KIMEP Admin Responses to SG Questions (tuition increase)

KIMEP announces Tuition increase

KIMEP will raise tuition by 18% for the 2007-2008 academic year. The funds from this increase will be used to fund scholarships, hire additional faculty, and cover costs to run the university. This essential increase in funds will allow KIMEP to improve its already high quality of education and will also help us to meet accreditation standards as soon as possible.

Students were consulted in a number of assemblies and meetings to educate them about eh reasons for the tuition increase. A 20% increase was approved by the KIMEP Council however, after discussing the tuition increase with students and considering other factors the KIMEP Executive Committee voted to reduce the tuition increase to 18%.

The Student Government had raised a number of questions to the management about the proposed tuition increase. The questions and answers are listed below:

Responses to SGA Questions (in order of the questions asked

Q1: Why don’t KIMEP students participate in the current budget preparation?

Student government representatives participate in KIMEP’s Budget and Finance Committee. The work of the committee during the fall semester led to the preliminary budget adopted by the KIMEP Council in March 2007. In addition, 3 meetings for students and parents were scheduled in the Great Hall during February. The first meeting had attendance of approximately 200 students, the second had less than 100 students present and the last meeting was cancelled because no students came. Upon the recommendation of new student government, the budget summaries will be available on the KIMEP website by the end of April.

Q2: What is the reason for the increase in tuition?

2. KIMEP is becoming a world-class university and must develop its educational delivery system to comply with international accreditation standards, which will help ensure KIMEP maintains its quality. The proposed tuition increase addresses critical needs in order to continue on the path to accreditation. Examples are: KIMEP must have a high percentage of doctorate and master faculty with degrees from the west, KIMEP must increase salaries for faculty and staff to be able to recruit and retain good performers, KIMEP must encourage diversification of its student population by increasing scholarships for exceptional students who cannot afford to attend without financial aid, KIMEP must continue to improve its facilities to meet International norms, and KIMEP must have an operating reserve fund to sustain operations in the event of unforeseen shortfall in revenue.

Q3: Why doesn’t KIMEP have a fixed tuition fee contract?

KIMEP is not a university modeled after universities in Kazakhstan, but, rather, an International University modeled after higher education institutions in North America. KIMEP is a credit-based institute rather than being program-based, like other institutions in Kazakhstan. To change to a fixed-fee-upon-entry institute (whether credit or program based) would require substantial changes in operating systems –something that cannot be accomplished easily. The administration has asked the current SGA investigate the idea of converting to a fixed-fee institution and offer a rational proposal for the administration to consider. No universities in the west have such a program.

Q4: Will tuition decrease since the nature of major capital expenditures is not repeating?

The construction contract for the new academic building was awarded to USKO International to construct according to specifications that were established by the administration. The project was part of a tender process that included invitations to submit bids from companies like TS Engineering. The Tender Committee made a recommendation to the Executive Committee. The decision to award the contract to USKO International was also reviewed by the KIMEP Council and recommended to the, Board of Trustees and the Shareholders of JSC KIMEP, both of which have government representatives serving on these boards. In total over 50 people were involved in the approval process at the KIMEP level and approximately 19 at the board and shareholder level. Throughout the entire process tender documents where available for inspection. In awarding the contract for the New Academic Building, KIMEP undertook a comprehensive competitive tender process. The contract was awarded to the lowest priced bid for the required quality and the per square meter price was deemed reasonable. The per square meter price presented by the SGA is not a benchmark for major high quality construction projects.

This tender process was extensively documented and is a matter of public record. Anyone wishing to review these documents is entitled to do so. Further, the process of awarding the contract for the New Academic Building was investigated by the Financial Police after anonymous allegations of corruption were made. This process was found to be in order by the Financial Police in March 2007. All other management and investment decisions investigated were also found to be in order at the conclusion of the investigation and KIMEP was cleared of all allegations.

KIMEP is in a unique situation. It is nonprofit joint stock company, 40% owned by the Government. This creates major obstacles in raising finance in the commercial market. KIMEP has to get the permission of the Government to go into debt and this is strongly discouraged. Further, given the dynamism of the Kazakhstan economy, interest rates are punitive and costs in the long run would be considerably higher for the KIMEP community. Financing this project over a longer term would require additional agreement from government authorities, which would have delayed the start date of the project. KIMEP is a debt-free organization and prefers this status. Future capital improvements, like a new dormitory will also be funded from current operations and short-term borrowing so each class of students participate in the growth of KIMEP. To introduce long-term financing would defer the cost to future generations of students and minimize the contribution of current students, which is considered unacceptable by the administration.

Q5: Why do we need a medical office for such an expensive price?

The medical center renovation was supported by a gift from WooLim Corporation. All higher educational institutes in Kazakhstan are required to provide on campus medical services. Many of KIMEP students come from outside of Almaty and those living on campus must have access to health care. International accreditation requires that adequate medical services be provided to its on campus students. Another function of the medical staff is to verify sickness and injury with other healthcare providers on behalf of the faculty and to treat and assist foreign students, faculty and students.

Q6: Why doesn’t KIMEP put efforts into finding new sources of funding?

As mentioned above, KIMEP must encourage diversification of its student population by increasing scholarships for exceptional students who cannot afford to attend without financial aid. This is a common and expected practice in North America and other advanced countries.

KIMEP’s mission statement says: “We seek to select students from among those who demonstrate leadership, talent and language capabilities, irrespective of their financial means, gender or ethnic origin, or any other subjective criteria”.

Providing quality education is expensive. Scholarships are necessary. Otherwise KIMEP will become an exclusive institution and thus fail in its mission.

In the North American education system, an average of 30% of tuition revenue is awarded as scholarships back to students. KIMEP’s scholarship program is modest by comparison.

While KIMEP would clearly prefer that scholarship support came from sources other than core revenue, it is a fact that the culture of giving for education in Kazakhstan is not well developed. For example, a leading bank recently donated a sum of money for scholarships to KIMEP. However, this is equivalent to one fifth of one per cent of their pre-tax profits.

KIMEP is committed to increasing the number and value of externally financed scholarships and has created an Office for Advancement, to focus exclusively on increasing external support, but the scale of the cultural challenge has to be recognized.

The proposed budget for 2007-8 raised the tuition waiver to 5% of tuition revenue. Previously it was 3.5%. This is financed in part by a gift of $270,000, with the remainder (around $360,000) drawn from general revenue. This amounts to $80 per student per year for 2007-8 based on projected enrollments. In assessing this issue, the following needs to be considered:

• attracting students on merit rather than ability to pay will become more difficult as the internal scholarship fund would be limited.
• current students may face financial hardship as competition for the support KIMEP offers is increased.
• Perceptions of KIMEP as an elite institution will be reinforced.
• The SG is mandated to represent all students. Supporting limits on scholarships sits uneasily with this mandate.

Q7: Why should we pay 5% for employee salaries for merit?

Salary increases are not across-the-board flat increases of 15% (average increase). The salary increase is a pool that contains 3 elements: 5% for everyone, 5% benefit for everyone and 5% merit. The merit increase is determined by employee performance. Thus, the lower limit is 10% and the upper limit is approximately 20%.

Q8: Should there be increase in finance for non-academic matters?

KIMEP is a tuition dependent university, which allows KIMEP to be income tax exempt. Increasing or growing non-academic revenue would jeopardize the tax exemption status and would cost KIMEP over $1,000,000 annually. The other revenue sources depend on the success of the program and cannot be increased without evidence of sustained success and protection of tax exemption standing.

Q9: Last year KIMEP promised to hire 25 PhD professors but hired only 15 and increased tuition, now you suggest hiring more PhDs but the numbers of PhDs do not increase. What is the reason of that?

Recruiting highly qualified International faculty is always a challenge because of the low wages base compared to other more developed countries. Foreign faculty and staff that come to KIMEP are interested in helping change society and helping KIMEP realize its goal to become internationally accredited. This year KIMP had a target to employ 25 new professors and teaching administrators and actually will have a net gain of 23 PhDs or equivalent this year:

KIMEP employed 34 new faculty and teaching equivalent administrators and 11 left KIMEP for various reason (attrition is expected at any organization). Of the net gain of 23 PhD or equivalent: BCB gained 7, CSS gained 11, Language Center increased by 1 and the administration gained 4 who have relevant experiences and are qualify to teach when needed. Additionally, KIMEP has hired a number of faculty with master degrees from the west. Also, KIMEP has a number of part time faculty positions that expire at end of May each year. One of KIMEPs goals is to replace part time faculty with full time faculty when possible.

Q10: Is it possible to provide students who are not from Almaty with better living conditions?

Cost of living expenses are of a fact of life. At $2,700 – 3,300 per student the total cost is low compared to other international cities. There is nothing KIMP can do to ease this burden. Those students who live at home in the Almaty area have an advantage that others do not. This is another reason to provide financial aid to deserving students.

Other responses to Student Concerns

This section of the response summarizes the rationales for the tuition fee increase of 20% in response to other concerns expressed by students.

Note: this is a real increase of less than 10% due to rapid inflation.

1. The Name of the New Academic Building

Concerns have been expressed by students that the New Academic Building will be only for the Bang College of Business. This is categorically not the case.

The building has not yet been named, but will be used by all KIMEP students. This perception is the result of misunderstandings and miscommunication.

2. Why Do We Need A New Academic Facility?

Students have expressed reservations that KIMEP may not require the New Academic Building.

The rationale for the development of the New Academic Facility is summarized in an extract from the documents presented to the Board of Trustees in April 2006 (and approved by them) below.

“The KIMEP Strategy recommends improving the quality of campus facilities during the period to 2010. The proposed creation of the New Academic Facility using the shell of the unfinished sports complex is a key project in realizing this ambition. It converts a campus eyesore to a start of the art facility.

While this environmental improvement is important, the most critical reason for the proposed project impacts directly on the capacity of KIMEP to meet its growth aspirations and become a financially viable organization. The next five years will be critical as KIMEP moves from a period of sustained growth to enrolment stabilization. There are space constraints in reaching a target population of 4,500-5,000 students.

In Academic Year 2005-6, KIMEP had a population of just over 3,500 students. KIMEP can continue to expand its student numbers until 2007-8, before achieving a steady state at 4,500-5,000 by 2008-9.

At current capacity, KIMEP has 57 classrooms and cannot continue to increase the student population without adding classroom and office space. An estimated nine classrooms will have been lost to accommodate additional faculty and administrative staff this year and next year. With more effective scheduling, utilization can be increased and separate plans are in place to develop larger classrooms to maximize space use. However, projections developed as part of the strategic planning process estimate that when it reaches a steady state position with 5,000 students, the Institute would require 23 additional classrooms and 4 computer labs offered by the construction of the New Academic Building.

In addition to classroom and office provision, there will be other demands on the facility. KIMEP is committed to providing its students with access to quality IT to assist them in their studies. The current ratio of publicly available PCs to students is 12. To improve on this and reach a target of 10 students per computer, it will be necessary to provide up to 190 additional computer workstations. Additional computer labs will be necessary. Three of these are planned for the New Academic Facility. The others will be developed over time in the existing facilities through renovation.

In summary, if KIMEP does not make this planned investment it will be unable to realize its strategic goals effectively in the period to 2010”.

3. Investing In Facilities versus Investing in Faculty

Students have expressed concerns that in their view KIMEP is investing in capital projects at the expense of raising faculty salaries to attract what would be in their view be a better quality of faculty. KIMEP salaries have been compared with leading schools in the USA to attempt to illustrate that since KIMEP pays low salaries in relation to the best schools its faculty must be of lower quality. The recommendation is therefore that KIMEP should invest more in faculty salaries and less in capital projects.

Faculty Quality

In the Faculty Teaching Evaluation Survey carried out in Fall 2006 with the extensive support of the previous Student Government:

the average score for all classes was 4.34 from 5.

82% of instructors were graded 4 or better – in other words good or excellent.

On the question 'would you recommend this faculty member', the KIMEP average score was 4.26 (and no college / center received a score of less than 4.10)

4,870 positive written comments were received against 764 negative.

There is a clearly a high satisfaction level in the student body.

Salary Competitiveness

Taking KIMEP’s competitiveness in the US labor market first, it is misleading to compare the top institutions in the USA with KIMEP. A more realistic comparison is with median salaries for the same disciplines in the USA. Research carried out by the Office of the President shows that, after taxation, KIMEP salaries are around 80% of the USA median for the same professorial occupations. This is before differential costs of living are taken into account.

KIMEP also aims to increase faculty salaries by an average of 15% per year to 2010. If this is achieved, KIMEP will be at or above the US median for salaries given the much slower rate of growth in US salaries (around 4% per year).

Further, KIMEP’s salaries within the Kazakhstan context are by far the highest of any educational institution. Salaries are up to eight times higher than those found in Kazakhstani institutions for professors and up to three times higher for instructors.

While there is still work to be done on faculty compensation, KIMEP has achieved 80% of the after tax US salary median and a lead position in Kazakhstan on a very low tuition base per student. KIMEP’s cost per credit is around 10% of a sample survey of US private universities carried out in March 2007 by the Office of the President.

5.3 Investment Choices.

Making a decision not to invest in facilities and plough it into faculty salaries is a false choice. KIMEP will not attract or retain quality faculty or students unless it is able to accommodate them in quality facilities to carry out research, to teach and to learn.

KIMEP is competing in a global education market and must be able to demonstrate that its facilities match that available elsewhere.

Further, the development and maintenance of well-planned quality facilities is a key requirement for accreditation.

Respectfully Submitted:

C. Y. Bang, President

H. Rahman, Senior VP Academic Affairs

J. Wood, VP Administration and Finance

B. Taylor, AVP Academic Affairs

E. Simpson, Executive Director of President’s Office