International Higher Education, Fall 2004

Private Universities in South Korea

Seung-Bo Kim and Sunwoong Kim
Seung-Bo Kim is a doctoral student at the KDI School of Public Policy and Management. Address: 207-43, Cheongnyangni 2-dong, Dondaemun-gu, Seoul 130-868, Korea. E-mail: skimbo@hanmail.net. Sunwoong Kim is professor of economics at the University of Wisconsin Milwaukee. Address: P.O. Box 413, Milwaukee, WI 53201, USA. E-mail: kim@uwm.edu.

South Korea (Korea hereafter) has experienced a spectacular expansion of higher education during the last five decades. In 1950, the number of students enrolled in higher education institutions amounted to just 11,358. In 2002, 52 years later, enrollments had increased to more than 3.5 million, and more than 40 percent of the age cohort is enrolled at four-year higher education institutions. Even in a period of global massification of higher education, the Korean experience is particularly spectacular.

Throughout this rapid expansion, the private sector has played a vital role in the supply of higher education, as the government has concentrated its scarce resources into the speedy implementation of universal primary and secondary education. As of April 2002, there were 159 two-year junior colleges and technical colleges in Korea. Out of these 159, 143 were private institutions, accommodating more than 95 percent of students. At the same time, there were 163 four-year colleges and universities, 137 of them private. Out of about 2 million students enrolled at four-year universities, three-quarters of them were in private institutions.

Reliance on Tuition
The rapid expansion of higher education by utilizing the private sector comes with substantial structural problems. First, the overall quality of education is considered to be low, while the prices paid by students are relatively high. The research output of Korean universities as measured by the Social Science Index is less than 4 percent of the U.S. output and 15 percent of Japan’s output. According to the IMD Management School of Switzerland, the competitiveness of the higher education sector in Korea ranks 28th among 47 countries. Year after year, a substantial portion of Korean secondary school and college students seek to study abroad.

As the government’s financial support to private universities has been rather limited, most private institutions rely heavily on student tuition. In the 2000 academic year, tuition comprised 78 percent of the revenue of four-year private institutions. Even the national universities rely on tuition for 33 percent of their revenue. Such heavy reliance on tuition creates heavy a financial burden on households, particularly those with a lower ability to pay. Consequently, the dispute over the level of tuition has been a perennial problem for higher education.

Profit Motives
Besides the lack of government subsidy, low levels of endowments is another reason for institutions’ heavy reliance on tuition. Besides the obvious reason for low endowments—the relatively short history of higher education—most Korean private universities have failed to attract a lot of donations, because they are regarded as for-profit organizations by the general public, even though they are legally designated as nonprofit. To encourage the private sector to provide such a large volume of higher education services, the government had to give a great deal of leeway to the founding families of institutions. The current law stipulates that the board of trustees can exercise almost complete control over financial and personnel matters. Also, one-third of board members can be a member of an immediate family of the founder. (In a recent survey of 83 private universities, control over 23 universities has passed, or is in the process, to the immediate family member of the founder.) Consequently, there is a great deal of room for the founder to misbehave. Nevertheless, the Korean system requires very little disclosure of financial and academic information from private institutions.

Faculty and students often challenge the owner regarding the improper transfer of funds. For example, the owner of a university may own a for-profit construction company, and the owner builds school facilities using the company. Another example is the personal usage of university properties, such as houses or vehicles. Such disguised profit motives create an incentive for the owner to allocate more school funds to facilities and less to faculty development, research, and instructional activities, which are more difficult to embezzle. Such illegal behavior creates many campus disputes. Between 1997 and 2000, 44 universities (more than 40 percent of the examined institutions) have been engulfed with some form of disputes.

Regulations to Market-Oriented Policies
Up until 1995, the Korean government not only maintained strict guidelines regarding the establishment and operation of higher education institutions, it also controlled the number of students in each department at each school, as well as student selection methods. In most cases, student quotas and school licenses were rationed to those institutions that could demonstrate to the government their capacity to provide quality education. Naturally, the strict regulations created substantial rent-seeking activities, while leaving little room for individual educational initiatives among institutions.

The 1995 higher education reforms greatly reduced government regulations. It became much easier to establish a new university. The government no longer dictated the number of students outside of the Seoul metropolitan area. Consequently, more private universities have been established, and the enrollments increased. Recently, the government tried to create more competition and diversity among higher education institutions. The institutions that adopt more competitive and market-based policies—such as introduction of the probationary period and tenure evaluation of faculty members, salary increases based on merit rather than the length of service, and allowing students to choose their majors—are awarded government grants or subsidies. As college admissions in Korea have always been determined through competitive entrance examinations, Korean universities have a very well established ranking system. With more market competition, higher-ranking universities have a definite advantage in attracting better students, professors, and donations. Therefore, they want to have more autonomy and deregulation, while less-established institutions seek more government protection and entitlement. Since the number of college students is expected to shrink in the next two decades, the divergence of interests will create political conflict among institutions. It seems inevitable that some of the institutions will have to be closed down or merged with others.

The Korean government decided to move away from strict regulations to more market-based policies. Despite this change in direction, the government’s role in higher education will not diminish at all, as it is imperative that the government maintains and enforces the rules of the game used in the competition. Since Korean higher education relies heavily on the private sector, the sector’s effort of imposing market principles of transparency and openness would be useful in evaluating whether these policies create accountability and other desirable outcomes.