KUALA LUMPUR: The Penang Institute in Kuala Lumpur has warned that some 70% of private higher education institutions may be in the red this year, following changes in funding rules.

The think tank said that based on data from the Companies Commission of Malaysia (SSM), 45% of private universities and university colleges have insufficient assets to cover their current liabilities.

Around 71% is below the market average in terms of sufficient asset coverage, while SSM’s data also shows that 28 private varsities — or 46% of those reported — made year-on-year losses in financial year 2013.

The Penang Institute said finances had been further tightened starting November last year when cuts were made to the public loan system of higher education — National Higher Education Fund Corporation (PTPTN) — by Putrajaya.

PTPTN loans have been cut by 5% for public universities and 15% for private universities. Loans for medical courses are unchanged.

“According to estimates by the Penang Institute using SSM’s data, these changes will lead to 69.2% of private varsities to fall into the red in the coming year.

“Around 76.2% of university colleges and ¾ of foreign-branch campuses could see their finances in negative territory due to these changes.

“Around 120,000 students are currently enrolled in those private varsities facing financial stress and this could rise to 215,000 students — or 44.5% of the total private sector enrolment — due to funding changes, according to the research,” the Penang Institute said in a statement yesterday.

The think tank cited the Allianze University College of Medical Sciences — which had around 2,000 students and 500 staff — as an example. The medical school had to close due to financial problems.

Masterskill Education Group Bhd, which owns the Asia Metropolitan University, has also faced a financial squeeze, it said.

The group saw its share price fall from RM4.24 in August 2010 to a low of RM0.30 in May 2014 before recovering only to RM0.62 last month, following restructuring and changes in its management and share ownership.

The Penang Institute study looked into 41 private universities, eight foreign-branch campuses and 27 university colleges.

At least two university colleges have been upgraded to university status in recent months, but both are in the “financially-stressed” group.

The revelations come as the National Higher Education Sector Blueprint 2015-2025 is set to be launched by Prime Minister Datuk Seri Najib Razak today.

Penang Institute general manager Dr Ong Kian Ming said the preliminary blueprint released by the Education Ministry for public feedback appears to largely focus on the public higher education institutions.

“The fact that the private higher education sector is largely ignored is a serious omission — given that almost half of the total enrolment in post-secondary education is in private universities, university colleges and colleges.

“In our recent comprehensive study to examine the organisational structure and financial sustainability of 41 private universities, eight foreign-branch campuses and 27 university colleges in Malaysia, we found serious implications on the overall health and sustainability of the private higher education sector,” he said. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on April 7, 2015.