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Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998



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Bills Digest No. 19  1998-99

 

Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass su bsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Contents

 

 

Passage History

Education Services for Overseas Student s (Registration of Providers and Financial Regulation) Amendment Bill 1998

Date Introduced:  11 November 1998

House:  Senate

Portfolio:  Education, Training and Youth Affairs

Commencement:  On Royal Assent

Purpose of Legislation

This Bill extends the sunse t clause in the Education Services for Overseas Students (Registration of Providers and Financial Regulations) Act 1991 (ESOS Act) by providing for cessation on 1 January 2002.(1)

Background

This Bill was originally introduced in the House of Representativ es on 24 June 1998 but lapsed when Parliament was prorogued on 31 August 1998. It is now being re-introduced in the Senate. If passed by the Senate, the Bill will then require further consideration by the House.

The ESOS Act provides assurances of education quality and financial protection to overseas students studying in Australia. It does so by registering providers of international education and training, based on State or Territory approval and accreditation, and by imposing financial conditions on private education providers.

Industry profile

In 1996-97 international education and training earned $3.1 billion for Australia's export industry.(2) About half this amount was spent on fees that were paid directly to institutions. The remainder was spent on g oods and services such as accommodation, food, transportation etc.(3) Earnings were expected to be in excess of $3.3 billion in 1998.(4)

In addition to export dollars, the industry contributes to Australia's economy generally, through the creation of jobs and the input to domestic taxation.

In 1997 the number of overseas student enrolments in Australia increased by 5.4 per cent over 1996 figures from 143 711 to 151 464. This was significantly lower than the 19.8 per cent growth rate experienced in 1996.(5)

Students are primarily from countries in the Asian Region - accounting for 83.4 per cent of the total international student population.(6) Five countries represented over 50 per cent of total expenditure in 1997. The five countries were:

• Malaysia ($371m)

• Indonesia (371m)

• Singapore (327m)

• South Korea ($324m), and

• Hong Kong ($314m).(7)

In addition to their studies, students gain insights into Australian culture, law, institutions and business practices, which fosters a better understanding of A ustralia overseas.

The industry has a relatively high profile in terms of providing perceptions of Australia as a trade and investment partner with future participants throughout our region. The industry is also supported by Government participation in bilateral and multilateral activities and program assistance.

Today, there are over 1 000 education and training providers in Australia. Half of these are administered by State/Territory education authorities or are entitled to receive Commonwealth recurrent funding.(8) The majority of providers are privately operate d. Multinational education and training providers have also entered the Australian market.

A cooperative model within a framework consisting of three tiers of regulation currently regulates the industry. They are:

• voluntary industry codes of practice

• State/Territory legislation and policy which set requirements for provider and course quality which are pre-requisites to entry into the industry and

• Commonwealth regulation under the ESOS Act.

The ESOS Act

The ESOS Act seeks to address three major proble ms, which have the potential to damage Australia's international reputation as a provider of educational services. These problems emerged in the late 1980s/early 1990s and are associated with:

• maintaining high standards and reliability among Australian e ducation and training providers

• ensuring that overseas students get the education and training for which they have paid and

• ensuring that taxpayer's funds are not required to recompense overseas students from loss as a result of the actions of disreputable Australian education and training providers.

Providers and the education and training courses they intend to offer to overseas students must first be accredited and approved by the appropriate State/Territory authority. Once providers and courses are approved and accredited, State/Territory authorities notify the Department of Education, Training and Youth Affairs (DETYA) to admit them to the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The ESOS Act specifically provides that only those on the CRICOS register may offer or provide courses to international students.(9)

Under the Migration Act 1958 and associated Regulations an applicant for a student visa must nominate a CRICOS-listed provider and course. Once in Australia, overseas students must maintain enrolment with a provider and in a course registered on CRICOS. To maintain registration on CRICOS, providers must comply with the requirements of the relevant State/Territory authority and the ESOS Act.

Under the provisions of the ESOS Act, providers must operate a Notified Trust Account (NTA).(10) Withdrawals from the NTA must only be made in accordance with Regulations made under the ESOS Act, which also contains provisions for refunds to students in the circumstances where a provider or a student defaults.(11)

The Tuition Assurance Scheme (TAS) offers alternative tuition placement to overseas students who are affected by a provider closing, defaulting or ceasing to offer a course in which they are enrolled.(12) Providers must make tuition guarantee arrangements before they enrol students in their courses registered on CRICOS. These include membership of a TAS, an insurance policy, bank guarantee or parent organisation guarantee, which protects tuition fees.

A provider registered on CRICOS on 1 January 1998 is liable to pay the Annual Registration Charge (ARC) for 1998 based on total enrolments of overseas students in 1997. The amount of the charge is set out in the payment schedule.(13)

The ESOS Act provides an alternative to legal action under the Trade Practices Act 1974 or for breach of contract at common law and can be accessed by students either on shore or off shore. It can also place a student quickly in an equivalent course. Furthermore, the trust account provisions enhance the integrity of the industry as a whole.

Position of stakeholders

The stakeholder groups affected by the regulatory environment are overseas students, current and potential service providers, industry associations, State/Territory education and training authorities, Commonwealth agencies and the community generally. The general conclusion drawn from the Regulation Impact Statement (RIS) is that the extension of the sunset clause is preferred by all stakeholders in the short term, but greater industry self regulation is the Government's preferred longer term option.(14)

Main Provisions

Schedule 1, the only provision of the Bill, amends section 20 of the ESOS Act by providing for the Act to cease on 1 January 2002.

Concluding Comments

Australia has experienced a decade of growth in education export, although during the fir st half of 1998 dramatic currency movements in a number of key Asian markets contributed to the decline in growth during that period.(15) Falling currency values and general economic volatility make it harder for Asian students to afford our education services. However, it now appears that Asian currencies have stabilised. Recent newspaper reports suggest that financial markets seem to be showing that investors' interest in Asia has returned. Furthermore, the International Monetary Fund (IMF) is predicting that the troubled Asian economies will begin to turn the corner around the middle on next year.(16) Despite this encouraging trend, earlier forecasts of longer-term growth in the private sector may nevertheless require review.(17)

There are costs to the C ommonwealth in maintaining the regulatory framework, including the register. The costs are shared by the Commonwealth and industry through the collection of annual and initial registration charges, introduced in 1997.(18)

Finally, the specific legislative provisions for accrediting and approving providers may differ between authorities, which may affect the notion of conformity.

Endnotes

 

1. A 'sunset clause' deactivates legislation. Section 20 of the ESOS Act specifically provides for the Act to cease on 1 January 1999. This Bill extends this section for three years.

2. Australian Bureau of Statistics Catalogue No. 5363.0, 1996-97 , pp. 28-29.

3. Australian International Education Foundation, Overseas Student Statistics 1997 , p. 9.

4. Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998, Explanatory Memorandum , p.22.

5. Australian International Education Foundation, Overseas Student Statistics 1997 , p. 9.

6. Ibid., p.10.

7. Ibid.

8. These providers are exempt from the financial and tuition guarantee requirements of the ESOS Act, but are subject to Commonwealth and State audit requirements under their funding arrangements, such as those under the Higher Education Funding Act 1988 and State Grants (TAFE Assistance) Act 1989 .

9.  Education Services for Overseas Students (Registration of Providers and Financial Regulation) Act 1991 , section 4.

10. Ibid., section 6A.

11. Ibid., sections 6B and 6C.

12. Ibid., section 7A.

13. Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998, Explanatory Memorandum , p.11.

14. Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998, Explanatory Memorandum , p.3.

15. Ibid., p.22.

16. Korporaal, Glenda, 'Troubled countries on the mend', The Sydney Morning Herald , 31 October 1998, p. 23.

17. Education Services for Overseas Students (Registration of Providers and Financial Regulation) Amendment Bill 1998, Explanatory Memorandum , p.22.

18. Ibid., p.11. The current cost to DETYA of administering the ESOS Act is approximately $1.9 million. The amount expected to be reimbursed each year through the charges is $0.94 million.

 

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Contact Officer

Ross Kilmurray

20 Novembe r 1998

Bills Digest Service

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