British universities are predicting multi-million pound drops in fee income as Malaysia's currency crisis takes its toll on overseas student recruitment.

International offices in institutions across the country are forecasting falls of up to 66 per cent in the number of Malaysian students, paying fees ranging from Pounds 6,000 to Pounds 16,000 a year, joining or returning to courses this year.

Figures out this week from Universities and Colleges Admissions Service show that with just a few weeks left for recruitment, only 1,547 Malaysian students have taken up offers, compared with a total of 3,500 last year. There are also worries that many existing students will drop out.

UCAS chief executive Tony Higgins said the fall in the value of the Malaysian currency and the removal of child tax relief from parents sending children overseas to study was to blame.

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"Without the bursary scheme announced by the Foreign Office in May this year, the effects of the recession in Southeast Asia on applicants interested in studying in the United Kingdom might have been worse," Mr Higgins said.

Many institutions are bracing themselves for other possible setbacks after the Malaysian government decided last week to introduce strict currency controls.

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The British Council has warned that red tape could lead to "significant delays" in the payment of fees from Malaysian students who do take up a place in Britain.

Last week, the Malaysian government announced that it was pulling the ringgit out of international financial markets and that the currency would have no value abroad within a month.

Although students have been given permission to exceed a M$10,000 (Pounds 1,577) limit on foreign currency taken out of the country, they must first apply to Bank Negara, the Malaysian national bank, and provide documents proving they have a place.

Allan Barnes, director of the British Council's education counselling service, said: "It is just another bureaucratic system the Malaysian government has set up. It remains to be seen if they will be able to cope with the numbers. There could be significant delays in the payment of fees."

Manchester University expects this year's Malaysian recruitment to be anywhere from a fifth to a half of last year's. Its international officer, Alex Robertson, said Malaysia's new arrangements were an "administrative headache" that could put off some students.

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"Our worry is that the bank may use any fault in the documentation as an excuse to refuse permission. From the point of view of the students, that could well be the last straw," he said.

Liverpool University expects to lose about a quarter of its Malaysian intake. Its director of international liaison, Joanna Millward, said the university could "only bend back so far" in accepting delays in fee payments.

Michael Asteris, international director at Portsmouth University, believes his institution will lose about two thirds of its Malaysian intake. He said: "We will have to consider each student on their merits."

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A 60 per cent drop is expected by Middlesex University, the biggest recruiter of Malaysian students. However, its director of international education, Joel Gladstone, suggested that the Malaysian government's decision to peg the value of the ringgit to the dollar might help.

Some institutions are worried that the new currency rules may affect Malaysian students already in Britain. One international office, which did not wish to be identified, told The THES that it was considering sending staff to Malaysia to exchange large sums ringgit held by students here.

Others said the Malaysian government had made last-minute offers for them to take scholarship-holding students with top grades, apparently in a move to protect the country's high-flyers from the effects of the currency crisis.

The UCAS figures show that applications from Singapore and Hong Kong, traditionally the largest sources of East Asia applicants after Malaysia, are holding up. So far 1,624 Singapore and 1,269 Hong Kong applicants have accepted places - more than 90 per cent of the final figure for 1997.

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