets translates into better economic and social outcomes through a range of policy actions,among which investing in skills of their populations is paramount (OECD, 2017:11).
As in the case of professional, telecommunication and computer services, the impact of education
services on value creation extends to all functions in the value chain and across various industries.
As indicated in the ASEAN-Japan Centre’s papers on these three services,2 their role is to ensuresmoother and more efficient operation of value chains in a country. Education services do so as well,although their more important function is to enable businesses in a country to move up and acrossvalue chains, to more sophisticated functions and activities, creating more value added.
The great public benefits of education have historically prompted governments to consider it a public
good and, up to a certain education level, differing from country to country, a human right. Therefore,
traditionally, education has not only been highly regulated and tightly supervised by the state (whichis also the case of many other services, e.g., financial services), but also largely, and in several
cases, entirely, financed and provided by the public sector. The underlying reason is that education
services are a case of market failure. When left to markets, the supply of education services would
be too small to produce socially desirable externalities. Education would be accessible to a limitedgroup of children and young people from better-off families, whose parents would be able to afford
to pay for it, leaving out the masses. Or its content could be deformed, serving private interests(profit making) rather than the public interest. A high level of government intervention, higher thanin most other services, has left less room for the market and, consequently, international trade foreducation services than for most other services.
Trade is a commercial transaction – buying and selling (or exchanging) of goods and services
between people and/or firms (domestic trade) in different countries (international trade), involving
payment of money by a buyer to a provider. The market is a system allowing trade. An education
system that relies entirely on free, no-fee, public provision of education eliminates the market andleaves little room for trade. In an open setting, however, there can still be trade through some modes
of international delivery. Parents who are unable to send children to a private school at home cansend them to a boarding school or a university abroad (Mode 2), if they can afford it.3 The potential

1

2

3

ASEAN Socio-Cultural Community 2025 Blueprint (URL: https://www.asean.org/wp-content/uploads/2012/05/8.March-2016-ASCC-Blueprint-2025.pdf ).
ASEAN-Japan Centre, Promoting Trade in Services, Papers 1, 3 and 4, https://www.asean.or.jp/ja/trade-info/pst_
papers-2.
Provided that the currency is convertible and there are no restrictions on the transfer of funds abroad and on
foreign travel.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

3international mobility of children increases with age and with the income level of parents. It is lowest
for primary school children and highest for tertiary students and adults. Talented multilingual
teachers can seek work at private education institutions abroad (Mode 4). And technology makes
it possible (technically, government permitting) to provide online education services from private
institutions abroad to students living in a system dominated by public provision of education services(Mode 1). Thus, some international trade exists even in an entirely state-based system.
In recent years, demand for education (especially at the tertiary level) and better-quality education
at all levels has been growing rapidly. Many governments have not been able to satisfy this demand,
despite increasing public spending on education. In response, in ASEAN countries the role of private
involvement in funding such services (mainly by parents) and in establishing, managing and providingthem (by NGOs, enterprises and public entities from other countries facing budgetary constraint andseeking additional revenues abroad) of private education services in exchange for payment (tuition)
has also grown. This growth has created space for market provision4 and for international trade in
selected activities and for select groups of customers – children and older students.
As a result, there has been a rapid expansion of trade in education services worldwide, and in the
ASEAN countries, which will be examined in chapter II. A caveat needs to be made here. There
has always been intensive non-commercial cooperation among educational institutions of various
countries, and the room for further such cooperation remains considerable. Such cooperation
is important for sharing experience about best practices, education methods and curricula, forteachers’ and students’ exchanges and, as a result, for raising the quality of education.5 Much of
the education system in countries remains public, and trade will never replace the need for noncommercial interactions. The discussion of this subject is beyond the scope of this paper, but it
cannot be entirely ignored, because the relationship between commercial and non-commercial
cooperation raises important issues, including policy issues.6
Before examining ASEAN trade in chapter II, it is important to identify the features of education
systems of ASEAN countries that broadly determine the room for such trade. This makes it possible
to assess whether room for trade will expand over time.

4

5

6

This expanded the role of markets in education in the sense that it allowed for commercial transactions. But nocountry has introduced a genuine economic market in primary or secondary education for local children. In higher
education, where commercial transactions are most common, Marginson (2013) noted, “no research university isdriven by shareholders, profits, market share, allocative efficiency or the commodity form”. At best, he concludes,
markets in higher education can be called regulated quasi-markets. One should thus be aware that despite theprivatization and commercialization of some parts of education, these processes are not akin to similar processes
in transportation, telecommunication or media.
An example is the ASEAN Work Plan on Education 2016-2020, endorsed by the 11th ASEAN Senior Officials Meetingin Education and adopted by the 9th ASEAN Education Ministers Meeting, held 23-25 May 2016 in Malaysia. In
higher education various collaboration programmes are implemented through the ASEAN University Network and
ASEAN + 3 Net. The Japan International Cooperation Agency’s AUN/SEED-Net is an example of such a programme(http://www.aunsec.org/index.php). Within ASEAN +3 Net, Kyoto University provides a double degree programme inhuman security. At a country level, for example, the Ministry of Education and Training in Viet Nam has set up theInternational Education Cooperation Department to be responsible for international cooperation (https://vied.vn/en). The United States government has set up the Vietnam Education Foundation to facilitate education exchange
and capacity building in Viet Nam (https://home.vef.gov/download/OverviewofVEF_Sept2016.pdf).
One issue is whether international agreements such as the General Agreement on Trade in Services (GATS) or
the ASEAN Framework Agreement on Trade in Services (AFAS) are needed to stimulate trade in higher education
services, one of the most dynamic categories of education trade. After all, students and education programmes
moved between countries through non-commercial programmes long before international treaties came into
existence. Many educators are of the view that trade rules embodied in international treaties are not necessary
to regulate the cross-border movement of commercial education, because the education sector has developed
regulations and policies suitable for trade and can continue to do so (Knight, 2006: 61).

4

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

I. STATE OF EDUCATION SERVICES IN ASEAN:
THE ROLE OF PRIVATE PROVISION
The objective of this chapter is to examine key components of the education systems of ASEAN
countries identified in the introduction that matter (or may matter) for trade in education services.
Therefore, the focus is on the role of the private sector by levels of education, measured by the shareof students’ enrolment in private primary and secondary schools and HEIs in total enrolment. The
assumptions are that the greater is the role of the private sector, the greater is the scope for buying
and selling education services, and that countries that allow domestic private trade in such services
would have fewer objections to allowing international trade in them.
Conceptually, the task of delineating the border between public and market-based provision of
education services seems to be straightforward. Compulsory, free provision by public institutions
excludes markets and trade. Private, tuition-based provision allows markets and trade. If it isextended to foreign providers, it creates room for international trade in Mode 3 and can impact tradein other modes.7 But in practice, the distinction between public and private does not necessarily andprecisely overlap with the distinction between free and fee-based provision, which is the essence ofcommercial transactions. Public schools and universities can provide free education to most (local)
students but collect tuition from some categories of students (e.g., foreign students). Conversely,
private institutions (e.g., religious schools) can be partly or entirely financed by the state and offer
no-fee education to some or all students. In most countries the recent regulatory landscape of
education services is one in which public and private suppliers co-exist and there can even be bothprivate and public provision in one school or institution. But the latter is rather an exception than a
rule.
Table 1 presents data on compulsory and free education guaranteed in the laws of ASEAN countries
in 2012 and 2017. Total years of compulsory education range from five in the Lao People’s Democratic
Republic and Myanmar, through six in Malaysia and Singapore; nine in Brunei Darussalam,8 Cambodia
and Thailand; to 10 in Viet Nam and 11 in the Philippines. The numbers for the last two countries
include also one compulsory year of pre-primary education. Differences among countries are thus
significant and seem to be determined rather by national choices and philosophies than by the levelof development. That said, in the less developed countries of the Lao People’s Democratic Republicand Myanmar, economic factors may play a role in the relatively short term of compulsory education.
In contrast, in relatively better-off Singapore and Malaysia, compulsory education lasts a much
shorter time than in less developed Viet Nam and the Philippines. In countries with requirementof five to six years, compulsory education ends at the primary level, while in others it extends tosecondary education, typically to a lower level (table 2). During the past 20 years, these durations ofcompulsory education have not changed, except in Viet Nam, where it was five years until 2004 andnine years until 2014.97

8
9The commercial presence of good-quality foreign private schools offering international programmes that facilitate
entry into Western universities can diminish the propensity of parents to send children for education abroad, thus
reducing imports through Mode 2. The presence in a country of prestigious universities, increasing chances forgood jobs at home and abroad (in e.g. multinational enterprises), can attract students from other countries, thus
stimulating exports in the same mode. Both may require bringing in qualified foreign teachers and lecturers fromparent schools and universities or other sources abroad, thus raising imports through Mode 4. But they may also
reduce the exodus of domestic teachers seeking better career opportunities abroad. They may also facilitate online
learning (Mode 1), making it possible to to combine distance learning with face-to-face classroom interactions.
Under the Compulsory Education Law of 2011.
World Bank, World Development Indicators database.

Total education
Compulsory
Free
2012
2017
2012
2017
9
9
..
..
..
..
9
9
9
9
9
12
5
5
5
5
6
6
11
11
5
5
5
5
11
11
11
11
6
6
..
..
9
9
12
12
9
10
5
6

P
P
P
P
P
P
P
P
P
P

PrimaryLower
secondary
P
P
P
P
P
P
P
(with fee)P(with fee)UppersecondaryP(with fee)(with fee)PPPP(with fee)P(with fee)P(with fee)(with fee)(with fee)(with fee)(with fee)(with fee)(with fee)(with fee)(with fee)

Tertiary
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

PrimaryLower
secondary
Yes
Yes
Yes
No
No
No
No
Yes
Yes
No

Upper
secondary
No
No
No
No
No
No
No
No
No
No

1 = tuition; 3 = free but not compulsory;
5 = free and compulsory
Lower
Upper
Primary
secondarysecondary
5
5
3
5
5
1
5
5
1
5
3
3
5
3
3
5
3
3
5
3
3
5
1
1
5
5
3
5
1
1

Secondary education
Compulsory
Free
2012
2017
2012
2017
3
3
..
..
..
..
3
3
3
3
3
6
..
..
..
..
..
..
5
5
..
..
..
..
4
4
4
4
..
..
..
..
3
3
6
6
4
4
..
..

Source: World Policy Analysis Center
Note: A country’s constitution may state that education is tuition-free, but if the country reports that tuition is charged, it appears in this table as tuition reported. This table is thus different from table 1,
which shows data based on what is stipulated in the laws of countries.

Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam

Country

Tuition Free

Table 2. ASEAN countries: actual free and compulsory education by level, 2014
Compulsory

Primary education
Compulsory
Free
2012
2017
2012
2017
6
6
..
..
..
..
6
6
6
6
6
6
5
5
5
5
6
6
6
6
5
5
5
5
6
6
6
6
6
6
..
..
6
6
6
6
5
5
5
5

Source: UNESCO, UIS.Stat.
Note: The Philippines and Viet Nam each have one compulsory year of pre-primary education.

Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam

Country

Table 1. Compulsory and free education in ASEAN countries guaranteed in law, 2012 and 2017 (Number of years)

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
56PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

In most countries the number of years of free education is the same as the number of years ofcompulsory education (there are no data on Singapore). However, the number of years of freeeducation is longer in Indonesia and Thailand by three years (12 vs. 9) and in Malaysia by six years(11 vs. 6). The former two countries give secondary school pupils a choice to pursue (or not) upper
secondary education and pay for it. Malaysia grants graduates of primary schools free secondary
education. Judging from the lengths of compulsory and free education, and the data in table 2 oncompulsory and tuition-free education in 2014 (based on actual situation, not on rules stipulated bylaws),10 no ASEAN country except for Brunei Darussalam provides free tertiary education.
Figures 1 through 4 show the current role of private student enrolment (private enrolment as apercentage of total enrolment in 2017 or latest available year) by education levels in ASEAN
countries. Private education exists in all countries except for higher education in Myanmar, although
its role differs greatly from country to country and by the level of education. There are few discernible
patterns that are common for all countries. In primary and secondary education this role is small,less than 6%, in Viet Nam, Cambodia, the Lao People’s Democratic Republic, Singapore and Myanmar.
In primary education, 41% of pupils attend private schools in Brunei Darussalam, about 21-22% inIndonesia and Thailand, 12% in Malaysia and 8% in the Philippines (figures 1 and 2). In secondary
education, the role of private enrolment is greatest in Indonesia (42%), followed by the Philippines(18%), Brunei Darussalam (16%) and Thailand and Malaysia (about 10%) (figures 1 and 3). In somecountries the role of private provision is more important in primary than in secondary school(e.g., in Brunei Darussalam, 41% vs. 15% and in Thailand, 21% vs. 11%), while in others the reverse
is true (in Indonesia, 22% vs. 42% and in the Philippines, 8% vs. 18%). In the remaining countries,
the difference is not that big. These data mean that the public sector is the dominant provider ofprimary and secondary education in most ASEAN countries, except for primary schools in Brunei
Darussalam and secondary schools in Indonesia, where public schools are important but notdominant, accounting for about 60% of enrolment.11

10

11

Tuition reported means that the country reports charging tuition by the last year of primary or secondary education.
A country’s constitution may state that education is tuition-free, but if the country reports that tuition is charged, it
appears as tuition reported.
Another exception is pre-primary education and early child development programmes. In Indonesia they are 95%
private and in Brunei Darussalam 77%, measured by enrolment. In most other countries (there are no data on
Singapore) the importance of private care for preschool children is much higher than the provision of private
primary and secondary education, including in countries with negligible enrolment in private schools: Viet Nam,
15-30%, depending on the programme; the Lao People’s Democratic Republic, 18-57%; Cambodia, 17%; andMyanmar, 28% (UNESCO Statistical Institute).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

7Figure 1. ASEAN 10: Enrolment in private education institutions by level as share of total
enrolment, 2017 or latest available year (Per cent)
70
60
50
40
30
20
10
0
ia
ei
od
un
Br alam amb
C
ss
ru

Da

ia

In

sia

DR

es

n
do

P
ao

L

y
ala

M

Primary

ar

M

es

pin

m

n
ya

ip
hil

P

Secondary

re

po

a
ing

S

nd

ila

a
Th

t
Vie

m

Na

Tertiary

Source: Author, based on UNESCO, UIS.Stat.

Figure 2. ASEAN 10: Enrolment in private primary schools as share of total enrolment,2017 or latest available year (Per cent)Brunei DarussalamIndonesia
Thailand
Malaysia
Philippines
Lao PDR
MyanmarCambodia
Singapore
Viet Nam
05

Source: Author, based on UNESCO, UIS.Stat.

10

15

20

25

30

35

40

45

8

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

The situation is different in tertiary education, although it also varies greatly from country to country(figures 1 and 4). In Cambodia, Indonesia and the Philippines, the role of private HEIs is more
important than that of public ones, with private student enrolment amounting to about 63% in thefirst two countries and 54% in the Philippines. Private enrolment is also significant in Malaysia(48%), Singapore (36%) and the Lao People’s Democratic Republic (25%).

Figure 3. Enrolment in private secondary schools as share of total enrolment,2017 or latest available year (Per cent)Indonesia
Philippines
Brunei Darussalam
Thailand
Malaysia
MyanmarSingapore
Viet Nam
Lao PDR
Cambodia
0

5

10

15

20

25

30

35

40

45

Source: Author, based on UNESCO, UIS.Stat.

Figure 4. ASEAN 10: Enrolment in private HEIs as share of total enrolment,2017 or latest available year (Per cent)Cambodia
Indonesia
Philippines
Malaysia
Singapore
Lao PDR
Thailand
Brunei Darussalam
Viet Nam
Myanmar
010

Source: Author, based on UNESCO, UIS.Stat.

20

30

40

50

60

70

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

9In the remaining countries, it ranges from about 13% in Brunei Darussalam and Viet Nam to 16%
in Thailand. As noted earlier, Myanmar does not have private HEIs. In seven out of ten countries
the importance of private provision of tertiary education is much larger than that of primary andsecondary education. The biggest difference is in Cambodia, where private schools account for only
2-4% of pupils, while the share of students enrolled in private universities is 63%. In Viet Nam, which
exhibits negligible private primary and secondary education (1-3%), the share of tertiary private
enrolment is quite significant (13%). The relatively small attendance at private schools and the muchlarger attendance at universities are also characteristic of the Lao People’s Democratic Republic,
Malaysia, the Philippines and Singapore. Only in Brunei Darussalam is the role of private provisionof higher education smaller than that of primary and secondary education and only in Thailand is it
smaller than that of primary education. In the former it may be perhaps explained by the fact thattertiary education, which is most costly, is provided for free by public HEIs.12
Data on the role of the private sector over longer periods are available from the World Bank’s World
Development Indicators database for primary and secondary education. From 2000 to 2017, there
was a clear trend towards increasing private enrolment in primary education in most countries,
except in the Philippines, where it fluctuated around 8-10%, and in Singapore, where it fell from
7.6% in 2009 to 3.9% in 2016. In Brunei Darussalam, the share increased from 35% in 2000 to 41%
in 2017, in Indonesia from 16% to 22%, in Thailand from 13% to 21% and in Malaysia from 1% (in2002) to 12%. The share tripled in Vet Nam (from 0.3% to 0.9%) and increased more the two and ahalf times in the Lao People’s Democratic Republic (from 2% to 5.7%) and Cambodia (from 1.6% to4.2%). In Myanmar, it increased from 0.2% in 2014 to 4.7% in 2017. The role of the private sector insecondary education has also expanded in seven ASEAN countries. In 2017 the shares provided infigure 3 were a couple of percentage points higher than in 2000 or later years, when the data begin(as in Myanmar – 1.3% in 2014 and 4.9% in 2017). In Indonesia the shares fluctuated at high levelsof 42% and 47%, but they have not increased. In Singapore, the share decreased from 6% in 2007 to
4.5% in 2017. There are no data for Viet Nam.
UNESCO provides data on private enrolment in HEIs for 2012 and 2017 or 2016, depending on the
country. The shares increased in Brunei Darussalam (by two percentage points) and Malaysia (byten points) to the levels shown for the latest year in figure 4. They decreased slightly, by a couple ofpercentage points, in Cambodia, Indonesia, the Lao People’s Democratic Republic, the Philippines
and Viet Nam, and considerably in Singapore, from 66% in 2012 to 35.5% in 2016. Generally, the roleof the private provision of higher education, as noted earlier, is much more important than that ofprimary and secondary education.
To conclude, the role of the private sector in enrolment by education levels serves as a proxy showing
the room for private, tuition-based transactions and thus domestic trade in education. In all ASEAN
countries, the room for trade is much bigger in higher education than in primary and secondary
education, where it is generally small. The role of the private sector in the provision of primaryand secondary education is growing in most ASEAN countries, but the public sector continues todominate.13 Exceptions include primary education in Brunei Darussalam and secondary education inIndonesia. Therefore, the scope for commercial transactions and, consequently, international trade

12

13

Apparently, a small country with a small number of children and students, large revenues from exporting petroleum
and gas and the second highest GDP per capita among ASEAN countries can afford free education for all, at alllevels, rather a rare situation in a developing countr
The scope of publicly supported, no-tuition provision may be even larger, as private schools, as noted earlier,
may be subsidized by the government directly or indirectly, through scholarships provided to students. Data on
private enrolment do not distinguish such schools. “Private” refers to all educational institutions not operated
by a public authority but controlled and managed, whether for profit or not, by a private body (e.g., religious body,foundation, private enterprise or person), regardless of whether these institutions receive financial support fromstate authorities.

10

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

in education services in ASEAN is much smaller than in most other services. Nevertheless, the scope
for trade is growing in response to the inability of some governments to satisfy the rapidly growing
demand for some types of education and to the often poor quality of public education. There is also
scope for trade in niche activities, where private (often non-profit) provision of services exhibits
a competitive advantage over government provision (e.g., international schools for expatriates’
children). This scope is examined in the next chapter.

II. ASCENDANCY OF EDUCATION SERVICES
TRADE: VOLUME OF TRADE IN SERVICESBY FOUR MODES OF TRADE
Total services supplied to international markets by ASEAN countries (exports) and their totalpurchases of services from abroad (imports) through the four modes of international services delivery
have been estimated at roughly $1 trillion each by the ASEAN-Japan Centre. Overall, ASEAN trade
in services is balanced. In professional and computer services, estimates of trade for the examined
services were added to calculate their shares in total services exports and imports, in order tocheck the ascendancy of trade – that is, their growing importance in overall services trade. A similar
exercise is not possible in the case of education services because of data gaps and inadequacies.
It is also not possible to estimate the values of trade in education services for each of the four modes
for all ASEAN countries.
However, on the basis of various data series, including on physical cross-border movement ofstudents, schools and universities, trade through Mode 1 (cross-border flow of services) is negligible.
Trade through Mode 4 (professors, teachers and researchers working abroad on a temporary basis) ismuch larger owing to the rapid expansion of commercial presence (Mode 3) by international primaryand secondary schools and foreign branches of universities, generating demand for international
teachers and academics. The largest international services flows in ASEAN countries take placethrough Mode 2 (students studying abroad) and through Mode 3 (commercial presence of providers– schools and universities – abroad, or, in other words, sales of foreign affiliates in host countries).
Trade through these three modes is, however, uneven. In most cases, ASEAN countries are large
importers (buyers) and small exporters (sellers) of education services. But there are exceptions:some ASEAN countries have emerged as significant exporters of tertiary services through Mode 2.
This is associated with attracting significant FDI in equity and non-equity forms to tertiary education(Mode 3), drawing foreign students, whose expenses generate exports.

1. Mode 1: cross-border supply
The most important type of this mode of trade is online distance education for obtaining a degree ora certificate. In most cases it concerns postsecondary and tertiary education. The service crosses aborder, but both the provider (school or university) and the consumer (student) stay home. This is the
only type of international education transaction akin to trade in goods. The case of Nagoya University(Japan) provides such an option, though with some variation (box 1).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

11Box 1. Case study of Japanese education institution in ASEAN: Nagoya University Asian
Satellite Campus Institution
Nagoya University’s Asian Satellite Campus Institution offers unique education services
through a combination of different modes of trade. Since 2014, it has established satellite
campuses in Cambodia, the Lao People’s Democratic Republic, the Philippines and Viet
Nam, as well as in Uzbekistan and Mongolia to provide higher education programmes
in education, law, medicine, bioagricultural sciences, international development andenvironmental studies. Its “Transnational Doctoral Programs for Leading Professionals in
Asian Countries” was established to contribute to human resource development in Asian
countries by offering doctoral courses to students who already hold master’s degrees
without the need to leave their home countries and their jobs.
The satellite campuses were established in local universities and research institutions,depending on the programme. Students can enroll in the doctoral programme through asatellite campus and receive education from the University using online and teleconference
facilities. Students can also join the short-term intensive programme at the Nagoya
University campus in Japan to follow up on their studies. Furthermore, members of thefaculty of Nagoya University travel to the satellite campuses to deliver lectures in therespective countries.
Source: Nagoya University Asian Satellite Campus Institution website, http://asci.nagoya-u.ac.jp/japan/.

With the rapid progress in technology, spread of the internet and the proliferation of online courses,
including cross-border ones, offered by universities and training institutions around the world,
there have been great expectations for online cross-border online education. It was heralded as arevolution in gaining access to education (and degrees) at prestigious foreign universities without
the need for costly travel and a physical presence in the classroom. Some 20 years ago, predictions
were for rapid, unstoppable growth of this type of education.
The predicted growth has not, however, materialized. Cross-border online enrolment is growing, but
the scale of full online provision of services has been described by one expert as “miniscule” (Ziguras,
2018). In 2016, in the three largest providers of international higher education, cross-border online
students accounted for less than 2% of all international students in Australia, 4.5% in the UnitedStates and nearly 14% in the United Kingdom.14 The role of online study is greater in domestic higher
education, and it can be quite significant, if one adds so-called “blended” learning, a combination of
online and face-to-face study, which is rapidly gaining popularity in some countries. For instance, in
Malaysia, blended students accounted for 18% of domestic higher-education students, comparedwith only 1% of fully online students.15 Another source also confirms this picture of sizable domestic
and very small international trade in online education. Malaysia has several universities that offer
distance and online learning services, two of which also serve foreign students through cross-border
trade. The Asia e-University had 1,033 local and 217 foreign students in 2012, and the Open University
Malaysia had 64,253 local and 128 foreign students (ASEAN and World Bank, 2015: 98).

14

15

International students include foreign students at HEIs in these countries and at branch campuses of their HEIs in
these host countries as well as cross-border online students.
A study by the Observatory on Borderless Higher Education, as reported in ICEF Monitor, 18 September 2018,(http://monitor.icef.com/2018/09/study-explores-adoption-of-online-learning-and-its-relationship-to-studentmobility/), accessed 2 June 2019.

12

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

The trends in ASEAN countries as regards cross-border online learning are no different fromworld trends. Although data are very fragmentary, end in 2010, and are available for only a coupleof countries,16 the picture seems to be clear (tables 3 and 4). Trade is very small, ranging from
$0.5 million in 2010 in the case of Malaysia’s imports, to $3.8 million for Indonesia’s, with values ofexports and imports of other countries (the Philippines, Singapore and Thailand) falling in-between
and typically not exceeding $2 million. Relative to overall exports and imports of services, in countries
with data, this trade is less than miniscule. In no country does the share even come close to 0.1%
of either total exports or imports of services (tables 3 and 4). Between 2005 and 2010, both exports
and imports increased in most cases, and in some very rapidly, although remaining at very low
levels. Indonesia and Thailand were net importers of cross-border education services and Malaysia
and Singapore net exporters, which may be associated with a large presence in these countries ofbranches of prestigious foreign universities, offering, among others, cross-border online courses.
Most likely, trade remains small.
What are the causes of the small share of international education in the form of cross-border trade,
despite its great initial promise? The causes concern worldwide trends, but those causes are similarin ASEAN and useful for the policy discussion later in this paper. One of these causes is the doubtthat many students (and governments) have concerning the quality and usefulness of international
online education. Foreign online education saves students the costs of living abroad and has been
often portrayed as a more efficient and convenient alternative to studying in another country.
But when done well, it requires intensive personal engagement of teachers with learners and tuition
can be prohibitively expensive.
Meanwhile, with the rapid expansion of branch campuses of prestigious universities in some ASEAN
countries, another alternative to studying abroad (and to online learning) has emerged (Mode 3).
Several potential importing countries, including Viet Nam, refuse to unconditionally recognize
degrees obtained through foreign online study. All in all, although technology has made education
services tradable across borders, the popularity of international online courses and, consequently,international trade, is relatively low in ASEAN. This may be due to many factors, but may also
simply mean that most students who can afford international education prefer traditional face-toface interaction in the classroom, with access to teachers, facilities, tutoring, support services andstudent life.

16

Cross-border education via Internet should be reported as part of the balance of payments category “Other
personal, cultural and recreational services”. However, most countries do not bother with singling out education.
Data in tables 3 and 4 come from the Trade in Services Database of the World Bank and are based on estimates.
World Bank no longer provides data on this type of trade in education services, reflecting, most likely, difficulties intheir collection.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

13Table 3. Exports of education services (part of Personal, cultural and recreational services)and their share in total exports of services, 2005–2010 (Millions of dollars and per cent)Country

2005

2006

2007

2008

2009

2010

Education services exports (under Personal, cultural and recreational services)
Brunei Darussalam

..

..

..

..

..

..

Cambodia

..

..

..

..

..

..

Indonesia

0.14

0.17

3.03

4.88

1.80

1.39

Lao PDR

..

..

..

..

..

..

Malaysia

..

..

..

..

0.11

1.69

Myanmar

..

..

..

..

..

..

Philippines

..

..

..

..

..

..

Singapore

..

0.07

..

0.07

2.25

2.12

Thailand

..

0.05

0.22

..

..

1.41

Viet Nam

..

..

..

..

..

..

0.14

0.29

3.25

4.95

4.16

6.61

12 56115 40113 22816 88728 29234 67681 828100 832

Total

Total exports of services (U.S. dollars at current prices in millions)
Brunei Darussalam
Cambodia
Indonesia

12 997

11 584

Lao PDR
Malaysia
MyanmarPhilippines
Singapore59 21589 675Thailand24 61230 11495 41142 675105 075

123 347

186 734

..

..

..

..

34 340Viet Nam
Total

12 997

Share of education exports in total exports of service (Per cent)Brunei Darussalam..

..

Cambodia

..

..

..

..

..

..

Indonesia

0.001%

0.001%

0.02%

0.03%

0.01%

0.01%

Lao PDR

..

..

..

..

..

..

Malaysia

..

..

..

..

0.00%

0.005%

Myanmar

..

..

..

..

..

..

Philippines

..

..

..

..

..

..

Singapore..

0.0001%0.0001%0.003%

0.002%

Thailand..

0.000%

0.001%..

..

0.004%

Viet Nam

..

..

..

..

..

..

ASEAN total

0.0011%0.0003%0.0076%0.0047%0.0034%0.0035%

Source: AAJC, based on data from the World Bank.
Education-related expenditure: World Bank, https://datacatalog.worldbank.org/dataset/trade-services-database.
Total exports of services: UNCTADstat.
Total exports of goods and services: UNCTADstat.

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

14

Table 4. Imports of education services (part of Personal, cultural and recreational services)and their share in total imports of services, 2005–2010 (Millions of dollars and per cent)Country

2005

2006

2007

2008

2009

2010

Education services imports (under Personal, cultural and recreational services)
Brunei Darussalam

..

..

..

..

..

..

Cambodia

..

..

..

..

..

..

Indonesia

0.44

0.47

2.24

2.53

2.70

3.76

Lao PDR

..

..

..

..

..

..

Malaysia

..

..

0.22

2.44

2.05

0.55

Myanmar

..

..

..

..

..

..

Philippines

..

0.16

0.14

0.15

..

..

Singapore

..

0.05

..

0.31

1.55

1.67

Thailand

..

0.19

0.14

0.15

1.29

1.88

Viet Nam

..

..

..

..

..

..

0.44

0.87

2.74

5.57

7.57

7.86

24 57828 47023 15226 461

28 66830 27027 47232 6457 544

11 08491 18284 135101 212

Total

Total imports of services (U.S. dollars at current prices in millions)
Brunei Darussalam
Cambodia
Indonesia

22 19721 561

Lao PDR
Malaysia
MyanmarPhilippines

6 587

Singapore

66 393Thailand32 61438 07146 02134 43041 333

127 155

98 862207 028

169 188

201 651

..

..

..

..

Viet Nam
Total

22 197

Share of education imports in total import of services (Per cent)Brunei Darussalam..

..

Cambodia

..

..

..

..

..

..

Indonesia

0.002%

0.002%

0.009%

0.009%

0.012%

0.014%

Lao PDR

..

..

..

..

..

..

Malaysia..

..

0.001%

0.008%

0.0075%0.00%

Myanmar

..

..

..

..

..

..

Philippines..

0.002%

0.002%

0.001%..

..

Singapore..

0.0001%..

0.0003%0.0018%0.0016%

Thailand..

0.0006%0.0004%0.0003%0.0037%0.0045%

Viet Nam

..

..

..

..

..

..

ASEAN total

0.0020%0.0007%0.0028%0.0027%0.0045%0.0039%Source: AAJC, based on data from the World Bank.
Education-related expenditure: World Bank, https://datacatalog.worldbank.org/dataset/trade-services-database.
Total exports of services: UNCTADstat.
Total exports of goods and services: UNCTADstat.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

15

2. Mode 2: trade through local supply to foreign consumers:
consumption abroad
In distinction from most other services (except tourism), consumption abroad is the key mode ofinternational trade in education services. Education services are part of the travel account in thebalance of payments. Trade results from travel by consumers (mostly tertiary students, usually
dubbed “international students”) to another country to enroll in a university or a school, generating
exports for the country of destination and imports for the country of students’ origin. Suppliers stayhome and do not provide services abroad, but within their own country.
Trade includes foreign students’ expenses on tuition, accommodation, local transport, healthservices, etc., recorded in the balance of payments. It would be cumbersome and costly to collectinformation on exact spending of every foreign student in a country (for example, the United States
has one million of them). Thus, expenses are estimated on the basis of the prevailing tuition andthe average cost of living. There is no way to measure expenses precisely. As with cross-bordereducation trade, few countries single out this category when collecting data on trade in tourism.
Trade in education services through Mode 2 is typically examined through data on students’
movement. During the past two decades or so, cross-border student mobility increased quickly
around the world and in most importing countries. According to UNESCO, the number of students
pursuing education abroad increased from 1.9 million in 2000 to 5.1 million in 2017 worldwide, andfrom 143,819 to 285,160 in ASEAN alone.
The rapid growth of international tertiary students, accompanied by the rapidly increasing numberof foreign affiliates of HEIs (termed “branch campuses” in the education literature) from a coupleof mostly developed countries in a small group of developing countries (discussed under Mode 3),
has been popularly referred to by scholars and the media as the “globalization” of tertiary education(e.g., Varghese, 2009). Most experts (e.g., Stiglitz) define globalization as closer integration between
countries through the flows of goods, services, information, capital and people, manifested by anincreasing share of an international component in a country’s domestic activity (e.g., the share ofexports in production). Defined this way, the scope of education globalization is very limited and has
hardly progressed at all during the past two to three decades. The share of students studying abroadin the number of tertiary students worldwide was 2.3% in 2017, increasing only minimally from 2.1%
in 2000. The overwhelming majority of world students pursue higher education in their own countries,
and this has not changed for nearly two decades. “Production” of tertiary education services, and,for that matter, of primary and secondary services, is predominantly local. This contrasts with therapidly progressing globalization of production of goods and services, exports of which increased asa share of global GDP from 19% in 1990 to nearly 30% in 2017.
All ASEAN countries are importers of tertiary education, and most, except Malaysia, Singapore
and recently Thailand, are large net importers. The ratios of exports to imports (measured bynumbers of outbound and inbound students) range, for the latest year with data, from 1% to 5%
in Myanmar, Cambodia and Viet Nam, through 10-13% in the Lao People’s Democratic Republic,
Brunei Darussalam and Cambodia, to 30% in the Philippines. In contrast, exports exceed imports
by 4% in Thailand, 60% in Malaysia and more than 100% in Singapore (table 5). There are someforeign students in every ASEAN country, but their numbers are too negligible to call these countries
exporters of higher education: from a couple of dozens or hundreds in Cambodia, Myanmar, Brunei
Darussalam and the Lao People’s Democratic Republic to a few thousand in the Philippines (2,600),
Viet Nam (4,100) and Indonesia (5,800). Since 2000, Viet Nam, the Lao People’s Democratic Republic,
and Myanmar have registered significant (five to six times) increases of foreign inbound students,
but their numbers remain rather small (annex table 1).

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

16

Table 5. Ratio of inbound (exports) to outbound (imports) numbers of tertiary students,
2000 and 2017 or earliest and latest year with data (Per cent)Country

Earliest year
Ratio in %Latest year
Year

Ratio in %Year

Brunei Darussalam

4

2000

12

2017

Cambodia

2

2001

3

2006

Indonesia

6

2005

13

2017

Lao PDR

6

2000

10

2017

Malaysia

41

2000

157

2017

Myanmar

2

2007

1

2012

Philippines

42

2001

30

2008

Singapore

214

2008

211

2016

Thailand

11

2004

104

2016

Vietnam

7

2000

5

2017

Source: AJC, based on UNESCO UIS.Stat.

Singapore and Malaysia have been significant exporters of tertiary education services, even on
the world scale, for many years. In 2017, Malaysia hosted 100,765 students,17 which placed it 14th
among over 100 countries with inbound foreign students listed by UNESCO – ahead of Italy, theNetherlands and Spain. Singapore, with a population less than a fifth that of Malaysia, attracted
53,122 foreign students in 2016 (annex table 2), which placed it 28th in the world. For years, bothcountries have implemented strategy aimed at diversifying their economies away from overrelianceon manufacturing exports and towards exportable knowledge-based services, among them tertiary
education services. Their aim was to become regional hubs for exporting higher education, and they
achieved it many years ago. As part of this strategy, they are among few developing countries that havesucceeded in attracting foreign branches of a dozen of the world’s prestigious universities in various
fields of study (discussed under Mode 3), which serve as a magnet for foreign students. In Singapore,
foreign students also choose public HEIs.18 Singapore has excellent local public universities, which
are among the best of the world,19 as is the overall quality of the education system, as reported in
the World Competitiveness Report by the World Economic Forum and proven by the top Programme
for International Student Assessment scores of Singaporean pupils in math, science and reading.
Both public and private HEIs often conduct teaching there in partnership with, or validated by, HEIs
from developed countries such as Australia, the United States and the United Kingdom. Malaysia
follows a similar pattern. It is still behind Singapore on indicators of education quality, but far aheadof all other ASEAN countries. Thailand seems to follow the path of both countries, but it still is in theinitial phase: its balance of outbound and inbound students, for many years heavily negative, turned
positive for the first time only in 2016 (annex table 3).

17
18

19

In 2016, it hosted even more students: 124,133.
In 2017, the share of foreign students in three public universities – National University of Singapore, Nanyang
Technological University and Singapore Management University – was 17%. In 2011, the government capped thenumber of these students in public HEIs. Relatively few international students at Singapore public universities
pay full tuition fees. The majority receive tuition grants, paid for by the Singaporean government (https://www.
todayonline.com/daily-focus/education/time-singapore-universities-admit-more-international-students).
In 2019, the National University of Singapore was ranked 23rd in the World University Rankings, occupying thehighest position among developing countries’ universities (https://www.timeshighereducation.com/worlduniversity-rankings/2019/world-ranking#!/page/0/length/25/sort_by/rank/sort_order/asc/cols/stats).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

17Starting in 2000, Malaysia, Indonesia and Thailand (in that order) have become the largest ASEAN
importers of tertiary education services, judged by the number of outbound students. They haveremained with one exception: in 2015, Viet Nam topped the list with 68,046 students abroad, anumber that increased to 82,160 in 2017. In the same year, Malaysia was second (64,187 students)
and Indonesia third (45,206), followed by Thailand (29,884), Singapore (24,793) and the Philippines(16,578). In the remaining countries the number of students abroad ranged from 3,593 in Brunei
Darussalam to 8,328 in Myanmar (annex table 1). In latecomers to an open economic system thenumber of outbound students increased the quickest, compared to 2000: in Viet Nam nine times,
in Myanmar more than four times, in the Lao People’s Democratic Republic four times and in
Cambodia more than three times. From 2000 to 2017, there were also increases in other countries
but much smaller: from 20% in Singapore through 30-40% in Indonesia, Malaysia and Thailand, to
63% in Brunei Darussalam. In the Philippines, which has long been an open economy, the increase
was larger: 200%.
Explanation of differences in the absolute numbers of outbound students would require analysis ofmany factors, but two – differences in the size of the candidates’ pool and in the level of development
or income – can be considered, by relating the number of outbound students to all tertiary students
in a country. By this measure, the list is topped by the two richest ASEAN countries with small
populations: Brunei Darussalam and Singapore. In 2017, the former sent 31% of its tertiary students
abroad (down from 58% in 2010) and the latter 13%. The difference between the two can perhaps
be explained by the fact that students in Singapore have a viable option in the form of the excellent
quality of local education. By contrast, a significant increase in Brunei Darussalam students
choosing a local option in recent years may be testimony to the improving quality of local HEIs.
In other countries the ratios of outbound foreign to domestic tertiary students are much smaller,from below or about 1% in the Philippines, Indonesia, Myanmar and Thailand, through less than
3% in Cambodia, to 4-5% in Viet Nam, the Lao People’s Democratic Republic and Malaysia. For the
overwhelming majority of students in these countries local, not foreign, tertiary education is themain or only option.
To complete the picture of trade, it is worthwhile to relate the number of inbound students (thatis, exports) to all tertiary students (that is, tertiary “production”) in each country. In 2017, only in
Singapore was the ratio high – 27%, placing it fifth among developing-economy exporters of higher
education services, after the United Arab Emirates, the Macao Special Administrative Region,
China and Qatar. Malaysia has the greatest number of foreign students but is more populous thanSingapore, and the ratio there falls to 8%, placing it 10th among developing-country exporters. In
other ASEAN countries the ratios are very small, much below 1%, except in Thailand, a country
with quite a large absolute number of foreign students (31,571 in 2016), but a relatively large
population and pool of tertiary students, where the ratio is still only 1.3%. But in Brunei Darussalam,
436 inbound foreign students registered by UNESCO in 2017 translate into almost a 4% share of all
tertiary students (table 6).
In eight countries, the ratios of inbound foreign tertiary students to all students are very low, in therange of 0.1% to 1% (table 6). The ratios for outbound tertiary students (table 7) are higher in mostcountries than for inbound tertiary students, but they are also low, ranging from 0.5% in Indonesia
and the Philippines to 5% in Malaysia and the Lao People’s Democratic Republic. Only in Brunei
Darussalam and Singapore they were higher in 2017, respectively 31% and 13%. This means that,except in these two countries, the overwhelming majority of tertiary students, and in six countries
almost all students, study at home. This should be kept in mind when the impact of outboundstudent mobility on ASEAN countries is discussed in chapter IV. Mobile students, when they returnhome after graduation, contribute to building human capital in the sending countries, but the mainburden in this respect falls on domestic private and public universities.

18

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Table 6. Foreign tertiary students in ASEANCountries, 2000 and 2017

Table 7. ASEAN tertiary students abroad,2000 and 2017 or earliest and latest
year (Per cent of total tertiary student

Country
Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Vietnam

Country
Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Vietnam(Per cent of total student number ina country)
2000
2.0
0.1
0.1
0.5
3.4
0.0
0.1
20.3a
0.1
0.1

Source: World Bank Education Statistics.
a
2008.

2017
3.8
0.1
0.1
0.4
8.1
0.1
0.1
27.2
1.3
0.2

number in a country)

2000
55.3
7.5
1.1
8.9
8.3
0.4
0.2
10.3a
1.1
1.2

2017
31.0
2.6
0.6
4.5
5.1
1.1
0.5
12.9
1.3
3.6

Source: World Bank Education Statistics.
a2007.

Where do ASEAN students go to study abroad and from where do foreign students in ASEAN countries
come? As noted earlier, at the world level, students from developing countries show a preference forstudy in developed countries. A similar preference is clearly notable for all ASEAN students: in 2016,78% of them studied in developed countries, and the remaining 22% in developing countries, out of
which 9% were ASEAN countries (table 8). The largest destination for ASEAN outbound students isAustralia, which in 2016 hosted 22% of them. Second is the United States (19%), third the United
Kingdom (14%) and fourth Japan (10%) (table 9). Other destination countries (not shown in the table)
are much less important, with Canada, France, Germany, New Zealand and the Republic of Korea
each hosting 2-3% of ASEAN students.
The preference for studying in developed countries (that is, importing tertiary education from themthrough Mode 2) holds for seven out of ten ASEAN countries (table 8): Singapore (92%), Viet Nam(89%), the Philippines (80%), Malaysia and Thailand (76-78%), and Brunei Darussalam and Indonesia(66-68%). Cambodia’s outbound tertiary students are evenly distributed between developed anddeveloping countries and Myanmar’s almost evenly: 53% vs. 47%. The Lao People’s Democratic
Republic is the only country whose students go overwhelmingly to developing countries: 89%, outof which 70% go to Viet Nam. The rapid growth of Viet Nam’s inbound tertiary students (that is,exports of tertiary education services), mentioned earlier, is almost entirely accounted for by Laostudents, who constitute 77% of all such students in Viet Nam. Apparently, most or about half ofstudents from poorer countries (except for the Philippines and Viet Nam), fewer of whom can afford
expensive study in a distant developed country, choose a cheaper option in developing countries,
often in ASEAN, which in 2016 accounted for 95% of all Lao students in developing countries, for
62% of those from Myanmar and 66% of those from Cambodia. ASEAN is also the largest destination
among developing countries for students from Brunei Darussalam (66% of the total number ofstudents in developing countries) and Indonesia (56%). In 2016, of all ASEAN tertiary students indeveloping countries, 41% studied in ASEAN. Out of individual countries hosting students fromASEAN countries, Australia is the largest destination for tertiary students from Indonesia (10,676
in 2016), Singapore (8,934), the Philippines (5,075) and Cambodia (908) (table 9). The United Statesis the largest destination for Vietnamese (22,172) and Thai students (6,914), the United Kingdom
for students from Malaysia (17,360) and Brunei Darussalam (1,564) and Japan for students from
Myanmar (1,564).

3 5255 479
47 3176 264
64 861
8 417
16 49225 20230 37582 159290 091

Source: AJC, based on UNESCO, UIS.Stat.

Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam
ASEAN

100
100
100
100
100
100
100
100
100
100
100

B. Percentage distribution of students by destination

Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam
ASEAN

A. Number of students

Origin of students

Total
world

66
50
68
11
76
53
80
92
78
89
78

2 339
2 730
32 250708
49 5494 457
13 13523 26823 83272 785225 053

Developed

2
11
21
1
15
16
21
20
24
29
21

86
620
10 161
63
9 451
1 344
3 494
4 975
7 355
24 20661 755North
America

46
12
17
3
32
7
15
35
25
17
22

1 634
652
7 849
160
20 894
614
2 498
8 779
7 668
13 81264 560West
EuropeOut of which

18
27
30
8
30
30
43
38
29
42
34

619
1 458
14 240485
19 204
2 499
7 143
9 514
8 809
34 767
98 738Australia, Japan,
New ZealandDestination of students

Table 8. Regional destination of ASEAN outbound tertiary students, 2016 (Number and per cent)

34
50
32
89
24
47
20
8
22
11
22

1 186
2 749
15 0675 556
15 312
3 960
3 357
1 934
6 543
9 374
65 038Developing

23
33
18
85
3
29
4
4
7
2
9

806
1 814
8 421
5 298
1 791
2 421
652
925
2 249
1 822
26 199

ASEAN

11
17
14
4
21
18
16
4
14
9
13

380
935
6 646
258
13 521
1 539
2 705
1 009
4 294
7 552
38 839Other
developing

Out of which

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
19

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

20

Table 9. Largest host countries for ASEAN outbound tertiary students, 2016
(Number and per cent)Country of destination
Country of origin

Total world

Australia

United States

United Kingdom

Japan

Brunei Darussalam

3 525

527

68

1 564

33

Cambodia

5 479

908

560

109

397

A. Number of students

Indonesia

47 317

10 676

9 309

3 164

2 854

Lao PDR

6 264

232

57

52

194

Malaysia

64 861

15 3198 446

17 3602 245

Myanmar

8 417

877

1 305

424

1 576

Philippines

16 492

5 075

2 951

660

573

Singapore

25 202

8 934

4 516

7 512

259

Thailand30 375

5 667

6 914

5 992

2 691

Viet Nam

82 15914 49122 1723 979

19 152ASEAN

290 091

62 70656 29840 81629 974

B. Share of all ASEAN outbound students (per cent)Brunei Darussalam

100

15

2

44

1

Cambodia

100

17

10

2

7

Indonesia

100

23

20

7

6

Lao PDR

100

4

1

1

3

Malaysia

100

24

13

27

3

Myanmar

100

10

16

5

19

Philippines

100

31

18

4

3

Singapore

100

35

18

30

1

Thailand

100

19

23

20

9

Viet Nam

100

18

27

5

23

ASEAN

100

22

19

14

10

Source: AJC, based on UNESCO, UIS.Stat.

As noted above, Malaysia, Singapore and Thailand are large exporters of tertiary education among
ASEAN countries, hosting the largest numbers of foreign tertiary students. There are no data on theorigin of foreign students in Singapore. In Malaysia, in 2017, the largest cohort of students came fromSouth and West Asia (40%), followed by East Asia and Pacific (23%),20 out of which some 11% were fromASEAN. There were also large groups of students from Arab states and Sub-Saharan Africa, accountingfor 16-17% each of all foreign students in Malaysia. In Thailand, students from Asia accounted for 43%
of all foreign tertiary students (out of which 17% came from ASEAN) and in Viet Nam they accounted
for 95%, most of them from the Lao People’s Democratic Republic. These and other data show rather
weak integration of ASEAN countries through trade in education services.

20

East Asia and Pacific includes here East Asia and South-East Asia.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

21Tables 10 and 11 show the values of exports and imports of education services through Mode 2 forsome ASEAN countries, for some years in the period 2005-2017, based on the balance of payments.
There are no data on Brunei Darussalam, Cambodia, the Lao People’s Democratic Republicand Myanmar. Only for the Philippines and Thailand is the set complete. For reasons explained
above, these data should be treated with caution. Some outliers apart, the table confirms broadly
the pattern revealed by the earlier examination of students’ mobility that was based on student
numbers. ASEAN countries are much larger importers than exporters, and both imports and exports
are growing in countries and in years for which data are available. A clear outlier is Singapore and,perhaps, Malaysia and Thailand. Singapore’s 2010 data (the latest year for which they are available)
show exports of $14 million and imports of $198 million. In the same year, Singapore hosted 47,915
foreign students (generating exports) and had 20,706 students abroad (generating imports) (annex
tables 1 and 2). Even if all Singaporean students studied in Australia, the United States and theUnited Kingdom, where the cost of study is much higher than in Singapore, there should be no suchdifference between the values of exports and imports: exports should exceed imports and theirvalues should be much higher. If, in line with earlier remarks on the cost of study in developing anddeveloped countries, it is assumed that the cost in Singapore is $6,000 per year (half tuition andhalf living expenses) and double that amount in developed countries ($12,000), the resulting exports
would be $287 million and the imports would be $248 million. Also, in Malaysia, the difference
between the value of exports and imports in 2010 ($6 million vs. $271 million) should not be that big,judging from the number of inbound and outbound students and making similar assumptions about
the costs. The situation is similar in Thailand in 2017.

2005

2006

2007

2008

2009

2010

2011

Education-related exports (under personal travel)
Brunei Darussalam
..
..
..
..
..
..
..
Cambodia
..
..
..
..
..
..
..
Indonesia
34.5
39.4
58.2
77.6
71.8
82.2
..
Lao PDR
..
..
..
..
..
..
..
Malaysia
2.3
1.0
4.9
1.0
4.5
6.0
..
Myanmar
..
..
..
..
..
..
..
Philippines
1.0
1.0
2.3
3.3
2.3
21.0
36.0
Singapore
7.2
8.0
7.7
15.7
12.8
13.9
..
Thailand
8.0
16.7
36.5
39.3
162.9
168.7
173.8
Viet Nam
..
..
..
..
122.4
209.0
..
Total
53.0
66.2
109.5
136.9
376.8
500.8
209.8
Total exports of services (U.S. dollars at current prices in millions)
Brunei Darussalam
Cambodia
Indonesia
12 997
11 58412 56115 40113 22816 887
Lao PDR
Malaysia
19 75021 08129 07630 75128 29234 676
MyanmarPhilippines
8 611
11 06413 50213 05514 08417 78218 878Singapore46 42759 21574 21489 67581 828100 832
Thailand
19 92524 61230 11433 12530 20434 34041 545
Viet Nam
5 766
7 460
Total
107 710127 556
159 467
182 006
173 402211 977
60 423
Share in total exports of services (per cent)Brunei Darussalam
Cambodia
Indonesia
0.3
0.3
0.5
0.5
0.5
0.5
Lao PDR
Malaysia
0.01
0.00
0.02
0.00
0.02
0.02
MyanmarPhilippines
0.01
0.01
0.02
0.03
0.02
0.12
0.19
Singapore
0.02
0.01
0.01
0.02
0.02
0.01
Thailand
0.04
0.07
0.12
0.12
0.54
0.49
0.42
Viet Nam
2.1
2.8
ASEAN total
0.05
0.05
0.07
0.08
0.22
0.24
0.35
Source: AJC, based on data from the World Bank (for 2005-2010) and UNCTAD (for 2011-2017).
Education-related expenditure: World Bank (https://datacatalog.worldbank.org/dataset/trade-services-database).
Total exports of services: UNCTADstat.
Total exports of goods and services: UNCTADstat.

Country(Millions of dollars and per cent)

..
..
..
..
..
..
50.0
..
143.0
..
193.0

23 33558 77682 112

0.21
0.24
0.23

20 43949 72270 161

0.19
0.38
0.33

2013

..
..
..
..
..
..
39.4
..
189.6
..
229.0

2012

0.30

0.26

0.39

81 03455 53625 498

..
..
..
..
..
..
98.9
..
145.8
..
244.6

2014
..
..
..
..
..
..
54.0
..
146.4
..
200.4

2015

0.22

0.24

0.19

90 82461 75929 065

Table 10. Exports of education-related services (part of personal travel) and their share in total exports of services, 2005–2017

0.23

0.25

0.18

98 88967 68531 204

..
..
..
..
..
..
55.0
..
167.7
..
222.7

2016

0.22

0.23

0.19

111 256

75 65135 605

..
..
..
..
..
..
69.2
..
172.5
..
241.7

2017

22

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

2005

2006

(Millions of dollars and per cent)

2007

2008

2009

2010

2011

Education-related imports (under personal travel)
Brunei Darussalam
..
..
..
..
..
..
..
Cambodia
..
..
..
..
..
..
..
Indonesia
2 009.1
2 026.6
2 213.5
2 645.2
3 254.9
3 628.5..
Lao PDR
..
..
..
..
..
..
..
Malaysia
131.3
126.1
125.2
135.8
240.4
270.6
..
Myanmar
..
..
..
..
..
..
..
Philippines
76.4
86.0
87.4
106.6
132.2
125.9
22.3
Singapore
94.2
99.1
98.3
107.1
156.7
197.5
..
Thailand
198.0
203.6
218.9
235.1
1 501.2
1 772.1
1 704.9
Viet Nam
..
..
..
..
605.0
808.5
..
Total
2 509.0
2 541.4
2 743.2
3 229.8
5 890.5
6 803.1
1 727.3
Total imports of services (U.S. dollars in current prices in millions)
Brunei Darussalam
Cambodia
Indonesia
22 19721 561
24 57828 47023 15226 461
Lao PDR
Malaysia
21 95623 651
28 66830 27027 47232 645
MyanmarPhilippines
6 463
6 587
7 544
11 0849 186
12 017
12 316Singapore
56 16466 39376 48291 18284 135101 212Thailand
26 79832 61438 07146 02134 43041 33346 097
Viet Nam
8 187
9 921
Total
133 578
150 806175 343207 028
186 562
223 589
58 414
Share in total imports of services (per cent)Brunei Darussalam
..
..
..
..
..
..
..
Cambodia
..
..
..
..
..
..
..
Indonesia
9.1
9.4
9.0
9.3
14.1
13.7
..
Lao PDR
..
..
..
..
..
..
..
Malaysia
0.60
0.533
0.44
0.45
0.88
0.83
..
Myanmar
..
..
..
..
..
..
..
Philippines
1.18
1.306
1.16
0.96
1.44
1.05
0.18
Singapore
0.17
0.149
0.13
0.12
0.19
0.20
..
Thailand
0.74
0.624
0.57
0.51
4.36
4.29
3.70
Viet Nam
..
..
..
..
7.39
8.15
..
ASEAN total
1.88
1.69
1.56
1.56
3.16
3.04
2.96
Source: AJC, based on data from the World Bank (for 2005-2010) and UNCTAD (for 2011-2017).
Education-related expenditure: World Bank (https://datacatalog.worldbank.org/dataset/trade-services-database).
Total exports of services: UNCTADstat.
Total exports of goods and services: UNCTADstat.

Country
..
..
..
..
..
..
48.8
..
1 692.4..
1 741.2

16 32047 40363 723
..
..
..
..
..
..
0.30
..
3.57
..
2.73

14 26145 67159 932
..
..
..
..
..
..
0.24
..
3.93
..
3.05

2013

..
..
..
..
..
..
34.5
..
1 796.0..
1 830.5

2012

..
..
..
..
..
..
0.42
..
4.02
..
2.88

66 16945 24720 922

..
..
..
..
..
..
87.1
..
1 819.0..
1 906.1

2014

2015

..
..
..
..
..
..
0.45
..
4.37
..
2.97

66 12942 51823 610

..
..
..
..
..
..
105.7
..
1 859.4..
1 965.1

Table 11. Imports of education-related services (part of personal travel) and their share in total imports of services, 2005–2017

..
..
..
..
..
..
0.51
..
4.44
..
3.04

67 62143 46024 160

..
..
..
..
..
..
123.2
..
1 929.8..
2 053.0

2016

..
..
..
..
..
..
0.55
..
4.41
..
3.01

71 95245 84326 109

..
..
..
..
..
..
143.6
..
2 023.6..
2 167.2

2017

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
23

24

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

3. Mode 3: supply through commercial presence: sales of foreign
affiliates
Despite the emergence of cross-border online trade in education services, the supply of mosteducation services requires face-to-face interaction between providers (teachers) and consumers(students). Therefore, Mode 2 of supply, as discussed in the previous section, is very important,
as is supply through commercial presence that allows such interaction. Commercial presence
involves FDI. FDI is straightforward and includes in every service industry the establishment of aforeign affiliate in a host country, controlled by a parent multinational enterprise (MNE) from a homecountry through ownership of more than 10% of the capital. The size of “trade” through this mode ismeasured by sales of foreign affiliates in host countries.
In education services, commercial presence takes the form of FDI. In primary and secondary
education a foreign affiliate is called an international school. In tertiary education a foreign affiliate
is called a branch campus.21 Data on commercial presence through FDI in education services islimited. Some private and public institutions collect limited data on the activities of international
schools and the international activities of HEIs. Publicly available data are used in this section as
well as data on international schools in ASEAN that were made available for this report courtesy of
ISC Research. Worldwide and ASEAN trends in FDI in education, concerning all types, are examined
first, followed by trends in commercial presence in primary and secondary education (international
schools) and then in tertiary education, worldwide and in ASEAN countries.

A. FDI in education services in the world and ASEAN
UNCTAD estimates world inward FDI stock by industry, including stock in education services. FDI in
education hardly existed in 1990: worldwide inward stock was estimated at some $100 million, alllocated in developed countries. By 2012, it had grown enormously, reaching nearly $8 billion, of which
nearly 27% was held by developing-country hosts. Thus, FDI activity in education clearly shifted
towards developing-country hosts.22 UNCTAD publishes recent data on annual FDI flows resulting
from mergers and acquisitions (M&As) and, since 2003, from greenfield projects in education services,which provide further insights about worldwide trends until 2018. Table 12 includes these data forannual average inflows in four subperiods since 1990. Initially, in 1990-1996, FDI flows were close tonil. They took off in 1997-2004, averaging $153 million annually in the case of cross-border M&As
and $391 million in the case of greenfield projects. During 2005-2010, both M&As and greenfield FDI
flows accelerated significantly, each reaching about $1 billion annually. M&A flows fell in 2010-2018
to $726 million annually, while greenfield flows continued to grow to $1,159 million annually. Adding
total M&A and greenfield-related flows in education services during 2013-2018 ($11 billion) to thelatest estimate of world stock by UNCTAD in 2012 ($8 billion),23 then, by 2018, the estimated world
FDI stock in all types of education services increased to $19 billion. Sizable values of both greenfieldprojects and M&As, although very small compared with total world FDI in services, indicate that FDI
in education has taken off and is now a well-established phenomenon in the global economy. There
has most likely been a further shift of this FDI towards developing countries.

21

22
23

It should be noted that providers of cross-border education, which are registered in their home countries as public
or non-profit institutions, are considered by host countries as private investors.
Annex tables to World Investment Report 2014.
Flows typically increase the value of the stock.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

25Table 12. World estimated FDI inflows in education through M&As and greenfield projects,
annual averages in periods (Millions of dollars)
Periods
Type of FDI inflow
Cross-border M&A sales
Greenfield projects

1990–19969..

1997–2004
153391a

2005–2010
1 012
989

2010–2018
726
1 159

Source: UNCTAD, World Investment Report 2019, annex tables 9 and 15.
a
Average for 2003-2004. Greenfield data exist since 2003.

In ASEAN, FDI inflows to education services from the world have been also increasing, from
$2.26 million in 2012 to $54.41 million in 2018.24 The lead investing economies include Canada,
Japan, the Republic of Korea and the European Union, led by the United Kingdom. Singapore is thesecond biggest investor in education services among all countries, and the largest among ASEAN
countries (table 13). In line with earlier remarks, compared with other service industries (except
for public administration and arts, entertainment and recreation), FDI inflows to education are verysmall. They were $54 million in 2018, compared with $1,126 million to “professional, scientific andtechnical activities”, $494 million to “administrative and support service activities”, and $905 to
health services.25

24
25

ASEAN-Stat portal, https://data.aseanstats.org/fdi-by-sources-and-sectors.
ASEAN-Stat portal, https://data.aseanstats.org/fdi-by-sources-and-sectors.

2012
-3.98
0.3
0.46
0.07
-0.35
-2.32
0.03
-1.65
..
..
0
0.01
0.45
..
..
..
..
..
0.02
..
..
..
..
..
..
..
..
..
..
0.3
2.26

2013
9.87
12.85
13.05
9.65
1.4
0.7
0.69
-0.13
1.34
0.91
0.29
0.16
0.59
0.32
0.26
0.05
0.8
0.01
0.03
0.01
0.09
..
0
0.01
0
0.19
..
..
..
14.36
65.77

2014
5.31
7.46
4.31
11.63
4.82
2.03
1.06
1.3
1.84
0.4
0.22
0.07
0.68
0.58
0.26
0.39
0.13
0.05
0.19
0.42
0.08
0
0
0.01
0.02
0.13
..
..
0.12
8.79
53.02

2015
-9.07
1.77
2.58
4.52
0.63
0.45
0.82
1.78
0.93
1.96
0.13
0.07
0.45
1.34
0.05
0.93
0.17
0.19
0.08
0
0.01
0
..
0
0
0.1
0
..
0
5.18
1.44

Source: ASEAN-Stat portal, https://data.aseanstats.org/fdi-by-sources-and-sectors.
Note: Ranking is based on the value of 2018 inflows. ASEAN total refers to only countries for which data are available.

Rankingin 2018
Source economy
1
Canada2
Singapore
3
Japan
4
Korea, Republic of
5
Hong Kong, China
6
European Union
7
British Virgin Islands
8
United Kingdom
9
Taiwan Province of China
10
Thailand11
Australia
12
France13
United States
14
Malaysia
15
Germany
16
Samoa
17
Cayman Islands
18
Seychelles
19
Switzerland
20
Belgium
21
Indonesia
22
Macao SAR
23
Cambodia
24
Norway25
Philippines
32
Brunei Darussalam
58
Lao PDR
87
Myanmar
143
Viet Nam
ASEAN total
TOTAL countries
2016
5.99
12.85
4.89
9.06
2.15
3.47
1.12
3.36
2.39
2.14
0.59
0.25
0.61
1.18
0.06
0.68
0.83
0.36
0.15
0.01
0.03
0.05
0.02
0
0.07
0.4
0.02
..
..
16.71
65.2

2017
23.27
13.01
13.4
11.16
1.94
9.54
2.12
8.04
1.87
0.91
0.21
0.14
1.13
0.39
0.53
0.6
0.51
0.21
0.08
0.07
0.06
0.01
0.01
0.01
0.04
0.06
0
0
..
14.48
96.54

2018
18.36
10.49
10.08
8.34
3.68
2.96
2.11
1.61
1.2
0.85
0.7
0.66
0.64
0.53
0.45
0.38
0.27
0.23
0.22
0.14
0.11
0.09
0.09
0.08
0.07
0.02
0
0
..
12.16
54.41

Annual average,
2012–2018
7.11
8.39
6.97
7.77
2.04
2.4
1.14
2.05
1.59
1.19
0.31
0.19
0.65
0.73
0.27
0.5
0.45
0.18
0.11
0.11
0.06
0.03
0.03
0.02
0.03
0.15
0.01
0
0.06
10.65
48.38

Table 13. Top 25 countries and ASEAN countries that invested in education services in ASEAN, 2012–2018 (Millions of dollars of FDI outflows in a given year)

26

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

27

B. Primary and secondary educationa. International schools
International schools as defined by ISC Research, which collects global data on them, are schools
for children between ages 3 and 18 that offer an international curriculum or a curriculum otherthan the country’s national curriculum (often the British National Curriculum or an American-stylecurriculum). Most are entirely English-speaking; others are bilingual, with English as one of themain languages of instruction.
With the economic success of many developing countries, especially in Asia, and the exploding
upper-middle classes and groups of rich citizens, the demand for international schools that offer
international English curricula has soared, as a growing number of countries have decided toallow local children access to these schools. Wealthy parents, especially in Asia (including ASEAN),
perceive such schools as the best possible education close to home to prepare their children for
university overseas, often in the West, and global careers, including at multinational companies,
international NGOs or ASEAN institutions, where since 2007 English has been an official working
language. As a result, by ISC Research estimates, the vast majority (80%) of international school
students today are the children of local families.26 International schools, which are overwhelmingly
private, have become booming cross-border business, boosting trade through Mode 3.
Worldwide, there were 2,500 primary and secondary international schools in 2000, 6,768 in 2012
and 10,282 in 2019, teaching 5.4 million pupils (compared with 3.4 million in 2012) and earning fee
income of $50 billion (compared with $28.4 billion in 2012). This amounts to worldwide trade inprimary and secondary education services through Mode 3 – that is, sales of foreign affiliates. ISC
Research, which provided these data, predicts exponential growth in international school sales inhost countries, to reach $89 billion by 2026.27 This growth, faster than that of international students,
will soon make the pupils of international schools, not students at HEIs abroad, the largest groupof customers (importers) participating in international education through Mode 3. In 2018, China
hosted the largest number of international schools (849), followed by the United Arab Emirates (641)
and India (537). Malaysia is the only ASEAN country among the top ten hosting countries, in the 8th
position with 241 schools.
Sales of international schools in host countries, at $50 billion, are the second largest stream ofinternational provision of education services, after purchases of tertiary education services
by international students through Mode 2. The preceding section showed that there were about
5 million international students in 2019. If the average tuition per tertiary student were considered
as $12,000 (most students study in developed countries, where tuition is often much higher), thevalue of trade of tertiary services through Mode 2 would be $61 billion in 2019 –still higher than thevalue of sales of primary and secondary education services through Mode 3 ($50 billion). But given
the higher dynamics of the latter, this may soon change.

26
27

http://monitor.icef.com/2018/09/annual-survey-finds-continued-growth-in-international-schools.
The growth is impressive, but the value of world sales of international schools would be only 60% of the value of thetotal exports of services from Singapore in 2016.

28

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

ASEAN countries have taken part in the international boom in trade by this mode of delivery,
but almost entirely as importers and not exporters, with the very few exceptions of international
schools from some countries such as Singapore.28 The majority of international schools originate indeveloped countries. There are also schools from other countries, including a couple of developing
countries and transition economies, that cater to the needs of diplomats and diasporas.
There are international schools in every ASEAN country, although their number in 2019 was smallin Brunei Darussalam (8) and the Lao People’s Democratic Republic (15) and only moderate in
Myanmar (56) and the Philippines (78) (table 14). In the remaining countries the number well exceeded
100 or even 200 schools, ranging from 125 in Viet Nam and 134-135 in Cambodia and Singapore,through 216 in Thailand, 283 in Malaysia and 328 in Indonesia. The number of schools and students
enrolled have increased in all countries (for which time series data exist), and in some very quickly.
For example, in Malaysia, the number grew from 66 schools in 2010 to 283 in 2019, and the numberof students from 57,200 to 101,200. Myanmar has also experienced a significant increase in thenumber of both schools and students (between 2013 and 2019) and Indonesia has seen an increasein the number of schools (between 2015 and 2019). The largest group of children attend international
schools in Malaysia and Indonesia (more than 101,000), followed by Thailand (80,100), Singapore(70,500) and Viet Nam (62,400). All in all, the number of international schools in all ASEAN countries
increased from 778 schools in 2015 to 1,378 schools in 2019, and enrolment increased from 300,000
to 519,000 students, more than one and half times in only four years (table 14).
ASEAN countries participate more intensively in international trade in primary and secondary
education through Mode 3 than in international tertiary education through Mode 2. Children enrolled
in international schools in ASEAN constituted almost one-tenth (9.7%) of all children attending
international schools in the world (in 2019), while outbound ASEAN students were only a little over
one-twentieth (5.6%) of the world’s international students (in 2017). Predictions are for further
dynamic growth of these schools in most ASEAN countries, as they liberalize their policies on theseschools (see next section).
Sales of international schools (of foreign education affiliates, in FDI parlance) in all ASEAN were
$5.1 billion in 2019, also one-tenth of global sales of international schools. They were the largest in
Singapore ($1,315 million), followed by Thailand ($954 million), Malaysia ($785 million), Indonesia($729 million) and Viet Nam ($676 million). In other ASEAN countries sales were much smaller(table 14). The difference between the highest sales and a rather moderate number of students
indicates that in Singapore average tuition fees per student are the highest among ASEAN countries:$18,660 per year. In Thailand, they are $11,906, in Malaysia $7,760, and in Indonesia $7,163.
Similarly, as in the world, in ASEAN countries the largest group of children attending international
schools in 2018 was local children, with their share in the total number of pupils ranging from 52%
in Indonesia and Thailand, through 60% in Malaysia, close to 65% in Cambodia and 72% in Viet Nam.
Only in Singapore, which restricts the participation of local children in international schools (seenext section), is the share small – 12% in 2018 (table 15). There are no data on other countries.

28

One source lists 11 Singaporean international schools abroad, all in Asia, of which seven are in ASEAN countries(Indonesia, Thailand and the Philippines). There are also a few Indonesian and Filipino schools abroad, cateringto the children of diplomats, often associated with, and sponsored by, embassies of these countries (https://en.wikipedia.org/wiki/Category:International_schools_by_country_of_origin).

Country
8

2019

110

Vietnam84

174

Thailand
109
778

1378

125

216

135

78

56

Source: ISC Research, 2018 Global Opportunities Report and media reports, based on ISC Research publications.
a
ISC Research estimate for South-East Asia.

Total

83
176

45
79

33

Singapore

25

Philippines

Myanmar283

Malaysia142

15

Lao PDR

328

190

2015

Indonesia
146

2013
134

66

2010

Cambodia

BruneiNumber of schools

Table 14. Profile of international schools in ASEAN countries, 2010–2019

39 20058 20054 80010 50057 2002013

300,000a

65 00060 0002015

Student enrolment(number)

519 900

62 40080 10070 50033 30017 900101 200

5 600

101 700

40 700

6 500

2019

314

680

991

628

2013

5 051

676

954

1 316

214

129

785

27

729

168

54

2019

Tuition fee income($ million)

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
29

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

30

Table 15. Top three student nationalities in international schools in selected ASEAN countries,
2018 (Per cent of total number of students)
Student nationality, share of total (%)
Country

Local

UnitedKingdom

UnitedStatesRepublicof Korea

Sample size
India

Students(number)

Schools(number)

Cambodia

64.3

7.5

5.1

4 573

13

Indonesia

51.1

4.5

6.6

13 70447

Malaysia

59.7

3.1

5.1

36 23073

Singapore

11.8

9.3

28 712

54

Thailand

51.6

3.3

35 321

94

Vietnam

72.3

32 204

59

9
4.5
2

7.6

Source: ISC Research, 2018 Global Opportunities Report.

b. ASEAN regulations of international schools
The dynamic growth of international schools in ASEAN countries has been the result of a rapidly
growing demand for international education from expatriates’ children and, more importantly, frombetter-off local parents from rapidly growing upper classes.29 But the growth would not have beenpossible if governments had not lifted restrictions on local children’s participation in these schools
and/or on FDI. In some countries, however, liberalization has been accompanied by introducing new
requirements that meet local needs and reflect differing visions of protecting consumers.
Malaysia is one of the ASEAN countries that has most proactively encouraged the growth ofinternational education, including international schools. The previous 40% restrictions on local
children’s enrolment at international schools were all lifted in 2012. In addition, the government has
introduced incentives, including a five-year 70% income tax exemption, for new international schools
and took steps to attract world-renowned schools to set up their affiliates in Malaysia. These schools
include Marlborough College, Epsom College and Raffles American International School.
In contrast, Indonesia, where international schools have rapidly expanded, has tightened international
school policy. Regulations introduced in 2014 require international schools to adapt their curricula forall students to include components covering Indonesian religion, culture and language. Regulations
prohibit full foreign ownership of international schools; school boards must prove that they
have enough capital to run the school for the next six years. Furthermore, international schools
had to remove the term “international” from their name, which forced the British International
School to become the British School Jakarta, the Australian International School to become theAustralian Independent School and the Jakarta International School to become the Jakarta
Intercultural School.
Thailand has a buoyant international education sector. In higher education, as mentioned earlier,it follows in the steps of Singapore and Malaysia in attracting international students. It was one of
the first ASEAN countries to lift restrictions on local students attending international schools (since
the mid-1990s).

29

This section is based on the following sources: https://asiancorrespondent.com/2016/02/asean-international-schools,
https://thepienews.com/news/vietnam-local-enrolments-foreign-schools-to-grow-cap-removed,
https://frontiermyanmar.net/en/new-rules-for-private-schools, and https://www.nst.com.my/news/
exclusive/2017/04/233140/international-schools-why-their-numbers-are-growing.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

31

By contrast, Singapore – like several East Asian countries, such as Japan, the Republic of Korea andTaiwan Province of China – has regulations that restrict local students from enrolling in international
schools. This leaves the international school sector to rely almost entirely on the country’s
large expatriate population. In about 2016, Singapore’s leaders predicted a growing demand forinternational schools over next years and the Economic Development Board, which controls land
zoning, released new sites for international schools, with 30-year leases.
Until not long ago, Viet Nam also restricted the number of local children who could enroll at any
international school, limiting local student shares to 10% in primary schools and to 20% in secondary
schools. This restriction was lifted for foreign-invested schools by a decree issued in 2017, allowing
these schools to determine themselves the ratio of domestic to international students. As Viet Nam
is a growing source of outbound students across many levels of education, the decree is expected tocreate incentives for Vietnamese students to attend foreign-invested schools in the country, limiting
their emigration in the future.
No major restrictions are reported on the activities of international schools in the Philippines, where
the number of these schools as well as enrolments are rather modest. Solid English language
proficiency in the country – surpassed only by Singapore and India – has lessened parents’ demandfor international schools.
Myanmar has also recently joined the group of liberalizing and regulating countries. Until not long
ago international schools seemed to be only lightly regulated or even unregulated. There were no
restrictions on enrolment, curriculum implementation or expatriate staff hiring and no requirements
concerning qualifications of teachers. The lack of requirements, which allowed teachers to havelower qualifications or less experience, was perceived as negative by some, reducing the quality ofteaching. Nonetheless, the country also allows international schools to charge lower fees and offer
more affordable learning options.
In 2015, the Ministry of Education began to work on a Private Education Law, replacing old laws,
and putting in place a regulatory framework for all private schools, including international schools.
As one of the results, by 2018, restrictions on foreign investment had been loosened by the Myanmar
Investment Commission, permitting investment in private schools that offer either a curriculum set
by the government or an international curriculum. The step enables investment in basic education,technical and vocational education, higher education and subject-based schools. It opens the way
for 100 percent foreign-owned institutions, as well as locally owned schools and joint ventures.
The curriculum of international schools will be subject to review and approval by the national
administration board. The draft law forbade “irrelevant subjects such as political opinions, religions
and other subjects that are out of the curricula and against the Burmese culture” and prohibited
the teaching of subjects that are “against the interests or policies of the country”. At international
schools, Myanmar national students will be required to learn the Burmese language, while foreign
students will have the choice of learning it.
There is no information on international school regulations in the remaining ASEAN countries.
Cambodia hosts a relatively high number of these schools with considerable enrolment, and it
is unlikely that there are severe restrictions. It is unclear if the small number of schools in the
Lao People’s Democratic Republic and Brunei Darussalam results from low demand and small
markets or from restrictions on schools’ activities.

32

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

C. Tertiary educationa. International branch campuses
As mentioned in the introduction to this section, an IBC, the term used by researchers of higher
education to describe expansion abroad by a HEI, corresponds closely to FDI, a key form ofcommercial presence abroad. Institutions30 that collect data on IBCs define an IBC as “an entitythat is owned, at least in part, by a foreign education provider; operated in the name of the foreign
education provider; and provides an entire academic programme, substantially on site [in a hostcountry], leading to a degree awarded by the foreign education provider.”Cross-border movements of students and scholars (Modes 2 and 4 of supply of education services)
have taken place as long as universities have existed, but institutional mobility – movements ofproviders and programmes across borders – is relatively new (as is cross-border supply throughMode 1). IBCs became visible on an international scale only in the 1990s (there were some 25-30 ofthem in about 1995). They started growing in the second half of the 1990s, to 67 by 2000, and expanded
rapidly in the 21st century, reaching 248 by 2015, and spreading to more and more host countries:
from 36 in 2006 to 51 in 2009 and 75 in 2015. They have provided some 180,000 students worldwide(not a big number, compared with the more than 5 million students who travel abroad for higher
education through Mode 2) the possibility to enroll in foreign higher education programmes andto receive foreign qualifications and degrees without leaving home. But in most of the 75 receiving
countries there are at most four foreign universities. The five largest host countries (and the largest
buyers of tertiary education through Mode 3) are all developing countries: China (with 32 IBCs in2015), the United Arab Emirates (31), Malaysia (12), Singapore and Qatar (11 each). Between 2009
and 2015, China and Malaysia registered the largest increase in IBCs (table 16). The United States isby far the largest home country for HEIs investing abroad, with 77, or 31% of all campuses in 2015,
followed by the United Kingdom (39 IBCs, or 16%) and France (28, or 11%).
Both Malaysia and Singapore have ambitions to play the role of regional education hubs. These
countries, like other hub countries, are cautious and selective in their choice of foreign HEI theylet enter their education system, aiming at high-quality institutions with prestige and reputation.
They recruit rather than unconditionally attract foreign universities. HEI entry into Singapore has
occurred only at the invitation of the government. In the 1990s Malaysia made collaboration with thelocal private sector a condition for licensing foreign providers. However, in 2013 Malaysia announced
a moratorium on the establishment of new foreign university campuses in the country. While themain objective of the moratorium was to control the oversupply of universities in the country, it also
aimed to ensure the quality of universities by controlling the entrants.31
Recruiting a good foreign university to establish a branch in a developing country is not an easytask. HEIs are not MNEs, which need to grow to survive. The MITs and Harvards of this world do
not need to venture abroad to prosper. The overwhelming majority of the world’s top universities
stay at home and expand by attracting foreign students to study onsite. The group of reputable,

30

31

One is the Observatory on Borderless Higher Education (OBHE), based in London, which sells data and publications
on IBCs. Some data are reproduced by media reporting on publications by OBHE. Another, mostly used here asa source of data, is the Cross-Border Education Research Team (C-BERT), hosted at the State University of New
York at Albany and Pennsylvania State University. C-BERT maintains a publicly available comprehensive list ofinternational branch campuses and tracks other aspects of cross-border higher education (http://cbert.org/).
“Two-year moratorium on new private tertiary institutions”, The Star Online, (https://www.thestar.com.my/
news/nation/2013/01/30/twoyear-moratorium-on-new-private-tertiary-institutions#aTTDzf8JAsfr0Jbu.99),
and“ Moratorium on establishment of higher learning institutions extended three more years”, New Straits Times(https://www.nst.com.my/news/nation/2017/12/311840/moratorium-establishment-higher-learning-institutionsextended-three-more) (Accessed 8 October 2019).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

33

Table 16. The 12 largest home and host countries for international branch campuses,
2009 and 2015 (Number of campuses)
Home country

Number of campusesabroadUnited States
United Kingdom
FranceRussian Federation
Australia
Netherlands
India
China
CanadaIrelandGermany
Malaysia
Total

2009
78
13
11
..
14
5
..
..
3
3
..
4
131

2015
77
39
28
21
15
9
7
6
6
4
4
4
220

Host country
China
United Arab Emirates
Malaysia
Singapore
Qatar
United Kingdom
CanadaFranceUnited States
Spain
Republic of Korea
Germany
Total

Number of campuses
from abroad
2009
15
40
5
12
9
5
6
..
..
..
..
..
92

2015
32
31
12
11
11
7
7
6
5
5
5
5
137

Source: Cross-Border Education Research Team (C-BERT). For 2009: WTO, 2010, based on OBHR.

good-quality universities that have decided to embark on foreign expansion through IBCs is not yet
large. Most HEIs that have established foreign branch campuses have done so for the first time,often under the pressure of opportunities (e.g., invitations and generous financing promises by hostcountry governments) or the temptation of enhancing their reputation and making financial gains.
Most have not had experience in managing operations abroad, including cross-border movementsof employees and money or dealing with foreign governments (Lane and Kinser, 2011). Parents of
IBCs are often public institutions, with a long tradition of being taxpayer-funded, subject to direction
by the government and characterized by bureaucracy and arcane decision-making structures. Theirorganizational culture is ill-suited to managing a private, money-making foreign subsidiary (Healey,2015). Therefore, failures have not been uncommon. In its latest survey of IBCs, C-BERT identified
41 IBCs that have closed, almost 17% of existing campuses in 2017.
As shown in table 16, some ASEAN countries participate – predominantly Malaysia and Singapore– in cross-border mobility of universities as hosts to IBCs of foreign HEIs and as sources of foreign
campuses, being among the top 12 host and home countries in the world.
Table 17 presents a full profile of IBCs in and from ASEAN countries, including also the foreign inboundcampuses that have been closed. Apart from Malaysia and Singapore, which together account for 23 of
32 IBCs (or 72%) in ASEAN, there are foreign campuses in Thailand (three), Indonesia and Viet Nam (twoeach) and Cambodia (one). Over 80% (26) of these campuses were established by HEIs from developed
countries. Australia, with eight campuses, leads the list of home countries, followed by the United
Kingdom (six), France (five) and the United States (four). ASEAN universities have established sevencampuses abroad: three have been set up by Malaysia’s Limkokwing University of Creative Technology(in Botswana, Cambodia and the United Kingdom) and two by the Management Development Instituteof Singapore (in Malaysia and Uzbekistan). The remaining two were set up by Malaysia’s Twintech
International University College of Technology (in Yemen) and by the Philippines’ AMA Computer
University (in Bahrain). So only two of the seven campuses are intra-ASEAN investments. Seven
foreign campuses have been closed: three in Malaysia and four in Singapore. Three of them were fromthe United States. Interestingly, Australia’s Royal Melbourne Institute of Technology, which closed its
Malaysia campus in 1999, then opened two campuses in Viet Nam, one in South Saigon in 2001 (with
6,000 students) and one in Hanoi in 2004 (with 1,200 students).

United Kingdom
United Kingdom

Malaysia

University of Southampton, Malaysia Campus

United Kingdom

Australia
Australia

Singapore
Singapore

University of Newcastle International Singapore

JCU Singapore

Singapore

Manchester Business School Singapore

FranceSingapore
SingaporeESSEC Asia Pacific

EDHEC Business School

FranceSingapore

INSEAD Asia Campus

United Kingdom

FranceChina

Singapore
Singapore

Curtin Singapore

Shanghai Jiaotong University Graduate School of Singapore

Australia

United Kingdom

Malaysia
Malaysia

University of Reading Malaysia

Heriot-Watt University Malaysia Campus

United Kingdom

Malaysia

Singapore

Malaysia

Malaysia

The Management Development Institute of Singapore

Ireland

University of Nottingham, Malaysia Campus

Malaysia

Penang Medical College

France

Egypt

China

Australia

Australia

Australia

Netherlands

FranceMalaysia

Home country

Newcastle University Medicine Malaysia

Malaysia
Malaysia

Al-Azhar University

Malaysia

Xiamen University Malaysia Campus

ESMOD Malaysia

Malaysia
Malaysia

Malaysia

Monash University

Swinburne University of Technology, Sarawak Campus

Indonesia

Stenden University Bali

Curtin University of Technology

Cambodia
Indonesia

Limkokwing University Phnom Penh

Host country

ESMOD Jakarta

A. International branch campuses in ASEAN countries

Category and institution name

Table 17. International branch campuses in ASEAN, as of 2017

3 500

..

4 880

384

400

2 000

3 000

2 000

..

1 500

..

..

..

2 200

..

..

..

..

4 411

2 390

6 000

..

..

3 000

Number of students, 2016…/34

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Singapore

Baruch College, City University of New York

Source: Cross-Border Education Research Team (C-BERT) - 2016 http://cbert.org/?page_id=34.

Singapore
Singapore

Singapore

University of New South Wales

Tisch Asia School of the Arts

Malaysia

Allianze University College of Medical Sciences

UNLV Singapore

Malaysia
Malaysia

Royal Melbourne Institute of Technology

Dublin Business School

C. Closed international branch campuses in ASEAN countries

Uzbekistan

Management Development Institute of Singapore in Tashkent

Philippines

Bahrain
Malaysia

AMA International University-Bahrain

The Management Development Institute of Singapore

Malaysia

Cambodia

Limkokwing University Phnom Penh

Malaysia

United States

United States

United States

Australia

United Kingdom

Ireland

Australia

Singapore

Singapore

Malaysia

United Kingdom
Botswana

Limkokwing University of Creative Technology

Limkokwing University of Creative Technology Botswana

Twintech International University College of Technology

Australia
Australia
Malaysia

VietnamVietnamRMIT Vietnam (South Saigon Campus)

RMIT Vietnam (Hanoi Campus)

United States

Netherlands

China

United States

United States

United States

Home country

Yemen

Thailand

Webster University, Thailand Campus

B. International branch campuses of ASEAN universities abroad

ThailandSingapore

DigiPen Institute of Technology Singapore
ThailandSingapore

The Culinary Institute of America, Singapore

Assumption University (Beijing Language and Culture University Bangkok Office)Singapore

University at Buffalo, Singapore

Stenden Rangsit University Thailand

Host country

Category and institution name

Table 17. International branch campuses in ASEAN, as of 2017

Closed in 2016

Closed in 2015

Closed in 2015

Closed in 2007

Closed in 2014

Closed in 2007

Closed in 1999

..

2 200

500

3 000

..

..

..

1 200

6 000

..

..

..

228

..

..

Number of students, 2016

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
35

36

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

b. Non-equity forms of commercial presence
Despite the rapid growth in the number of IBCs worldwide, this form of commercial presence has
not yet become very important for international delivery of tertiary education services. As noted, it
affects only some 180,000 students worldwide, in the pool of 5 million students who have left theircountries to study abroad. In 2016 in Australia, for example, 40,130 people studied at IBCs of Australian
universities, while 64,581 students were enrolled in twinning and franchising programmes delivered
through partnerships between Australian and foreign HEIs, mainly from Singapore, Malaysia, China
and Viet Nam (Australian Government, 2018). ASEAN countries have been involved as buyers in the
supply of tertiary education services through NEMs since early years of their opening to foreign
education (box 2).

Box 2. Non-equity forms of investment in education services
In education, as in other services, there are non-equity forms of investment, which varyby industry. In hotels, car rental and restaurants, they typically include franchising andmanagement contracts, whereas in legal, business consultancy and accounting services
they predominantly take the form of partnerships.
In education services franchising contracts are popular, but there is a wide variety of otherforms, determining the degree of control over programmes by a providing institution and therights of a receiving institution. They include double or joint degree programmes, twinningand validated programmes. The key provisions of these arrangements concern the award
of qualifications and degrees and ways in which programmes are delivered (including thedivision of teaching work between the staff of both partners), which determine modes andscope of control.
In franchising agreements a foreign provider (franchisor) designs the programme, which
is delivered in the domestic institution (franchisee) of a host country. Students receive thequalifications of the franchisor’s institution. In the twinning arrangement, students pursue
part of the programme at the domestic institution and part at the partner foreign institution.
The degree is awarded by the foreign institution. A validated programme is established ina local HEI by approval of a foreign institution as being equivalent to its own, leading to theaward of a qualification from the latter. In the case of double or joint degrees, students
pursue programmes offered jointly by institutions in two countries. The qualifications canbe either a degree that is awarded jointly or two separate degrees awarded by the foreign
institution (Zimny, 2011).

At the beginning of the 21st century there were some 2.2 million international students worldwide, andbranch campuses had only started growing. The number of students attending foreign collaboration
programmes in host countries then under various NEMs of commercial presence was estimatedat 500,000. Data compiled from various sources indicate that there were close to 2,000 foreign-run
programmes in developing countries, most in the form of twinning and franchising arrangements.
Top home countries for the delivery of higher education abroad through NEMs were the same asexporters of education through other modes, discussed earlier: sellers of education to visiting
foreign students and home countries for FDI in foreign campuses: Australia, the United Kingdom
and the United States, as noted, but also Canada and New Zealand (Bashir, 2007: 30-34).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

37The number of students seeking qualifications from Australian universities through NEMs ofpartnering HEIs of other countries grew from about 20,000 in 1996 to over 66,000 in 2008, representing
nearly one-third of international enrolment in those universities. More than 85% of the programmes
were reported to be in China, Singapore and Malaysia (WTO, 2010:15). At the beginning of the century,
enrolment in United Kingdom overseas programmes was estimated at 150,000 to 200,000 students,
focusing on ASEAN and Central and Eastern Europe. Some examples from that time concern ASEAN
countries. In Malaysia, almost all 560 private colleges had twinning and franchising agreementswith foreign institutions. In Viet Nam, at least 15 foreign HEIs offered franchised or joint degree
programmes in collaboration with local public universities. In the second half of the first decade of
the 21st century, one-third of Singapore’s higher education students were enrolled in international
education programmes through non-equity arrangements of local HEIs with foreign partners(WTO, 2010: 15).

4. Mode 4: supply through movement of professionals abroad
This mode concerns HEIs’ staff (called expatriate academics in education literature), school
teachers, researchers and trainers working abroad on a temporary basis (which may last a few
years), providing cross-border education services in foreign countries. Income (salaries, fees) earned
by foreign educators is a form of imports of foreign education services for the receiving countries
and exports for the countries of educators’ origin.
It is not clear how countries’ expenses on visiting foreign teachers are treated in the balance of
payments (though hardly any country collects such data). As discussed earlier and stipulated in
the IMF BOP Manual (BPM6), spending of students abroad is included in education-related travel
expenditures of a country’s travel account. Income of “teachers and so forth, who supply services
directly in host countries” is listed in the IMF BOP Manual, together with “correspondence courses
and education via television or the Internet” as part of “other personal, cultural and recreational
services”, thus combining genuine cross-border trade with trade related to the travel of educators.
This raises the question of why foreign students’ travel should be travel and teachers’ travel shouldbe cross-border trade, together with trade through the internet? This inconsistency was noted ina WTO study on education services: “Since Mode 3 is not captured in BOP data and educationrelated travel expenditure reflects Mode 2, it is assumed that the education services included inother personal, cultural and recreational services represent Mode 1 and 4 flows” (emphasis added;
WTO, 2010: 15). In this report, such data for ASEAN countries (very incomplete), taken from theWorld Bank’s database on trade in services, were used to illustrate Mode 1. The values are too
small to reflect trade through Mode 4, which can be quite considerable. For example, in Singapore,exports through Mode 1 were $2.1 million and imports $1.7 million (in 2010, the last year, for whichdata in tables 3 and 4 are available). Singapore is the only ASEAN country that has for many years
reported education services within the “personal, cultural and recreational services” account of thebalance of payments.32 In 2011, exports of these services were $11 million and imports $87 million,
increasing in 2019 to $34 million for exports and $128 million for imports.33
The presence of natural persons for the supply of cross-border education services is not well
documented. Examples indicate that the international movement of school and academic staff,
and thus trade through Mode 4, is significant. A good part of it, also in ASEAN, takes place within

32

33

Singapore, however, does not distinguish education service within travel account. On the other hand, Malaysia,
which does so, does not single out education services in its “personal, cultural and recreational services” account.
https://www.tablebuilder.singstat.gov.sg/publicfacing/createDataTable.action?refId=16831, accessed 19 March 2020.

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 202038

government-sponsored programmes of teacher and academic exchanges. But movement in theprivate sector is also quite large. In several categories of educators it is rapidly increasing, withintensifying direct interactions between private (and public) education institutions on joint teaching
and research programmes, expansion of international schools and branch campuses, and growing
teacher deficits in many countries.
Seemingly, the largest international market for the provision of education services through Mode 4
in ASEAN countries is for the teaching of English by native speakers associated with the rapidly
growing demand for English-language skills. According to the British Council, in 2015 approximately
1.7 billion people of all ages were learning English, a number that is rising and was already projected
to reach 2 billion by 2020. According to a 2013 study by GSV Advisors for Pearson English, oneof the largest English-language training companies, English-language instruction for non-native
speakers was at that point already a $63 billion a year global industry.
In ASEAN countries, demand for English instruction is also large and rapidly growing. On realsalary scales for an average-earning English teacher, provided by a consultancy firm that recruits
them,34 10,000 native English teachers in Cambodia (where the average monthly salary is $850)
would produce $102 million of imports annually, in Viet Nam (with a salary of $1,300) $156 million,
in Malaysia ($1,750) $210 million and in Singapore ($3,150) $375 million of annual imports. If thenumber of English teachers in every ASEAN country were greater than 10,000 (there are no data onthis), estimated imports would be accordingly higher.
Table 18 presents data on the number and geographic origin of teachers at international schools in
six ASEAN countries, obtained courtesy of ISC Research. The six countries in the table account foralmost 90% of all international schools and student enrolment in ASEAN. The data exhibit anotherlarge supply stream of education services through Mode 4. The share of teachers who are foreignis close to 60% in Indonesia and Malaysia, over 70% in Cambodia and Viet Nam, and about 90% in
Thailand and Singapore. The average for six countries is 71%. Not surprisingly, most foreign teachers
come from countries such as the United Kingdom, the United States and Australia. Assuming an
average annual salary of a foreign teacher is $24,000 per year (or $2,000 per month), the total annual
cost of salaries in the six countries would be $790 million. This is not an exaggerated assumption inlight of the English teachers’ salaries shown earlier and given that teachers in international schools
teach all subjects, including math and science, for which salaries are much higher.

Table 18. Foreign teachers in international schools in ASEAN, 2018
Country

Total staff(number)

Foreign staff(number)

Foreign staff as shareof total (%)

Annual salary costof foreign staff (dollars)a

Cambodia

3 800

2 774

73

66 576 000

Indonesia

9 800

5 586

57

134 064 000

Malaysia

10 6006 254

59

150 096 000

Singapore

6 900

6 210

90

149 040 000

Thailand

8 500

7 310

86

175 440 000

Vietnam

6 500

4 810

74

115 440 000

Total

46 10032 944

71

790 656 000

Source: AJC, based on data provided by ISC Research.
a
Estimate based on the assumption of an average monthly $2,000 salary.

34

See https://www.internationalteflacademy.com/asia-english-teaching-job-abroad-index for ASEAN country profiles.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

39One aspect of the internationalization of tertiary education has been increased cross-border mobilityof academic staff. By one estimate, top universities of the world, most from developed countries,
employ 25% or more of their academics from other countries (Trembath, 2016), most likely fromdeveloped countries. This amounts to considerable trade in tertiary education services through Mode
4 among developed countries. The involvement of ASEAN countries in such trade, predominantly inimports, is associated with the activities of IBCs, which, as shown earlier, have been growing rapidly
in selected countries. As a reminder, ASEAN hosts 32 IBCs, most of them (24) in Malaysia andSingapore, three in Thailand, two in each Indonesia and Viet Nam and one in Cambodia (table 17).
In practice, the result in terms of the share of foreign academics in total staff is influenced bymany factors and may differ from campus to campus. At EduCity in Malaysia, the share of foreignteachers in the total teaching staff varies from 40% at the University of Reading to 85% at Newcastle
University of Medicine (Trembath, 2016). The University of Nottingham in Malaysia, a joint venturewith local institutions, initially relied significantly on staff seconded from the mother university in the
United Kingdom, but with time it increasingly hired local academics. By contrast, two affiliates of theRoyal Melbourne Institute of Technology in Viet Nam rely almost entirely on expatriate academics
from Australia and other developed countries (Neri and Wilkins, 2018).

III. TRADE AGREEMENTS AND REGULATIONS AMONGAND IN THE ASEAN MEMBER COUNTRIESThe ASEAN Framework Agreement on Services (AFAS) is the main trade agreement concerning
liberalization of trade in education services. It is a progressive agreement with subsequent
packages offering deeper commitments for trade liberalization. Annex table 2 provides the specificcommitments for trade in education services and the remaining restrictions for every ASEAN
country, by types and levels of education, under the AFAS 10th package, the latest and final one
under this framework. Further liberalization will be continued under the ASEAN Trade in Services
Agreement (ATISA). To assess the degree of liberalization under the AFAS, the Hoekman index has
been applied.35 The higher the value, the more liberal are the country’s service trade commitments
to the FTA members. In order to calculate Hoekman indexes, the database was constructed for
155 subsectors of education services of ASEAN countries. Then simple averages were calculated
for each subsector for each country and, finally, an average index for the entire education sector.
It must be noted that Mode 4 was left out of the calculations, as it is not covered by the AFAS and issubject to a separate agreement on the movement of natural persons. Also, data in the table refer tocommitments. Actual policy can be, and typically is, more liberal, as explained in chapter V.

35

Hoekman (1995) proposed an indexation method for measuring the GATS-style degree of commitment in theservices sector by four modes of cross-border services delivery. Using this method, values are assigned to eachof eight cells (for four delivery modes and two aspects of liberalization, concerning market access and national
treatment, thereby making eight cell entries) of a single table concerning one country and one type of service (e.g.,
5A. Primary Education Services). Tables are prepared for every country for every type of education services. Values
are assigned as follows: 1 means that the sector is fully liberalized; 0.5 that liberalization is limited, but bound(which means that, even if liberalization is partial, a country committed not to withdraw it); 0 indicates that the
government has not committed to liberalize. For the aggregation of the values of the degree of liberalization (from1 = full liberalization to 0 = no liberalization), simple averages are calculated for subsectors, sectors and countries.
As shown, it is a simple but objective indexation method, applying the numerical estimates (i.e., discrete points of
0, 1 or 0.5) to sometimes ambiguous legal texts. Based on the law of large numbers, aggregation of these values is
expected to reflect degrees of service trade liberalization by sectors, subsectors and countries.

40

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Summary table 19 shows the results of the calculations: most ASEAN member countries haveliberalized commitments to trade in education services. The average index value for all countries,
modes, and the entire education sector is 0.84, which is rather high, considering that 1 means full
liberalization. By mode, Mode 2 has the highest value (0.95), followed by Mode 1 (0.80) and Mode 3(0.72). This implies that Mode 3 remains relatively restricted in trade in education services of ASEAN
countries. The policy implications of this are discussed in chapter V.
Following is a summary of liberalizing commitments and remaining restrictions by country:• Brunei Darussalam: In Mode 3 some regulations are retained (“only through a joint venture withforeign equity not exceeding 70%” for market access”, and “a majority of the senior managers inany such enterprise are Bruneian nationals” for national treatment); otherwise, the education
sector is open.
• Cambodia: Primary education is not liberalized; Mode 3 regulations include “foreign equity
participation is limited to maximum of 70% through joint venture” for market access; otherwise
trade in Mode 3 is unrestricted.
• Indonesia: Primary education is not liberalized; Mode 3 regulations include “joint venture withforeign equity participation up to 70%” for market access, and “subject to qualification andlicensing requirements and procedures, including registration”, as well as “foreign education
institutions are required to collaborate with local education institutions in Jakarta, Surabaya,
Bandung, Yogyakarta and Medan.” For national treatment other than these, Indonesia has a rather
open policy.
• Lao People’s Democratic Republic: Its education sector is rather open.
• Malaysia: Secondary and other education are unbound; joint-venture and equity participation
requirements are in place for Mode 3; otherwise its education sector is open.
• Myanmar: Its education sector is highly open.
• The Philippines: Higher and other education are unbound; foreign equity participation is limited
for some sectors in Mode 3; otherwise, this sector is open.
• Singapore: Its education sector is highly open.
• Thailand: Nationality requirements apply in Mode 3; otherwise the education sector is open.
• Viet Nam: Primary as well as secondary education services remain unbound; otherwise, theeducation sector is open.

Transition from a positive to a negative list
The ATISA, which will replace the AFAS framework, is in the final stage of negotiations among
the ASEAN member states.36 There will be a transition from the AFAS positive-list approach toliberalization (i.e., listing service sectors that are liberalized, fully or at least partially, and the typesof restrictions for non-liberalized sectors) to the ATISA negative-list approach (listing sectors thatare not fully liberalized and the types of remaining restrictions).
Meanwhile, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),a negative-list-based free trade agreement, involving four ASEAN members (Brunei Darussalam,
Malaysia, Singapore and Viet Nam), has already taken effect. The agreement merits attention
because reservations under it are quite limited in all four ASEAN members, and, as a result,
their liberalization commitments appear to be higher than those under the AFAS 10th package.
This gives hope that ATISA commitments based on negative-list negotiations will be more liberal

36

As of September 2019.

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

0.83

1

2

3

1

2

3

1

2

3

1

2

3

1

2

3

1

2

3

All modes

5A.
Primary education
services

0.72

0.75

0.80

0.60

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

0.75

1.00

0.00

0.00

0.00

0.00

Cambodia

0.67

0.40

0.80

0.80

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.00

0.00

0.00

Indonesia

0.95

0.85

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

0.75

1.00

1.00

0.75

1.00

1.00

0.75

1.00

1.00

Lao PDR

0.72

0.65

0.90

0.60

0.75

1.00

0.50

0.50

0.75

0.50

0.50

0.75

0.50

0.75

1.00

0.50

0.75

1.00

1.00

Malaysia

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

Myanmarth

Source: AJC, based on the specific commitments tables of the ASEAN members under the AFAS 10 package (see annex table 4).

Simple averagesof the five services

5E.
Other education
services

5D.
Adult education

5C.
Higher education
services

5B.
Secondary education
services

1.00

Mode

Education service

Brunei
Darussalam

0.63

0.50

1.00

0.40

0.50

1.00

0.00

0.50

1.00

0.00

0.50

1.00

0.00

0.50

1.00

1.00

0.50

1.00

1.00

Philippines

Table 19. Hoekman index for education services in ASEAN member countries under the AFAS 10th package

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

Singapore

0.85

0.55

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.50

1.00

1.00

0.75

1.00

1.00

0.50

1.00

1.00

Thailand

0.87

1.00

1.00

0.60

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

0.00

1.00

1.00

0.00

Viet Nam

0.84

0.72

0.95

0.80

0.78

1.00

0.85

0.75

0.98

0.85

0.73

0.98

0.85

0.75

1.00

0.75

0.60

0.80

0.70

Simpleaverage

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
41

42

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

than the ongoing commitments under the AFAS 10th package. In general, the results of negotiations
based on a negative list are more transparent and allow for much shorter presentation, focusing
only on the remaining restrictions. The assumption is that non-listed sectors and subsectors are
fully open and liberal in both aspects, that is, market access and national treatment. This perhaps
also makes negotiations less complicated and easier, permitting them to focus on important andsensitive matters of restrictions, and resulting in widening the scope of liberalization.

IV. IMPACTS OF TRADE IN EDUCATION SERVICES
As a result of the generally open attitudes in ASEAN countries (chapter III), trade in education services
has expanded (chapter II). This chapter examines key impacts of trade in education services, by firstlooking at the importance of education services for the economy as a whole and then considering
the impacts of two key forms of trade in education services in ASEAN: (a) outbound student mobility
and international schools, and (b) HEIs and inbound students.

1. Economic impact of education: providing skilled human capital for
economic development
As signaled in the introduction, education provides social and economic benefits to individuals andsociety. As regards its economic impact – the subject of this section – it creates human capital, whichis central for growth and development. Investing in education – particularly in higher education – is a
crucial part of countries’ drive toward higher productivity and technological advancement. No country
or region has achieved high-income status, in the long term, without first crossing a “respectable”
higher education threshold (World Bank, 2012: 13). A highly educated and well-trained workforce
also underpins competitiveness: skilled workers achieve higher levels of productivity and income
than unskilled ones; apply, assimilate and adapt existing technologies; and engage in innovation
to invent new products and production methods. In the long run, greater skills, including those
involved in research and development, support productivity and competitiveness by contributing toreorienting, upgrading and diversifying national economic structures.
While the ultimate overall goals of higher education are similar across countries in ASEAN, education
priorities differ for member states at different levels of economic and technological development.
Tertiary educational attainment is important, but every country also needs workers with different
levels of education.
The success of ASEAN in attracting FDI imposes additional requirements on members’ education
systems. Most ASEAN countries achieved economic progress by relying significantly on FDI, especiallyin export-oriented manufacturing and, in some, tradable business services (e.g. Singapore). MNEs
account for a sizable share of production for exports, which is the most advanced and competitive
segment of industry in ASEAN (World Bank, 2012: 11). Because of their technical advancement, MNEs
tend to hire more educated workers than domestic firms do. If ASEAN countries wish to continue toattract high-quality FDI, their education systems need to provide graduates with skills that matchthe (higher) requirements of foreign investors relative to those of domestic firms. If ASEAN countries
wish to retain foreign investors, they must encourage them to upgrade and/or attract new investors tomore advanced activities. To succeed, they need to provide skills for such future advanced activities.
Export-oriented FDI is footloose and moves from country to country in search of lower costs andbetter business conditions. As wages rise with economic success, ASEAN countries will eventually

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

43lose their comparative advantage that is based on low-cost, semi-qualified or even qualified labour,and current manufacturing investors will leave (as they left Singapore a few decades ago). The task ofthe education systems of ASEAN countries is to prepare for this eventuality.
Although access to higher education has expanded, many ASEAN countries face a problem
of unsatisfied demand resulting from the insufficient capacity of local HEIs. Cambodia, the Lao
People’s Democratic Republic, Myanmar and Viet Nam (despite rapid progress in recent years) do
not produce enough higher-education graduates to satisfy the needs of their labour markets. The
quality of graduates is also a problem. They often do not possess the high-level skills required by
the modern economy. In part, this results from insufficient capacity to supply STEM skills, those in
the areas of science, technology, engineering and mathematics. But in part, it is also due to a lackof the functional skills that future workers must possess to be employable and to support firms’
competitiveness and productivity. They include the problem-solving and creative skills to support
higher value added manufacturing and the business, thinking and behavioral skills for a highproductivity services sector (World Bank, 2012: 1-2).
In economic terms, the deficit of supply of good-quality postsecondary education translates into
shortages of skills for the economy: ambitious development plans must be postponed or cancelled
altogether because of the deficit. Local businesses, including small and medium-size enterprises,
suffer from a lack of entrepreneurs and able managers. As a rule, countries with fewer skilledhuman resources have less capacity to produce new human resources. Consequently, the fewer
people with higher education degrees, the fewer chances a country has to get out of the vicious circleof low skills and low participation in tertiary education.

2. Impact of ASEAN trade in education services
The key role and economic impact of trade in education services is to support and supplement
domestic education systems in their task of generating and improving human resources for acompetitive and productive economy. All modes of trade can contribute to this task in one way or
another, but the most visible effects can originate from students’ outbound mobility (Mode 2) andfrom the commercial presence of IBCs and international schools (Mode 3), which are the focus of
this section. In addition, IBCs can assist in expanding exports and reducing imports of education
services, alleviating skill shortages (including for FDI) and enhancing domestic education systems.
Trade in education services is also associated with risks of adverse impacts. Therefore, the roleof trade policy in education (discussed in chapter V) is to create conditions for increasing positive
impacts, while avoiding or limiting negative ones.
Some of the positive impacts and risks overlap by the modes of trade. For example, increased supplyof skills can be generated by all modes, but in particular by Modes 2 and 3. Issues of unequal accessto education also arise in connection with several modes. For clarity, the discussion is organized bymodes and educational institutions, with subtitles indicating key impacts.

A. Outbound student mobility and international schools
Supplementing and improving human capital
According to the literature, the key impact of international students’ mobility on their home countries
is to meet the demand for higher education, which cannot be satisfied by the domestic education
system in terms of either quantity or quality, and thus assist countries in building and expanding
the capacity of high-quality higher education. A report on tertiary education by the World Bank and44

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

OECD (2007: 72-73) concludes that “Encouraging and supporting domestic students to study abroad
is arguably the best way to get a well-trained international workforce, which can improve the quality
and quantity of human resources in the economy as well as in the domestic education sector”.37
The supposition is that knowledge, skills and experience gained during foreign study, and eventuallysome work abroad, will benefit the society and economy of the students’ home countries.
As shown in chapter II, the two biggest education trade flows of ASEAN countries are imports oftertiary education services through Mode 2 (ASEAN students abroad) and of primary and secondary
education services through Mode 3, commercial presence of international schools in ASEAN countries.
Although the expectation is that the former trade flow will contribute to human capital directly, thelatter one may have a similar impact. Worldwide, 80% of children attending international schools are
local, and 90% of the graduates become international students. As shown in chapter II, in ASEAN,
except for Singapore, most pupils are also local, and there are no reasons to think that the situation
is different as regards graduates going abroad for tertiary study. Thus, the impact of international
schools in host ASEAN countries becomes, with a delay, the impact of international students.

Risk and extent of brain drain in ASEAN and potential benefits from diaspora
This impact would be unequivocally beneficial, if, after graduation and perhaps some work abroad,to broaden horizons and permit the acquisition of more skills, students returned to their homecountries, expanding the pool of human capital. If instead students take jobs abroad – typically indeveloped countries – and remain there permanently, becoming emigrants and diaspora members,
the result is a brain drain from ASEAN countries to developed countries, and benefits to homecountries of student mobility can be questioned, especially in countries where the rates at which
students remain abroad are high.
UNESCO’s 2018 Global Education Monitoring Report (Deuster and Docquier, 2018), suggests thatemigration rates of highly skilled citizens, educated both at home and abroad, are above 20% inover one-quarter of 174 countries (UNESCO, 2018:105). The data in table 20 show that in ASEAN
countries in 2010 the emigration rates of all highly educated people – that is, educated at home andabroad – were mostly very low to moderate: 1-2% in Indonesia, Thailand and Myanmar, and 5-9%
in Singapore, Malaysia and Brunei Darussalam (in this order). They were higher in the Philippines
and Viet Nam (11-14%) and the highest in Cambodia and the Lao People’s Democratic Republic(18-26%). Assuming that all highly skilled emigrants study abroad, the beneficial impact ofinternational student mobility takes place in ASEAN countries, because in most of them theoverwhelming majority of graduates38 return home and increase the stock of human capital. In most
ASEAN countries, the impact has increased over time as the ratios declined, reflecting perhaps the
improved living conditions associated with rapid economic growth. For all of South-East Asia, theratio declined from 11% in 1990 to 6.2% in 2010. The most notable declines took place in Malaysia
and Singapore, from 25% in 1990 to 6% or less in 2010 (table 20).

37

38

The same applies to academics travelling abroad. In addition to acquiring new skills, mobility exposes them to a
new cultural experience (which may broaden their perspectives on their home countries), leads to better linguistic
abilities and facilitates interactions with academics of other countries that may result in long-term cooperation.
These effects may be achieved through trade and through official cooperation between universities and education
ministries.
In the Lao People’s Democratic Republic, the majority.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

45Table 20. ASEAN: Ratio of highly skilled emigrants to OECD area to the total number of highly
skilled peoplea in country (Per cent)Country

1990

2000

2010

Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
VietnamSouth-East Asia

22.1
22.5
5.6
30.2
26.3
4.3
12.6
25.3
2.4
23.8
10.8

13
16.4
2
26.5
9.9
3.2
10.8
12.9
1.7
18.8
7.4

8.7
18.3
1.1
25.8
6
2.1
11.4
5.5
1.4
14
6.2

Source: Deuste and Docquier (2018).
a“Highly skilled” means with tertiary degrees.

The rate at which today’s international students stay abroad is not known. There is no reason to thinkthat they have changed drastically after 2010. But even if they are high, representing a loss of humancapital, other benefits arise. Students who remain abroad become highly educated emigrants, and,like most emigrants, they send home remittances, contributing to the overall inflow of remittances,which for most developing countries are a significant source of foreign currency and capital. If insteadof losing contact with their home countries, students join their diasporas, then benefits associatedwith diaspora activities can arise for the home countries. Some international students who remain
emigrants may invest in their home country or return to establish a business. As the study of mostinternational students is financed privately, the financial costs of losing – or rather not gaining –additional human capital for the sending country are limited to the cost of free public primary andsecondary education. Costs arise, if non-returning students use scholarships sponsored by theirgovernments and development partners. Several ASEAN countries do indeed support foreign study,
but neither the extent of this support nor the number of sponsored non-returning students are known.

B. Inbound international branch campuses
These impacts are limited to ASEAN countries that have attracted IBCs and foreign programmes
through non-equity forms of investment (chapter II). They are Malaysia, Singapore, Thailand and, toa much smaller extent, Viet Nam, Indonesia and Cambodia. Impacts vary, depending on the type ofstudents, links of IBCs with the local environment and countries’ policies.

Generating exports and reducing skill shortages through retaining foreign graduates
If IBCs are aimed at attracting foreign students, then a key benefit is exports of education services,bringing foreign currency revenues and contributing positively to the trade balance in education
services. This is the case of Malaysia and Singapore, which, as shown in chapter II, are significant
exporters of tertiary education, and on a smaller scale, of Thailand. Another is stimulation of
economic activity in education centres, through student spending on accommodation, food andrecreational activities (apart from tuition, which also supports indirectly local economy).
If a country has a policy of retaining talented foreign graduates in its labour force (as most developed
countries do), this will contribute to the reduction of shortages of skilled human resources, which

46

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

many developing countries suffer. In Singapore, for example, the number of inbound foreign students
recruited after graduation to work there by far exceeds the number of Singaporean students studying
abroad (Ziguras and Gribble, 2014: 14).

Increased supply of skills lacking for the economy and FDI
Where students at IBCs are mainly local (as is the case in Cambodia), the key benefits are a reductionin the shortage of skilled human resources and a contribution to building the stock of human capital
more rapidly and cheaply than could be done either with limited domestic resources or by sending
students abroad for expensive studies in developed countries. If the IBCs are affiliates of reputable
universities, they also meet local student demand for tertiary education of high quality and provide
an incentive for students to not study abroad, thereby reducing brain drain and easing the burden ofoutbound students for the balance of payments.
If skillfully targeted and smartly regulated, foreign establishments in higher education have thepotential to rapidly fill the skills gap in a country’s FDI sector, facilitating not only increased flowsof FDI but also attracting better FDI. In many studies, education has been found to be a key FDI
determinant, especially of better types of FDI39 (for a comprehensive discussion of the relationshipbetween education and FDI, see te Velde, 2005; see also Varghese, 2009: 11-13, and Miningou andTapsoba, 2017). Thus, providing the right skills is particularly important in countries that expect
FDI to contribute to the restructuring of their economies towards higher valued added and more
technologically advanced industries.
A basic condition for the success of such a policy is the provision of a steady flow of human resourcesable to meet foreign investors’ current and future skill requirements. Any policy of this kind is doomed
to failure if not accompanied by an appropriate policy on human resources supply. Attracting FDI into
education can provide a shortcut to achieving this end. An example is Malaysia’s programme toestablish a hub for the biotechnology industry. There are no data on the employment of graduates offoreign programmes in host countries. But the prospect of work for an MNE is mentioned as a key
driver motivating students to enroll in foreign programmes, as “[MNEs] are more willing to recruit
people who have certifications from the universities of their parent countries” (Varghese, 2009: 21).
Foreign-based institutions can provide skills not taught at local universities but demanded by the
local economy. This is of importance in small countries, which, given their small populations, cannot
support HEIs that teach a wide range of subjects. Many countries suffer from shortages of engineers,
information technology specialists, medical doctors, and other key professions. The shortages
inhibit further development of existing industries or make it difficult to establish new ones. They areparticularly acute in new areas such as biotechnology, renewable energy and artificial intelligence,
where cutting-edge knowledge is necessary for progress. Foreign provision of education in suchareas by institutions from countries that are at the cutting edge of knowledge and technology often
appears as a viable solution.

Competitive pressures and spillovers enhancing local education institutions
There can be indirect impacts, that is, spillovers from the presence of foreign campuses in thehost country. Competition from foreign affiliates, one of the channels of spillovers in business anda mechanism for mobilizing local enterprises to greater effort and improvement, works well in

39

For example, the credit for attracting FDI and for the expansion of the software sector in India goes to “technicalyoung people and English-speaking scientific professionals” (Varghese, 2009: 13), cited from Business andEconomy, Indian business Industries, 2008.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

47

environments where there are viable domestic businesses able to take up the competitive challenge.
Education does not provide such an environment. But there are examples indicating that competition
in some areas of higher education is, indeed, fierce. A case in point is the competition for MBA
students in Asia, which is, in fact, global. Australian business schools, facing decreasing enrolment ofinternational students, have found themselves in competition with business schools from Singapore,
among other countries.40 Within countries, competitive pressures from foreign providers may work
better where there are many local private providers. In contrast, competition may have limited effects
in countries that rely largely on public HEIs, which may not feel threatened by competition from foreign
units. The best local universities are often in such great demand that it may take years before theywould feel the effects of competitive pressures. In such cases, the threat of foreign affiliates crowding
out local institutions, typically perceived as a downside of FDI, is limited.
Demonstration effects from the presence of foreign universities can be another channel of positive
impacts on the quality of local institutions. “Technologies” used at universities – curricula, textbooks,
methods of teaching – are relatively easy to observe and to emulate, especially at universities inproximity. Vincent-Lancrin (2007: 72) points out that “Internationalization allows [local] institutions
to benchmark themselves with foreign provision, through direct competition with foreign providers
to attract students and grants”.41 Thus, there can be positive externalities from foreign branch
campuses. Other externalities may come from the movement of qualified people: teachers moving
between local and foreign universities, local academics attending Ph.D. programmes at foreign
branches, and so on. Externalities may be easier to achieve where collaboration between foreign
branches and local HEIs is encouraged, facilitated or even required as a condition to operate in a hostcountry. Cooperation or partnership can enable local partners to enhance their capacity in teaching,
their curriculum content and their delivery through the direct assistance of, and interactions with,the foreign partner. To this end, some countries require foreign affiliates to employ local staff. As
noted in Vincent-Lancrin (2007: 72), “Partnerships or foreign programmes may also help developing
the infrastructure to undertake more efficient teaching and research and ultimately create a more
effective and cost-efficient organization of the HEIs and sector”.
Further spillovers may come from foreign universities that undertake research activities in hostcountries, adding to the research capacity of the host country. If foreign HEIs establish links withlocal industries, these may also benefit the local economy. Such links are encouraged in both
Singapore and Malaysia.

C. Risks of trade
In the discussion of the beneficial impacts of trade, some risks were identified. What follows isa summary of those risks as well as other risks associated with trade:• Bogus institutions that disguise themselves as reputed providers of higher education may entera country, banking on high demand for education and, sometimes, mainly on demand for tertiary
degrees. The risk is particularly present in countries in which oversight and regulations are weakor non-existent.
• A country may attract genuine but cheaper programmes of low quality, catering to mass students,
motivated primarily by financial considerations and having nothing to lose in terms of reputation.
In addition, foreign programmes of reputable universities may not live up to expectations, and40

41“Australia shifts gear to attract students”, Special Report on Education, International Herald Tribune, 20 October
2011, p. 12.
This will happen where competition exists, which, as noted earlier, is not always the case. In addition, foreign units
have to be allowed to compete with local units for students with loans and grants, which is not always the case either.

48

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

the benefits discussed earlier may not materialize or may be limited in scope. For example,
Altbach (2010: 2) notes, “with regard to the Johns Hopkins University’s program in Singapore,
the local authorities did not feel it was providing the promised goals, resulting in cancellation of
the program”.
• FDI in tertiary education services may prove to be unsustainable for financial or other reasons:witness the closures of several campuses, including in ASEAN countries, discussed in chapter II.
Campuses have failed due to poor business models (US Michigan State University in Dubai and the
University of New South Wales in Singapore),42 disagreements with local partners (George Mason
University in the United Arab Emirates) or the inability to adapt to changing local regulations (Bond
University in South Africa) (Owens and Lane, 2014; Healey, 2017).
• Foreign providers may act as enclaves, with few benefits to domestic education systems. In somecases they may crowd out domestic providers of higher education services, especially private
providers.
• Equity issues in tertiary education arise in connection with private provision, as countries andpublic universities introduce and/or raise student fees, which reduces access by students
from poor segments of the population. Because foreign programmes are more expensive thandomestic ones, they further exacerbate inequity issues. Study abroad, available only to students
from wealthy families, is an even more vivid demonstration of inequity, as it is more expensive thanforeign programmes in the country.
• In primary and secondary ASEAN education, where compulsory and free education is common,
equity issues become visible in countries where there is inequity of access to better local schools,
resulting in inequality of learning outcomes, and dividing children into those with better and worse
life prospects, thereby creating elites. The growing attendance by local children at international
schools compounds the inequity, preparing fertile ground for its continuation at the tertiary levelof education.
• Increased imports of tertiary education through Mode 2 may accelerate brain drain from ASEAN.
While potentially reducing the risk of brain drain, as discussed earlier, the commercial presenceof foreign HEIs (Mode 3) does not eliminate it altogether. Students at IBCs often receive, as isadvertised, education similar or identical to that at the parent campus. More importantly, thedegree from the parent university is recognized in the country of the university headquarters, andpossibly, through mutual recognition agreements, in other developed countries. Such a degree
may open the door to the job markets of developed countries and result in emigration.

V. POLICY OPTIONS AND RECOMMENDATIONS
The previous chapter discussed the benefits of trade in education services in general and in ASEAN.
However, these benefits do not come automatically. Some ASEAN countries need further liberalizationof education services to expand trade, as well as supplementary measures, especially to attract FDI
in education and benefit from it. At the same time, ASEAN governments should be aware of thepossible risks associated with the commercial presence of foreign education and other forms oftrade and should take measures aimed at avoiding or at least reducing these risks. Discussionof possible policy options and recommendations in this regard is the objective of this chapter.

42

The University of New South Wales (Australia) closed its campus in Singapore in 2007, less than one year after
entry, due to low enrolment (Altbach, 2011: 8).

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

49

1. Attracting foreign education institutions
Further liberalization of trade in education services in ASEAN under ATISA
Imports through Mode 3 are the most restricted educational trade activity of ASEAN countries(chapter III), and the least committed to liberalization within the AFAS, lowering the overall index
of liberalization of educational trade. As assessed by the Hoekman index (chapter III) as well asreported in a joint study by ASEAN and the World Bank, most countries are fairly open in Mode 1 andMode 2 types of trade. On average, in all ASEAN countries applied trade policy in education services
for all modes is pretty liberal, at the level of 23 (out of 100, which means that trade is banned), as
measured by the World Bank’s Services Trade Restrictiveness Index.43
In Mode 3, however, this is not the case. For example, Indonesia, Myanmar, the Philippines andThailand apply some restrictive measures (ASEAN and World Bank, 2015: 59). Furthermore, according
to AFAS commitments, some countries still maintain operational restrictions on the activities offoreign affiliates, which results in a Hoekman index of liberalization considerably lower than 1.
These countries include Brunei Darussalam, Indonesia, Malaysia, the Philippines and Thailand,with an index of 0.5, and the Lao People’s Democratic Republic, with an index of 0.75. Some of theserestrictions may pose difficulties for attracting FDI, especially if they concern the requirement of a
joint venture with a local partner, combined with the condition that the majority of senior managers
be nationals of a host country (Brunei Darussalam), control and administration be vested in local
citizens (the Philippines), or at least half of the directors and of the university council members anda managing director, be local (Thailand). Whereas for some HEIs investing abroad these conditions
may be acceptable, for most they will be a deterrent, as they mean that the university headquarters
will not be able to fully control the activities of their branch campuses.
Thus, in several ASEAN countries there is still room for further liberalization of Mode 3 of trade ineducation services and/or for narrowing the gap between actual policy and commitments underthe AFAS and the AEC Blueprint, which would improve the investment climate for intra-ASEAN FDI.
The ongoing transition from the AFAS to the ATISA may facilitate further liberalization, as a resultof the latter’s negative-list approach, which as noted earlier is simpler and more transparent thanprevious positive-list-based negotiations.

Supplementary measures to remove trade barriers in education services
Liberalization is only the first necessary step towards attracting FDI into education. Supplementarymeasures are also needed to reduce investment risks and increase chances of attracting FDI.
Supplementary measures include the establishment of a clear, stable and transparent regulatory
framework for foreign HEIs to invest their capital for long-term operation. In general, regional
regulatory cooperation is very important to achieve progress in supplementary measures, andneeded also to advance trade in education, because of the diversity and differences in quality ofnational regulations. The challenges of improving regulatory quality are particularly high for lowerincome ASEAN countries, and strong support from other ASEAN countries and ASEAN institutions
would be desirable in facing these challenges (ASEAN and World Bank, 2015: vii).
Although it is useful to review restrictions and commitments to liberalizing trade in education
services by each mode of supply, it would also be helpful for policy to regroup them by key typesof activity and associated modes of delivery. In policy practice, countries liberalize not modes but

43

But applied policy is much more restrictive than was the goal of the AEC Blueprint. The target for education
services was set at 10 points (ASEAN and World Bank, 2015: 77).

50

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

access to their territory by international schools or HEIs. Looking at restrictions and commitmentsfrom this perspective makes it possible to identify across all modes those restrictions that could
hamper the establishment and activities of schools or HEIs and discourage some of them frominvesting. Restrictions that do not fall under any of the modes should also be added. For example,
if a country wishes to attract foreign students, cumbersome visa procedures may be an obstacle.
If a country’s objective is to use foreign graduates to reduce a shortage of skilled human resources,
then immigration policy becomes very important as do issues such as the availability of scholarships
to foreign students, the possibility to work while studying and the availability of work permits after
graduation. Such issues are typically dealt with by different government departments, and one
department’s actions can inadvertently inhibit the objectives of another department or even theentire government. Reviewing an activity by all associated modes and other issues would provide
a clear picture that is useful for conducting policy and achieving its objectives. Supplementarymeasures should focus on these restrictions as well.
Furthermore, it is essential to monitor and consider the skill needs of foreign investors in education
policy, as FDI skill requirements are typically different from and higher than those of domestic firms.
ASEAN governments should aim at attracting the right education institutions, those that can provide
education and/or training that increases the chances of satisfying the skill needs of foreign investors.

Incentives to attract good-quality foreign education institutions
Countries that have managed to attract foreign campuses have also typically provided generous
incentives in the form of infrastructure, buildings and/or financing of campuses for foreign
providers. Some have added operational subsidies. Incentives have been predominantly financial.
Both Singapore and Malaysia, two leading ASEAN countries that have attracted high-quality IBCs,
have invested significant amounts of money, providing investment incentives for the establishment
and operations of IBCs. Both have also established clear, transparent and secure frameworks
for transnational higher-education investment, reducing investors’ risks. These incentives weretypically accompanied by host government’s expectations, often turned into commitments by foreign
investors, concerning the content of teaching, degrees offered, quality of the programme andother requirements, as well as the return on investment. For example, Singapore has undertaken
significant investment to attract world-renowned universities and formulated conditions for their
quality (Verbik, 2006: 7). If these conditions are not met, accreditation is withdrawn. According to
one source, Malaysia spent about $100 million on the infrastructure and buildings in EduCity, aregional education hub in the southern part of the country that hosts IBCs, among other services.44
Given that drawing in foreign universities is costly, a common view is that low-income developing
countries stand little chance of attracting FDI into tertiary education despite fully opening to foreign
providers (Vincent-Lancrin, 2007: 81). In low-income countries, a viable solution could be to use ODA– multilateral, regional or bilateral, including from better-off countries in the region – to support theestablishment of foreign HEIs in these countries.45

44

45“Education in Malaysia. A reverse brain drain. Ambitious plans to become an Asian hub for Western education”, The
Economist, 5 May 2011.
There are many examples indicating that ODA was indeed used to set up branches of world-class universities indeveloping countries, including in low-income countries. A case in point is Carnegie Mellon University’s branch
campus in very low-income Rwanda, which opened in 2012 and is still operational. The campus was built with funds
provided by the African Development Bank and the Rwandan government, which has also secured an operational
subsidy for many years, until the campus can stand on its own feet. Rwanda provides scholarships to its citizens to
pay tuition and cover other fees. The campus also relies on foreign students from East Africa.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

51

2. Benefiting from foreign education institutions
Strengthening quality assurance programmes in education services
Education, like many other services, involves a problem of asymmetric information between providers(in this case, foreign HEIs) and consumers (students), arising out of the fact that the quality of aservice cannot be assessed at the time of purchase and/or delivery – that is, at the time of enrolment
into a foreign programme – and that there is no guarantee in the case of a “faulty” service. The
essence of asymmetric information is that providers are aware of weaknesses in the quality of theirservices and do not reveal them to students, who, as a result, do not have complete information
about the product they are buying.
Therefore, to avoid these risks and ensure benefits from foreign campuses, and, for that matter,also from domestic HEIs, it is essential to build systems of quality assurance. As mentioned earlier,the risks associated with the quality of foreign transnational education may be greater than thoserelated to private domestic education, because it is new, less stable and more difficult to oversee.46
Some ASEAN countries have systems that address quality issues at foreign universities that are
already in the entry stage (box 23).

Box 3. Quality assurance measures in Malaysia and Singapore.
In both Singapore and Malaysia, only good-quality foreign institutions are targeted andallowed to enter. In exchange for incentives, quality requirements for subsequent operations
are formulated and applied, to the extent possible, at the stage of entry.
Malaysia requires foreign universities to teach subjects that will be most useful to thecountry (also in terms of attracting international students), to provide education at a level
similar or identical to that at a home campus and to offer identical degrees. It encourages
cooperation between local and foreign universities (Bashir, 2007: 41). To establish a campus,
a candidate institution must go through a five-stage approval and review process, covering
legal, educational and business requirements. Any foreign programme must include
subjects that local students are required to pass in order to graduate.
In Singapore, foreign universities operating in cooperation with local ones must be approvedby the government. Prior to the approval they have to provide information on course content,
their status and accreditation in the home country, and the division of responsibilities
between them and their local partners. Entry and cooperation with local universities canoccur only at government invitation, as noted earlier (OECD, 2004: 192).

However, most developing countries lack capacity in quality assurance and thus do not yet have such
systems. Quite a few countries instead apply restrictions on the entry of foreign HEIs, justifying themwith concerns about quality. For example, in an Asia-Pacific Economic Cooperation (APEC) survey,
Indonesia cited quality assurance considerations as a key reason for not allowing private for-profit
education, including FDI in education (APEC, 2009: 32). Indonesia has quality assurance regimes
but does not extend them to private for-profit and foreign institutions, preferring until recently to

46

The greatest risks come from cross-border distance education, because it is most difficult to control.

52

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

ban them altogether, except for foreign twinning programmes.47 However, since 2018 Indonesia
has allowed equity FDI in education. Although some media speculated that complete ownership is
now possible, the Regulation on Foreign Universities (No. 53 of 2018) of the Ministry of Research,
Technology and Higher Education is silent on this matter. Indonesia’s commitment under the AFAS
10th package stipulates only a joint venture with foreign equity participation of up to 51% (annex 2,
p. 61). While liberalizing entry, including that of foreign academics, Indonesia has kept most of theprevious requirements (see footnote 47), and added new ones such as that foreign universities canbe established only in special economic zones.48 Thailand, by contrast, combines quality assurance
regimes – sometimes quite extensive ones – with liberal foreign entry rules (APEC, 2009, pp. 31-32;
APEC, 2019, pp. 55-57).
Countries that wish to benefit from FDI in education should build or strengthen their quality
assurance systems as a key prerequisite to removing bans on entry of and operational restrictions
on foreign educational affiliates. This should, however, be done in a way that does not replace one
set of restrictions with another. International cooperation can be instrumental in this respect.
Within APEC, which includes all ASEAN countries, for example, work is under way to develop Higher
Education Quality Assurance Principles for the Asia-Pacific region, aiming at defining minimum
standards rather than across-the-board standards for all countries. The expectation is thatdeveloping a “ladder” of quality standards would help countries, indicating steps and standards
that could be used to move towards improvement (APEC, 2009: 46). Similar initiatives would be welladvised within ASEAN.
As of 2016, the ASEAN countries other than Myanmar formally had at least one institution responsible
for external quality assurance for study programmes or entire HEIs. However, higher-education
systems and approaches to quality assurance are organized very differently and follow a wide rangeof standards and procedures. Despite these differences, there is ground for cooperation across theASEAN region on issues such as expanding higher education, increasing the number of universities
and improving the quality of teaching and learning processes (SHARE, 2016:14). Quality assurance
is one of the important fields for cooperation, although the differences presented above do notfacilitate it. At the ASEAN level, two organizations – the ASEAN Quality Assurance Network (AQAN)
and the ASEAN University Network (AUN) – as well as several other higher-education stakeholders,both regional and national, are committed to developing quality assurance as the backbone ofconvergence in higher education across the region, as part of the ambitious project of establishinga common ASEAN higher-education space (box 4).

47

48

There are also several additional requirements for these programmes, which may amount to restrictions on theiroperations and discourage entry, as follows. Foreign qualifications must be accredited in the home jurisdiction, andto receive a license as a “working partner” of a domestic institution, the foreign provider’s programme must be
evaluated by the responsible Indonesian ministry. Cooperation, as mentioned, should not be undertaken for profit
and should be “an equal partnership”. Activities should cover not only teaching, but also research and community
service. Partnerships should be consistent with national and institutional priorities and include areas in which
graduates are especially required. Not more than 50% of a course should be taught in a foreign language, unlessprior permission is granted. Periodic reports must be submitted for evaluation (OECD, 2004: 192).
For more on this topic and the link to an unofficial English translation of regulation no. 53, see https://www.
lexology.com/library/detail.aspx?g=5b971e9f-a4f4-49fa-a1b4-bc24cfe9c162; and https://internationaleducation.
gov.au/News/Latest-News/Pages/Indonesian-Government-Ministerial-Regulation-on-Foreign-Universities(Decree-53)-.aspx.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

Box 4. ASEAN platforms to promote quality assurance activities
The ASEAN Quality Assurance Network (AQAN) represents national external quality
assurance bodies and ministries in charge of quality assurance that formulate, develop
and implement external quality assurance frameworks. Its members either have decision
power on education issues or direct access to national decision-making bodies (SHARE,
2016: 21). The mission of AQAN is to “promote and share good practices of quality
assurance in higher education in the South-East Asia region; to collaborate on building
capacity for quality assurance in higher education in the region; to share information onhigher education and facilitate mutual recognition of qualifications throughout the region;and to develop a regional quality assurance framework for Southeast Asia” (ASEAN Quality
Assurance Network, 2014). Its main task is to help establish a regional quality assurance
framework.
The key tool for regional cooperation on quality assurance has been the ASEAN Quality
Assurance Framework (AQAF), drafted by a consortium of expert institutions and practitionersof higher education management, and endorsed by AQAN members in 2013. The primary
purpose of the Framework is to enhance the quality of education in the ASEAN region andto support the mobility of students, workers and professionals, both within and outside theregion (AQUAN, 2014: 6). It is supposed to be a basic document for the formulation of quality
assurance policy in the region. In 2014, AQAN members submitted a draft framework toa higher level of education principals to consider the AQAF for endorsement at a politicallevel and future adoption. They recommended that the AQAF should be submitted to the
ASEAN Senior Officials Meeting to start a formal political endorsement process. In 2016,
putting the AQAF on the political agenda was still an unfinished process. The authors ofa study sponsored by the European Union, suggested that “binding legal basis would be
extremely helpful for implementing the AQAF principles at the HEIs and quality assurance
agency levels” (SHARE, 2016: 23).
The ASEAN University Network (AUN) is another platform for promoting quality assurance
activities in the region, although with a rather narrow scope. Its membership is limited to
30 key universities, because of the restrictions on the number of members per country.
AUN objectives and activities are many, but one of them has been quality assurance. The
AUN was established in 1998. The Network has developed quality assurance guidelinesthat have been used for quality assessments of programmes of member universities since2007. Since 2014, the impact of the Network has broadened, as associated, non-member
universities have also been able to take part in quality assurance activities. Evaluations arevoluntary and carried out on request. According to the AUN website, 171 study programs
were assessed between December 2007 and the end of 2016.49 Since 2016, the AUN quality
assurance unit has been preparing to conduct assessments at the institutional level (thatis, assessment of the entire university rather than its individual programmes). The AUN
assists also in building capacity for quality assurance by organizing training courses on
quality assurance, the AUN assessment process, and how to perform self-assessment
as a prerequisite for the AUN quality assurance assessment of the study programme.
Furthermore, since 2013, AUN has started to offer advanced training that targets futureassessors (SHARE, 2016: 22).

49

http://aun-qa.org/AssessmentAnalysis, accessed 6 January 2020.

53

54

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Facilitating positive spillover effects of foreign presence
As mentioned in chapter V, increasing trade in education services may create competition among
local private and foreign education institutions, instigating in some cases the potential for crowdingout of the former by the latter. Such possible downsides of foreign presence could be minimized
by encouraging and facilitating collaboration between foreign and local HEIs, including throughjoint teaching and research programmes, or joint ventures between foreign and local education
institutions. Cooperation or a partnership can enable the local partner to enhance its capacity inteaching, curriculum content and delivery through the direct assistance of, and interactions with,foreign partners. Ideally, joint ventures should not be imposed on foreign institutions, because they
can be considered by some as an unacceptable condition and a barrier to investment.

Ensuring equity of education services
As foreign programmes are typically fee-based and more expensive than domestic ones (whereas
access to public HEIs may be free), they raise equity and access issues for students from worse-off
families. Government scholarships and/or student loan programmes permitting the use of stipends
or loans at foreign branches are instruments that facilitate access of local students to better-quality
education. Such programmes can be linked to students’ performance and can then also serve as atool for identifying and educating a country’s best talent. They can also be used to promote equity inaccess to education, as inequity is exacerbated by trade and FDI.50 One of the key responsibilities ofgovernments is to make sure that academically qualified students are not prevented from studying
by the lack of financial resources.
Issues of access, equity and inclusiveness are associated with ethical choices, guided by considering
education as a public good and human right. But they also have an economic dimension. Whatevercountries’ choices regarding access and equity, every country must pay special attention to its talented,
most able children, especially when they come from disadvantaged and poorer backgrounds, andmake sure that they are not excluded from higher education because of inequality of access or theirparents’ difficult economic situations. From an economic perspective, such an exclusion amounts tothe waste of valuable human resources.

Preventing brain drain through effective graduate and diaspora policy
Governments can implement measures aimed at reducing brain drain and encouraging highly
skilled graduates of foreign study and/or diaspora members to return or, at least, to engage inbeneficial interactions with home countries. Several ASEAN countries support outbound student
mobility in the expectation that students educated abroad will help build domestic capacity in higher
education and other areas when they return. They also have policies aimed at ensuring high return
rates of students. Malaysia has provided scholarships for postgraduate study or training of teachers,
academics and civil servants, mainly in the United Kingdom and Australia (World Bank and OECD,2007). It also established offices abroad to assist students who are studying outside the country.
Malaysia secured very high return rates among government-sponsored students, mostly bumiputra,
through conditions attached to scholarships and career prospects on return. Thailand has provided
scholarships for students and employees in the public sector. However, given the costs, the number

50

For a review of schemes available in this respect, see Geloso-Grosso (2007: 165). Another mechanism to promote
equity is an affirmative action, and especially preferential treatment in admission for low-income and disadvantaged
students. But experience shows that interventions at the tertiary level often come too late, as discrimination starts
in access to primary and secondary education. The proportion of students from rich families at HEIs is typicallyhigher than their share in the population.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

55of scholarship programmes is limited, and successful capacity-building also depends on attracting
foreign programmes and HEIs (Vincent-Lancrin, 2007: 50 and 100).
As regards diaspora, sending countries increasingly recognize that their highly skilled diaspora
may contribute to the economy through investments, remittances and strengthened economic links
between receiving and sending countries in the areas of trade, innovation and knowledge, including
academic research and knowledge. Consequently, they have active diaspora policies aimed at
encouraging return and stimulating and increasing these contributions.51 An effective policy should
start with preparing a catalogue of difficulties that returning highly skilled migrants face. These may
relate to the education needs of children, recognition of diplomas and degrees, health insurance,
getting a job, investing in business or the lack of dual citizenship. Barriers may differ from country
to country. The next step would be to remove or at least reduce these barriers by changing laws
and regulations, eliminating bureaucratic obstacles and streamlining activities of government
institutions that deal with returning migrants. Establishing a special institution, coordinating
activities of government agencies in this area, and supporting and assisting returning graduates andhighly skilled emigrants in settling down (as, in fact, a few ASEAN countries have done; see box 5)
would be an additional necessary component. Finally, to complete an institutional setup for attracting
highly skilled diaspora, an institution is needed for establishing productive, supportive and lastingengagement with members of the diaspora. Many countries have created such institutions. There isno one-size-fits-all solution for their mandates, which should consider the specific characteristics
and needs of a country’s diaspora population, which differ. These institutions may concentrate on
graduated outbound students or on all highly skilled diaspora members. The key is to ensure thatthey provide relevant types of services and support, suited to the needs of the target group.

Box 5. Diaspora policies of selected ASEAN countries
In general, the better diaspora programmes address the needs of diaspora members, thegreater the chances for their effectiveness. For example, to resolve challenges related
to recognition of qualifications, governments can provide advice or offer validation andrecognition services to ease reintegration of returning migrants in the labour market. Anotherexample is the recognition of dual citizenship.
The Philippines: Under the Technical Education and Skills Development Authority, six
agencies oversaw the Permanent Returning Overseas Filipino Workers Network. In Davao
Province, the Skills Registration Database linked returnees to recognition services andprospective employers (UNESCO, 2018: 106-107).
Viet Nam: The government recognizes the Vietnamese diaspora as an important factor forthe country’s development. It has developed a legal framework and practical programmes tocater to the needs of both emigrants and the diaspora.52
…/

51

52

International organizations may assist in this. For example, the International Organization for Migration has
programmes aimed at encouraging temporary work in home countries of highly skilled diaspora members fromdeveloping countries (World Bank and OECD, 2007: 98).
https://link.springer.com/chapter/10.1007/978-3-319-56342-8_15.

56

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Box 5. Diaspora policies of selected ASEAN countries (Concluded)
Indonesia: The government organizes diaspora congresses, providing a platform to
discuss issues and challenges related to human resources in Indonesia and to find out inwhat fields the Indonesian diaspora can make contributions.53 Indonesian Diaspora Connect
is an internet platform aimed at developing the country’s human resource by helping 4.5 million
members of the diaspora to contribute while living, studying and working abroad.54
Malaysia: In 2010, there were 311,000 Malaysians living in OECD countries, and 55% ofthem held tertiary degrees.55 The government has established Talent Corp Malaysia, whichis responsible for implementing a programme to reach out to Malaysian talent abroad andexpatriates with sought-after skills. The Returning Expert Programme targets highly skilled
Malaysians abroad who are interested in returning. They include people in a wide rangeof occupations, from engineers and bankers to specialist doctors and accountants. The
program provides fiscal and other incentives such as a 15% flat income tax for five years andpermanent residency for foreign spouses and children. The World Bank suggested that the
programme could be improved by paying more attention to connecting returning Malaysians
with job opportunities by providing more information and facilitating interactions between
applicants and recruiters, through job portals and career fairs. A common platform could be
developed to identify and monitor critical occupation and skills shortages that would informmigration and workforce development policies and programmes.
Singapore: Since the late 1990s, Singapore has implemented several policies aimed at
reducing the number of outbound students by enlarging options to study in Singapore (throughimproving the quality of public universities and attracting prestigious foreign HEIs), promoting
the return of graduates after their studies and engaging with the Singaporean diaspora(Ziguras and Gribble, 2014). These policies have proved to be successful. The number ofoutbound students, which peaked in 1998 at 28,318, had declined to 18,894 by 2008. It started
growing after that but in 2017 it was still at a lower level than in the peak year, with 24,793
students. Furthermore, Singapore has encouraged its highly skilled diaspora to return homeby, among other efforts, establishing in 2006 the Overseas Singaporean Unit with the mandate
to strengthen the diaspora’s relationships with the home country, and providing support andfunding for diaspora communities, including for business and student associations (Ziguras
and Gribble, 2014). However, the effectiveness of diaspora policy is reduced by the lack of adual citizenship policy, even though major host countries for Singaporean outbound students
permit dual citizenship, including Australia, the United Kingdom, the United States, Canada
and New Zealand. Thus, highly skilled emigrants who gave up Singaporean citizenship facedifficulties if they wish to settle in Singapore.

53
54
55

https://jakartaglobe.id/context/indonesian-diaspora-congress-to-focus-on-human-capital.
https://diasporaconnect.id/.
https://www.nst.com.my/news/2015/09/revise-eligibility-criteria-target-malaysian-diaspora-world-bank.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

57

Ensuring inter-agency coordination in addressing interrelated modes of trade ineducation services
Modes of trade are interrelated: trade in one mode can influence trade in other modes or it can
influence trade policy for other modes. For example, an exodus of young people for study abroadand children sent to boarding schools abroad (Mode 2) may have prompted ASEAN countries to open
up to commercial presence of HEIs and international schools (Mode 3) and to permit local children
to attend these schools, as is the case of more and more ASEAN countries. Mode 3 has the biggest
impact on trade in other modes, especially in higher-education services. Mode 3 in primary andsecondary education (international schools) prepares the ground for future trade (mainly imports)
through Mode 2, as most graduates – including local children – seek foreign education, typicallyfocusing on a couple of English-speaking developed countries. The commercial presence of foreign
HEIs in equity or non-equity forms may reduce imports of tertiary education through Mode 2, as itprovides an option and incentives (lower cost) for local students to obtain valued foreign degrees
without leaving the country. If the commercial presence is large, as it is in Malaysia and Singapore, it
triggers significant exports of tertiary services through Mode 2, attracting foreign inbound students(Mode 2). If the provision of services involves the combination of face-to-face and online crossborder teaching, it has an impact on trade in Mode 1. Finally, trade in Mode 3 stimulates quite
significant trade in Mode 4, as foreign HEIs and international schools typically employ many foreignteachers and academics.
An important policy implication is that interactions between modes should be considered in policy
formulation: opening to commercial presence may not be enough to stimulate significant trade, or
expected trade, if there are restrictions on other modes of associated delivery. Such interactions
between modes should be kept in mind by governments, when they design trade policy: liberalizationof one mode may not be enough to trigger trade (or to encourage significant trade), if there areserious restrictions on supplementary modes.

Attracting foreign
education institutions…/• Use the ASEAN cooperation framework to achieve the objective of making degrees andlearning outcomes comparable across ASEAN.
• Add school teachers, academics and education consultants and managers to the list of
professionals whose movement is supported by ASEAN agreements, including those dealing
with the mobility of skilled persons concerning the movement of natural persons andmutual recognition arrangements.

The mobility of educational professionals
among ASEAN countries is limited.

• Work on establishing a policy and regulatory framework that is clear and transparent,
providing sufficient stability and minimizing risk for foreign providers in order for them toinvest their capital for long-term operations.
• The challenges of improving regulatory quality are particularly high for lower-income
ASEAN countries, and strong support from other ASEAN countries and ASEAN institutions
is desirable in facing these challenges.
• The skill needs of foreign investors should be monitored and considered in education policy,
as FDI skill requirements are typically different from and higher than those of domestic
firms.

Removing barriers may not be enough to attract
FDI (Mode 3), as it is only a necessary but not a
sufficient condition.

• Identify foreign universities that would be interested in foreign expansion and most suitable
for meeting the policy objectives of the host country.
• Prepare an incentive programme suited to the needs of selected investors and eventuallyfind a local private partner interested in investing in an education undertaking.
• Use incentives as a carrot, committing the investor to teach subjects that will be mostuseful to the country (also in terms of attracting international students), to provide
education at a level similar or identical to that at the home campus, and to offer identicaldegrees.
• Low-income countries could use ODA and/or support from regional development banks,
together with the government commitment, to attract good-quality foreign universities.
The assistance of high-income ASEAN countries would also be helpful.

• Support further liberalization of Mode 3 under the ATISA.
• Narrow through the ATISA the gap between actual policy and commitments under the AFAS
and the AEC Blueprint, to improve the investment climate in general and for intra-ASEAN
FDI in education.
• Remove the remaining entry and operational restrictions on IBCs and/or international
schools, after putting in place quality assurance frameworks.

Some barriers remain to foreign service
providers in establishing and operating
education institutions through Mode 3.

Good-quality foreign universities typically
expect investment incentives and/or operational
subsidies from a host government.

Policy options and recommendations

Issues/Challenges

Table 21. Summary of policy options and recommendation: attracting foreign education institutions and benefitting from them58

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Source: AJC and the author.

Benefitting from foreign
education institutions

Policy options and recommendations• Implement regulations to ensure and monitor the quality of education services offeredby foreign providers, while not discouraging them from investment.
• Implement a quality assurance system for both online learning (for Mode 1) and foreign
branch campuses (Mode 3).
• Strengthen regional cooperation in establishing quality assurance systems, including
through the AQAN and the AQAF.
• Encourage collaboration between foreign and local HEIs.
• Support demonstration effects from foreign universities to increase the quality of local
institutions in such areas as curricula, textbooks and methods of teaching.
• Support low-income students with government scholarships and/or student loan
programmes to facilitate their access to better-quality education.
• If the government’s funds for student support are limited, link programmes to students’performance.
• Make sure that academically qualified students are not prevented from accessing goodquality education by the lack of financial resources.
• Support policies that encourage graduates and highly skilled diaspora members to return tohome countries, including through- Analyzing the difficulties that highly skilled diaspora members face when returning to theirhome countries and remove or reduce such difficulties with effective policies.
- Providing more information to returning diaspora members and connecting them to job
opportunities.
- Facilitating the return of diaspora members by easing the procedures for settling down.
- Taking steps towards the recognition of degrees obtained at foreign institutions (including
those located abroad) in cooperation with ASEAN countries.
- Considering the adoption of a dual citizenship policy.
• Engage diaspora members in beneficial interactions with the home country that may resultin investment and trade.
• Acknowledge the interactions between the four modes of trade and address issues related
to trade in education services in a holistic manner.

Issues/Challenges

The quality of foreign programmes could be low
or bogus providers could try to capitalize on thehuge demand for higher-education degrees by
providing low-quality service (Mode 3).

Foreign providers may crowd out domestic
service providers of higher-education services,
especially private providers.

Inequity in education may be exacerbated bytrade and FDI in education services, sinceforeign programmes are typically fee-based andmore expensive than domestic private ones.

Increased trade in Mode 2 (studying abroad) andMode 3 (establishment of international schools
and branch campuses of foreign HEI) may
exacerbate brain drain from ASEAN.

Issues related to trade in education services aregoverned by different parts of the governmentand difficult to coordinate.

Table 21. Summary of policy options and recommendation: attracting foreign education institutions and benefitting from them (Concluded)

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
59

60

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

CONCLUSIONSThe key economic task (and impact) of education services is to build human capital, meetingthe skill requirements of labour markets for improving productivity and competitiveness, and,
consequently, for stimulating economic growth. Skill requirements differ depending on the levelof countries’ economic development and, therefore, expectations concerning education systems
and their tasks differ, too. They are not the same in the highly developed economy of Singapore,
which relies to a significant degree on knowledge-based services, as in Malaysia, which seeks toadvance in GVCs and to avoid the middle-income trap, as in rapidly industrializing Viet Nam, which
has been successful in attracting export-oriented FDI, as in other lower-income countries at theearly stages of industrialization, or as in oil-dependent and rich Brunei Darussalam. However, in all
countries, higher education is central to building human capital for future growth. The key tasks ofhigher education will also be dependent on the development level. Countries at the higher level ofdevelopment will pay more attention to educating cadres of skilled human resources for researchand innovation, whereas lower-income countries may struggle with ensuring access to tertiary
education for more people. In all countries, tertiary education is a source of qualified teachers
for primary and secondary education. Higher education contributes directly to improvements inindividuals’ welfare, as citizens with tertiary degrees not only exhibit higher productivity but also
enjoy higher earnings and income.
Education services differ from most other services, which are typically commercial. Education isconsidered a public good and, as a result, the public sector plays a dominant or major role in its
financing and provision. In recent decades, however, the private sector has rapidly gained importance,
including in most ASEAN countries, in response to a rapidly growing demand for education, especiallyat the tertiary level, and for better-quality education at all levels, which many governments have notbeen able to satisfy. This has created more room for commercial transactions and for cross-border
trade in education services, which has rapidly expanded worldwide and in the ASEAN countries.
These countries increasingly participate in most types and modes of education services trade, butmainly as importers. Some countries (Singapore, Malaysia and recently Thailand) have emerged as
significant net exporters through Mode 2.
The role of trade in education services is also different from that of “ordinary” trade in goods
and in most categories of other (commercial) services, where the key contribution of trade is tobetter allocate resources, leading directly (through the provision of better and cheaper services toenterprises and consumers) and indirectly (through competitive pressure on local firms) to improved
efficiency and productivity of enterprises. In education services, the role of trade is to help education
systems build human capital and to satisfy demand, often for better-quality education, whichcannot be met by domestic public and private providers of education. Trade can also make othercontributions, depending on the mode of delivery, such as spillovers to the domestic system andexports of services from the commercial presence of foreign providers, especially at the tertiary level.
There are also risks; for example, that contributions to building human capital will not materialize
or will be reduced because students educated abroad will not return to the home country, or that
foreign investors will provide low-quality education or that a country will benefit little from foreign
education, apart from imports through outbound students.
Expansion of ASEAN education trade has been possible owing to liberalization of trade in mostcountries. On average, the trade policy of ASEAN countries in education services for all modes ispretty liberal, with Mode 3 imports, which also generate trade in other modes (including possibly
exports), the least committed to liberalization. Thus, there is room for further liberalization of Mode 3(commercial presence, that is, FDI) in several ASEAN countries. When liberalizing, governments

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

61should be aware of interactions between modes of trade as well as of barriers to trade beyond trade
policy. Liberalization is a necessary but not a sufficient condition for attracting FDI, especially into
tertiary education. Supplementary measures are needed to reduce investment risks and increase thechances of attracting foreign investments in equity and non-equity forms, including, among others,
the establishment of a clear, stable and transparent regulatory framework for foreign HEIs’ activities.
Another important policy task of ASEAN governments is to increase the benefits and avoid or reduce
the risks of education trade, which differ by the modes of trade. Key policy measures should aim at
reducing brain drain by encouraging and facilitating graduates of foreign study and skilled diaspora
members to return home or to engage in beneficial interactions with home countries. Concerns
about the quality of foreign provision should be alleviated by monitoring entry (avoiding, however,unnecessary trade barriers) and putting in place quality assurance infrastructure, facilitated byintra-ASEAN cooperation.
An important educational policy issue is related to the success of several ASEAN countries in attracting
export-oriented FDI in manufacturing and services, and the aspirations of other ASEAN countries
to follow a similar path in their industrialization. Education, providing skills for more advanced andsophisticated industries and activities, is key for retaining existing investors and encouraging them
to upgrade and for attracting new investors to more advanced activities that rely on skilled workers
and employees. The skill needs of foreign investors should be identified, monitored and consideredin education policy, as they are typically different from and higher than those of domestic firms.
Promotion of trade may contribute to increased foreign investment in education services, especiallyin tertiary education, and to alleviating skill shortages faced by foreign firms, and to expanding thepool of highly skilled human capital required for attracting better FDI and for economic development.
In addition, both local and foreign HEIs should be motivated to adapt accordingly programmes, andcurricula cooperation between foreign investors and schools and universities should be encouraged.

62

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

REFERENCES
Altbach, P. D. (2010). “Why Branch Campuses May Be Unsustainable”, International Higher Education,
No. 58, Winter (Boston: The Boston College Center for International Higher Education),pp. 2-3.
Altbach, P. D. (2011). “Is There a Future for Branch Campuses?”, International Higher Education,
No. 65, Fall (Boston: The Boston College Center for International Higher Education), pp. 7-10.
APEC (2009). Measures Affecting Cross Border Exchange and Investment in Higher Education in the
APEC Region. Singapore: APEC Human Resources Development Working GroupAPEC (2019). Asia-Pacific Cross-Border Higher Education Provider Mobility Report on a Survey of
Policy and Practice, Singapore: APEC Human Resources Development Working Group.
ASEAN and World Bank (2015). ASEAN Services Integration Report. A Joint Report by the ASEAN
Secretariat and the World Bank. Jakarta: ASEAN and World Bank.
AQUAN (2014). ASEAN Quality Assurance Framework.
Australian Government (2018). “Offshore Delivery of Australian Higher Education”, Department of
Education and Training, April.
Bashir, S. (2007). “Trends in International Trade in Higher Education: Implications and Options forDeveloping Countries”, Education Working Paper Series no. 6. Washington, DC: World Bank.
Deuster, C., and F. Docquier (2018). “International Migration and Human Capital Inequality: A Dyadic
Approach”. Paper commissioned for the UNESCO 2018 Global Education Monitoring Report,
Migration, Displacement and Education: Building Bridges, Not Walls.
Fernandez-Stark, K., Bamber, P., and G. Gereffi (2012). “Upgrading in Global Value Chains: Addressing
the Skills Challenge in Developing Countries”, OECD Background paper, September 26.
Geloso Grosso, M. (2007). “Developing Capacity in Tertiary Education through Trade Liberalisationand the GATS”, in Cross-border Tertiary Education. A Way towards Capacity Development(Paris: OECD and the World Bank, CERI: 159—182.
Gereffi, G. (2015). “Global Value Chains, Development and Emerging Economies”. Working Paper
18/2015, UNIDO, Vienna.
Healey, N. (2015). “Managing International Branch Campuses: What Do We Know?”, Higher Education
Quarterly, Vol. 69, No. 4, pp. 386-409.
Healey, N. (2017). “Management of International Branch Campuses”, in Teixeira, P. N., and J. C. Shin,.
(eds.) Encyclopedia of International Higher Education Systems and Institutions, Amsterdam:
Springer.
Hopper, R. (2007). “Building Capacity in Quality Assurance. The Challenge of Context”, in Crossborder Tertiary Education. A Way towards Capacity Development (Paris: OECD and World
Bank), CERI: 109-156.
ISC Research (2018a). 2018 Global Opportunities Report.
ISC Research (2018b). Higher Education Report: Pathways from K-12 English-medium International
Schools to University.
Hopper, R. R. (2007). “Building Capacity in Quality Assurance. The Challenge of Context”, in Crossborder Tertiary Education. A Way towards Capacity Development (Paris: OECD and World
Bank), CERI: 109-156.
Knight, J. (2006). Higher Education Crossing Borders: A Guide to the Implications of the General
Agreement on Trade in Services (GATS) for Cross-border Education. Paris: UNESCO.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

63

Lane, J. N., and K. Kinser (2011). “Africa: The Next Market for Cross-Border Higher Education?”, The
Chronicle of Higher Education, September 20, https://www.chronicle.com/blogs/worldwise/
africa-the-next-market-for-cross-border-higher-education/28691.
Mackie, C. (2019). “Transnational Education and Globalization: A Look into the Complex Environmentof International Branch Campuses”, May 28, https://wenr.wes.org/2019/05/the-complexenvironment-of-international-branch-campuses.
Marginson, S. (2013). “The Impossibility of Capitalist Markets in Higher Education”, Journal of
Education Policy, Vol. 28, Issue 3.
Miningou, E. W., and S. J. Tapsoba (2017). “Education Systems and Foreign Direct Investment: Does
External Efficiency Matter?”, IMF Working Paper WP/17/79, International Monetary Fund.
Neri, S., and S. Wilkins (2018). Talent Management in Transnational Higher Education: Strategies
for Managing Academic Staff at International Branch Campuses. Journal of Higher Education
Policy and Management, 41(1), 52-69.
OECD (2004). Internationalization and Trade in Higher Education: Opportunities and Challenges.
Paris: OECD.
OECD (2017). OECD Skills Outlook 2017: Skills and Global Value Chains, Paris: OECD Publishing.
Owens, T. L., and J. E. Lane (2014). “Cross-Border Higher Education: Global and Local Tensions
Within Competition and Economic Development”, Critical Perspectives on Global Competition
in Higher Education: New Directions for Higher Education, No. 168, Winter, Wiley Periodicals,Inc., pp. 69-82.
SHARE (2016). State of Affairs and Development Needs. Higher Education Quality Assurance in
the ASEAN Region. The European Union Support to Higher Education in the ASEAN Region.
Jakarta: SHARE Project Management Office.
Trembath, J. L. (2016), “The Professional Lives of Expatriate Academics”, Journal of Global Mobility,
Vol. 4, No. 2, pp. 112-130.
UNESCO (2018). Global Education Monitoring Report. Migration, Displacement and Education:
Building Bridges, Not Walls. Paris: UNESCO.
United Nations (2017). The Sustainable Development Goals Report 2017. UN: New York.
Varghese, N. V. (2009). Globalization, Economic Crisis and National Strategies for Higher Education
Development, Paris: UNESCO and International Institute for Educational Planning.
te Velde, D. W. (2005). “Globalization and Education. What Do the Trade, Investment and Migration
Literatures Tell Us?”, Working Paper 254, London: Overseas Development Institute.
Verbik, L. (2006). “The International Branch Campus: Models and Trends”, in Going Global.
International Branch Campuses: Does the Reality Fit the Models? (London: British Council),unprocessed.
Vincent-Lancrin, S. (2007). “Developing Capacity through Cross-border Tertiary Education”, inCross-border Tertiary Education. A Way Towards Capacity Development (OECD and World
Bank, Washington, DC: World Bank), pp. 47-109.
Vincent-Lancrin, S. (2009). “Cross-border Higher Education: Trends and Perspectives”, in Higher
Education to 2030. Volume 2. Globalisation (Paris: OECD).
Wilkins, S., and S. Neri (2018). “Managing Faculty in Transnational Higher Education: Expatriate
Academics at International Branch Campuses”. Journal of Studies in International Education,
Vol. 23, Issue 4, pp. 451-472.
World Bank and OECD (2007). Cross-border Tertiary Education. A Way Towards Capacity Development,
Washington, DC: World Bank.

64

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

World Bank (2012). Putting Higher Education to Work. Skills and Research for Growth in East Asia.
Washington, DC: World Bank.
World Bank, IDE-JETRO, OECD and WTO (2017). Global Value Chain Development Report 2017.
Measuring and Analyzing Impact of GVCs on Economic Development (Washington, DC: World
Bank).
WTO (2010). Education Services. Background Note by the Secretariat. S/C/W/313, 1 April.
Ziguras, C. (2018). Will Global Online Higher Education Ever Take Off?, University World
News, 19 January; accessed 2 June 2019, https://www.universityworldnews.com/post.
php?story=20180116150633478.
Ziguras, C., and C. Gribble (2014). “Policy Responses to Address Student ‘Brain Drain’: An
Assessment of Measures Intended to Reduce the Emigration of Singaporean International
Students”, Journal of Studies in International Education, 1-19.
Zimny, Z. (2011). “Foreign Direct Investment in Education”. Background paper prepared for UNCTAD,
http://ssrn.com/abstract=2433876.

189

36
..
124
16 480
..
2 323
..
2 508
661

..
..
75
18 892
..
..
..
..
622

2001

78

2000

39
..
129
27 731
..
2 609
..
4 092
936

..

2002

..
..
95
30 407
..
4 744
..
..
1 048

41

2003

40
..
215
23 441
..
3 495
..
4 170
..

198

2004

..
2 026
174
..
..
4 836
..
4 334
2 053

164

2005

68
4 730
174
24 404
..
5 136
..
5 601
..

150

2006

..
5 319
254
30 581
57
..
..
8 534
3 230

177

2007

..
5 388
332
41 310..
2 665
40 401
10 915
3 362

190

2008

..
..
680
57 824..
..
48 62316 361
4 207

295

2009

..
6 437
725
64 749..
..
47 91519 052
3 260

229

2010

..
..
786
63 62565..
52 95920 155
3 717

372

2011

..
7 235
588
56 203100..
48 93820 309
3 996

354

2012

2 202

2 048

2001

2 027

2002

1 954

2003
1 967

2004
2 487

2005
2 169

2006
2 567

2007
2 930

2008
3 151

2009

Source: World Bank Education Statistics.

1 656
1 755
1 936
2 373
2 460
2 485
2 607
2 885
3 103
3 843
34 24235 53938 94738 80933 04831 73030 84733 57434 96136 484
1 256
1 100
1 223
1 567
1 998
2 382
3 022
3 501
3 893
4 292
45 80744 71946 90549 29448 53347 49149 07352 56656 17059 769
1 896
1 954
2 681
2 979
3 018
3 012
3 286
3 710
4 736
6 125
5 547
5 538
6 385
7 078
7 315
7 550
7 902
8 122
8 883
10 065
21 02723 10626 18625 47921 18219 77818 98318 95418 89420 07321 05621 98625 60625 45525 41925 05725 43526 40726 07426 8409 130
9 828
12 15214 66916 44019 71323 00527 58436 07643 529143 819 147 573 164 048 169 657 161 380 161 685 166 329 179 870 195 720 214 171

2000

Country

Brunei
Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam
ASEAN total

3 440

2011

3 560

2012

3 522

2013

..
..
317
..
..
..
..
..
3 608

..

2013

3 480

2014

..
..
543
99 648
..
..
..
..
2 540

360

2014

3 455

2015

..
..
315
111 443
..
..
..
..
2 874

529

2015

3 525

2016

..
..
451
124 133..
..
53 12231 571
5 624

349

2016

3 593

2017

..
5 878
472
100 765
..
..
..
..
4 162

436

2017

4 169
4 261
4 231
4 440
5 075
5 283
5 479
5 469
37 05836 75136 00939 41739 54944 84747 31745 206
3 887
4 160
4 366
4 821
3 372
3 509
6 264
4 962
59 44259 70659 45259 84462 53664 76764 86164 187
6 786
7 281
7 054
7 410
6 860
7 659
8 417
8 328
11 898
11 681
11 22911 70313 25414 62816 49216 57820 70621 32822 08822 82923 51624 73525 20224 79327 98627 10426 41625 84526 45029 20530 37529 88446 83151 93653 83555 98059 46868 04682 15982 160222 105 227 648 228 240 235 811 243 560 266 134 290 091 285 160

3 342

2010

Annex table 2. Students from ASEAN countries studying abroad, number, 2000-2017 (Mode 2 imports of education services)

Source: World Bank Education Statistics.

Brunei
Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam

Country

Annex table 1. Foreign students in ASEAN countries, number, 2000–2017 (Mode 2 exports of education services)

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S
65

ANNEX

-1 897..
-1 094-19 174..
-3 776-21 514-11 216-1 719..
-976-28 239..
-3 215-19 478-9 167..
..
-1 181-26 915..
..
..
..
-8 508..

2002-1 8592001-2 124

2000

Source: World Bank Education Statistics.

Brunei
Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet Nam

Country-13 621..
-1 472-18 887..
-2 334-1 913

2003-21 249-2 420..
-1 783-25 092..
-3 820-1 7692004-20 723-17 660..
-2 714-29 704-2 208-2 3232005-19 834-2 766-2 539-26 117-2 848-24 669-2 0192006-17 873-24 354..
-28 255-3 247-21 985-3 653-2 3902007-6 21821 507-15 159-32 714..
-29 573-3 561-14 860-2 7402008

28 550-10 479-39 322-3 612-1 945..

-2 8562009

27 209-8 934-43 571..
-30 621-3 1625 307-3 1132010

31 631-6 949-48 219-3 3743 919-7 216..

-3 0682011

Annex table 3. Trade balance in tertiary education (Number of students abroad minus foreign students in a country)

26 850-6 107-49 839..
-28 774-3 778-3 249-6 954-3 206

2012

..
..
..
..
-52 372..
..
-4 5042013..
..
-2 82937 112..
..
..
..
-56 928-3 1202014..
..
-3 19446 676..
..
..
..
-65 172-2 9262015..
..
-5 81359 272..
..
27 920
1 196-76 535-3 1762016..
-39 328-4 49036 578..
..
..
..
-77 998-3 157

2017

66

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

67

ANNEX TABLE 4.
SPECIFIC COMMITMENT TABLES FOR EDUCATIONSERVICES UNDER THE AFAS 10TH PACKAGE
Brunei Darussalam
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

Primary Education
For International School Only (CPC 921)

(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) A majority of the senior managers
in any such enterprise are Bruneiannationals.

Secondary Education
For International School Only (CPC 922)

(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) A majority of the senior managers
in any such enterprise are Bruneiannationals.

Higher Education (CPC 923)

(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

Adult Education
Courses with the maximum duration of 3
months (Private education) (CPC 924)

(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) A majority of the senior managers
in any such enterprise are Bruneiannationals.

Adult Education
Services For Skill Centre Only
(CPC 924)(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) A majority of the senior managers
in any such enterprise are Bruneiannationals.

Foreign Language Training Centre(CPC 929)(1) None(2) None(3) Only through a joint venture with foreign
equity not exceeding 70%.

(1) None(2) None(3) A majority of the senior managers
in any such enterprise are Bruneiannationals.

1) Other Higher Education Services
provided by privately funded HEIs [excluding
courses such as engineering, medicine,law and architecture on undergraduate andgraduate programmes]2) Other Higher Education Services provided
by privately funded higher institutions[except for those institutions which has
government subsidies and investment]

68

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Cambodia
Cambodia will seek to establish an independent national accrediting process for market purposes in
education and professional services which is in keeping with global practice.
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

Technical school-type education services
for handicapped students (CPC 92240)(1) Unbound*(2) None(3) None. Foreign equity participation islimited to maximum of 70% throughJoint Venture(1) Unbound*(2) None(3) NoneHigher education services (CPC 923)
Adult education (CPC 924)
Other education services (CPC 929)

(1) None(2) None(3) None(1) None(2) None(3) None

Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

B. Secondary education services:
Technical and vocational secondary
education services (electronic automotive)(CPC 92230)(1) None(2) None(3) Joint venture with foreign equity
participation up to 70%(1) None(2) None(3) (a) Subject to Qualification andLicensing requirement and procedureincluding registration.
(b) Foreign Education Institutions
are required to collaborate with local
education in Jakarta, Surabaya, Bandung,
Yogyakarta and Medan.

C. Higher Education Services (CPC 923)
Postsecondary technical and vocational
education services (Polytechnique Machine
and Electrical)(CPC 92310)(1) None(2) None(3) Joint venture with foreign equity
participation up to 51%(1) None(2) None(3) (a) Subject to Qualification andLicensing requirement and procedureincluding registration.
(b) Foreign Education Institutions
are required to collaborate with local
education in Jakarta, Surabaya, Bandung,
Yogyakarta and Medan.

D. Adult Education (CPC 924)
Language courses and training(1) None(2) None(3) Joint venture with foreign equity
participation up to 70%(1) None(2) None(3) (1) Subject to Qualification andLicensing requirement and procedureincluding registration.
(2) Foreign Education Institutions
are required to collaborate with local
education in Jakarta, Surabaya, Bandung,
Yogyakarta and Medan.

E. Other Education services (CPC 92900)
Football and chess only

(1) None(2) None(3) Joint venture with foreign equity
participation up to 49%.
Licences will be issued only for five foreign
education institution for joint venture withforeign equity participation up to 51%.

(1) None(2) None(3) Subject to Qualification and Licensing
requirement and procedure including
registration
Establishment only in Jakarta, Surabaya,
Bandung, Yogyakarta and Medan.

Other Education services (CPC 92900)
Football and chess only
Establishment only in Jakarta, Surabaya,
Bandung, Yogyakarta and Medan.

(1) None(2) None(3) Joint venture with foreign equity
participation up to 70%.

(1) None(2) None(3) (a) Subject to Qualification andLicensing requirement and procedureincluding registration(b) Licences will be issued only for fiveforeign education institution

Indonesia

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

69Lao People’s Democratic Republic- The contents of the education curriculum must be approved by the Ministry of Education andconcerned Ministry.
- With respect to C and D below, all subjects are allowed, except for teacher training, religious andpolitical
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

A. Primary Education Services (CPC 921)
B. Secondary education services- Higher Secondary Education Services(CPC 9222)
C. Higher education services- Postsecondary Technical andVocational Education Services (CPC
92310)(1) None(2) None(3) As per specified in the horizontal
section(1) None(2) None(3) None

B. Secondary education services- General Secondary Education services(CPC 9221)- Technical and vocational training (Partof CPC 922)
C. Higher education services (CPC 923)
D. Adult education services (CPC 924)
E. Other education services
Short-term foreign language training(Part of CPC 929)

(1) None(2) None(3) None1(1) None(2) None(3) None

The main criteria include the number of existing service suppliers in a particular geographical area, the stability of market andgeographical scale.

1

Malaysia
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

Primary education services (CPC 921)
Covering international schools only

(1) None(2) None(3) None except only locally incorporated
joint-venture corporation with Malaysia
individuals or Malaysian - controlled
corporation acting or both. Aggregate
foreign shareholding in the joint-venturecorporation shall not exceed 70%.

(1) None(2) None(3) None

General secondary education services(CPC 9221)
Covering international schools only

(1) Unbound*(2) None(3) None except only locally incorporated
joint-venture corporation with Malaysia
individuals or Malaysian - controlled
corporation acting or both. Aggregate
foreign shareholding in the joint-venturecorporation shall not exceed 70%.

(1) Unbound*(2) None(3) NoneTechnical and vocational secondary
education services(CPC 9223)
Covering private education services onlyTechnical and vocational secondary schooltype education services for handicapped
students(CPC 9224)
Covering private education services only

(1) None(2) None(3) None except only locally incorporated
joint-venture corporation with Malaysia
individuals or Malaysian - controlled
corporation acting or both. Aggregate
foreign shareholding in the joint-venturecorporation shall not exceed 70%.

(1) None(2) None(3) None

70

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

Other higher education services provided
by privately funded HEIs, excluding private
HEIs with government equity or that receive
assistance from the government(CPC 92390)
Adult education services provided byprivately funded education institutions
excluding private education institutions
with government equity or that receive
assistance from the government (CPC 924)

(1) Unbound, except for requirement forcommercial presence(2) None(3) Only through a joint venture with foreign
equity not exceeding 51% and subject
to the requirement of a needs test if
necessary(1) Unbound including for grant of federal
or state funding or subsidies suchas but not limited to land grants, tax
benefits, scholarships and loans limited
to institutions with government equity or
citizens or permanent residents(2) Unbound(3) Unbound including for grant of federal
or state funding or subsidies suchas but not limited to land grants, tax
benefits, scholarships and loans limited
to institutions with government equity or
citizens or permanent residents.

Other higher education services provided
by privately funded HEIs, excluding private
HEIs with government equity or that receive
assistance from the government(CPC 92390)
Covering private university services only

(1) Unbound(2) None(3) None except only through a
representative office, regional officeor locally incorporated joint-venturecorporation with Malaysian individuals or
Malaysian-controlled corporation acting
or both. Aggregate foreign shareholdingin the joint-venture corporation shall not
exceed 70%.

(1) Unbound(2) None(3) None

Adult education services provided byprivately funded education institutions
excluding private education institutions
with government equity or that receive
assistance from the government (CPC 924)
Professional and/or short course education
services (excluding teaching local language)(CPC 92400)(1) None(2) None(3) None except only through a
representative office, regional officeor locally incorporated joint-venturecorporation with Malaysian individuals or
Malaysian - controlled corporation acting
or both. Aggregate foreign shareholdingin the joint-venture corporation shall not
exceed 70%.

(1) None(2) None(3) None

Other education services(CPC 929 / 9290 / 92900)(1) Unbound*(2) None(3) Only through a joint venture with foreign
equity not exceeding 51%.

(1) Unbound*(2) None(3) None

Other education services(CPC 929 / 9290 / 92900)
Language tuition services(1) None(2) None(3) None except only locally incorporated
joint-venture corporation with Malaysia
individuals or Malaysian-controlled
corporation acting or both. Aggregate
foreign shareholding in the joint-venturecorporation shall not exceed 70%.

(1) None(2) None(3) None

Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

Primary education services (CPC 9211)- Preschool education services (CPC 9211)- Other primary education services(CPC 9219)(1) None(2) None(3) None(1) None(2) None(3) None

Secondary education Services (CPC 922)
- General secondary education services(CPC 9221)(1) None(2) None(3) None(1) None(2) None(3) NoneHigher education services (CPC 923)
- Postsecondary education services(CPC 9231)- Other higher education Services(CPC 9239)(1) None(2) None(3) None(1) None(2) None(3) None

MyanmarPA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

71Adult education services (CPC 924/9240)- Language courses and training- Business courses(1) None(2) None(3) None(1) None(2) None(3) None

Other education services(CPC 929/9290)- Skills training services covering theprovision of training for technical,
supervisory and production related
functional levels in new and emerging
technologies as follows:(1) automated manufacturing technology;(2) advanced materials technology;(3) biotechnology;(4) electronic;(5) information technology;(6) avionics (CPC 97090)- High level training services of computer(1) None(2) None(3) None(1) None(2) None(3) None

Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

A. Primary education services establishedby religious groups and mission boards forchildren of foreign diplomatic personnel(CPC 92110**)(1) None(2) None(3) Up to 70% foreign equity participationis allowed provided that control andadministration of educational institutions
shall be vested in citizens of thePhilippines.

(1) None(2) None(3) None, except that no educational
institution shall be established exclusively
for aliens and no group of aliens shallcomprise more than one-third of theenrolment in any school; and unlessincorporated as a stock or non-stock
educational corporation pursuant to the
Corporation Code of the Philippines

B. Secondary education services
established by religious groups and mission
boards for children of foreign diplomatic
personnel (CPC 922**)(1) None(2) None(3) Up to 70% foreign equity participationis allowed provided that control andadministration of educational institutions
shall be vested in citizens of thePhilippines.

(1) None(2) None(3) None, except that no educational
institution shall be established exclusively
for aliens and no group of aliens shallcomprise more than one-third of theenrolment in any school; and unlessincorporated as a stock or non-stock
educational corporation pursuant to the
Corporation Code of the Philippines

C. Higher Education Services(1) Unbound(2) None(3) Up to 51% foreign participation for
religious orders and mission boards,
provided they are previously existing in
the country of origin, duly recognized as areligious order or mission board; foreign
student population shall not be more than
1/3 of the total Filipino student population
per programme/discipline; the operation
and administration shall remain with
Filipino citizens; and regulations of the
CHED on the operation of higher
degree programmes(1) Unbound(2) None(3) None

Philippines

72

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

C. Higher Education Services
Postsecondary technical and vocational
educational institutions established byreligious groups and mission boards(CPC 923**)(1) Unbound(2) None(3) Up to 70% foreign equity participationis allowed provided that the control andadministration of educational institutions
shall be vested in citizens of thePhilippines(1) Unbound(2) None(3) None, except that no educational
institution shall be established exclusively
for aliens and no group of aliens shallcomprise more than one-third of theenrolment in any school; and unlessincorporated as a stock or non-stock
educational corporations pursuant to the
Corporation Code of Philippines.

D. Adult Education Services
Educational institutions establishedby religious groups and mission boards(CPC 924**)
E. Other Education Services
Educational institutions establishedby religious groups and mission boards(CPC 929**)(1) Unbound(2) None(3) Up to 70% foreign equity participationis allowed provided that the control andadministration of educational institutions
shall be vested in citizens of thePhilippines(1) Unbound(2) None(3) None, except that no educational
institution shall be established exclusively
for aliens and no group of aliens shallcomprise more than one-third of theenrolment in any school; and unlessincorporated as a stock or non-stock
educational corporations pursuant to the
Corporation Code of Philippines.

Singapore
Specific commitments on Market Access and National Treatment through any mode of supply shallnot be construed to apply to the recognition of university degrees for the purpose of admission,
registration and qualification for professional practice in Singapore.
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

Primary Education Services (CPC 921**)
Excluding provision of the service forSingapore citizens, including sports
education services(1) None(2) None(3) None(1) None(2) None(3) None

General secondary and higher
secondary education services(CPC 9221**, CPC 9222**)
Excluding provision of the service forSingapore citizens, including sports
education services (applies only to juniorcolleges and pre-university centres under
the Singapore educational system)(1) None(2) None(3) None(1) None(2) None(3) None

Postsecondary technical and vocational
education services (only non-publicly
funded education institutions)(CPC 92230*, 92240*, 92310)(1) None(2) None(3) None(1) None(2) None(3) None

Other higher education services, excluding
training of doctors (only local tertiary
institutions56 shall be allowed to operate
undergraduate or graduate programmes
for the training of doctors in Singapore)(CPC 92390 **)(1) None(2) None(3) None(1) None(2) None(3) None

Adult Education Services (CPC 924)

(1) None(2) None(3) None(1) None(2) None(3) None

Other education services (CPC 92900)(1) None(2) None(3) None(1) None(2) None(3) None56

	Local tertiary institutions are tertiary institutions which are established pursuant to an Act of Parliament, or as designated by
the Ministry of Education.

PA P E R 2 T R A D E I N E D U C AT I O N S E R V I C E S

73ThailandCommitments undertaken in this offer are subject to the following general conditions:- Specific commitments on Market Access and National Treatment through any mode of supply shallnot be construed to apply to the recognition of degrees for the purpose of admission, registrationand qualification for a higher education, employment or professional practice in Thailand- Services suppliers may be subject to notification or registration with the authority concerned.
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

A. Primary education services:
Preschool education services (CPC 92110)(1) None(2) None(3) As indicated in 3.3 of the horizontal
sectionAt least half of its director(s), and if
applicable its managing director, must bea person of Thai nationality(1) None(2) None(3)- The manager or the representative of thejuridical person must be a Thai national,
only who can apply for school license.
- The school director and deputy director
must be Thai nationals.
- The School manager/Executive manager
must be a Thai national.

B. Secondary education services:- General secondary education services(CPC 9221)- Higher secondary education services(CPC 9222)- Technical and vocational secondary
education services (CPC 9223)- Technical and vocational secondary
school-type education services forhandicapped students (CPC 9224)(1) None(2) None(3) As indicated in 3.3 of the horizontal
section(1) None(2) None(3) None

C. Higher education services:
Postsecondary technical and vocational
education services (CPC 9231)(1) None(2) None(3) As indicated in 3.3 of the horizontal
sectionAt least half of its director(s), and if
applicable its managing director, must be
the person of Thai nationality(1) None(2) None(3)- The manager or the representative of thejuridical person must be a Thai national,
only who can apply for school license.
- The school director and deputy director
must be Thai nationals.
- The School manager/Executive manager
must be a Thai national.

C. Higher education services:
Science and technology faculty(Part of CPC 92390)(1) None(2) None(3) As indicated in 3.1 of the horizontal
section(1) None(2) None(3) At least half of the university council
members must be of Thai nationality

Other higher education services(CPC 9239)

None
None
As indicated in 3.3 of the horizontal section(1) None(2) None(3) At least half of the university council
members must be of Thai nationality

D. Adult education services
Professional and/or Short Courses
Education Services (CPC 92400)

None
None
As indicated in 3.3 of the horizontal section(1) None(2) None(3)- The manager or the representative of thejuristic person must be a Thai national,
only who can apply for school license.
-The school director and deputy director
must be Thai nationals.
-The School manager/Executive manager
must be a Thai national.

74

PROMOTING SERVICES TRADE IN ASEAN: SECOND PHASE (SOCIAL SERVICES) – MARCH 2020

E. Other education services:
Foreign language tuition services(1) None(2) None
As indicated in 3.3 of the horizontal
section. At least half of its director(s), andif applicable its managing director, must
be the person of Thai nationality(1) None(2) None(3)- The manager or the representative of thejuristic person must be a Thai national,
only who can apply for school license.
- The school director and deputy director
must be Thai nationals.
-The School manager/Executive manager
must be a Thai national.

Viet Nam
Only in technical, natural sciences and technology, business administration and business studies,
economics, accounting, international law and language training fields.
With regard to points (C), (D), and (E) below: The education content must be approved by Viet Nam’s
Ministry of Education and Training.
Sector or Subsector

Limitation on Market Access

Limitation on National Treatment

A. Primary education services (CPC 921)

(1) Unbound(2) None(3) None(1) Unbound(2) None(3) None

B. Secondary education services (CPC 922)

(1) Unbound(2) None(3) None(1) Unbound(2) None(3) None

C. Higher education services (CPC 923)
D. Adult education (CPC 924)
E. Other education services(CPC 929 including foreign language
training)(1) None(2) None(3) None(1) None(2) None(3) None

Source: ASEAN Secretariat, AFAS 10 Consolidated Schedule, 29 November 2018 (https://asean.org/?attachment_id=74257).
Notes: * after a CPC code means the sector is part of the wider service sector elsewhere indicated. ** after a CPC code means
the sector is part of the wider service sector indicated by the CPC code. Unbound* means unbound due to lack of technicalfeasibility.

ISBN 978-4-910293-05-9

ASEAN Promotion Centre on Trade, Investment and Tourism
www.asean.or.jp/en