No V-shaped recovery for international students

Last year, FTAlphaville ran an interesting report on the company Navitas, which has made a fortune providing agency services to Non-English Speaking (NES) students seeking to study in Australia:

Earlier this year, a consortium of buyers took an Australian company private in a multi-billion-dollar deal. The move wasn’t a play on commodities, real estate or any other of the other lines of business you might associate with the country’s economy.

Instead, it was all about education.

Navitas, which was founded in Perth in 1994, was bought for $1.5bn USD by a consortium which included private equity firm BGH, Australiansuper, the country’s largest pension fund, and Rod Jones, its former chief executive.

Its business model relies on the huge rise in international students looking to study in English-speaking countries. Navitas is part of a little-understood network of companies and agents that influence where these students end up — and which university receives the lucrative fees they are willing to pay for a Western education…

Navitas had an annual turnover of $930m in 2018, and has 45 partnerships with universities around the world, which provide more than half its revenues…

The following graph, from the Navitas takeover documents, captures the scale of the commercial opportunity which Australian institutions have flocked to participate in…

Given Navitas’ fortunes are tied to the international student trade, it is no surprise to see its CEO, Scott Jones, lobby to open Australia’s borders, predicting a V-shaped recovery in student enrolments if policy makers move quickly:

Mr Jones, who heads Australia’s largest education company, said the country was well-positioned for a V-shaped recovery in the $40bn-a-year education export industry if governments and education providers worked together on a plan to safely resume the intake of significant numbers of foreign students early next year.

The federal government’s success in flattening the coronavirus curve “and making Australia a very safe destination has put us in a really enviable position that we haven’t been in for quite a period”, Mr Jones said.

According to a Navitas survey of nearly 400 education agents who place international students in Australia, based on governments’ handling of the corona­virus only New Zealand is a more attractive place to study than Australia. Mr Jones said it was a major opportunity for Australia because the two countries usually preferred by international students, the US and Britain, were slipping in terms of student preference…

Mr Jones said there was sig­nificant “pent-up demand” from international students, adding that “the first-mover advantage will be significant”.

He said for Australia to take full advantage of its position, the national cabinet needed to set out a plan by August at the latest for international students to return in substantial numbers early next year. “If we do that, we will see a V-shaped recovery going back to pre-COVID levels (of international student entry) potentially by September 2021,” he said.

But he warned if international students did not resume entering in significant numbers by March next year, then Australia would lose its first-mover advantage…

He said the federal government also needed to resume full visa processing for international students. And there needed to be pilot programs to admit limited numbers of international students — such as those proposed by some state governments, Universities Australia and the Group of Eight — to test the processes for safe ­student entry.

It is worth highlighting that private companies like Navitas target NES students, such as those from India and Nepal. As MB has documented previously, such students are over-represented in cases of plagiarism, academic misconduct and underperformance, as was documented in last year’s Four Corner’s expose and elsewhere. They also tend to use education visas as a backdoor to accessing working rights and permanent residency.

Therefore, providers like Navitas are very likely contributing to the degradation of tertiary education standards across Australia.

They have helped to turn Australia’s higher education system into a commercial enterprise whereby international students pay huge fees to effectively buy their qualification, often for the express purpose of gaining work rights and permanent residency.

This process has been facilitated by the tertiary institutions themselves, who have relaxed both entry and teaching standards in a bid to maintain the throughput of international students and maximise fees.

The big losers from this scam are domestic students and recent graduates, who are having their degrees devalued. Residents and workers across Australia’s major cities have also had to endure rising congestion, more competition for housing, and lower wages as international students are exploited en masse across the labour market.

Rather than returning to business as usual, and restoring international student numbers to the obscene heights of 2019 (see next chart), the education sector has a significant window of opportunity to fix its dependence on international students, fix its fallen standards, and go back to its primary purpose of educating Australians.

COVID-19 has exposed the universities’ flawed business model, falling standards, disregard for freedom of thought and speech, and their supine subservience to the Chinese Communist Party. And yet they have not made the slightest effort to acknowledge or address these vitally important issues and want a quick return to mass international student flows.

We have also witnessed a cluster of COVID-19 infection among workers in a hotel used for quarantine in Melbourne. The chances of that happening again would obviously be multiplied with tens-of-thousands of students all coming in at once for the start of university semesters.

Moreover, who exactly will foot the full bill for quarantine, including accommodation, feeding, supervision and testing of tens-of-thousands of international students? Australian taxpayers should not foot any part of these costs.

Australians have sacrificed far too much, enduring lockdown at considerable personal and financial cost. Why should we risk all we have sacrificed so that the universities and associated businesses like Navitas can feather their own nests?

In any event, I can’t see international student numbers returning to their absurd 2019 heights anytime soon. The CCP’s trade war and the rapid spread of COVID-19 in India should crimp numbers from our two biggest source markets for the foreseeable future.