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When Shen's center hosts visitors from foreign universities, she usually skips small talk and comes right to the point, delving into the particulars to answer a barrage of questions: Can students' credits be mutually recognized? Are students insured? How many students share a dormitory room? Sometimes her travel-beaten guests don't even take time for lunch, but rush back to the airport to hop on the next flight to the next university in the next country.

Strategic Promontories

“We're always on the move with a suitcase in tow,” says Shen, who has taught at NTU's Department of Chinese Literature and has also served as head of its Graduate Institute of Musicology. Meanwhile, she has become as familiar with receiving foreign guests and the standard operating procedure for international treaty signing ceremonies as with her specialty – music for the guqin (the Chinese zither).

Shen's career shift from a secluded life of teaching and research to a frantic calendar of travel, hosting visitors and recruiting students at home and abroad is a perfect illustration of university mobility in today's globalizing world.

In August this year, Newsweek magazine published its first-ever special report on the globalization of education, which emphasized that the universities of the past built on nationalism, while today's universities are shaped by globalization. Never before has the destiny of universities been as closely tied to a country's national strength as today. According to Lio Monchi, assistant professor at the Department of Political Economy, National Sun Yat-sen University, universities are the “strategic promontories” of a nation's competitiveness.

A practical cross-analysis by Professor Sir David King, chief scientific advisor to the British Government, found a direct correlation between a country's wealth and the number of scientific papers published by that nation, as well the number of citations these works receive.

Spurred by a sense that the quality of their universities could affect their countries' overall success, governments in the late 1990s began to view enhancing their universities' international competitiveness as a top administrative priority. Policymakers scrambled to inject large sums into beefing up their universities for survival in the global knowledge economy. Moreover, a number of global university rankings have come out in recent years that have attracted worldwide attention, increasing pressure on universities to market themselves.

Bent on making Japan a power to be reckoned with in the global knowledge economy, the Japanese government will invest NT$600 billion in a bid to produce 30 Nobel Prize laureates within the coming 50 years. Spooked by the onslaught of the Asian financial crisis, the South Korean government has decided to pour NT$200 billion per year into the Brain-Korea 21 (BK21) project, a transnational human resources development program which aims to propel Seoul National University (SNU) into the top league of international universities. Over the past decade SNU has already outstripped Taiwan's top university NTU in terms of global academic prestige, as well as quantity and quality of academic papers published.

But China on the other side of the Taiwan Strait is an even more formidable rival.

Building economic development on “scientific education” and “human talent,” China is investing more than NT$100 billion into the modernization of higher education. “Project 211” aims to develop 100 first-class universities and “Project 985” hopes to develop world-class research-oriented universities. Moreover, funding is concentrated on a small number of priority universities. Over a process of more than a decade Peking University (PKU) and Tsinghua University have reinvented themselves and are now showing off their full potential to the world. In the world university rankings produced by The Times of London, some 3,703 academics worldwide were asked to identify the best universities within their own field of expertise. In these top 100 rankings PKU has already pushed the University of Tokyo off its longtime position as the leading university in Asia. In the “Academic Ranking of World Universities” by Shanghai Jiao Tong University (SJTU), which is based on research output, Tsinghua University has this year for the first time replaced NTU as the top university in Greater China.

Even India, with an average annual per capita income of just US$600, has focused its fiscal resources, investing some 80 percent of its higher-education budget in a handful of top-notch technological institutes. It is the graduates of these institutes who have turned India into a software powerhouse.

Chen Der-hwa, director of the Department of Higher Education at the Ministry of Education, lays bare the cruel reality of international competition: “Only playing in the top league is good enough.”

There are two major reasons why higher education has become governments' top concern, says Wu Se-hwa, president of National Chengchi University and a specialist in knowledge management. On the one hand, demand for highly educated talent has skyrocketed in the knowledge economy; on the other hand, higher education has become a new industry that drives national economic growth.

The World Bank estimates that higher education has become a global industry worth US$300 billion, or 1 percent of global economic output. And then there is the booming business of satellite campuses. Last year overseas campuses generated as much as US$3 billion, most of which lined the pockets of universities in Britain and the U.S., the two dominant powers in the global higher-education market. Moreover, top universities also boost domestic economic growth. Foreign students studying in the U.S. generate US$13 billion for their host country every year.

Where does Taiwan stand in this emerging industry?

Let's apply competitive strategy theorist Michael Porter's classic model of the Five Competitive Forces (existing competitors, new entrants, customers, suppliers, and substitute products) to examine the competitiveness of Taiwan's universities.

Existing Competition, Threat of New Entrants

The first force is rivalry among existing competitors: Over the past decade the number of players in Taiwan's higher-education industry, the universities, has ballooned, while the market and resources have not expanded correspondingly. It is an undisputed reality that this trend, in combination with a lack of differentiation and low barriers to market entry, led to ruinous competition. Two years ago the Control Yuan set the record straight, saying that the quality of our universities “has slid back 15 years.” The stimulation of competition has resulted in innovation and enhanced quality in only a small minority of universities.

On the other hand, even though government policy protects Taiwan's universities, they cannot escape the challenges from new entrants. The new faces in the competition are mainly universities from other Asian countries. And they pose a potential threat on two fronts: They eat away at our brands (prestige) and our consumers (students).

As other Asian countries cultivate one or two universities of international standing, Taiwan's indiscriminate all-round allocation of resources will make it very difficult to compete internationally. Sick at heart, a veteran professor points out that with the exception of a few elite universities, Asia's image of Taiwan's higher education is “low-price, low-quality” – exactly what the “Made in Taiwan” label stood for in the past.

Suppliers Have Big Bargaining Power

Secondly, the bargaining power of universities' major suppliers – the government, which supplies funding, and the teachers, who provide their brain power and labor – has risen markedly.

Over the past ten years the Ministry of Education's annual budget for higher education has stood at around NT$70 billion to NT$90 billion. With more than 100 universities vying for a piece of this pie, “no one gets enough to fill his stomach and no one starves to death,” the Education Ministry's Chen says frankly. He notes that there is virtually no room for increasing higher education spending given that budgets are cut everywhere to rein in government debt. Where funding is insufficient, universities have to be inventive and design their own ways of raising money.

National Chiao Tung University (NCTU) vice president Hsu Chian-shu, who also directs the university's program to promote academic excellence, recalls that when he launched exchanges with China's four Jiao Tong Universities (in Beijing, Shanghai, Southwest, and Xi'an) some ten years ago, their annual budgets did not exceed NT$800 million, while NCTU had a “distant lead” with more than NT$2 billion. In contrast, Shanghai Jiao Tong University now has an annual budget of more than NT$8 billion, four times more than NCTU. “We have completely fallen behind,” Hsu says with regret.

Given that funding cannot be increased, higher fees would appear to be a way out. But even when it comes to setting tuition fees, the government enjoys an absolute advantage in negotiating prices.

Not only is there little money, the government also always has the upper hand because it can use “administrative guidance” to micromanage universities, telling them how and where to use government money.

Victor W. Liu, chairman of the Higher Education Evaluation and Accreditation Council of Taiwan (HEEACT), argues that it's excessive legal restrictions that inhibit university development, not insufficient funding. “If you ask a chef to prepare a dinner banquet, give him some money and specify how much he can spend on meat and how much on fish, he won't be able to do a good job,” says Liu, a former president of National Sun Yat-sen University, in illustrating the universities' current predicament.

Kao Chiang, president of National Cheng Kung University, has had his own bitter experience with strangulating legal restrictions. The concept for the university's new College of Social Sciences building was lying around collecting dust for 13 months before it was confirmed that the project would be subsidized, Kao recalls. After the project plan was submitted to the government, it was kicked around various departments for another nine months, before the university was instructed to make improvements on the grounds that “the construction costs per square meter are too low.” Kao remains unsure whether the building will actually be built.

“Why can't they give universities the flexibility to let them decide for themselves?” Kao asked rhetorically.

Another difficulty that universities have to overcome seems to come from another group of suppliers, the more than 80,000 teachers. Salaries for university teachers have been lagging behind the market for a long time. And with the global boom in higher education creating high salaries in many countries throughout the world, Taiwan's own higher-education sector is finding it more and more difficult to retain existing talent and to attract outstanding new faculty. NCTU vice president Hsu Chian-shu, who formerly served as the university's head of research and development, remembers how some ten years ago a single opening for a teaching position would draw applications from 200 to 300 candidates with doctoral degrees from overseas universities. Nowadays, just over a dozen people will apply, he said.

NTU vice president Chen Tai-jen, an atmospheric sciences professor, also has a story to tell that illustrates how meagerly paid Taiwan's university teachers are even in comparison with their colleagues in other Asian countries. When Chen chatted with a senior South Korean professor at an academic symposium about ten years ago, he found out that he earned twice as much as his South Korean colleague. However, when he met the same professor again at an international conference this year, it turned out that now it's the other way round, with the South Korean professor getting twice as much as Chen.

Good teachers leave for greener pastures, and thus good talent congregates at foreign universities. And there is still another negative factor affecting the sources of higher-education suppliers, namely the continued decline in the ratio of university graduates who go abroad to pursue a higher degree. Chen Der-hwa of the Ministry of Education states frankly that Taiwan's higher education is presently sustained by those who studied abroad some twenty years ago. Should students continue to stay at home rather than studying abroad, Taiwan will eventually “run out” of excellent faculty, he predicts.

More Power in the Customer's Hands

With more than 160 suppliers of university education and enrollment levels of 90 percent or more, the industry has turned from a seller's market into a buyer's market. Given that it costs little to switch universities, the customers – university students – now have more bargaining power than ever before.

The customer's bargaining power also manifests itself in the fact that today's universities “don't dare and also can't” demand a lot from their students.

At American universities, only half of all matriculating students complete their studies within four years, while in Taiwan more than 90 percent of all students graduate. The president of a private university in northern Taiwan candidly admits that schools and teachers have to battle with their conscience when it comes to deciding whether a student should be kicked out, because “losing a student means a loss of over NT$1 million in revenues.”

National universities face the same pressures. An assistant professor who has just returned from overseas to teach at a private university in the north of the island suffered a “major blow” during his first two weeks on his new job. At the end of the first class he assigned dozens of pages of extra reading, which the seven attending students were supposed to read in turns. The following week he was shocked to find that just a single student remained in his class. A veteran professor at the department even indicated that his young colleague had to blame himself, saying “You can't be so strict, or else the students will run away.”

Projections based on the current birthrate show that ten years down the road Taiwan's universities will provide more places than needed to enroll all eligible students. Facing the gloomy prospect of oversupply, universities have begun to look for potential customers abroad. At Taiwanese universities, foreign students still account for just a tiny 1 percent of the student body, Ministry of Education statistics show. The ratio of foreign students who study at Taiwanese universities at their own expense rather than on scholarships is even lower. As a result Taiwan's schools flock to other countries' higher-education fairs to market themselves in what has become something of a collective movement.

On that front, Singapore has been clever to forge strategic alliances with international competitors. Aiming to attract some 100,000 foreign students by 2012, Singapore uses as incentive dual-degree programs in cooperation with the world's top schools. Their message is, “Study in Singapore, and get a degree from MIT.” The city-state has also signed similar alliances with other leading universities, such as the European Institute of Business Administration (INSEAD) in France, the Munich University of Technology (TUM) in Germany, and the University of Chicago.

During a visit to Taiwan last year, Lee Hyun-chong, secretary general of the Korean Council for University Education (KCUE), commented gravely, “A closed university education system without foreign professors and foreign students will hardly be internationally competitive.” After globalization has swept across the world's universities, this is also the major worry for Taiwan's higher-education industry.

Substitute Products: No Threat Yet

In the short term, we will probably not see any substitutes to university education emerge, given that Chinese society attaches great importance to degrees. The Major Survey of University Education that CommonWealth conducted for the first time this year shows that more than 90 percent of parents in Taiwan think their children should attend university, although they are not satisfied with the higher-education system.

Former Education Minister Huang Jong-tsun, now president of China Medical University, believes that university education in Taiwan is “at the crossroads of life and death,” and that reforms are urgently needed given the worsening imbalance between excellence and mass access, and the massive threat from international competition.

When analyzing European universities' apparent inability to fight the massive threat from American universities, the British business magazine The Economist made the following suggestions: universities should diversify their sources of income by raising, for instance, tuition fees and soliciting corporate donations. They should aggressively compete for customers worldwide, impart useful knowledge, be flexible and offer educational variety.

This piece of advice could be equally applied to Taiwan's universities.

However, the precondition is that universities choose between administrative guidance and free competition. If universities still want to rely on public subsidies, they can only improve themselves within the government-regulated framework. If they opt for free market competition, student fees and remuneration packages must be thoroughly liberalized and left to the market mechanism. But letting the market reign will also touch the hot potato of social justice. The big question is whether the universities, the public and the Legislative Yuan are ready to accept this reality.

The Taiwanese government is already trying to respond to calls for university reform. It has taken various measures, such as revising the University Act, reorganizing national universities as corporations, and launching a five-year program giving NT$50 billion to the island's top twelve universities for the purpose of promoting academic excellence and developing world-class research centers. As universities lament their lack of funding, they should perhaps also do some soul-searching as to how they can improve the quality of their products.

All in all, Taiwanese universities' competitiveness manifests itself in more than research performance. An even greater showcase is the tens of thousands of “products” that they process year by year – the students. Professor D.H. William Seetoo, who has been teaching at National Chengchi University for 30 years, cuts to the chase: “The problem is not competition, but whether the values that produce talent for the country can be put to use.”

Translated from the Chinese by Susanne Ganz