Over the last three months, currencies in Asian and other emerging economies have taken a beating, including countries like Malaysia, Indonesia, Turkey, Brazil, Mexico and Chile. This comes on the backdrop of China’s stock market crash (and continued decline and economic contraction), extreme volatility and dropping commodity prices, which has seen the confidence of the middle-class shrink tremendously. This has sparked fears on possible knock-on effects on international student recruitment by universities from popular study destinations like the United States, Australia and United Kingdom.
The recent slide of currencies have led to fears by some countries – namely Malaysia and Thailand – following the recent Asian financial crisis in 1997 that saw currencies from Thailand, Malaysia and South Korea losing as much as half their value against the US dollar. During that time, many Asian students (and parents) halted plans for overseas study and opted to study in each of their domestic markets instead.
While the current currency crisis has not yet shown signs to be as severe as that experienced in the late 90s in Asia, the effects this time are much more widespread, with the two Asian giants, China and India, affected.
Just in a matter of days in early August, China’s yuan was devalued three times. This is the fastest drop faced by the currency in 20 years set against a declining stock market and slowing economic growth, resulting in negative knock-on effects in many countries.
Just over the past year, India’s rupee has dropped 10% against the US greenbag, sparking recent fears of 2013 and 2011 when the rupee crashed against the dollar and sterling pound. The decline during that time resulted in many parents trekking back on their decision to send their children to study abroad, especially to traditionally popular study destinations like US, UK and Australia for several years.
The Indian rupee currently stands at about 65 to the dollar compared to its low of 48 back in 2011. For many, tuition fees have already been paid, making it difficult for families to retract. For many student recruitment agents in India, they believe that they’ll start to see the real impact of the declining rupee during the next university enrolment year.
Back on the home front, the Malaysian ringgit has taken a real beating. The currency decline started earlier than other currencies, with some believing it was due to an ongoing political crisis by a corruption scandal. Though the current decline in Malaysia is not as severe as the currency crisis in the 90s, Malaysian students both domestic and abroad are growingly concerned.
Within a year, no one expected the exchange rate to jump up from RM3.21 to RM4.32 (as of September 10, 2015) within a year. Some Malaysian parents may remember when the ringgit lost 50% of its value in 1997/98 and fear the current stark decline seems to be pointing in a similar direction. This fear is coupled by several other ongoing factors – Malaysia’s political instability and corruption scandal, China’s stock market crash, America’s rebounding economy and of course, the decline of crude oil prices, all of which are resulting in shaky after-effects in Malaysia and many other economies. A British Council survey in the 90s revealed that Malaysian student enrolment to UK universities dropped a whopping 44% in 1998, a year after the 1997 Asian financial crisis.
Other Asian countries have also seen sharp currency declines including Indonesia, Taiwan and Vietnam, with emerging countries like Brazil, and Turkey not being spared as well.
According to Todd Maurer, partner of Sinica Advisors, a California-based company that specialized in emerging markets, he believes that international education markets are facing increasing challenges to remain immune to currency fluctuations, given the recent rise in cross-border education and the following impact of affordability for international students from developing countries. He added that while students do consider an institution’s reputation, proximity and prospects, a difference of between 10% to 15% in cost can severely impact household budgets; adding a further 20% to 30% due to weakening currencies can altogether result in withdrawing decisions to pursue international education.
Since the 90s, there has been a growing number of international branch campuses – such as University of Nottingham in Malaysia, Monash University in Malaysia – offering a more cost-effective alternative for those with tighter budgets. Such options have grown in popularity as it allows students to pay relatively costly tuition fees, but save on living and travel expenses associated with studying abroad. With most currencies around the world being hit hard against the US dollar, such international branch campuses are foreseeing increased demand from students, both domestically and within the region.
The Malaysian government finances a large number of scholarships for its citizens abroad and has allayed fears of the depreciating Ringgit. Malaysia’s Higher Education Minister, Idris Jusoh said on his Facebook page, “The sponsorship the students receive depend on their needs and does not change according to the exchange rate.” He also added that the government is absorbing the rising cost by paying for these scholarships abroad through overseas banks.
The declining Ringgit has caused concern for many self funding students studying overseas with some resorting to philanthropic foundation to top-up funds. In fact, five students studying in England and five in the US will receive financial aid from the Raja Zarith Negeri Johor Foundation, which is associated with the Johor royal family. In addition, the Terengganu Foundation, a philanthropic organization that supports about 650 Malaysian students studying abroad, has also bumped up its funds by 25% to support students overseas.
International students in the UK also face a double blow as the UK has announced that from September onward, international students will no longer be able to support their students through part-time work. Some experts believe that for existing enrolled students, UK universities need to offer some financial support to avoid potential dropouts due to lack of funds, as the job route is now closed. Nick Hillman, Director of Higher Education Policy Institute believes that, “[f]or international students to be forced to drop out would be a tragedy.” He further commented that universities have a duty to international students and must think more of their non-academic needs as well.
Australia and Canada
Both Australia and Canada have not been immune to declining its currency value against the US dollar. This in turn, has made both these countries much more attractive education destination as compared to the US or UK, which in turn, has seen the British pound strengthen against the US dollar.
In just over a year, Australia’s currency has dropped by 22% against the US dollar, while Canada’s dollar slipped 19%. Some Australian universities have argued that the drop in the Aussie dollar has offset recent tuition fee rises, despite the devaluation of China’s yuan and weakening Indian rupee. Most experts believe that US will be one that is most hard-pressed with the devaluation of the Chinese yuan as US is often the top choice study destination for Chinese students looking to study abroad. As most non tuition expenses are usually paid in cash, such as lodging and food, the declining value of currencies against the US dollar will see an immediate impact on international study in the US.
So, what are your thoughts regarding the weakening currencies around the world and how it impacts student decisions to study abroad? Share your thoughts with us!