Investing in the future-Nepali students abroad

The tragedy of 20,000 Nepali students going abroad to study is not that there are that many students going abroad who will never return home. The tragedy is that either too many of them fail or are unable to maximize their potential simply because they lacked the financial support to focus on their education.

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Thousands of Nepali students travel abroad for higher education every year.Last year, 16,499 sought formal no-objection certificates from the Ministry of Education for higher education in 67 countries. In the first five months of this fiscal year, 12,602 students have sought similar clearances to study in 60 different countries. Australia, the US, the UK and increasingly, China, have emerged as preferred destinations outside South Asia. [break ]

There is no conclusive data on Nepali students heading abroad for higher education. A no-objection certificate is not required to study in India. A clearance is also not required when the student does not need to purchase foreign currency in Nepal.

The Ministry of Education estimates that approximately Rs 3 billion (US $30 million) is spent annually by Nepali students abroad on their fees and expenses. The Ministry’s estimate is based on the applications for the right to purchase foreign currency in Nepal to pay for expenses abroad.

The majority of students travelling abroad for higher education will not return home. After the completion of their studies, most will go on to have successful careers in the countries they have studied, often becoming naturalized citizens in due course. If they do return, it will most likely be to participate in the annual Non-Resident-Nepali (NRN) jamboree or test out a new career when trying to tide over a mid-life crisis.

What attracts students to study abroad isn’t just the lure of being and studying in the developed world, such as Australia, Europe, the US, Canada and Japan. Many countries are actively encouraging international student enrolment in their colleges and universities.

These universities need international students to fill the vacant seats. The rush to market these universities to international students is far more pronounced now, compared to even just a decade ago. An industry of international student placements has sprung up around the world.

There is another reason that developed countries need students from abroad. These countries are ageing rapidly. Birth rates are declining from the already low rates. The population entering their workforce, those that will be taxpayers in the future, are far smaller than the generation that will be retiring. This imbalance between productive workforce and retiring population is already straining the ability of these economies to raise taxes and support social spending, especially for the elderly. Social security and other welfare measures, particularly those targeted at the elderly, will be under severe stress unless these countries expand their tax base.

International students are a good way to augment workforce and expand tax base. Following their studies, most will seek employment opportunities in their host country. For developed countries, these students are more socially integrated and better bet for long term productive asset than new migrants coming straight into the workforce.
Only a few decades ago the big concern for developing countries was “brain drain”—the fact that the smartest, brightest and most talented were leaving for employment opportunities abroad. The current phenomenon represented by the large number of students travelling abroad who will never return home is a “tax drain”—the erosion of productive assets that significantly undermines the ability of a country to build the basis for future growth.

But how do we counter this trend? By embracing it rather than seeking to reverse it.

We should make it easier for Nepali students to travel abroad for studies. Even as we continue to invest in higher education infrastructure at home, we must strengthen the support that outbound students receive. Once abroad, we must improve their chances of success.

There is a big disconnect between the number of students heading abroad for studies and the amounts they are spending. The average spending per student is too low. This is even after discounting for the large number of students heading to India, where the costs are substantially lower than in developed countries, and adjusting for the financial aid packages that some students receive.

Students abroad should be spending US $15,000-$20,000 annually on average. But data shows that they are spending far less, under US $5,000. These numbers reveal a dark reality: many students drop out of their full-time commitment to education because they are unable to find the funds to continue. They struggle with a part-time job, trying to catch a class here and there, in between their many jobs. Many lose their visa status, which further deteriorates their chances of completing education.

Even the students from middle class Nepali families suffer from this plight. Despite having a strong asset base in Nepal—a house, land and other ancestral properties—they are simply not able to generate the money needed for their education. Inspirational stories about the poor student who worked three jobs, studied at night and toiled to success are wonderful. But the vast majority need financial support to concentrate on their studies.

The tragedy of 20,000 Nepali students going abroad to study is not that there are that many students going abroad who will never return home. The tragedy is that either too many of them fail or are unable to maximize their potential simply because they lacked the financial support to focus on their education.

All of this can change, if we recognize that spending US $100-$200 million annually for higher education abroad is actually a productive investment.

There are several ways that government can facilitate this expenditure without straining its own finances. It could, for instance, allow collateral based lending for higher education. It could, if it wanted to promote the initiative, allow banks to lend directly to students in which a fixed asset is used not as collateral but simply as a guarantee that the student will return to pay back the loans in the future. There could also be cheaper longer-term loans to make international higher education more accessible to poorer students.

But we should not expect these students to return home. Besides, it doesn’t make sense to spend precious dollars on higher education abroad and then expect the returning graduates to recover that through employment in Nepal.

Nepali students who never return are still a productive national asset. The country has a legitimate right to treat all of its non-residents, including these students who never return, as national income. It should tax global income of all its citizens, independent of where the income originates and where they reside. If someone decides to forfeit their Nepali citizenship, the country should tax the prospective future income stream of the person.

The distinction between resident and non-resident Nepali should be rendered meaningless.The fact that 20,000 students leave every year for education abroad is a good thing. The fact that most of them will settle abroad and not return home is a good thing. We should ensure that all of them are equipped to succeed. Where they choose to live and work after their studies is irrelevant. Nepal can continue to benefit from their contribution to the national tax base.

source: Thapa, Bishal (2014),"Investing in the future ", republica,4 feb 2014

2014-02-04 | EducateNepal


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