The Finacing of Education

Education is a federal matter and is the responsibility of the Federal Government. It has been a major item of public expenditure and its provision has been increasing steadily as a trained and educated workforce is essential to economic growth.

Equal educational opportunities are provided for all, both in terms of access and achievement. Children who are disadvantaged in terms of economic status, location, and disability are the focus of intervention measures to provide educational opportunities and thereby improve their chances of educational achievement. Several programmes are introduced, including scholarships to needy students in schools and institutions of higher learning. Selected students are given scholarships to enable them to pursue higher education overseas, especially in the United Kingdom, the United States of America, Canada, New Zealand, Egypt, Australia, Indonesia, Japan, India, Pakistan and South Korea. Students are awarded scholarships based on merits. State governments through their respective Education Foundations also provide loans and scholarships to students of their state at the tertiary level.

Malaysia receives external aid for education and training in the form of technical assistance and investment programmes. The United Nations Development Programme (UNDP) constitutes the major source of multilateral technical assistance while UNICEF and UNESCO also provide support in smaller amounts. The other principal sources of bilateral assistance are Australia, Canada, Japan and the United Kingdom. Their focus is on industrial and vocational training, human resources planning and research, and higher education. The on-going education and training projects which concentrate on skills training, higher education and teacher training are financed by the Asia Development Bank (ADB) and the World Bank, which remains the major source of external assistance. The financial assistance from these agencies is mainly used for accelerating the implementation of policy reforms and institutional changes aimed at improving the quality of education. For instance, the World Bank has agreed to loan the amount of US$141 million to develop and improve primary and secondary education over a ten-year programme. This includes funding of studies directed towards upgrading the efficiency and effectiveness of education programmes, as well as identifying educational problems and issues which will provide the basis to structure effective intervention measures for further development.

The educational finance system is based on a modified Programme Performance Budgeting where the budget allocation by objects of expenditure is translated into various programmes, activities and sub-activities. The Programme and Activity structure is arranged by levels of education and specific activities which facilitate the periodic measurement of performance and final outcomes. Programme Agreements are signed to monitor achievement targets through quarterly reports on physical and financial status.

Through the National Education Policy, the government plays a dominant role in financing education. Annual allocation warrants are distributed based on the Programme and Activity structure to all levels of educational institution and the financial monitoring cascades to state and regional education authorities. Generally, schools and educational institutions up to the second level are almost entirely dependent on government financing. All schools are financed through per capita grants to meet the annual personnel compensation and operational requirements. Individual schools maintain complete financial records on expenditure and are audited by government auditors.

The private sector, non-governmental organizations (NGOs) and local authorities do not play a major role in providing education finance at the lower levels and their contributions are felt more at the tertiary and university levels of education. Over the years the government has gradually increased its role in providing for the infrastructural and recurrent expenditure on education, always seen as a priority item in its Social Services commitment.

The trend maintained in education financing amounts to about 5% of the GNP and 15-18% of the total annual government’s expenditure. There are indications aimed at encouraging greater participation of the private and corporate sectors in education financing thus reducing the burden on the government, especially in providing for some of the infrastructural requirements and technological advancement in tertiary education.