An Australian state government has negotiated a deal to establish the country's first branch campus of an American university.

South Australia's Labor Premier, Mike Rann, last week signed an agreement with Carnegie Mellon University in Pennsylvania to open a private university in Adelaide in 2006.

The new institution will aim to attract students from East Asia (including China) and the Middle East, and will compete with the three existing South Australian universities.

Robert de Crespigny, former chancellor of Adelaide University, was involved in the negotiations. He is chairman of the South Australian Economic Development Board and founder of the multibillion-dollar company Normandy Mining Limited.

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Members of the Adelaide University council are outraged that Mr de Crespigny, a fellow councillor, was involved. One member said it was a duty of all councillors to do what was in the best interest of the university and to declare any conflict of interest.

The new university is expected to offer American and Australian postgraduate degrees in fields popular among foreign students, such as computer science, information technology, public administration and management.

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The venture will attract state government subsidies. The Federal Government is also expected to contribute, given the involvement of Alexander Downer, the Foreign Affairs Minister.

Mr Downer, who represents an Adelaide constituency, said Carnegie Mellon was a world-class university and its standing would attract students from the target market of East Asia, India and the Middle East.

He said the project had potential to make Adelaide "an education centre of excellence".

Mr Rann said there would be talks over the next months with South Australia's three universities to look at how they could benefit from the new institution.

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