While the administration of President Benigno Aquino III has won much public acclaim for engineering a transformation of the education system, the sheer speed and scope of change taking place has caused concerns among some observers. If cleared, further budget increases in education are planned in 2014. A total of P44.6bn ($1.07bn) will fund the building of 43,183 new classrooms and hiring of 33,000 teachers.

If this momentum continues, the education sector will provide opportunities for private participation, giving the Philippines perhaps the best chance it has had in many years at producing the kind of talent its economy will need to sustain growth.

PRIVATE SECTOR: The impact of these reforms will be tested most critically in 2016 and 2017, when students under the new K-12 curriculum will enter Grade 11 and Grade 12, respectively, and colleges will be left without an incoming cohort. Classrooms in both public and private universities will go vacant for two years as the new extended high school curriculum comes into force. That has prompted the government to come up with a public-private partnership model which will put excess classroom space in universities into use and keep redundant faculty members employed.

This will be done by conducting teaching for Grades 11 and 12 in universities rather than schools and retraining redundant university faculty members as high school teachers. Central to this model is a voucher scheme that will allow a student entering Grades 11 or 12 to decide where they want to study, using the voucher to pay tuition in part or in full. Since most higher education institutions are private, the voucher amount may fall short, forcing students to make up the difference.

The K-12 system could also create an entirely new demand for vocational training. “Once students start graduating at 18 and job skills get embedded in the two-year senior high school curriculum, attitudes to vocational training will begin to change. Some students may want to go to vocational schools rather than colleges,” said Vicente Fabella, president of Jose Rizal University. He believes this presents an opportunity for foreign training providers. “By 2016, this would be a wonderful market to move into,” he told OBG.

Department of Education (DepEd) investments in school infrastructure, textbooks, laboratories and toilet facilities has already resulted in business opportunities for the private sector, which has played a key role as supplier of goods and services. For example, 9332 new classrooms are being constructed under a 10-year build-lease-transfer contract, while in 2012, the government invested P1.8bn ($43.38m) in information technology equipment. This included 1500 laptops, 3700 PC packages and 7000 internet connections to public schools. A massive procurement of textbooks in 2011 ended an endemic shortage in public schools.

ENROLMENT CHALLENGES: However, acute challenges remain. According to the 2004 “Wallace Report”, the dropout rate at the primary and secondary levels was 33% and 30%, respectively. In college, it jumped to 73%. Out of 100 children, 67 finish primary school, 45 finish secondary, but only seven are able to finish college. The report estimated that up to 1.7m children in the country are out of school because of poverty: even if basic education is free, they often cannot afford associated expenses such as supplies or uniforms. In poorer regions the immediate need to help supplement household income by working on farms or finding jobs in cities often takes precedence over education.

ALTERNATIVE PROVISION: The government has tried to address their needs by introducing the Alternative Learning System. In 2005 DepEd embarked on an open high school project aimed at bringing out-of-school youth back into the mainstream by providing secondary education through print, radio, television and computer-based communications, satellite broadcasting, teleconferencing and other multi-media technologies.

With the government subsidising tuition fee up to P6500 ($160) per year for every participant, this programme has opened a new market for private service providers in the basic education sector. But even with a significant budget increase, reforms in the basic education sector will only be as effective as the flexibility they allow. Consistent with its budgeting practice, Congress requires that proposed expenditures be very precisely outlined. Once specified there is little or no room for DepEd or local education authorities to change or redirect expenditures within the budget.

In its Master Plan for Basic Education, DepEd observed that the current system discouraged school heads from exercising financial discretion that could otherwise result in improved outcomes. But over the past decade the department has gradually devolved some of its decision-making functions to regional, and to a lesser extent, division levels. Increasingly, community constituents, particularly non-governmental organisations, parents and local service providers, are being courted as partners. This trend should go a long way in plugging the gaps in access and quality.

HIGH LITERACY: The Philippines does enjoy some important advantages. Literacy for both sexes is 95.4%, among the highest rates in the region. English remains the primary language of instruction in schools and in recent years, thanks to the English-language proficiency of its workforce, the country has emerged as a destination of choice for many voice-enabled business process outsourcing services (see BPO chapter). Furthermore, many Korean and Chinese students see the Philippines as an attractive, low-cost destination to undertake English-language training.

CHANGE AT THE TOP: The higher education sector appears to be the weakest link in the chain of reform. That is because private higher education institutes (PHEIs) account for 80% of total tertiary education enrolment, and the vast majority do not prescribe to any accreditation process. Although voluntary accreditation has increased, only 13.3% of these institutions have any accredited programmes, limiting improvements to the quality of higher education. Attempts to regulate PHEIs have consistently failed. The last time the government tried to do so was in 1982 when it introduced the Philippines Education Act, stipulating that all PHEIs must be established as non-stock, non-profit entities. However, resistance from interest groups forced it to back down. PHEIs have since mushroomed all over the country. Many are little more than single-classroom commercial outfits.

The Commission on Higher Education (CHED) has no effective authority over PHEIs, and nor does it appear to have the power to resist political pressure which has resulted in the growth of sub-standard public institutions over the years. From 1999 to 2004, the number of state universities and colleges (SUCs) increased from 219 to 360. According to local press reports, SUCs can often be used by politicians as sources of patronage within an electoral constituency.

Cronyism and corruption are rife in such institutions. As a result, groups with vested interests are likely to resist attempts by the CHED to improve governance structures and shut down academically irrelevant but revenue-generating programmes as part of its rationalisation drive (see overview).

ACCESS & FEES: The collapse of College Assurance Plan (CAP), which affected the student loans of close to 1m Filipino students is another factor inhibiting both access and quality of provision. The non-availability of long-term study loans affects how much tuition students can afford, in turn influencing their choice of disciplines. Therefore, the deregulated higher education sector mainly offers professional programmes rather than academic or research degrees. Many citizens also take pride in noting that the University of San Carlos and the University of Santo Tomas were awarding degrees years before Harvard, but while the Philippines can certainly trumpet the long tradition of such institutions none features in the global ranking league of top 100 premier universities. The Asian Institute of Management (AIM) is perhaps the only post-graduate institute in the country that comes close to enjoying recognition for globally competitive standards.

The University of Philippines, De LaSalle, Ateneo de Manila and Santo Tomas are, however, popular with local students and admission for programmes in business management, engineering and hospitality in these institutions is very competitive. Ateneo de Manila, for instance, accepts only 2200 out of the 18,000-20,000 applications it receives every year. “We take the upper quartile,” said John Paul Vergara, vice-president of Loyola Colleges at Ateneo de Manila University.

Although few poor families can afford the tuition fee that PHEIs now charge, which can cost anything between P35,000-80,000 ($850-1900) per semester, academic selectivity in more affordable SUCs effectively becomes a problem of social exclusion as only affluent families are able to pay for the expensive private tuition that helps to prepare students for competitive entry exams. With no more than 21% of the population classified as middle class or above, higher education is likely to remain a distant prospect for the vast majority of the poor unless more state-funded institutions are established. Although the 2013 budget has increased funding for SUCs by 40% and CHED has promised increased financial support for needy students, the discrepancy between the demand and provision is so large that it is unlikely to have much impact.

GRADUATE SKILLS: Despite these drawbacks, some 250,000 students graduate with tertiary degrees every year in the Philippines. Employers, however, complain that most of these young graduates do not possess the basic skills they need. There is a mismatch between what the market wants and what the high education sector produces. In fact, 34.3% of all unemployed Filipinos have attained a higher education degree. The Medium-Term Philippines Development Plan 2004-10 suggested that such graduates were more than twice as likely to be unemployed as those who had completed elementary education – at 15.4% compared to 6.7%.

The issue of quality in tertiary education can to a large extent be traced to the early 1990s, when the government removed a 10% cap on annual tuition fee rises. As a result, tuition at private colleges and universities jumped by as much as 50% year-on-year. Institutes – including SUCs – started pursuing revenues at the cost of academic excellence. The result is that only a handful of higher education providers currently offer programmes of international standards. The drop in the quality of higher education is reflected in test pass rates. In 2004 CHED published a report that plotted the pass-fail rates of every university programme. It revealed that almost 325 degree programmes had a pass rate of less than 5% for four years running. A further 78 did not register a single passing student. “Although the private higher education system does have too many players of unequal quality, they are eventually going to face dwindling enrolment as their increasing tuition prices are not being matched with a higher quality of education or return on investment,” Michael Alba, president of Far Eastern University, told OBG.

CHED hopes that categorising institutions in groups, developing a quality framework and providing PHEIs with incentives to meet industry standards should bring about improvements in the overall quality of higher education. Closer academic collaboration with universities based in the West, including joint programmes and double degrees, may also provide a solution to the problem, raising the bar on the quality of content as well as research and teaching. External validation may also help some PHEIs gain recognition. However, there are as yet no transparent norms for foreign higher education providers to establish a presence in the sector.

STAFFING: Just as the wider workforce has difficulty sourcing quality graduates, the higher education sector itself faces challenges in accessing a sufficient talent pool. Indeed, only 4% of higher education faculty members in the Philippines have doctoral degrees and just 33% possess any post-graduate qualifications.

Working conditions at local universities generally do not help to attract teaching staff. Low salaries, poor research opportunities and an excessive teaching load mean that local universities continue to have considerable difficulties in recruiting qualified faculty. Addressing these issues would be a step to improving quality.