Tertiary Education in Mongolia

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  • TERTIARY EDUCATION IN MONGOLIA: Meeting the Challenges of the Global Economy

    POLICY NOTE

    September 2010

    Human Development Sector Unit Mongolia Country Management Office East Asia and Pacific Region

    Document of the World Bank

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    wb406484Typewritten Text 52925

  • Tertiary Education in Mongolia: Meeting the Challenges of the Global Economy

    POLICY NOTE

    September 2010 Human Development Sector Unit Mongolia Country Management Office East Asia and Pacific Region

    Document of the World Bank

    REPORT NO. 52925 - MN

  • CURRENCY EQUIVALENTS

    Currency US$1.00 = MNT 1,168.20 (2007) US$1.00 = MNT 1,171.36 (2008) US$1.00 = MNT 1,358.19 (2009)

    FISCAL YEAR

    January 1- December 31

    WEIGHTS AND MEASURES

    Metric System

    ACRONYMS AND ABBREVIATIONS

    ECDE Early Childhood Development and Education

    MSUE Mongolian State University of Education

    EGSPRS Economic Growth Support and Poverty Reduction Strategy

    MUST Mongolia University of Science and Technology

    ESMP2 Education Sector Master Plan 2

    NER Net Enrolment Ratio

    GER Gross Enrolment Ratio

    NQF National Qualification Framework

    GDP Gross Domestic Product

    NUM National University of Mongolia

    HSU Health Sciences University of Mongolia

    NVETMC National Vocational Education and Training Methodology Center

    LSMS Living Standards Measurement Survey

    OECD Organization for Economic Cooperation and Development

    M&E Monitoring and Evaluation

    QA Quality Assurance

    MECS Ministry of Education, Culture, and Science

    STF State Training Fund

    MNCEA Mongolian National Council for Educational Accreditation

    TEI Tertiary Education Institution

    MOF Ministry of Finance

    TVE Technical and Vocational Education

    MSUA Mongolian State University of Agriculture

    Country Director: Klaus Rohland Sector Director: Emmanuel Jimenez Sector Manager: Eduardo Velez Bustillo Task Team Leader: Kin Bing Wu

  • MONGOLIA HIGH EDUCATION POLICY NOTE i

    CONTENTS

    Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v

    1. Challenges to Post-basic Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

    1.1. Educational Development since the Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

    1.2. Key Policy Questions Surrounding Tertiary Education . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

    2. The Demand for Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

    2.1 Rising Wage Premia for Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

    2.2. Prospects for Job Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

    2.3. Migrant workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

    2.4. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

    3. The Impact of Governance and Financing on Quality and

    Equity of Tertiary Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

    3.1. Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

    3.2. Accreditation and Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

    3.3. Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

    3.4. Tuition Fees and Student Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

    3.5. Strategies of the Updated Education Sector Master Plan . . . . . . . . . . . . . . . . . . . . . . . . 26

    4. Policy Options to Reform Tertiary Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

    4.1. Differentiate Roles of TEIs and Improve System Articulation

    to Facilitate Lifelong Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

    4.2. Concentrate Resources to Fund Premier Universities

    through Competitive Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

    4.3. Higher Education Commission and Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . 32

    4.4. Public Accountability and Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

    4.5. Better Targeting of Financial Aid and

    Improvement of Basic Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

    5. Technical and Vocational Education and Training:

    An Alternative to Tertiary Education? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

    5.1. The Structure and Outcomes of Mongolias TVET system . . . . . . . . . . . . . . . . . . . . . . . 39

    5.2. Challenges to the Quality of Mongolias TVET System . . . . . . . . . . . . . . . . . . . . . . . . . 40

    5.3. Options to Improve Quality and Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

    6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

    References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

  • ii MONGOLIA HIGH EDUCATION POLICY NOTE

    LIST OF TABLES

    Table 1: Growth of the Tertiary Education Sector, 1991-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

    Table 2: Tertiary Graduates per 10,000 Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

    Table 3: Gross Enrollment Rates by Level, 1991, 1995, 2000 and 2007 . . . . . . . . . . . . . . . . . . . . 3

    Table 4: Wage Premia of Various Levels of Education, 1998 and 2007 . . . . . . . . . . . . . . . . . . . . 8

    Table 5: Wage Premia for Different Levels of Educational Attainment,

    1998 and 2007 by Age Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

    Table 6: Distribution of Wage Employees by Sector, 1998, 2002, and 2007 . . . . . . . . . . . . . . . 10

    Table 7: Public Expenditure on Education, 1991, 2002 and 2007 . . . . . . . . . . . . . . . . . . . . . . . 18

    Table 8: Sources of Funding of Tertiary Education Institutions, 2007 . . . . . . . . . . . . . . . . . . . . . 19

    Table 9: International Comparison of Per Student Spending

    By Level of Education (US Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

    Table 10: State Training Fund Recipients by Program Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

    Table 11: A Cross Country Comparison of Tuition Fees as Percentage

    of per capital Gross National Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

    Table 12: State Training Fund Allocation of Resources, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

    Table 13: Proportion of College Costs Covered by Tuition/Financial Aid . . . . . . . . . . . . . . . . . . . . 25

    Table 14: Tripartite System of Tertiary Education in Selected OECD Countries . . . . . . . . . . . . . . . 28

    Table 15: Ranking of the Worlds Top Universities, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

    Table 16: Spatial and Income Disparities in Educational Completion Rates. . . . . . . . . . . . . . . . . . 38

    Table 17: Basic Outcomes of TVET in Mongolia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

    LIST OF FIGURES

    Figure 1: Enrollment Ratio by Age, 1998 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

    Figure 2: Age Earning Profiles of Workers between 25 and 55, 1998 and 2007 . . . . . . . . . . . . . . 7

    Figure 3: Characteristics of World Class Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

    Figure 4 : The Widening of STF Eligibility Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

  • MONGOLIA HIGH EDUCATION POLICY NOTE iii

    LIST OF BOXES

    Box 1: Californias System of Universities and Community Colleges . . . . . . . . . . . . . . . . . . . . 29

    Box 2: Competitive Funding as an Innovative Financing Tool . . . . . . . . . . . . . . . . . . . . . . . . . 32

    Box 3: New Zealands Tertiary Education Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

    Box 4: How Singapore is proposing to deal with the proliferation

    of private tertiary education institution to assure quality . . . . . . . . . . . . . . . . . . . . . . . 35

    Box 5: Labor Market Observatories in Italy and Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

    Box 6: Singapores Institute of Technical Education (ITE) Curriculum Development Model . . . . 43

    Box 7: Denmarks TVET Teachers Qualification and Training . . . . . . . . . . . . . . . . . . . . . . . . . 44

    Box 8: The Australian Qualification Framework (AQF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

    LIST OF ANNEXES

    Annex 1: Mongolias Educational Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

    Annex 2: Years of Schooling of the Younger and Older Adult Population . . . . . . . . . . . . . . . . . . 52

    Annex 3: Tertiary Premia by Year, Age Group, Gender and Sector of Employment . . . . . . . . . . . 53

    Annex 4: Aggregate Institutional and Enrollment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

    Annex 5: Enrolment Data, by Degree Level and Type of Institution . . . . . . . . . . . . . . . . . . . . . . . 62

    Annex 6: Enrolment by Subject and Degree Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

    Annex 7: Students Supported by Financial Assistance, by Degree Level and Institutional Type 68

    Annex 8: Faculty Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

    Annex 9: Recent Research Excellence Initiatives Worldwide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

  • iv MONGOLIA HIGH EDUCATION POLICY NOTE

    ACKNOWLEDGEMENTS

    The preparation of this policy note was led by Kin Bing Wu (Lead Education Specialist, EASHD). Prateek Tandon (Economist, EASHD) wrote the sections on tertiary education development, finance, and accreditation. Fook Yen Chong (Consultant) assessed the system of technical and vocational education and training. Chris Sakellariou (Consultant) analyzed the Living Standard Measurement Surveys to obtain trends of the labor market, and Roberta Bassett provided useful information on New Zealands Tertiary Education Commission. Ms. Tungalag Chuluun (Human Development Operations Officer) provided helpful advice on the substance and also provided quality assurance on the translation of this policy note into the Mongolian language. The policy note benefited from discussion on South Gobi development with Arshad Sayed (Country Manager, Mongolia, EACMF) and James Reichert (Senior Operations Officer, EASCS).

    The Team is grateful to the Minister of Education for framing the policy questions for tertiary education reform and for guiding the team in the direction of its research. We thank Mongolian officials and academics for sharing their insight and information on the countrys higher education system, particularly Mr. M. Baasanjav, Director of Tertiary Education Department, Mr. R. Bat-Erdene (Director of the Monitoring and Evaluation Department and former Director of the Tertiary Education Department); Ms. D. Khishigbuyan (Director of the Rural Education and Development Project PMU); Mr. O. Gankhuyag (Deputy Director, EFA-FTI); Mr. A. Tsolmon (Officer in the Monitoring and Evaluation Department); Mr. D. Bayar (Officer in the Tertiary Education Department); Mr. Ts. Erdentsetseg (Officer in the Education Evaluation Center); and Ms. D. Chuluuntsetseg (Senior Officer for External Relations and Program Accreditation of the National Accreditation Center) for their helpful advice and guidance. Byambatsogt Jugder (Consultant) shared with us his knowledge and insight, including the direction of revision of the Master Plan. We are also grateful to representatives from Ivanhoe Mines, LLC and the Mongolia Employers Federation for sharing their perspectives on the education and training system in the country.

    Peer reviewers for this note are Jamil Salmi (Lead Education Specialist, HDNED) and William Experton (Lead Education Specialist, AFTH2).

  • MONGOLIA HIGH EDUCATION POLICY NOTE v

    EXECUTIVE SUMMARY

    Since the transition from a planned economy to a market-based democracy in the early 1990s, Mongolian higher education has experienced a marked expansion. Between 1992 and 2007, the number of tertiary education institution (TEIs) has increased more than four-fold and enrollment more than six-fold, with the gross enrollment ratio growing from 14 to 47 percent.

    This rapid growth has been fueled by the increased demand for higher skills in the labor market and has led to rising education premia. These trends, in turn, have stimulated increased household demand for tertiary education. In the early 1990s, the liberalization of the economy and the legalization of private higher education made it possible to increase the supply of tertiary education. However, this expansion in supply has been met with the charging of tuition fees in public universities and the growth of private institutions. As a result, public expenditure on higher education has been contained to about 14 percent of total expenditure, compared with over 20 percent in China.

    Although this policy has met the need for an increased supply of tertiary education, it has failed to produce graduates who can improve Mongolias international competitiveness. The emerging problems are low-cost and low-quality education, a mismatch between the demand for and supply of skills, and inequitable opportunities of access between the urban and rural areas and between the rich and the poor. The policy has triggered a downward spiral:

    Per student public expenditure on tertiary education is about $339, low by international standards. In contrast, the average per student public expenditure on tertiary education in OECD is $11,512. Insufficient public funding and the proliferation of small private institutions have driven TEIs to rely on the mass admission of fee paying students for financial sustainability.

    As a result, TEIs have few resources to attract highly qualified persons into teaching, improve teaching and learning facilities, or upgrade the qualification and skills of faculty members. A full professors salary in a public TEI is about $300 a month, with little distinction from that of a school teacher. The salary of professors in private institutions varies more, but is generally not much higher. Only 23 percent of faculty members in public institutions and 15 percent in private institutions have PhDs, reflecting the non-research nature of higher education. There are few incentives or resources for professional development or upgrading.

    Moreover, there is a mismatch between the fields of study demanded by the labor market and the fields of study chosen by those enrolled. Most private TEIs offer social science and business studies because of lower delivery costs. But the labor market demand is in science and technology, which accounts for only 23 percent of the total enrollment.

  • vi MONGOLIA HIGH EDUCATION POLICY NOTE

    As tertiary education enrollment grows more quickly than the number of available jobs, ill prepared graduates face grim employment prospects. Only about 36 percent of university graduates have been able to find a job, compared with 60 percent of graduates from technical and vocational education. The majority of those who find a job come from public universities.

    Yet, as tertiary education premium remains high, urban parents who can afford to pay continue to send their children to pursue tertiary education. About 70 percent of students are from urban areas, although only half of the population live in the urban areas. Tuition fees in public and private TEIs, however, are high and average around $300 per year with variation across institutions.

    These fees contribute to households indebtedness. About 67 percent of the personal loans taken by herders are spent on tertiary education.

    This indebtedness is partly a lack of publicly available information on the quality of education offered by each institution and about the employment prospects of the graduates from different disciplines. Hence, the consumers of education (i.e. parents and youths) are not making informed choices.

    There is thus an urgent need to reform the tertiary education subsector. This policy note calls for several actions to improve quality and the equity of access.

    Enhancing the quality of tertiary education is essential to improving Mongolias international competitiveness. To do so requires making strategic choices, improving governance, and increasing investments in tertiary education. The following steps should be considered:

    Rationalize TEIs in order to concentrate resources on fewer, premier institutions and programs to help them reach international standards;

    Use competitive funding to allocate resources (such as equipment and staff training) to the best programs (as measured by key performance indicators and labor market outcomes) on a tri-annual basis to allow for predictability of funding and to give time to demonstrate outcomes;

    Invigorate the existing accreditation and quality assurance mechanisms, using international benchmarks, to facilitate rationalization of public and private institutions and to allow for good quality offshore programs to compete in Mongolia;

    Develop a diversified but integrated tertiary education system so that each institution can play a key role in regional development and transfers between institutions can be made; and

    Establish a Tertiary Education Commission comprising representatives from industry, key professions, and academics from developed countries to set strategic direction, improve governance, allocate block grants, and oversee the role of TEIs in facilitating regional development.

  • MONGOLIA HIGH EDUCATION POLICY NOTE vii

    To improve the equity of access and to provide greater consumer protection, the following measures could be adopted:

    Tighten eligibility criteria and improve the targeting of the State Training Fund to aid low-income students;

    Improve the quality of basic education to ensure that the poor complete schooling so as to enhance the probability of their enrollment in higher education; and

    Set up a labor market observatory to inform the public about the key performance indicators of each institution and employment statistics by discipline to facilitate school and career choice.

    To reduce the pressure on tertiary education and provide alternatives to youths, the development of technical and vocational education at the senior secondary level should be explored.

  • viii MONGOLIA HIGH EDUCATION POLICY NOTE

    Summary of Issues and Options

    Subsector Issues Recommendations

    Tertiary Education

    Low Cost and Low Quality:

    Establish a Tertiary Education Commission comprising representatives from industry, key professions, and academics from developed countries to set strategic direction, allocate block grants, and oversee the role of TEIs in facilitating regional development Create institutional rankings based on quality of programs, research output of faculty, and facilities available Introduce incentive mechanisms to encourage institutions to carry out quality assurance, quality improvement, and participate in accreditationInvest in a national system of faculty training, skills standardization and certification to allow staff to continuously advance their skills, knowledge, and qualificationsIntroduce Competitive Funding to allocate resources in a more strategic mannerIntroduce fee-generating short courses with selective admission for professional development and upgradingProvide public finance in the form of scholarships to faculty members who have been admitted to overseas institutions, and support a systematic upgrading program (including attachment to industries)Establish a monitoring and evaluation system to ensure the implementation of suggested improvements

    Mismatch between Skill Supply and Demand:

    Finance tracer studies to be used as a market signal to inform the admissions processPublish employment statistics by subject areas and by institutions so that new entrants can make decision as to whether and where they want to enrollShift students to more relevant disciplines to realign the supply of skills to the demands of the labor market

    Inequitable Access:

    Reform the structure, capacity, targeting, and operation of the State Training FundIntroduce a monitoring and evaluation system for the State Training Fund to track the extent to which its programs reach its targeted groups

  • MONGOLIA HIGH EDUCATION POLICY NOTE ix

    Summary of Issues and Options

    Subsector Issues Recommendations

    TVET Poor Quality of Infrastructure and Equipment:

    Work with industries to obtain donated of equipmentChannel resources into the updating of equipmentCreate practical training workshops on infrastructure rehabilitation

    Fragmented Governance:

    Create a new TVET agency, absorbing the National Vocational Education Training and Methodology Center, to support vocational standards, curriculum development, certification procedures, teacher training, school management and training facilities

    Lack of Opportunities for Faculty Skill Upgrading:

    New TVET agency to specify minimum teachers qualificationExisting teachers to attend in-service training on pedagogy and industrial attachments with industry partnersNewly recruited teachers to receive pre-service training for both pedagogy as well as technical skills

    Limited Collaboration with Industry:

    Increased participation by employers and unions in reviewing training courses, setting occupational standards, offering on-the-job training and developing bridge programs between school and work, such as apprenticeships and internships

    Inefficient Financing: Encourage public-private partnerships and private investmentReview funding of stipends to students so that more funding is channeled to those attending courses that have strong demand from employers

  • MONGOLIA HIGH EDUCATION POLICY NOTE 1

    1. CHALLENGES TO POST-BASIC EDUCATION

    1.1. EDUCATIONAL DEVELOPMENT SINCE THE TRANSITION

    Universities educate future leaders and develop the high-level technical and managerial capacities that underpin economic growth. Specifically, they perform three critical roles teaching, service to the community, and research and development. In an age of rapid technological change and globalization, the role played by institutions of higher learning is indispensible: they facilitate regional development and are an integral mechanism of national development. Recognizing the importance of tertiary educations contribution to development, Mongolia has rightly prioritized reform of its tertiary education system as a key aspect of its efforts to achieve economic growth and employment-based poverty reduction.

    1.1.1. Tertiary Education

    Mongolias rapid expansion of its tertiary education system has been a key element in its successful transition from a planned to a market-based economy, which grew at an annual average of 9 percent between 2004 and 2008.1 The gross enrollment ratio (GER) increased from 14 percent in 1991 to 47 percent in 2009 (Table 1). The total number of students rose from some 20,000 to about 150,000 during the same period. This rapid growth was stimulated by the increased demand for skills in the market economy, which has fueled the private demand for tertiary education, and was enabled by the legalization of private institutions in 1991.

    The increase in supply has been driven by private expansion, but state institutions continue to have a strong presence in the sub-sector. The number of tertiary education institutions (TEIs) grew from 14 to 151 in 2009, of which 72 percent is private, and has been accompanied by several positive outcomes. Mongolias GER in tertiary education is more than twice as high as Chinas 23 percent, and closer to the OECDs average of over 55 percent. It should be noted, however, that although 72 percent of TEIs are private, 66 percent of students still enroll in public TEIs. The student-to-teacher ratio in Mongolia is 22:1, similar to South Koreas, although slightly lower than OECDs average of 16:1. The availability of student financial assistance has mitigated to some extent the adverse impact on access.

    1 The Governments Economic Growth Support and Poverty Reduction Strategy (EGSPRS) has specifically called for improving the quality of and access to tertiary education services, and the Governments Education Sector Master Plan (ESMP2) has set the twin goals of establishing a world-class university system and transforming Mongolia into a knowledge economy. With respect to tertiary education, the ESMP2 identifies three main policies: (1) to upgrade education quality and produce citizens who can function effectively in a modern knowledge economy; (2) to provide education services that can be accessed by students in all parts of the country, including rural areas, and by poor and vulnerable groups; and (3) to improve the management capacity of central and local educational institutions.

  • 2 MONGOLIA HIGH EDUCATION POLICY NOTE

    Table 1: Growth of the Tertiary Education Sector, 1991-2009

    1991 2009 % increase, 1991-2009

    Share of total, 2009

    Number of TEIs 14 151 979% 100%

    Public 14 42 200% 28%

    Private - 109 - 72%

    Number of Students 20,000 150,326 652% 100%

    Public 20,000 99,037 395% 66%

    Private - 50,878 - 34%

    Source: MECS statistics.

    Note: The number of institutions in 2008 was higher, but this table presents the most updated statistics.

    In addition to the national education system, Mongolians also have access to education overseas. During the socialist era, thousands of students attended universities in the former Soviet Union, as well as Eastern European countries such as East Germany, Czechoslovakia, Hungary, and Yugoslavia. Many government officials were graduates of overseas universities. After the transition, the academic connection with Russia and some newly independent states continued, while many more went to Singapore, Australia, the United Kingdom, and the USA. The vast majority of these students were self-financed, 80 percent of whom attended institutions in Singapore. In 2010, the Government of Mongolia (GoM) set up a program to fund and place Mongolian graduate students into U.S. universities through the Fulbright Program. It is clear that the formation of high level skills is not restricted to TEIs in Mongolia. Rather, it has a global reach.

    As a result of the rapid development of tertiary education, Mongolia compares well with other developed countries (Korea, Japan, USA and UK) and middle income countries (such as Mexico and Brazil) in terms of graduates per 10,000 population (Table 2).

    Table 2: Tertiary Graduates per 10,000 Population

    2003 2004 2005 2006 2007

    Mongolia 73 84 88 91 N/A

    Korea 127 126 126 125 125

    Japan 81 82 83 84 83

    USA 81 84 87 89 90

    UK 101 100 105 106 107

    Mexico 34 34 37 40 N/A

    Brazil 31 36 41 N/A 43

    Source: World Banks EdStat database, and OECD Education at a Glance (2009).

  • MONGOLIA HIGH EDUCATION POLICY NOTE 3

    1.1.2. Basic Education

    In contrast with tertiary education after the transition, pre-primary, primary, lower secondary and upper secondary education suffered a severe decline throughout the 1990s and has only recovered in recent years (Table 3). Both the supply of and demand for these subsectors have been adversely affected by the contraction of fiscal and household expenditures and by the dismantling of the collectives and social safety nets which provided these services. These trends began to reverse starting at the turn of the 21st century.

    Table 3: Gross Enrollment Rates by Level, 1991, 1995, 2000 and 2007

    Pre-primary PrimaryLower

    SecondaryUpper

    SecondaryTertiary

    1991 39% 97% 82% 69% 14%

    1995 21% 88% 59% 21% 15%

    2000 28% 99% 63% 28% 29%

    2007 54% 94%* 89% 54% 47%

    Source: Edstats 2008 and MECS statistics.

    Note: the GER of 94% in 2007 is due to the lowering of the entry age in primary education from 8 to 7 in 2004-5, and from 7 to 6 in 2008-9. This entails expanding the number of school-age children which is used as a denominator for estimating the enrollment ratio. It does not mean reduced coverage.

    Recognizing the importance of providing more and better basic education to all school-age children on the grounds of equity and the need to deepen human capital, the GoM began an important structural reform by adding an 11th year to the primary-secondary education cycle in 2004-2005 and subsequently added a 12th year beginning in 2008-2009. The reform addresses the very short (10-year) primary-plus-secondary cycle that existed in Mongolia prior to 2004-2005.

    An analysis of the Living Standard Measurement Surveys (LSMS) of 1998 and 2007 found that due to improved education conditions and the lowering of school-entry age, more children have entered schools earlier and have stayed longer (Figure 1). It also shows that a larger group of youths who have completed secondary education continue on to tertiary education. The same trends are apparent for both boys and girls (Annex 4, Table A4.6). Compared to 1998, enrollment ratios disaggregated by gender were much higher in 2007; this trend is particularly pronounced for girls entering secondary school and tertiary education. There have also been impressive enrollment trends among the rural population (Annex 4, Table A4.7). While both rural and urban enrollments increased in 2007 compared to 1998, significantly more rural students have enrolled in secondary education and are staying in the system longer.

  • 4 MONGOLIA HIGH EDUCATION POLICY NOTE

    Figure 1: Enrollment Ratio by Age, 1998 and 2007

    0

    20

    40

    60

    80

    100

    120

    6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

    19982007

    Enrollment by Age, 1999 and 2007

    Age

    Enro

    llmen

    t R

    atio

    Source: LSMS, 1998 and 2007.

    Figure 1 also shows that enrollment in basic education for the 8 to 15 age group has still not reached 100 percent. Boys, girls, rural, and urban student enrollments start tapering off by age 14, and rural students still have the furthest to go. Overall, Mongolias basic education completion rate is only 77 percent, lower than other transitional economies, such as Armenia (87 percent) and Tajikistan (90 percent). These data indicate that that Mongolian education policy is facing the serious challenge of a trade-off between basic and tertiary education in the medium term and also explain the urban and rural disparity in access to tertiary education.

    Demographic trends show that the 20-24 age-group constitutes the largest cohort in the population in 2010, with 342,000 people, or about 13 percent of the total population (US Census Bureau projection, also see Annex 2). Therefore the social demand for tertiary education is also the highest. By 2020, this cohort is projected to decline to 283,000, thereby reducing pressure for this subsector. This shift presents an opportunity to improve quality while expanding the gross enrollment ratio for tertiary education, even if everything is held constant. At the same time, with a total fertility rate of 2.24, the number of school-aged children in the country will increase by almost 40 percent (Annex 2). The education system will need to adjust to accommodate greater numbers of students in lower levels of education in the coming decades.

    This policy note looks primarily at the tertiary education subsector but also reviews the technical and vocational education and training (TVET) subsector in order to assess policy options to meet the demand of the economy and the aspiration of parents and students for social mobility.

  • MONGOLIA HIGH EDUCATION POLICY NOTE 5

    1.2. KEY POLICY QUESTIONS SURROUNDING TERTIARY EDUCATION

    Given the history of Mongolian tertiary education development, three factors appear to be inhibiting its ability to improve the countrys competitiveness: (i) low cost and low quality; (ii) a mismatch between the supply of and demand for skills; and (iii) inequitable access that perpetuates the wealth gap and rural-urban disparities.

    Low-cost and low-quality. First, this subsector has expanded with low cost and low quality. Due to underfunding, per student public expenditure on tertiary education is about $339, slightly higher than per student expenditure of $206 in primary education and $285 in secondary education. This is far below the OECDs average of $11,520 (Table 8). Low-cost TEIs can ill afford to use high salaries to attract qualified faculty members, or invest in better learning facilities or skill upgrading for staff. A full professors salary in both public and private TEIs is about $300 a month, with little distinction from that of a school teacher. Insufficient funding has driven even public tertiary education institutions to rely on the mass admission of fee paying students for financial sustainability, further driving down the standards.

    Poor labor market outcomes and mismatch of skills. A low-cost and low-quality system that relies on mass enrollment to sustain itself predictably over-produces ill-prepared graduates with grim employment prospects. In recent years, only about 36 percent of university graduates were able to find a job (MECS 2008). This is likely due to the over-supply of poorly prepared graduates in fields with low demand. By comparison, the official employment rate for TVET graduates was 60 percent2 in 2008.

    Data from Mongolias Labor Force Survey indicate that most of those unemployed in 2002-2003 had an educational attainment of either incomplete secondary (34 percent) or completed secondary (33 percent). Data from the School-to-Work Transition Survey indicate that, among people aged 15-29, unemployment rates were lower for vocational education graduates (15 percent) than for general secondary (22 percent) and lower for those with technical diplomas (8 percent) than for a tertiary degree (12 percent). The labor market outcomes of graduates from tertiary education and TVET raises serious questions of how best to match supply with demand.

    Inequitable access. There are obvious disparities in enrollment between rural and urban areas, and between high and low income groups. Although post-basic education has never aimed for universal access, the inequality in opportunity is striking: 71 percent of all students in tertiary education come from urban areas, although half of the population live in rural areas. This is in large part due to lower academic achievement and lower school completion rates of rural students; the charging of tuition fees presents a prohibitive barrier for aspiration. Fees on average cost about $300 per annum. However, for herding families with multiple children, it would be very difficult to finance all childrens tertiary

    2 This figure is derived from the MECS official statistical yearbook. A World Bank mission recently visited selected TVET schools in Ulaanbaatar and Selenge. All visited schools reported employment rates in excess of 80 percent, though they were unable to provide formal tracer study of their graduates. Interviewed school directors said that they surveyed their students on an informal basis. MECSs Information, Monitoring and Evaluation Department confirmed that there is no formal survey or tracer study to collect data on TVET school leavers by TVET schools.

  • 6 MONGOLIA HIGH EDUCATION POLICY NOTE

    education. About 67 percent of debts incurred by herders are spent on higher education. Even if families can borrow to pay for the direct cost of schooling, few can afford the opportunity cost of not getting their children involved in economic activities.

    It should be noted that student financial assistance from the State Training Fund (STF) is available to help low income students to offset their cost. However, the fund is poorly targeted and eligibility covers a number of categories, including civil servants. Thus, the fund cannot be counted on to offset the tuition fees or living expenses of a tertiary education.

    There is a broad consensus in Mongolia that the tertiary education system should aim to strengthen quality in order to produce the professional and technical manpower to meet the needs of the economy and improve Mongolias competitiveness. There is also consensus that equity of access and efficiency of the use of public resources should be improved. There are thus two sets of policy questions:

    Is there an oversupply of tertiary education graduates, given low employment rates? Should there be a policy to contain the growth of enrolment? If not, what are the options to improve quality?

    What options are available to meet the skill demand of the economy and aspiration for employment of parents and youths?

    This study will examine the following areas in order to answer the aforementioned policy questions and assess the policy options for both tertiary education and TVET:

    Demand for skills: What is the wage premium of the 25-34 age group, compared with the older age group of 35-55? What are the implications for the demand for skills and, hence, for the policy towards tertiary education and technical and vocational education and training?

    The impact of governance and finance of tertiary education on quality and equity: How is tertiary education governed? How has the proliferation of tertiary education institutions affected the financing of public and private tertiary education, and how have these financing trends affected equity and quality? Is the existing system of accreditation adequate to assure quality?

    Policy Options for Reform: What should be done to break the vicious cycle of low-cost and low quality education from the perspective of governance and finance and to protect the consumer?

    TVET as alternative to tertiary education: How feasible is it to channel more students from tertiary education to TVET? What are the key challenges in TVET? And what needs to be done to address them?

  • MONGOLIA HIGH EDUCATION POLICY NOTE 7

    2. THE DEMAND FOR SKILLS

    Since the opening of the economy in the early 1990s, Mongolia has experienced a surge in the demand for skills. This is the underlying factor for the growth in demand for tertiary education. Better understanding of the demand for skills would help steer education policy with respect to which subsector and which discipline to invest in, and what kind of trade off needs to be made.

    2.1. RISING WAGE PREMIA FOR SKILLS

    An analysis of the Living Standard Measurement Surveys (LSMS) undertaken by the World Bank, found that wages have undoubtedly risen and, predictably older workers had higher wages between 1998 and 2007 (Figure 2).

    Figure 2: Age Earning Profiles of Workers between 25 and 55, 1998 and 2007 (Hourly Wage)

    0

    200

    400

    600

    800

    1000

    1200

    1400

    1600

    25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55

    Hwage-1998

    Hwage-2007

    Source: LSMS, 1998 and 2007.

    Wage earners with a university education command the highest wage premia compared with both workers with no education and workers with other levels of education. Table 4 shows the following trends between 1998 and 2007:

  • 8 MONGOLIA HIGH EDUCATION POLICY NOTE

    A reduced wage premia of junior secondary education over that of primary education (-0.231);

    An increase in the wage premia of high school vocational education over that of primary education (0.349) is higher than that of general high school education (0.093), signaling the increasing demand for vocational skills among high school graduates;

    An increase in the wage premia of university educated graduates (0.408) over that period, whose magnitude is only second to graduates of vocational high schools; and

    An increase in the wage premia of tertiary diploma (mostly awarded to tertiary level TVET graduates) (0.639) which is the highest among all adult workers.

    Table 4: Wage Premia of Various Levels of Education, 1998 and 2007

    1998 2007

    Change 1998-2007

    Primary

    Junior Sec./primary

    Senior Sec./ primary

    General high school/primary

    Vocational high school/primary

    Tertiary Diploma/primary

    University/primary

    -0.250

    0.521

    0.603

    0.650

    0.525

    0.667*

    0.979*

    0.116

    0.290*

    0.786*

    0.743*

    0.874*

    1.306*

    1.387*

    0.366

    -0.231

    0.183

    0.093

    0.349

    0.639

    0.408

    *Statistical significant except for primary.

    Source: Sakellariou, 2009. Industry and Skill Premia in Asia. Background Paper for the World Banks Regional Study on Skills. Preliminary Draft.

    These data signal growing demand for higher levels of skills, particularly those developed by technical and vocational education. The rising wage premia for higher levels of skills are not inconsistent with low employment rates among tertiary education graduates. It merely indicates that the labor market sorts well trained graduates with the right skills from those who do not.

    Further analysis of the wage premia found a distinctive pattern between the younger and the older age groups, between men and women, and between the public and private sector of employment (Table 5 and Annex3):

    First, males between the 25-34 age group, who have had tertiary education appeared to enjoy greater growth in the wage premium between 1998 and 2007, a testimony to why there is a strong household demand for tertiary education.

  • MONGOLIA HIGH EDUCATION POLICY NOTE 9

    The wage growth between 1998 and 2007 was much less for tertiary educated women (by a factor of nearly 10), but their wage premium was much higher than that for men in 1998 (1.22 vs. 0.68) (Annex3, Tables A1 and 2).

    Furthermore, the wage was higher for those employed in the private sector during each period of observation.

    For older workers, those aged 35 and 55, men had a higher wage premium than women, but wage growth was higher for women.

    Those who worked in the public sector had higher growth in their wage premium than the private sector.

    Table 5: Wage Premia for Different Levels of Educational Attainment, 1998 and 2007 by Age Group

    Education Premiums (vs. No Education):

    1998 2007 Change (%) (1998-07)

    25-34 Age Group Primary Lower Secondary Secondary General completed Secondary Vocational Tertiary Diploma University R-sq adjusted N

    (dropped) 0.515 0.392 0.376 0.531 0.827

    0.025 384

    -0.304 -0.082 0.458*

    0.679*** 1.01*** 1.18***

    0.180 2,549

    -

    16.84 80.6 90.2 42.7

    35-55 Age Group Primary Lower Secondary Secondary General completed Secondary Vocational Tertiary Diploma University R-sq adjusted N

    0.839 1.34** 1.63*** 1.45** 1.61*** 1.94***

    0.100 702

    0.172

    0.554*** 0.976*** 1.15*** 1.64** 1.69***

    0.157 4,739

    -79.5 -58.7 -40.1 -20.7 1.8

    -12.9

    Note: Based on a Mincerian regression with basic controls. Percentage changes were not calculated when premiums for both years were statistically insignificant.

    Source: LSMS, 1998 and 2007.

  • 10 MONGOLIA HIGH EDUCATION POLICY NOTE

    2.2. PROSPECTS FOR JOB GROWTH

    In which sectors did job growth occur? Data from the LSMS show that mining is the fastest-growing sector: employment increased by 671 percent for the 25-34 age groups between 1998 and 2007 (Table 6). Mining also attracts a greater number of younger workers than older ones as reflected in the lower growth of 295 percent among the 35-55 age groups (Table 6). Construction is the sector with the second fastest growth rate between 1998 and 2007 for the 25-34 age group (368 percent), while transport and communication came third (110 percent). This suggests that the labor market has potential absorptive capacity for the younger population and demand for technical, vocational, and engineering skills.

    Table 6: Distribution of Wage Employees by Sector, 1998, 2002, and 2007

    Industry 1998 (%) 2007 (%) Change (%)

    (1998-07)

    25-34 Age Group Agriculture Mining Manufacturing Utilities Construction Trade Transport/Commun. Public admin. Services

    (n=383) 4.18 0.78 4.69 3.39 2.08 9.89 6.77 25.52 42.56

    (n=2,579) 1.86 6.01 9.93 3.44 9.74 11.02 14.19 9.55 34.25

    -55.5 670.5 111.7 1.5

    368.3 11.4 109.6 -62.6 -19.5

    35-55 Age Group Agriculture Mining Manufacturing Utilities Construction Trade Transport/Commun. Public admin. Services

    (n=700) 6.43 1.28 4.70 3.85 3.56 5.13 7.26 22.36 45.29

    (n=4,780) 3.28 5.06 9.50 5.84 8.37 7.85 10.66 10.91 38.52

    -49.0 295.3 102.1 51.7 135.1 53.0 46.8 -51.2 -14.9

    Source: LSMS, 1998 and 2007.

    This labor market snapshot is corroborated by the rising importance of these sectors in the economy. Mongolia is well endowed with mineral deposits, including copper, coal, gold, and uranium. Revenue from the mining sector, for example, contributed nearly 45 percent of the 2008 state budget and accounted for nearly 28 percent of GDP. The Erdenet mining company alone accounted for 12 percent of the countrys GDP in 2008. The transportation and communications sectors accounted for nearly 13 percent of GDP.

  • MONGOLIA HIGH EDUCATION POLICY NOTE 11

    These trends are likely to continue in the future. Because of Mongolias mineral wealth, many investors have shown great interest in the high growth potential in South Gobi, where there is a huge deposit of coal, gold, and copper. As the World Banks Southern Infrastructure Strategy for Mongolia points out, the need for skilled mining and construction workers will be very large in the region and is expected to require at least 7,000 additional workers. These workers would be involved in various infrastructure development projects surrounding the mines such as township development, road construction, mine equipment operations and maintenance, and railway construction. Besides the increased quantity of imported labor expected to be brought in to the region, training facilities will need to be established to help locals benefit from new mining-related jobs, help upgrade locals skills, and ensure a supply of suitably skilled labor to the mining industry.

    Over the medium term, mining companies are beginning to prepare for the transformation of the sector. Ivanhoe Mines Mongolia LLC, for example, expects to hire 3,000 workers in the region for its steady-state operations and about 8,000 workers during the construction phase of its mining work in the South Gobi. Energy Resources LLC also forecasts a similar jump: it aims to double the current number of workers to 800 by end of 2009 and 1,500 in three years time. Both companies are concerned about the inadequacy of competent (skill and knowledge) workers and wish to be actively involved in the training of mine workers through formal collaboration with MECS. Some of these companies are planning to bring in migrant workers (mostly from neighboring China) to work until Mongolian workers are available.3

    Similarly, the Mongolia Employers Federation, a national NGO representing the interest of 8,300 businesses in Mongolia, has acknowledged the gap between the expectations of employers and the technical competencies of TVET graduates. They have argued that TVET graduates appear to have very little competence with regards to occupational health and safety or high technological skills and are currently advocating for curricular reform in the subsector.

    The sentiment expressed by these employers appears to be supported by data on student enrolment by discipline (Annex 5). Only 23 percent of students are enrolled in science and technology courses in 2008 (areas in demand by employers), versus over 50 percent who enrolled in the social sciences and the arts (areas with low demand). It is not surprising, then, that a skills mismatch dominates the labor market.

    Thus, given the potential for development, there appears to be a strong need to improve the quality of tertiary education and realign the supply of skills to the demands of the labor market. To do this entails reforming this subsector in several important ways, detailed in the following sections.

    3 Interview with mining official.

  • 12 MONGOLIA HIGH EDUCATION POLICY NOTE

    2.3. MIGRANTWORKERS

    The above description of the labor market does not include migrant workers. South Korea is the most important destination for Mongolian export workers. There are roughly 30,000 Mongolians, in addition to the domestic workforce of 1.1 million, working in South Korea. If the self-employed and herders are excluded as denominator, the wage earning jobs in South Korea may add about 6 percent to the total number of jobs. There are other jobs held by Mongolians in neighboring and far away countries, although such statistics are not available.

    At the same time, there are about 15,000 Chinese migrant workers in Mongolia, mostly in construction. Some of these jobs filled by Chinese workers are low wage jobs which are not attractive to Mongolians. Others are skilled jobs for which Mongolians may not be qualified.

    In the age of globalization, it would no longer be viable to plan for education with only the national labor market in mind. Remittances from migrant workers have increasingly become a major source of wealth and migration relieves pressure on the domestic labor market. In Bangladesh, for example, which is also a large labor-exporting country to the Middle East and

    Southeast Asia, remittances from migrant workers amount to 10 percent of GDP. Hence, in making policy for education, Mongolia would be well served by taking into account the demand for skills beyond its border.

    2.4. CONCLUSION

    On the basis of the above evidence, given the potential for development, there appears to be a strong need to improve the quality of tertiary education and realign the supply of skills to the demands of the labor market. To do this entails reforming not only tertiary education but also technical and vocational education in several important ways.

  • MONGOLIA HIGH EDUCATION POLICY NOTE 13

    3. THE IMPACT OF GOVERNANCE AND FINANCING ON QUALITY AND EQUITY OF TERTIARY

    Governance and financing impinge on the quality of education. A World Bank study on world-class universities finds that they have three features: (a) favorable governance; (b) abundant resources coming from public budgets, endowment, tuition fees and research grants); and (c) excellent teaching staff, research and students (Salmi, 2009). Figure 3 presents these characteristics schematically. This chapter uses the concept of world-class universities to assess which features are present in Mongolian tertiary education and what could be improved.

    Figure 3: Characteristics of World Class Universities

    Public Budget Resources

    Endowment Revenues

    Tuition Fees

    Research Grants

    SupportiveRegulatoryFramework

    AutonomyAcademic Freedom

    Leadership TeamStrategic VisionCulture of Excellence

    Dynamic

    Knowledge &

    Technology

    Transfer

    WCUTop

    Graduates

    Students

    Teaching Staff

    Researchers

    Leading-Edge

    Research

    CONCENTRATION

    OF TALENT

    ABUNDANT

    RESOURCES

    FAVORABLE

    GOVERNANCE

    Source: Adapted from Salmi (2009).

    3.1. GOVERNANCE

    Governance encompasses the framework in which an institution pursues its goals and policies in a coherent and coordinated manner. Governance structures are extremely diverse across countries. On one side of the spectrum is the highly decentralized system in the USA with state university systems for publicly funded universities and private universities governed by their own board. On another side of the spectrum are British Commonwealth countries (UK, Australia, India, Pakistan, etc) where tertiary education is steered by the Commission on Higher Education, or the University and Polytechnic Grants Commission, which are independent from the Ministry of Education, often comprise of representatives from industry and the private sector, as well as academics from other countries, and allocate budgets based on multi-year plans generated by tertiary education institutions. On yet another side of the

  • 14 MONGOLIA HIGH EDUCATION POLICY NOTE

    spectrum lays countries whose ministries of education make policy for tertiary education. While there is no single system that is intrinsically better than others, there are elements associated with favorable governance. These are a supportive regulatory framework, institutional autonomy, academic freedom, strong leadership with strategic vision, and a culture of excellence (Salmi, 2009).

    3.1.1. The Public Sector

    There were 42 public TEIs in Mongolia, accounting for 28 percent of total institutions, enrolling about 99,000 students, or 66 percent of total enrollment. The premium universities are in the public sector. These are the National University of Mongolia (NUM), the Mongolian University of Science and Technology (MUST), the Mongolian State University of Education (MSUE), the Health Sciences University of Mongolia (HSU) and the Mongolian State University of Agriculture (MSUA). NUM is strong on law, international studies, languages, economics, and geology. MUSTs strength is in mining and computer sciences. Newer ones such as the University of Finance has the best MBA program in the country. The plan is to consolidate the public TEIs into 16 universities.

    Mongolian tertiary education is administered directly by the Ministry of Education, Science and Culture (MECS) and regulated by the Law on Higher Education and a number of statutes. The Department of Higher Education is in charge of policy formulation. The Minister of Education has overall responsibility for tertiary education. Public universities are accountable to MECS.

    The Minister has an advisory council which is composed of individuals selected by the Minister himself and provides advice on a broad range of issues covering education, culture and science. Advisory council members are often from the higher education subsector. This council meets irregularly, at the Ministers request, and does not have decision-making authority.

    There is no formal council or internal unit mandated for strategic planning for tertiary education. The usual practice is to form an ad hoc group, always with funding from outside (usually a development partner such as the Asian Development Bank). The ad hoc group is composed of Ministry staff and representatives from other ministries and other relevant parties. The main strategic paper such as the Master Plan for Education is submitted to the cabinet for approval or endorsement. Sometimes, development partners are invited to comment or endorse jointly (which was happened in case of the 2006 Master Plan). Operational planning is based on longer term strategic plans, and initial suggestions and proposals are collected from line departments of the Ministry and synthesized by the Department of Finance and Investment which makes final costing. After the Ministers endorsement, the plan becomes an obligation to be implemented by officials who are indicated to be in charge.

    The presidents or rectors of public universities are appointed by the Minister of Education, although the Civil Service Sub-Committee led by the State Secretary of MECS is responsible for selection. Each TEI has a Board of the Directors. According to legislation (Education Law and Higher Education Law), the government sets common procedures and regulations in the form of charters and bylaws. Institutions are authorized to make some adaptation when they adopt their own institutional bylaws reflecting specifics of the institution, giving them some room to maneuver. Therefore, the internal institutional power distribution can be controlled by the President. Institutional bylaws are subject to approval of the

  • MONGOLIA HIGH EDUCATION POLICY NOTE 15

    institutional governing board. However, in practice, board members tend to approve the presidents suggestions with no or minor change. Presidents of public institutions sign a contract indicating performance outputs annually, so the Minister can set specific conditions and targets that may streamline or limit the actions of the president.

    The Mongolian National Council for Education Accreditation (MNCEA) accredits new private TEIs, but its coverage remains low. In recent years, program accreditation has also been instituted. Numerous programs, especially in the fields of economics and management, engineering, have been accredited by special bodies authorized by the National Council and MECS and subject to the National Councils formal endorsement.

    Faculty members are appointed by the rectors. If faculty members commit misconduct, there is a moral committee in each public institution to judge them and determine the penalty. In general, Labor Codes and other internal procedures of the higher education institutions are applied in such cases. However, if faculty members are incompetent or out-of-date in their teaching contents, there is no remedy. MECS does not get involved in the dismissal of faculty members from public universities, although in principle this is possible.

    3.1.2. The Private Sector

    Since the passage of the 1991 Education Law that established the legal basis for private universities and institutions, it has not been difficult to obtain a license to run a private college in Mongolia. All that was required was to have adequate facilities, a faculty, a library, and financial resources. With the increasing demand for tertiary education in the country and the fact that colleges do not pay value-added or profit taxes, investing in private colleges is lucrative for many. As a consequence private institutions have grown from zero to 144 in 2007. Only about 20 percent private institutions or 29 out of 144 have been accredited.

    All regulatory and legislative norms apply to all TEIs regardless of their ownership. So, private institutions are also required to observe educational standards for designing and performing their academic programs, and their internal processes should comply with typical regulations established by the Ministry. There is, however, one major difference between private and public TEIs. The presidents of private TEIs are appointed by the owner, or are themselves the owner. Their power is not curtailed by any external body. There is no board required for private TEIs.

    The expansion of higher education has not contributed to regional development as much as it should, as the vast majority of private TEIs are located in Ulaanbataar. Private TEIs are accountable to their owners who appoint the directors and staff.

    Private TEIs are very small, averaging 468 students per institution, closer to the size of a high school than a university. By contrast, many American and Asian universities have over 10,000 students. Many Mongolian private institutions offer only a single field of study, such as business. Private TEIs faculty members also have lower academic qualifications. Only 15 percent have PhDs, compared with 24 percent of public TEIs, suggesting that private TEIs are not oriented towards research. They also have many part-

  • 16 MONGOLIA HIGH EDUCATION POLICY NOTE

    time staff, who were working full time in public TEIs. Private TEIs limited course offering reduces the quality of education, as students do not receive a general education that would enable them to have broad-based knowledge, make connections across different fields, think creatively, develop the skills to learn on their own, communicate well with others, and be entrepreneurial in their future career.

    There is also no regular, national information about the graduation rates and employment rates of each of the public and private TEIs. Policymakers do not have the evidence to steer tertiary education with respect to the strengths and difficulties of each institution.

    3.2. ACCREDITATION AND QUALITY ASSURANCE

    Good governance always has a built-in mechanism for quality assurance (QA) and academic excellence, as well as public accountability. Accreditation is akin to institutional peer review, in which a community of experts performs impartial review. In the age of mass tertiary education, and liberalization of service provision, educational accreditation carries an especially important role. Accreditation is an integral part of quality assurance. In this process, an external body evaluates the services and operations of an educational institution or program to determine if the required standards are met. If standards are met, accredited status is granted by the agency. In most countries, the function of educational accreditation is conducted by a government agency. In the USA, QA is independent of the government and performed by private membership associations.

    The Mongolian National Council for Education Accreditation (MNCEA) has been in operation since 1998. It is responsible for accrediting TEIs and TVET centers. Institutional accreditation remains voluntary.

    MNCEA is self-financed exclusively from the accreditation services they provide to applying institutions. The Council is chaired by the Minister and composed of rectors of universities and colleges accredited by the Council. Although it is an independent agency, since the Council is chaired by Minister, it functions very much like a part of the Ministry but funded from service fees charged to applying institutions. Since it is sustained by fee paying institutions, its financial viability is precarious.

    MNCEA includes the Board of the National Council, Executive Office, 6 full time officers, 13 accreditation council members for TEIs and 11 accreditation council members for

    TVET institutions. The Council also employs over 150 external evaluators on a part-time basis. Since its establishment the Council has accredited 91 TEIs including state-owned universities, institutes and colleges, vocational education and technical training centers and private higher education institutions.

    MNCEA has established a two-step process for the assurance of quality in higher education institutions, vocational and technical training centers and their educational activities. First institutions wishing to be accredited submit a self-assessment to MNCEA detailing its operational and pedagogical practices. Subsequently a team of visiting external assessors visits the institution for an on-site accreditation to interview faculty and students, review assignments, classroom practices, academic publications, and staff

  • MONGOLIA HIGH EDUCATION POLICY NOTE 17

    academic qualifications. Assessors accredit an institution based on the major criteria for accreditation in Mongolia, namely: (i) whether an institution has a clear and publicly stated mission; (ii) whether an institution has made progress towards achieving that mission; (iii) whether an institution has established the extent to which resources of the institution are directed and organized toward achieving its stated educational objectives; and, (iv) whether an institution has demonstrated the integrity and commitment to the accomplishment of its mission.

    Program accreditation began in early 2000s. Now numerous programs, especially in the fields of economics, management, and engineering, are accredited by special bodies authorized by the National Council and the ministry. Program accreditation is a process subject to the National Councils formal endorsement. All tertiary programs need to comply with standards approved by the National Standardization Council but there is no mechanism of enforcement.

    The criteria used for accreditation are not derived using international benchmarks. The external assessors do not include international members. Also, the accreditation work has mainly focused on new private TEIs. There is no periodic review of academic programs, new or existing, under public TEIs. Until recently, there was little quality assurance or public accountability. However, the 2003 Higher Education Law introduced a new form of audit, which can be initiated by the Ministry to examine whether an institution performs in compliance with established common criteria. The degrees and diplomas dispensed by accredited private institutions are assumed to confer recognition of the completion of an academic program of at least minimal quality.

    The current challenge for the Government is to strengthen the quality assurance and accreditation system in a way that can to improve its links with the labor market, begin to reference international benchmarks in developing the criteria for accreditation, and further engage with distance and overseas learning activities. It also should reexamine its system of incentives and sanctions and provide students with more and better information regarding the quality of institutions and programs.

    3.3. FINANCE

    3.3.1. Public Expenditure on Education

    Level of public spending. Currently, Mongolia spends between 6 and 7 percent of its gross domestic product (GDP) on education, a level of spending similar to former socialist economies and higher than the OECDs average of 5.8 percent. This level of public spending reflects the high cost of service delivery to a population dispersed over vast territory, as well as the harsh climate.

    As a percentage of total government expenditures, public spending on education has been consistently above the East Asian average of 16.2 percent (see Table 7 for trends). The high spending on education reflects the value Mongolia places on education. Even during the global economic crisis in 2009, the education budget has not been cut. As the overall public expenditure shrank, the share of education increased to 30 percent of the total public expenditure. The high share of public spending on education suggests that there is not much fiscal space for a further increase, at least in the medium term.

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    Intra-sectoral allocation. Prior to the crisis, tertiary educations share has declined from 15 percent of the total public expenditure on education before the transition to 10 percent in 2007, while the share of vocational education declined from 10 to 6 percent over the same period (Table 7). As primary education enrollment has expanded, greater efficiency has been realized with higher student-to-teacher ratios. As more students continue on to secondary education, greater shares of resources have also been channeled to this subsector. While tertiary education absorbed only 10 percent of the countrys total public expenditure on education, it accounted for 28 percent of the total student population.

    Table 7: Public Expenditure on Education, 1991, 2002 and 2007

    1991 2002 2007

    GDP per capita (US$) (nominal) 929 1,113 1,431

    Education Expenditure as Share of GDP (%) 12% 8% 6.2%

    Education Share of Total Public Expenditure (%) 18% 16% 17%

    % share of total education expenditure:

    Primary n/a 40% 27%

    Secondary n/a 26% 37%

    Technical & vocational n/a 5% 6%

    Tertiary 15% 15% 10%

    Per student public spending (as % of GDP p.c.)

    Primary 17% 17% 13%

    Secondary n/a 14% 18%

    Technical & vocational 10% 5% 6%

    Tertiary 10% 12% 14%

    Sources: Ministry of Finance (MoF) and Ministry of Education, Culture and Science (MECS) through Education Finance Study team; Edstats.

    A priority of the Government (expenditures in primary and secondary education make up over 50 percent of the overall education expenditures), this subsector accounts for 70 percent of all students in Mongolia. In the near term as the system expands to 12 years, this sector will require additional resources to finance the additional grade level and achieve universalization targets. In particular, while government spending on kindergarten has remained relatively consistent over the years, funding for kindergartens may become more of a priority in the coming years to encourage on-time enrollment of six year-olds to grade 1.

    In the medium-term, Mongolia faces hard choices. On the one hand, it has to protect spending on basic education. On the other hand, it has to ensure that the system produces well trained and flexible

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    professional, technical, and vocational manpower needed for economic development. Given the resource constraints, it was an equitable use of public finance for Mongolia to use cost recovery to finance higher education, thereby making available more public resources to fund basic education.

    In the long-term, however, as Mongolia is expecting the development of mineral resources to bring in revenue for investment in education, it will have to think through how best to use its new windfall to make its education system world class. Thus, educational strategy must plan for two potentially very different medium- and long-term scenarios.

    3.3.2. Financing of Tertiary Education

    Diversification of funding sources. Mongolias tertiary education has been financed largely by private expenditure, through the payment of tuition fees, donations, and income generation (Table 8). Tuition fees are the largest source of financing for HEIs. Private TEIs receive almost 62 percent of their funding from tuition fees, and public TEIs receive almost 58 percent of their funding from these fees. The State Training Fund (STF) provides about 28 percent of funding to tertiary education through the provision of grants and loans to help offset the cost of education for about 40 percent of students in this subsector. Direct state budget support to TEIs accounts for only 5 percent of total public spending on tertiary education.

    Table 8: Sources of Funding of Tertiary Education Institutions, 2007

    Sources of Funding All By Type

    TEIs State TEIs Private TEIs

    1 State Budget 5.2% 7.1% 0.3%

    2 State Training Fund 27.6% 27.6% 21.0%

    3 Tuition Fees 54.7% 54.4% 61.4%

    4 Income from Non-Core Activities

    5.8% 7.1% 1.4%

    5 Donations and Grants 1.7% 2.1% 2.4%

    6 Programs and Projects 2.9% 0.1% 8.3%

    7 Other Sources 2.1% 1.8% 5.4%

    Total 100% 100% 100%

    Source: Ministry of Education, Culture, and Science (MECS), 2008.

    The State Budget mainly finances operating costs of the public TEIs, allocated by the Department of Finance in MECS. These usually pay for utilities, such as electricity and heating; there is no state budget for goods and services or repair and maintenance. Capital investment in facilities, equipment, and laboratories is decided by the Board of Directors in each public TEI. If the TEI does not have the resources

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    to fund investment, the Board of Directors will present their request to MECS which consolidates the proposals from different TEIs and presents the draft to the Ministry of Finance (MoF) where major negotiations take place. Then MoF submits the proposal to the Cabinet discussion. The Cabinet submits the final draft to the Parliament. At the Parliament, all Standing Committees discuss the proposal where individual MPs can propose specific funding or investment. At this stage, lobbying for specific programs and projects takes place. Once the Parliament approves the budget with a specified itemized allocation, the Cabinet, the Minister and other authorities are charged to execute the plan. The dependency on MECS and Parliamentary approval for funding, the vulnerability to lobbying efforts, and the lack of TEIs own endowment, reduces institutional ability to plan and act. Funding is on a short-term basis and unpredictable and undermines medium-term planning and institutional development.

    Salaries, which constitute roughly 60 percent of total expenditure on higher education, are funded by tuition fees.4 There is a strong incentive to expand enrollment irrespective of the capacity of the faculties to deliver and labor market outcomes. In general, faculty salaries are not that much higher than teachers salaries, making teaching unattractive for people with high levels of skills, particularly if they are young and well trained. Since the Parliament approves investment budget, public institutions are accountable to the government. Furthermore, as demand for tertiary education outstrips supply, there is little incentive for TEIs to be accountable to the students they serve, or to provide information about their own performance in order to facilitate the consumer of education to make informed decision about enrollment and field of study.

    For research, there are two types of research grants, given on a competitive basis. The first grant is given through the Mongolian Academy of Sciences to the scientists and researchers. Every year up to 16 people receive the grant for an amount of up to 4,000,000 MNT (US$3,600). They are those who carried out a high level theoretical research and those who need funding for their research work, which was approved to be applicable into practice. By comparison, the USA National Institute of Healths annual budget ranges from US$26-30 billion, and a research grant can run into the amount of hundreds of million dollars.

    The second grant is received by young scientists for their outstanding research work. Every year a conference on scientific research is held and young scientists present their research work. The Commission of Young Scientists select the top ten young scientific works by each sector based on the decision of the conference on scientific research and the MECS endorses the decision to select the young scientists to receive the grant.

    There is no financial scheme to provide incentives to encourage efficiency, for example, the allocation of the budget by the number of students who graduate on time, the number of students who find a

    4 A May 2009 World Bank mission selectively examined the categorical expenditures of six universities in Ulaanbaatar and found that these universities spent between 55 and 68 percent of their revenue on staff and teacher salaries. In several instances, expenditures on equipment and facilities were largely financed by private donations (e.g., computer laboratories in two universities were sponsored by private commercial interests).

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    job, or to reward publications in international peer reviewed journals. The lack of resources to fund improvement in facilities, improvement of the teaching and learning environment (laboratories, libraries, etc.), faculty upgrading, research, and conference participation has hampered the ability of Mongolian tertiary universities to deliver high quality education.

    According to official statistics, 25 percent of faculty members in public universities are part-time staff, seriously affecting the quality of teaching and research. Only 16 percent of faculty members in all public universities have a doctoral degree, while about 43 percent have masters degrees. In private universities, only 5 percent have doctoral degrees and 23 percent have masters degrees (Annex 7). There is no predictable funding for the upgrading of qualifications for faculty members or for attending international conferences, and there is no systematic tracking of faculty members publication and research efforts.

    Unit cost. Mongolias per student public spending on tertiary education (including allocations from the State Budget and allocations made to the State Training Fund) is a paltry $339 per year. This amount is higher than per student expenditure of $206 in primary education and the $285 in secondary education. However, by any of these analyses, per student spending is extremely low in comparison with the OECDs average of $11,512 and Chinas $854. Spending on tertiary education per student as a multiple of spending on primary education is low, 1.6 to 1, compared with the international range of 6 to 1 to 30 to 1. Since the quality of tertiary education depends heavily on the quality of faculty members, laboratories, equipment, and libraries, which are driven by international prices, the extremely low unit cost in Mongolia suggests that its quality is far below international standards (See Table 9).

    Table 9: International Comparison of Per Student Spending By Level of Education (US Dollars)

    Pre-primary Primary Junior

    Secondary Senior

    Secondary Tertiary

    Mongolia (2007) N/A 206 285* 285* 339

    China (2007) Budgetary 227 236 278 343 854

    Budgetary, fees, others

    403 300 378 378 2063

    OECD Average (2005) 4,888 6,252 7,437 8,366 11,512

    USA 8,301 9,156 9,899 10,969 24,370

    Korea 2,426 4,691 5,661 7,765 7,606

    Japan 4,174 6,744 7,630 8,164 12,336

    Brazil (2005)** 1,215 1,425 2,359 899 9,994

    Chile (2005)** 2,952 1,936 1,865 1,965 6,620

    Source: China Educational Finance Statistical Yearbook 2007; OECD Education At a Glance, 2008. World Bank Global Development Finance Database 2007 for exchange rate $1=7.6075.

    Note: *Mongolia data do not disaggregate between junior and senior secondary education. **Brazil and Chile are OECD partner countries and included in the table for comparison with Latin America.

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    3.4. TUITION FEES AND STUDENT FINANCIAL ASSISTANCE

    Shift in financing from public to private through fees. In 1992, the Mongolian government passed Resolution No. 107 which endorsed new regulations for post-secondary education financing. In particular, this resolution established the State Training Fund to administer and manage financial aid programs for students.5 These new financing measures governing board consists of six officials, selected for their positions by the Ministry of Finance and the Ministry of Education, Culture, and Science. No institutional or public representatives are included on the Board.

    drastically reduced the number and amount of government subsidies to the tertiary education subsector that had been a staple since the Soviet-era. The new legislation allowed institutions to begin charging tuition and fees up to the amount of per student variable costs, enforced tuition grants for students enrolled within the state quota, provided need-based tuition and stipend loans to students, and provided TEIs with government subsidies to cover the fixed costs of their operations.

    Since that time, public funds have been channeled to tertiary education institutions through the STF. As a proportion of funding, the State Budget itself provides a relatively small percentage of funds to TEIs. The STF funds themselves, however, are not well targeted to the poor. Only 39 percent of students receive funds based on needs or disadvantaged status, while 40 percent are children of civil servants (Table 10).

    Table 10: State Training Fund Recipients by Program Area

    Grants

    2003 2004 2005

    Number % Number % Number %

    Need-based Grants 8,119 23.3 13,294 33.5 13,831 33.5

    Disadvantaged Group Grant

    2,216 6.4 2,454 6.2 2,149 5.2

    Merit-based Grants 153 0.4 149 0.3 126 0.3

    Public Employee Family Grant 15,915 45.7 16,335 41.2 16,428 39.8

    Loan 8,409 24.2 7,390 18.6 8,696 21

    Total 34,812 100 39,622 100 41,230 100

    Source: Ministry of Education, Culture and Science, 2007.

    5 The State Training Fund is a semi-governmental agency which is governed by an independent board but is operationally attached to MECS. It is responsible for the implementation of all state financial aid programs. Its

  • MONGOLIA HIGH EDUCATION POLICY NOTE 23

    Tuition fees have constituted a barrier to aspiration for higher education for the poor, if not a barrier to entry. Mongolian bachelors degree students pay an average of 383,000 tugriks (US$270) per academic year, which is roughly 16 percent of the Gross National Income per capita. This is higher than most OECD countries, on par with South Korea, and lower than Chiles (see Table 11 for international comparison). The fee levels in private TEIs are similar. When living expenses are included, an average student would have to spend over 150,000 additional tugriks (over US$120) per year. The policy of cost recovery is cushioned, to some extent, by the availability of grants and loans to students through the State Training Fund (STF). On average, a recipient student would receive assistance in the amount of 80 percent of tuition.

    Table 11: A Cross Country Comparison of Tuition Fees as Percentage of per capital Gross National Income

    Country Public Universities Private Universities

    Mongolia Australia

    16% 11.3%

    16% 21.9%

    Canada 10.0% n/a

    Japan 11.8% 18.5%

    Korea 16.3% 31.1%

    New Zealand 6.5% n/a

    United Kingdom 5.2% 4.9%

    United States 11.4% 42.0%

    Italy 3.3% 11.5%

    Netherlands 4.4% 4.4%

    Israel 12.0% 29.2%

    Chile 27.9% 32.0%

    Sources: Provided by Salmi, drawn from OECD Education at a Glance 2007; Background Report; World Bank World Economic Indicators.

    Expansion of eligibility criteria. Since its inception the mandate and the operations of the STF have changed several times.6 The mandate of the STF stems from the countrys Constitutional rights to

    6 In 1995, new and detailed regulations were issued for financial aid for students that specified the criteria for eligibility, the conditions for the repayment of grants and loans, and the establishment of a satellite program to provide financial assistance to students from the families of public employees. Other legislation at the time reduced the coverage of grants to needy students only and abolished the state quota system. State financial aid was also extended to Masters and Doctoral students, those pursuing graduate degrees abroad, and outstanding high school graduates and college students with a GPA of no less than 3.8 for four consecutive semesters. In 2000 tuition grants were extended to nomadic families with less than 700 heads of livestock on the basis of one child per family and also to a maximum of one student per family in which three or more children were enrolled in TEIs (Box 1, below).

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    education: the STF aims to provide financial support to low income, academically able students in order to provide them the opportunity to pursue tertiary education, regardless of their ability to pay. Annually, about 20,000 students apply for university admission, but under current resource constraints, the STF funds on average only about 6,000 7,000 students per year.

    Need-based loans. Loans represent the third largest financial aid program in terms of the number of students covered, as well as in the percentage of allocation of the STF resources.

    Students who receive loans must repay them within ten years. They have a grace period of six years after their graduation. After the seventh year, the STF raises the interest rate on the loan to 0.5 percent above the average annual bank rate for commercial loans. Loans can be forgiven if recipients have been employed for eight consecutive years, including five years in a rural county. In 2004, the government universally forgave all outstanding loans.

    Non-need and non-merit based grants. Grants represent the largest of the STFs financial aid program. Children of public sector workers can receive both grants and loans. Further, the tuition grant is for only one student pursuing an undergraduate degree for the total duration of the parents employment in the public sector. Grants are made on a semester basis and are renewable if the recipient maintains full-time enrolment and maintains a GPA of at least 2.0 and the parent remains employed by the government.

    The widening of the eligibility criteria in 2000 with the passage of Government Resolution 201 has extended coverage to the children of civil servants (Figure 4). In 2007, over 17,000 students, or over 40 percent of all recipients of the STF were children of civil servants (Table 12). Although the poor are more likely to receive government tuition aid for tertiary education, approximately 54 percent of beneficiaries are non-poor. 7

    Figure 4 : The Widening of STF Eligibility Criteria

    1993-1995 Stipends for needy, talented and foreign students and tuition fee to students who studied by state

    contract

    2000+

    Loans for poor students and disadvantaged families

    Grants to orphans, disabled and disadvantaged students

    Grants for one child of civil servants

    Grants to herders, low income students and families with 3+ children

    Scholarships to able students

    1996-1999

    Tuition loans for very poor students and disadvantaged families

    Small number of grants to orphans/disabled students and MA/PhD students in developed countries

    7 Since 2000 the number of higher income students receiving assistance has grown by 36 percent, from 13,487 to 18,402 (Interview with STF official). Higher income students are defined as those who would not be eligible for a grant from the STF based on their family income level.

  • MONGOLIA HIGH EDUCATION POLICY NOTE 25

    Table 12: State Training Fund Allocation of Resources, 2007

    No. of Students Covered

    Average Amount per Year (USD)

    Resources as % of STF Fun