The USP grant issue

USP Vice Chancellor Professor Pal Ahluwalia (right) talks to USP Student Association and staff members on June 8, 2020. Picture: ATU RASEA/File

At the recent PIF meeting in Suva, all the regional leaders expressed concern about the USP grant issue that has arisen because the Fiji Government has unilaterally decided not to pay its bill to USP for the last three years, unless USP Council investigates allegations of mismanagement by its Vice Chancellor Ahluwalia.

Effectively, Fiji is taking its “USP loaf of bread” from the USP Bakery, but is refusing to pay the USP bakery its full bill.

In the meantime, all the other smaller eleven USP member countries are dutifully paying their bill to USP.

This is surely outrageous and would never be allowed in the real world.

In a pure market situation, if anyone wants to consume a loaf of bread (i.e. get your students taught), you should pay for it before you take the bread (graduates) from the shop.

The Tuvaluan Foreign Minister, Simon Kofe, suggested that a solution should be by consensus and the Pacific Way; Australian Foreign Minister Penny Wong hoped the leaders would find a way through the issue; NZ Prime Minister Jacinta Ardern was optimistic that the issue would be worked through.

But they offered no solutions or even a rebuke for one Government which was effectively blackmailing the USP Council.

The Tongan Prime Minister, Siaosi Sovaleni, correctly pointed out that it was for the USP Council to address the issue.

USP’s Pro Chancellor told Islands Business “the whole structure of how the countries are supporting the university needs to be revisited or looked at.

What else can be done so the university is not subject to political whims of leaders?

This article suggests what USP Council can do.

Not a ‘grant’ issue

First, the members of the USP Council need to understand clearly that the grant Issue has always been a total misnomer purely because of the way USP was paid when it was first created.

From the beginning, USP’s revenues from Government used to be divided into a “general grant” (60 per cent ) divided among the countries in proportion to the students they sent and a “special grant” (30 per cent of revenues) depending on how much USP spent in each country on salaries.

This Special Grant was an artificial construct supposed to reflect the economic benefits each country received because of USP spending in that country.

Fundamentally it was the result of smaller countries falsely accusing Fiji of “hogging all the benefits” of USP and had all kinds of undesirable effects on USP.

You can read some early analysis I did here.

I say “falsely” because any good university tries to have facilities in the geographical location where it has economies of scale in teaching their students with good quality staff and facilities.

You would never site a fish cannery all over the Pacific just so as to distribute the benefits, would you.

In any case, what has happened over the years is that while government grants remained about the same in nominal dollars (around $42 million), student fees shot up from $15 million in 2004 to $79 million in 2018; donor funds increased from $6 million to $43 million, and even other income shot up from a mere $4 million in 2004 to $36 million in 2018.

The graph makes clear that government grants from being 64 per cent in 2004, has declined to a mere 21 per cent in 2018.

Student fees have increased from 23 per cent in 2004 to 39 per cent in 2018.

Other revenues have increased from 6 per cent to 18 per cent .

These trends can be made to continue.

Fiji Government Contributions

In 2018, out of the $42 million coming to USP as ‘Government Grants’, Fiji contributed $32 million.

According to USP Financial Statements for 2019, 2020 and 2021, the Fiji Government in total paid roughly $56 million less than what it should have, with no payment at all in 2021.

If this refusal to pay its proper dues continues, it will be owing USP roughly $88 million by the financial year 2022.

This is utterly outrageous and an unfair burden on USP, the other 11 member countries, the staff, students and their parents.

It is a source of wonder to me that the parents of USP students are not daily protesting at the massive damage that is being done to the premier tertiary institution which is training their students for the labour markets in Fiji and the world.

A USP Council solution

I suggest that USP Council initiate a small inquiry to examine how USP’s financing has been changing over the last forty years.

That inquiry will find that while tuition fees, donor funds and other incomes of USP have become larger, “government grants” as a proportion of total USP revenue has been shrinking away and is now a mere 21 per cent of total USP Revenue.

I suggest that USP Council can make a relatively simple decision to subsume these “government grants into the “tuition fees” for all the courses by adjusting all the fees upwards, by the required amounts to reflect their true economic cost of provision.

USP will then be receiving $121 million in student fees and zero from “government grants”.

At the end of that process, there will no bill to any Government whatsoever to pay any grant to USP, thereby eliminating the general grant and special grant forever.

All governments and all students will simply pay the full economic student fees associated with the course they wish to enrol for.

This step will make very little overall difference to the 11 USP member countries who are currently paying their bills to USP.

But any student or government that refuses to pay the required tuition fee for students they sponsor will simply not be registered and be banned from attending any class.

No cash, no loaf of bread.

No unilateral government’s “theft from the USP Bakery”.

To be fair to the law-abiding 11 USP member countries who are paying their bills on time, I suggest that USP Council consider charging any Government that has a debt to USP for services already rendered, an interest rate equal to the interest rate that USP pays for borrowed funds, or what it earns on its reserves, whichever is larger.

Note also that there are now many tertiary institutions in the Pacific which are offering the same or similar courses to that being offered by USP.

With a transparent pricing policy for each course, USP member countries and private students can “shop around” for the best value for money.

• PROFESSOR WADAN NARSEY is a former Professor of Economics and Director of Planning and Development at USP. The views expressed are his and not shared by this newspaper.

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