The turning point for higher education

SUITS THE C-SUITE By Reginald Angelo S. Gripal

Business World (05/02/2016 – p.S1/2)

(First of two parts)

With the passage of Republic Act 10533, or the Enhanced Basic Education Act of 2013, otherwise known as the K-12 Basic Education Program, the Philippines adopted a globally-accepted system that will better equip students to meet the increasing demand for a highly-skilled work force.

The education sector has not substantially changed since the public school system was introduced at the turn of the 20th century. As a result, the Philippines was the last country in Asia and one of only three countries worldwide (Angola and Djibouti are the other two) with a 10-year pre-university cycle.

According to Government’s FAQs on the K-12 program, “a 12-year program is found to be the best period for learning under basic education. It is also the recognized standard for students and professionals globally.”

The K-12 program adds two more years of basic education, also known as Senior High School, in order to give students more avenues to specialize in certain fields based on their aptitude, interests and school capacity. By introducing specialization at an early stage of learning, it is believed that the youth will be able to work, earn and contribute to the growth of the economy even without the traditional four-year college degree. The K-12 program may also reduce unemployment as it minimizes job mismatches as certain tracks equip students with the appropriate skills for certain jobs at an earlier stage of learning.

While the program may boost Philippine economic growth and support it in the ASEAN integration, there are also perceived drawbacks.

The K-12 program may negatively impact both public educational institutions and private institutions, particularly higher educational institutions. For public institutions, the main issue is the capability and capacity of the public school system to service the additional two years of basic education. In 2011, the IBON Foundation reported shortages of 152,569 classrooms for school year 2011-2012, more than 150,000 water and sanitation facilities, 13.23 million school chairs, and 95,600,000 textbooks. In addition, it also highlighted the shortage of 104,000 teachers. According to Government’s count, from 2010-2014, there have been 86,478 classrooms constructed, 128,105 teachers hired, and a 1:1 student-textbook ratio has already been achieved. It is expected that the two additional years of basic education will heighten the need for more facilities and teachers.

For private higher educational institutions, the shift to the K-12 program may significantly impact profitability, since no new enrollments (excluding transferees or late enrollees) for school years (SY) 2016-2017 and 2017-2018 are expected. The estimated normalization of earnings as a result of the lack of new students is seen only in SY 2021-2022, or a total of six years of significantly reduced revenue.

Thus, unless there is a financial buffer to address the reduced revenue for six years, many private educational institutions are at risk of incurring large losses and may eventually close down.

A look at the educational institutions that are listed in the Philippine Stock Exchange reveals that for the past 3 SYs, total revenue growth has averaged between 3%-16%, buoyed mainly by new student enrollment and increases in tuition fees. It remains to be seen whether revenue growth will still be sustained with the K-12 program.

There is also the added burden on the students and their families to consider. Two more years of basic education translate to additional tuition fees, allowances and other incidental costs. For families who barely make ends meet, it will take more time before the students can earn a living and provide for their families. A further shift in the student population, where some students in private schools will transfer to public schools, is also possible, with some entirely dropping out. Further, since the curriculum is supposed to provide students with the skills to make them eligible for hiring after finishing basic education, some may no longer pursue a four-year college degree, which could make a dent on the cash flow of higher learning institutions.

Not surprisingly, there are several groups opposed to this new educational system, either because they believe the old system was working perfectly, or that Government is not yet ready to implement such a radical change. Some have elevated the issue to the Supreme Court, which denied the plea to set the case for oral arguments. As such, there appears to be no urgency to hear the petitions against K-12, much less the issuance of a restraining order against its continuing implementation.

In next week’s column, we will look at some of the measures that private educational institutions can consider taking in order to mitigate the impact of the K-12 program, including raising tuition and other fees or expanding course and program offerings.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Reginald Angelo S. Gripal is a Director of SGV & Co.