A government scholarship scheme to help cash-strapped Southeast Asian students on courses in Britain has been left with Pounds 900,000 of unused money. The government and the British Council have therefore decided to extend the scheme for a further year.

Launched last year as a one-off rescue package to help new and continuing students from Malaysia, Thailand, Korea and Indonesia hit by the currency crisis, the scheme is to run again from September.

But this time the scholarships will only be available for students on taught postgraduate programmes in order to target high-fliers most in need.

Figures from the Education Counselling Service show recruitment in the region has fallen by as much as 44 per cent.

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British institutions face growing competition from Australia, America, Canada and France.

A British Council spokesman said there were hopes that something might emerge from a review of arrangements for encouraging more overseas students to come to Britain. The review was set up by the Cabinet Office following prime minister Tony Blair's trip to China last autumn.

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A report of the review, involving the Department for Education and Employment, the Foreign Office, the Department of Trade and Industry, the ÁñÁ«ÊÓƵ Office, and the British Council, has gone to Downing Street.

It is understood to consider: the range of British scholarships and whether they need to be increased or refocused; arrangements for student visas; employment rules that make it illegal for people with student visas to take part-time work; and the general perception of British education in the global marketplace.

A working group, likely to include representatives from the DFEE, the Committee of Vice-Chancellors and Principals, the UK Council for Overseas Student Affairs, the FCO, DTI, and the British Council, is to be set up to consider options in the light of the report's conclusions.

Malaysian students took almost a third of Pounds 1,547,000 allocated under the Southeast Asia scheme. But Malaysia also accounted for more than half of unused new undergraduate awards, which totalled Pounds 236,000, and over a third of unused new postgraduate awards, which totalled Pounds 624,500.

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