Pedro Teixeira and Alberto Amaral examine the rise of private provision in education overseas.

With the rapid expansion of higher education in recent decades it seemed to make sense to increase the ways in which it was delivered. The arrival of a "market rhetoric" in higher education in the early 1980s gave an extra boost to the arguments for private provision. The idea was that the private sector, armed with greater administrative flexibility and driven by financial incentives, was more responsive to both niche and new markets. It was argued that it could supply courses that were better balanced from a disciplinary perspective, could reach a wider geographical area than traditional institutions and could turn out graduates who were better suited to labour-market needs.

In addition, governments, sandwiched between increasing financial constraints and the massive expansion of the higher education sector, were looking to redefine not only their financial responsibilities but also their administrative and political ones. A common strategy that seemed cheap and effective was to offload part of this responsibility onto the emerging (quasi) market mechanisms and in particular to promote the growth of private competitors to existing public institutions. In Western Europe, where the state was - and remains - the main resource provider, the "market" has been more of an ideological concept than a reality, the only exception being Portugal, with its private sector enrolling about one-third of the country's students.

Privatisation has meant that universities have had to diversify their funding sources (for instance, by selling services, increasing tuition fees or outsourcing services to the private sector) and have faced growing competition for students. But in Latin America, Asia and Eastern Europe privatisation has seen the establishment of for-profit institutions paid for by tuition fees rather than through the public purse. In these regions, private institutions have become significant players, though with variable levels of success.

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Privatisation tends to follow two main phases. Phase one relates to institutions created well before massification and is frequently associated with religious bodies; phase two to institutions created as a response to the demands of massification. These include a requirement for economic stringency and the changing needs of the labour market in rapidly developing economies. The widespread adoption of neo-liberal ideologies and pressures from international development agencies also contributed to this phase.

Our research focuses on this latter wave of privatisation in Latin America, Asia and Eastern Europe, in particular Portugal, Hungary, Romania, Brazil, Chile, Thailand and the Philippines, where higher education evolved from a system of almost homogeneous public or semi-public provision to one in which the private sector accounts for a significant portion of students. In several cases it caters for the majority (roughly speaking, one-third in European countries and more than half in other regions). Despite some differences, our research shows that the private sector in these countries shares common patterns of development and behaviour.

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First, private institutions tended to compete for the same potential students as public ones. In some cases, they were able to reach the overflow of students from the public sector. Where public institutions remained the elite of the higher education system (based on selective recruitment policies), the private institutions catered for mature students or those with lower qualifications who could not find a place in public institutions. This is interesting given the difference in tuition fees between the public and private sectors.

Second, being highly dependent on ability to pay, the burgeoning private sector tended to be concentrated in the wealthiest areas of the country and to focus on popular programmes with low investment costs. The typical emphasis was on business and management studies, law, economics and political sciences, with some targeted provision of more costly courses in areas with a guaranteed market, such as computer sciences and, in some countries, medical sciences.

Third, some private institutions, especially those in Southeast Asia, established partnerships with foreign institutions to achieve greater credibility or to promote cheaper alternatives to studying abroad. This strategy was partly aimed at overcoming resistance to privatised courses from public administration and/or accreditation bodies.

Fourth, most private institutions relied on academic staff from public institutions - many of whom were moonlighting. Most favoured hiring staff on a part-time basis and many had fairly low academic qualifications. Their purpose seemed not so much to form a permanent, qualified staff but to teach according to student demand. One knock-on effect of this emphasis on the growing undergraduate market has been that little postgraduate training has been carried out by private institutions.

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Despite some positive examples, most private institutions did not encourage innovation. They were more likely to either duplicate what public institutions were doing or to expand low-cost courses in areas with strong demand. Where they could more or less do what they liked, the emphasis was on short-term managerial solutions rather than academic goals, as shown by their poor (or even non-existent) research activity and staffing policies. Private institutions tended to offer a low-quality, low-cost product that maximised short-term benefits.

Even when private institutions achieved some credibility, they avoided specific areas of provision and certain students, replicating a narrow version of public-sector supply instead of complementing it. The public sector was left to cover more costly or risky areas.

Research suggests that governments can count on the private sector to expand the system but that they should not rely on it to increase diversity. It also shows the demands that privatisation puts on governments in terms of evaluation and quality concerns.

But it is not just the private sector that is to blame. Our research shows that governments either do not give enough power to the private sector because they mistrust it, or give it too much of a free rein, allowing institutions to mushroom without any sound academic or financial underpinning.

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More research is needed into the links between privatisation and diversification in higher education. In particular, we need more data on cases in which the state has attempted to simulate market mechanisms within public institutions so that we can compare this with our data on private institutions. Nevertheless, we believe that our results challenge some of the more simplistic and dogmatic views put forward about privatisation and increasing diversity in higher education. Are we willing to take the next step and test our prejudices against the hard light of factual evidence?

Pedro Teixeira is associate researcher and Alberto Amaral is director at the Centre for Higher Education Policy Studies.

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