091010_2nd International Entrepreneur & Family Business_Changing Trends on Overseas Tertiary Education Choices

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  • 1. Full Paper Submission for:2nd International Entrepreneur & Family Business Association World Conference 2009 Shah Alam, Selangor, Malaysia 10 October 2009 Spire Research and Consulting Sdn. Bhd. ( 779502-T ) 36th Floor Menara Maxis, Kuala Lumpur City Centre, Kuala Lumpur 50088, Malaysia Tel : (60 3) 2615 0015 Fax : (60 3) 2615 0088 Website : www.spireresearch.com
  • 2. Article by Spire Research and Consulting (www.spireresearch.com)© 2009 Spire Research & ConsultingNo part of this report may be given, lent, resold, or disclosed to non-customers without writtenpermission. Furthermore, no part may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying, recording,or otherwise, without the permission of the publisher.For information regarding permission, write to:Spire Research & Consulting Sdn. Bhd.36th Floor, Menara MaxisKuala Lumpur City Center50088 Kuala Lumpur, MalaysiaTel : + 60 - 3 - 2615-0015Fax : + 60 - 3 - 2615-0088
  • 3. Article by Spire Research and Consulting (www.spireresearch.com) Changing Trends on Overseas Tertiary Education Choices for Indonesian Students & Top ExecutivesWritten by: Jeffrey Bahar, Managing Director, Southeast Asia Spire Research and Consulting Sdn. Bhd. Office: +60-3-2615 0015 Mobile: +60-16- 9555 884 Email: jeffrey.bahar@spireresearch.comAbstract:Owners of successful family-owned business would typically inherit their business to theirchildren. In order to prepare for the succession, their children are often sent to overseas fortheir tertiary or even secondary education.The 1997 Asian financial crisis reduced the „buying power‟ (affordability) of many SoutheastAsia families in funding their children‟s tertiary education. This is especially seen forfamilies in the more affected countries such as Indonesia and Malaysia. There has beenchanging trend in the choices of university and country selection within ASEAN –particularly studying in Singapore and Malaysia; Australia and New Zealand universitiesgaining higher popularity due to closer distance proximity and more affordable living andeducation budget required. The previously popular countries like the United States, Canada,and UK are becoming less popular with Asian new student intakes reducing over the time.In addition, education institutions and universities aggressively increase their marketingeffort to attract overseas students by organizing seminars in hotels or directly at elite highschools, appointing education service agents, establishing linkage with local universities inthe targeted countries for twinning program or even opening a new local campus in the high-promising countries.
  • 4. Article by Spire Research and Consulting (www.spireresearch.com)Executive MBA program are also gaining popularity among the children of family-businessowners after their completion of formal Bachelor degree. To equip themselves better inmanaging their family-owned businesses, some of top executives even take further postgraduate studies. Top executives (business owners‟ children) would have the budget and timeto attend a full-time program and will elect for short or distance-learning program, due totheir busy schedules.This paper highlights this changing trend on choices for graduate and post-graduate overseaseducation programs for students and top executives in Indonesia.
  • 5. Article by Spire Research and Consulting (www.spireresearch.com)About Spire Research and Consulting and Our Speaker Participation Request:Spire Research and Consulting has conducted a comprehensive survey in Indonesia‟soverseas education sector, covering interviews with industry players comprising ofinternational schools & universities established in Indonesia, education agents promoting theoverseas education and potential students looking for overseas education. The survey is alsobacked up with official statistics from the relevant government bodies. Examples ofinteresting findings are also attached in Appendix 1, as preview.The presentation to be made by Jeffrey Bahar as the speaker conference will highlightinteresting findings as well as his analysis on the changing trend in overseas graduate andpost graduate education choices for Indonesian and Malaysian students and top executives.Furthermore, the speaker – Jeffrey Bahar – has previously worked in a family-ownedbusiness for four years, The personal experience gained working in that family-ownedcompany in the wood industry and with headquarter in Singapore (with multi-countryoperations in Indonesia, Malaysia, China and USA) will add the interesting facts to thematerials to be presented by the speaker.We seek the committee consideration for granting the request for Jeffrey Bahar, representingSpire Research and Consulting Sdn Bhd, to be one of the speakers in this exciting event.
  • 6. Article by Spire Research and Consulting (www.spireresearch.com)Presenter & Writer Bio-data: BIODATA Jeffrey Bahar Managing Director, Southeast Asia Spire Research and Consulting Snd BhdJeffrey Bahar, currently Southeast Asia Managing Director of Spire Research and Consulting(www.spireresearch.com), joined Spire Research and Consulting in Singapore in October2000 as a Research Manager in the Singapore office. He was promoted to Senior ResearchManager in 2002 and subsequently started Spire Research‟s Indonesian office in 2003,Malaysia and Vietnam office in 2007 to 2008.Besides building up the business in Indonesia, he has also been tasked with heading a 50-member research team across three offices (Indonesia, Vietnam and Malaysia) offering a highlevel of needs-tailored research services to a high-caliber portfolio of clients consisting ofleading companies in the telecommunication, automotive, agribusiness, banking,pharmaceutical and fast moving consumer goods industry.With nine years industrial experience in market research, Bahar brings to his clients valuableprimary research and secondary research services using both internal corporate data andpublicly available data sources to derive relevant and actionable information to supportstrategic planning and business development. His valuable technical background inengineering and the IT industry, has endeared him to many clients in related fields.Bahar began his career with Chartered Semiconductor Manufacturing (CSM), as a ProductionControl Engineer in 1996. He subsequently joined Pacific Plywood in 1997, a leading Asia-Pacific timber company listed in Hong Kong yet also a family-owned business with multicountry operation in Asia namely Indonesia, Malaysia, China and USA, where, as a Senior
  • 7. Article by Spire Research and Consulting (www.spireresearch.com)Specialist, he was in charge of regional business development and related research beforejoining Spire Research in Singapore.Bahar holds a Master‟s degree in Industrial Engineering from the University of Wisconsin inthe United States. He is well networked in Indonesia and has an excellent understanding ofthe country‟s business environment.With a good working knowledge of Malaysia, Vietnam, Thailand, China and Japan, Baharhas honed Spire‟s regional capabilities in strategic market entry studies, in-depth competitoranalysis and distribution channel analysis, while extending its service range into financialfeasibility studies, marketing consulting, business partner evaluation and supply chainmanagement benchmarking.He holds a Master of Science and Bachelor of Science in Industrial Engineering from theUniversity of Wisconsin, Madison.Contacts: email jeffrey.bahar@spireresearch.com, at office + 60 – 3 – 2615 0015 or mobilephone + 60 – 16 – 9555 884
  • 8. Article by Spire Research and Consulting (www.spireresearch.com)Full Paper:Trend on Location Choice of Overseas EducationOwners of successful family-owned businesses would typically inherit their businesses totheir children. In order to prepare for the succession, their children are often sent to overseasfor their tertiary or even secondary education. These students are becoming the narrowertarget segment for overseas education outside Asia.Each year, more than 4 million new Indonesian students in pursue tertiary education programin local and overseas universities. It is only about 30,000 students that elect for overseaseducation program or about 0.75% of total. Nonetheless, this small group of students createsa large market of estimated USD 450 million each year for the tuition fee spending to betapped by overseas education providers.For Indonesian students pursuing for overseas tertiary education, more than 90% of thestudents obtain their education fund from their parents. As the overseas education has costincreased with higher exchange rate of foreign currencies like US Dollar, British Pounds andAustralia Dollar against the Asian local currencies since 1997, this gradually reduces andlimits the affordability for overseas tertiary education to children of the rich families thatmostly having a family-owned business or the upper-class families that their parents haveaccumulated savings for their children education overseas. The potential international studentsegment for oversea education narrows to children of these families.The 1997 Asian financial crisis reduced the „buying power‟ (affordability) of many SoutheastAsia families in funding their children‟s tertiary education. This is especially seen forfamilies in the more affected countries such as Indonesia and Malaysia. There has beenchanging trend in the choices of university and country selection within ASEAN –particularly for studying in Singapore and Malaysia; Australia and New Zealand universitiesgaining higher popularity due to closer distance proximity and more affordable living andeducation budget required. The previously popular countries like the United States, Canadaand UK are becoming less popular to Asian new student intakes continue to decline, losingthe students from upper-middle class families that may not from family-owned businessfamilies. Students from these families have changed their location choice for overseas
  • 9. Article by Spire Research and Consulting (www.spireresearch.com)education to Australia, Singapore and Malaysia that are more affordable and closer inproximity to their home country.Indonesia is ranked 16th in top countries sending students to the US education system, with itstotal of 7,629 students in 2007-2008 academic years 1 . One the top six universities forIndonesian students is University of Southern California, a private and high-tuition feeuniversity in Los Angeles that is a popular choice for the children of the rich, family-ownedbusiness owners since the 1990‟s. Major high living cost cities in California, New York,Massachusetts and Washington States of USA are observed as the popular destination of thefamily-owned business children. While US universities still having 7,629 Indonesian studentsattending their study in the US, the number seems to have declined in the past 10 years thatwas earlier reported at more than 10,000 students each year before 1997.For UK universities, Indonesia is ranked 6th among overseas students studying in the UK andjust slightly lesser students than Malaysia on the 5th rank. Total number of Indonesianstudents studying in UK is less than 1,000 students2, as the average tuition fee of £9,000 as of2007-2008 (in 1999-2000: only £6,550)3 only becomes affordable to the rich-family childrenfor self-funding students.On the other hand there were 21,000 Malaysian students enrolled in Australian universities in20084, making Malaysia on the 5th most of all international students studying in Australia. Incomparison, there were also a total of 16,000 Indonesian students registered in 20085. BothIndonesian and Malaysian students combined contribute AU$500 millions of tuition fee, withaverage tuition fee of AU$13,500 per year6.The total number of international students attending education system in Singapore climbedfrom 50,000 students in 2001 to almost 100,000 students in 2008, with Indonesian andMalaysian students are the top in the ranking. Singapore is a natural choice due to its Asian1 US Commercial Service Indonesia Education and Training Review, United States of America Department ofCommerce, http://www.buyusa.gov/indonesia/en/education.html2 British Council3 Median tuition fee of UK universities for class-room based graduate program, source: UK Council forInternational Student Affairs4 Hobson‟s International Students Guide,5 The Australia Government, Department of Foreign Trades & Services6 Average tuition fee in Australia university for bachelor program, Australia Education International
  • 10. Article by Spire Research and Consulting (www.spireresearch.com)culture and the closest proximity to Indonesia and Malaysia, with many Indonesian family-owned businesses owners having their own residential property investment in Singapore.Some of their children were even sent to study in Singapore as early as for their primary orsecondary education stage. More new universities, like Singapore Management University,were opened in Singapore allowing for more student intakes and high percentage ofinternational students including from Indonesia. Long-established universities and institutionslike Nanyang Technology University, National University of Singapore, Singapore Instituteof Management and LaSalle International Design School are also some of the popular choicesamong Indonesian students studying in Singapore. Upon completion of their bachelorprogram, children of the family-owned business will either return to Indonesia to run thefamily business or continue their further post-graduate education in Australia.There are also a number of successful large Indonesian companies that was previously afamily-owned business growing to become international companies and set up their regionalhead quarter in Singapore. Their children of the founding family that studied in Singaporewill continue to live in Singapore and take senior position in their Singapore regionalheadquarters.Executive Post-Graduate & MBA Program Gaining PopularitySingapore also benefits from its close distance to Indonesia, as some top executives runningthe family-owned businesses require further post-graduate study will choose to attend theprogram in Singapore campuses. As they have started working or having family commitment,these top executives are likely to elect for short-program or distance-learning Executive MBAprogram where top executives are only required to take class-room based teaching or lecturesfor a short-period of time only (a certain numbers of days in each month or each semester).These programs are typically from world‟s top universities with high tuition fees, whichaffordability and frequent travel expenses, even once or twice in a month, is not be an issue tothese top executives.Twinning Program, Local Campuses and Increasing MarketingIn addition, education institutions and universities aggressively increase their marketingeffort to attract overseas students by organizing seminars in hotels or directly at elite highschools, appointing and working with education service agents, establishing linkage with
  • 11. Article by Spire Research and Consulting (www.spireresearch.com)local universities as campus in the targeted countries for twinning program or even opening anew local campus in the high-promising countries. There are more options of “3+0”, 2+2”,“2+1” denoting the number of years required to study in local campus and overseas campus,that need lower education fund as most of the study years are in local country, withoutattracting high expenses of living abroad. From observation, tuition fee for such twinningprogram typically range from US$10,000 to 20,000 for the whole program of 3 or 4 years ofstudy to completion.However, the student target is typical not for children of rich, family-business owners butmore on children of upper-class families that looking for lower-cost option yet still obtainingdegrees from international universities in US, UK or Australia. Family-business owners willtend to still send their children for overseas education in outside Indonesia.Intangible Benefits, Emergence of New Young EntrepreneursChildren of family-owned businesses attends „elite‟ universities and start to build their makefriendship with same country of origin as well as similar family background, that is the richfamilies that own businesses. These „elites‟ top-executive-to-be at their parent‟s companiesgain intangible benefits from its school friendship network that later turns out to be apowerful business network system, when they return to their country and starting to run thefamily-owned companies.It is often new businesses are started among them studying together in overseas, shortly in afew years after their return to their home country. With no difficulty in raising the initialinvestment capital, new businesses in the sector of retail, fashion, food franchises andentertainment services are the most commonly selected as the new business ventures as thesebusiness are easier to set up and having a high profile for social acknowledgement andrecognition. Some of these businesses become successful and grow into a sizable businessrelatively faster in 2 to 3 years, as there is again lesser constraint of business expansioncapital.Young entrepreneurs groups and clubs now have new members from these successful youngbusiness people that reunite back with their old school friends and strengthening their socialand business network of this powerful group. New members of high-profile socialite classesare now made of these young entrepreneurs and top executives.
  • 12. Article by Spire Research and Consulting (www.spireresearch.com)Dynamic, Gradual Changes in Family-Owned Business and ConglomeratesMany family-owned business and conglomerates in Indonesia are now run by the 2nd or eventhe 3rd family generation of the company founders and owners. The sons and daughters ofthese family-owned businesses and conglomerates are immediately posted in top position andsenior managements of the company. These top executives having obtained their academicqualification from overseas education system bring new management concepts learnt fromthe school and gradually change the management system from a single-authority managementto team-based or committee-based senior management decision. The senior managementteam are formed with academically-qualified and professional managers, with some are fromtheir school friends that are from the upper-middle class family that their parents do not owntheir own businesses. Their ex-school friends are trusted due to the long-established relationbuilt since the student days.In ConclusionSending children for overseas education is a strong trend among the families of rich andfamily-owned business owners. In general, the popular location choice for overseas educationchanges with Australia, Singapore and Malaysia gaining more international students fromIndonesia. For children of Indonesia rich, family-owned business, United States, Australia,Singapore and UK are the popular location choice. Universities in US and UK have narrowerstudent target segment that is mainly from the „elite‟ children that overseas educationbecoming a compulsory. Children of the upper-middle class families would elect for lower-cost options such as Australia, Singapore and Malaysia or the growing twinning programswith local campus setup. High-tuition fee Executive MBA program with close proximitycampus, like in Singapore, also grows its popularity to top executives that are children of rich,family-owned businesses owners and running the company of their parents.The dynamic change in management of the family-owned businesses as their children takeover as the top executives, the emerging new young entrepreneurs, intangible benefits frompersonal business network developed among these group and new business started amongthese elites are some of the interesting trends observed and related to this topic.