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[Opinion] College Inc.

Posted June. 02, 2007 03:25,   


The University of Warwick in England turns into a hotel during its summer and winter breaks. It earns income by providing accommodations to visitors and holding academic events. Many of its research and training centers are an important source of revenue, too. The “Warwick Manufacturing Group” is a good example of a business-school cooperation program run in partnership with companies. An art center, another source of school revenue, is the second largest cultural venue in England, with 250,000 visitors visiting the center every year. All these activities befit the name “Warwick Inc.,” which was coined by students.

The University of Warwick had to depend on the government for as much as 70% of its expenses in the 1970’s. But that figure was down to 27% of its total budget of 284 million pounds (521.3 billion won) last year. Proceeds from many business activities the school is engaged in easily make up 63% of its annual budget. British Prime Minister Tony Blair praised the school to the then U.S. President Bill Clinton visiting the college in 2000, saying, “Warwick is a representative college in the U.K. in terms of its dynamism, quality, and entrepreneurial passion.”

The Ministry of Education and Human Resources Development of Korea announced on May 30 a plan to allow private colleges to invest reserve funds in the stock market, and to involve themselves in more profit-making businesses such as running department stores, theaters, convenience stores, pharmacies, and clothing stores than before. As of 2005, the total reserve funds of 193 four-year private colleges amount to 4.4573 trillion won. However their profit margin is a mere 5.55% or 247.6 billion won in earnings, most of which was from fixed deposit returns.

Diversifying the investment channels of the fund, however, seems to have its limitations. A look at the management of “basic properties for profit” of private college foundations, in which free investment is allowed, makes this point obvious. In 2005, 292.9 billion won, or a profit rate of 5.7%, was made by 193 private colleges from their basic properties, for a profit of 5.1 trillion won. Leasing, running funeral homes, and producing dairy products were their main business items, and only 16.4 billion won came from investing in the stock market. In this regard, it remains to be seen how successfully private colleges will invest their reserve funds, which require stable management as they are used to providing research and scholarship, to turn their schools into “Universities Inc.”

Gwon Soon-taek, Editorial Writer, maypole@donga.com