The Growing Trade in Education Goods and Services

Stephen P. HeynemanVice President, International OperationsGlobal Resources DivisionFrontline Group1729 King Street, Suite 200Alexandria, Virginia 22314Tel: (703) 684-8400 Fax: (703) 684-9489 Email: sh@imd-net.com

Presented to the Symposium onThe World Education MarketVancouver, British Columbia

May 24-27, 2000

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Presentation Outline

What does the commercial education goods and services sector look like?

What do we know about markets? Within the U.S. Within OECD countries Within middle and low income countries

What can we predict about the future of international trade? Drivers of change Illustration: Testing and Assessment Debate over the morality of educational trade

Summary

What does the commercial education goods and services sector look like?

What do we know about markets? Within the U.S. Within OECD countries Within middle and low income countries

What can we predict about the future of international trade? Drivers of change Illustration: Testing and Assessment Debate over the morality of educational trade

Summary

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TextbooksTeaching materials

Supplemental Materials Vocational/Scientific Equipment

Educational SoftwareVideos/Multimedia

School Supplies

Goods

Testing Certification

Test Preparation After school programs

Tutoring

Consulting

Services

Elementary and Secondary Education Post-secondary Education

Distributed Learning Corporate Training and Adult Learning

Technology-based Training Early Education and Child Care

Adult Education/Continuing EducationSpecial Education

Markets

Corporations Individual Consumers Schools

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What does the Sector Look Like in OECD Countries?

Large growth expected in particular arenas

Examples Products: textbooks and educational

software Services: testing and evaluation

Wide variation in spending/pupil

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Variation in Student Non-Salary Expenditures within OECD Countries

Country Percent of Current Expenditures Per-student costs

Sweden 44% $2,394U.S. 20% $1,168France 21% $975Spain 16% $486Ireland 11% $288Greece 3% $57

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Consumer Market for Home Computers

1995 1996 1997 1998

USA 13,000 16,000 22,000 31,000

Europe 7,500 11,000 19,000 32,000

Rest ofWorld

9,500 13,000 19,000 28,000

TOTAL 30,000 40,000 60,000 91,000

#’s of Units

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Education Software Market for Schools & Private Consumers

1996 1997 1998 1999 2000

SchoolMarket

1,105 1,540 2,155 3,055 4,100

ConsumerMarket

1,200 1,400 1,600 1,830 2,120

TOTAL 2,305 2,940 3,755 4,885 6,220

Source: IDC Financial Times

$U.S. in millions

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What does the Sector look like in Low and Middle Income Countries?

Four out of five of the world’s students

Lower spending/studentHigher educational spending

associated with economic growthStrong potential markets in specific

regions and countries

Four out of five of the world’s students

Lower spending/studentHigher educational spending

associated with economic growthStrong potential markets in specific

regions and countries

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Middle Income/

Developing*88%

USA3% OECD

9%

USA

OECD

Middle Income/Developing*

Distribution of Elementary and Secondary School Students*

*World Total = one billion children enrolled of the 1.5 billion in the 5-18 age group

Middle Income/

Developing*83%

USA5%

OECD12%

USA

OECD

Middle Income/Developing*

By Category of Economic Development

Enrollment Age Group

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EAP29%

LAC9%

ECA7%

Others9%

S. Asia26%

Africa13%

MENA7%

Africa

MENA

S. Asia

EAP

LAC

ECA

Others

Distribution of Elementary and Secondary School Students*

*World Total = one billion children enrolled of the 1.5 billion in the 5-18 age group

Others6%

ECA10%

LAC10%

EAP35%

S. Asia22%

Africa11%

MENA6%

Africa

MENA

S. Asia

EAP

LAC

ECA

Others

By RegionEnrollment Age Group

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Low Spending on Teaching Materials/Student

Seychelles 95.0Thailand 28.8

Chile 26.1South Africa 23.3

Malaysia 10.8Lithuania 10.0

China 4.7Benin 3.5

Zimbabwe 3.1Swaziland 1.6

India 0.7

$U.S.

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Low Spending Does not Mean Small Markets

Country Teaching materials perstudent in US $)

Total students enrolled Total Spent in millions of US $

China 4.71 211,132,216 993.7France 34.67 12,137,211 420.8Thailand 28.80 10,476,682 301.7South Africa 23.26 12,249,798 284.9India 0.68 181,956,795 123.1Chile 26.13 3,347,946 87.5Malaysia 10.78 4,622,095 49.8Zimbabwe 3.11 3,239,195 10.1Philippines 0.52 18,373,539 9.5Lithuania 10.03 688,100 6.9Iceland 74.70 67,167 5.0Benin 3.54 835,559 3.0Seychelles 94.98 18,960 1.8Swaziland 1.55 273,813 0.4

Source: UNESCO Statistical Yearbook, 1998

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As economies grow, more is spent on goods and services per student

R2 = 0.3289

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Non-salary current expenditure per student

GN

P p

er

cap

ita

Finland

Israel

Denmark

USA

Greece

Spain

SwitzerlandJapan

Sweden

HungaryPhilippines

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Markets for Teaching Materials in Ten Years*

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Malaysia India South Africa China

1995

2009

* Assuming 3% economic growth; UNDP projected populations growth rates; 1:1 ration of economic growth and expenditures on teaching materials

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Large Growth of Education Expenditures in Certain Regions

Continents, major areas andgroups of countries

Public expenditure oneducation per inhabitant ($)

Percent Change1980-1994

1980 1985 1990 1994World Total 126 124 202 252 100Africa (North and SSA) 48 40 41 41 -15America 307 375 521 623 103Asia 37 39 66 93 151Europe 418 340 741 982 135Oceania 467 439 715 878 88Industrializing Countries 31 28 40 48 55

SS Africa 41 26 29 32 -22Arab States 109 122 110 110 1

LAC 93 70 102 153 65EAP 12 14 20 36 200

S. Asia 13 14 30 14 1Poorest Countries 9 7 9 9 0

Industrialized Countries 487 520 914 1211 149

Source: UNESCO Statistical Yearbook, 1998

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Focus on Qualifications Testing and Assessments

Driver Illustration

Technology change: Performance-based & CBTGlobalization: Test validity using international

labor marketsPolitical Influence: Democracy brings accountabilityConsolidation: BritainPrivatization: NetherlandsDemographics: More types of tests for more

peopleTrade: Technical assistance

Use of copyrighted itemsJoint development of new instruments

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Issues for Private Investors

Market appears significantData are problematicMarkets are fragmentedExperience in developing countries is limitedRegulatory environments may distort markets

Public authorities need to hear why the

commercial provision of goods and services is beneficial for education

Market appears significantData are problematicMarkets are fragmentedExperience in developing countries is limitedRegulatory environments may distort markets

Public authorities need to hear why the

commercial provision of goods and services is beneficial for education