As the 21st century opens, tertiary education is facing unprecedented

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1 Overview and Main Findings It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. Charles Darwin As the 21st century opens, tertiary education is facing unprecedented challenges, arising from the convergent impacts of globalization, the increasing importance of knowledge as a principal driver of growth, and the information and communication revolution. 1 But opportunities are emerging from these challenges. The role of education in general, and of tertiary education in particular, is now more influential than ever in the construction of knowledge economies and democratic societies. Tertiary education is indeed central to the creation of the intellectual capacity on which knowledge production and utilization depend and to the promotion of the lifelong-learning practices necessary for updating people s knowledge and skills. At the same time, new types of tertiary institutions and new forms of competition are appearing, inducing traditional institutions to change their modes of operation and delivery and take advantage of the opportunities offered by the new information and communication technologies. The State of Tertiary Education in Developing and Transition Countries In response to these momentous and converging trends in the environment, a number of countries have undertaken significant transformations of their tertiary education systems, including changes in patterns of financing and governance, growing institutional differentiation, the creation of evaluation and accreditation mechanisms, curriculum reforms, and technological innovations. But progress has been uneven, and sharp contrasts remain between and within tertiary education systems worldwide. Most developing and transition countries continue to 1

2 2 CONSTRUCTING KNOWLEDGE SOCIETIES wrestle with difficulties arising from inadequate responses to existing challenges. Among these unresolved issues are the expansion of tertiary education coverage in a sustainable way, the reduction of inequalities of access and outcomes, the improvement of educational quality and relevance, and the introduction of effective governance structures and management practices. Even though tertiary-level enrollments have grown significantly in virtually all countries in the developing world, the enrollment gap between the most advanced economies and developing countries has widened. In addition, tertiary education systems continue to be elitist as regards access and the socioeconomic composition of the student body. Financial resources have been insufficient to sustain growth of enrollment and improve quality. In many countries rigid governance models and management practices are preventing tertiary education institutions from embracing change and launching reforms and innovations. In this context, developing and transition countries are confronted with a dual task. On the one hand, there is a pressing need to overcome the existing coverage, equity, quality, and governance problems that have beset their tertiary education systems. On the other hand, developing and transition countries, like industrial countries, are exposed to the new challenges arising from the construction of knowledge-based economies and democratic societies. A key concern is whether developing and transition countries can adapt and shape their tertiary education systems to confront successfully this combination of old and new challenges. Purposes of This Report Even though the World Bank has actively supported tertiary education reform efforts in a wide variety of countries for many years, there is a perception that the Bank has not been fully responsive to the growing demand for tertiary education interventions by clients and that lending for the subsector has not matched the growing importance of tertiary education for economic and social development, especially in the poorest developing countries. It thus became necessary to revisit the Bank s policies and experience regarding tertiary education in the light of the changes in the world environment and the persistence of the traditional problems of tertiary education in developing and transition countries. This World Bank report on tertiary education describes the role of tertiary education in building up a countryæs capacity for participation in an increasingly knowledge-based world economy and investigates policy options that have the potential to enhance economic growth and reduce poverty. The report examines the following questions:

3 OVERVIEW AND MAIN FINDINGS 3 What is the importance of tertiary education for economic and social development? How should developing and transition countries position themselves to take full advantage of the potential contribution of tertiary education? How can the World Bank and other development agencies assist in this process? The report has two complementary goals. The first is to provide information and insights that reflect current knowledge about successful reforms and effective implementation and that are applicable to World Bank tertiary education lending practices. The second is to engage client countries and the international community in a dialogue on the role of tertiary education in the context of overall World Bank strategies and policies, the justification for investing in the subsector, and ways of minimizing the negative political impact of tertiary education reforms. The report builds on previous World Bank policy research and analysis, notably Higher Education: The Lessons of Experience (1994); Education Sector Strategy (1999a); and the report of the independent Task Force on Higher Education and Society set up jointly by the World Bank and the United Nations Educational, Scientific, and Cultural Organization (UNESCO), Higher Education in Developing Countries: Peril and Promise (2000). It also draws on recent work by the Organisation for Economic Co-operation and Development (OECD), UNESCO, and the regional banks, as listed in the Bibliography in this volume. In addition, it links knowledge about tertiary education with the findings of recent World Development Reports The State in a Changing World (1997), Knowledge for Development (1999c), and Entering the 21st Century (2000e) and with ongoing Bank analytical and strategic work on the dynamics of knowledge economies and on science and technology development. This study expands on many of the themes developed in the first World Bank policy document on the subsector, the 1994 volume Higher Education. Nevertheless, it contains significant differences, stemming from the radical changes that have transformed the external environment in which tertiary education systems operate. Foremost among these changes are the emerging role of knowledge as a major driver of economic development, the appearance of new providers of tertiary education in a borderless education environment, and the transformation of modes of delivery and organizational patterns in tertiary education in response to the information and communication revolution. Other important changes in the past few years are the rise of market forces in tertiary education and the emergence of a global market for advanced human capital. There has also been a notable increase in requests from World Bank client countries for financial support for ter-

4 4 CONSTRUCTING KNOWLEDGE SOCIETIES tiary education reform and development, often as a consequence of their rapid progress in basic and secondary education coverage. The report emphasizes the need for a balanced and comprehensive view of education as a holistic and global system that includes not only the human capital contribution of tertiary education but also its critical humanistic and social capital building dimensions and its role as an important international public good. This perspective leads to new recommendations for tertiary education policy. Although the World Bank is but one of many donor agencies working in the tertiary education subsector, it can make a significant contribution in at least two important areas. First, the World Bank is in a unique position to introduce a comparative global perspective on recent tertiary education developments and reform while engaging in policy dialogue in a large number of developing and transition countries. Second, extensive technical and practical experience with tertiary education projects over the past 20 years provides the World Bank with relevant and concrete implementation lessons from successful and less successful reforms in a variety of national and institutional contexts. Tertiary Education Policy in the Context of Overall World Bank Strategy The findings of this report demonstrate how improvements in tertiary education contribute to the World Bank s overall strategy, including its work in support of the United Nations Millennium Development Goals. Poverty Reduction through Economic Growth The Bank s analytical framework for studying and explaining the dynamics of knowledge-driven development identifies the converging roles of four contributing factors: the macroeconomic incentive and institutional regime, the information and telecommunication infrastructure, the national innovation system, and the quality of human resources. In this framework, the contribution of tertiary education is acknowledged as vital because it exercises a direct influence on national productivity, which largely determines living standards and a country s ability to compete and participate fully in the globalization process. More specifically, tertiary education institutions support knowledge-driven economic growth strategies and poverty reduction by (a) training a qualified and adaptable labor force, including high-level scientists, professionals, technicians, teachers in basic and secondary education, and future government, civil service, and business leaders; (b) generating new knowledge; and (c) providing the capacity to access existing stores of global

5 OVERVIEW AND MAIN FINDINGS 5 knowledge and adapt this knowledge to local use. Tertiary education institutions are unique in their ability to integrate and create synergy among these three dimensions. Sustainable transformation and growth throughout the economy are not possible without the capacity-building contributions of an innovative tertiary education system, especially in low-income countries with weak institutional capacity and limited human capital. Poverty Reduction through Redistribution and Empowerment World Development Report 2000/2001 emphasizes a poverty reduction strategy based on empowerment, opportunity, and security. The role of tertiary education is linked to the opportunity and empowerment dimensions. Tertiary education can offer better opportunities and life chances for low-income and minority students, thereby increasing their employability, income prospects, and social mobility and decreasing income inequality. The norms, values, attitudes, ethics, and knowledge that tertiary institutions can impart to students contribute to the social capital necessary for constructing healthy civil societies and socially cohesive cultures, achieving good governance, and building democratic political systems. Fulfillment of Millennium Development Goals Tertiary education institutions play an essential role in support of basic and secondary education. The training of teachers and school principals, from preschool to the upper secondary level, is the primary responsibility of tertiary education institutions. Education specialists with tertiary education qualifications participate in curriculum design and educational research for lower levels. The linkage between tertiary education and the other levels of schooling has the potential to stimulate a virtuous circle of capacity building because the quality of tertiary education affects the quality of primary and secondary school education and is in turn directly influenced by the quality of secondary school graduates. Outline and Principal Messages of the Report This volume is organized into five chapters, supplemented by data and information appendixes. Chapter 1 analyzes recent changes in the global environment that constitute new challenges for tertiary education institutions. In Chapter 2 the implications of these changes are examined from the viewpoint of the contribution of tertiary education to economic and social development. Chapter 3 looks at the present state of tertiary

6 6 CONSTRUCTING KNOWLEDGE SOCIETIES education in developing and transition countries and assesses progress toward overcoming the traditional problems of access and coverage, equity, quality and relevance, and governance. Chapter 4 discusses the evolving nature of the relationship between tertiary education institutions, the marketplace, and the state; the justification for continuing public support of tertiary education; and the appropriate role of the state in support of knowledge-driven economic growth. Finally, Chapter 5 evaluates recent Bank experience with assistance to tertiary education and proposes a framework for future Bank involvement. Briefly, the main messages of the report are as follows: Social and economic progress is achieved principally through the advancement and application of knowledge. Tertiary education is necessary for the creation, dissemination, and application of knowledge and for building technical and professional capacity. Developing and transition countries are at risk of being further marginalized in a highly competitive world economy because their tertiary education systems are not adequately prepared to capitalize on the creation and use of knowledge. The state has a responsibility to put in place an enabling framework that encourages tertiary education institutions to be more innovative and responsive to the needs of a globally competitive knowledge economy and the changing labor market requirements for advanced human capital. The World Bank Group can assist its client countries in drawing on international experience and mobilizing the resources needed to improve the effectiveness and responsiveness of their tertiary education systems.