Ownership and Control of Private Higher Educational Institutions

 

This note is a follow-up to a question raised at the end of a previous article, Private Higher Educational Institutions: Confusion Continues Over Their Status. That question was about ownership and control of private higher educational institutions (PHEIs), established under the Private Higher Educational Institutions Act 1996 (the Act), particularly the division of powers between the regulatory agencies, the company, and the Chief Executive, who is the statutory official appointed to manage the PHEI.

Some of the conclusions from the previous article are repeated here as background to the discussion in this article.

The PHEI is Not an Entity Separate from the Company

1.      The previous article established (i) that a PHEI can only be established by a company registered under the Companies Act, (ii) that the company owns and maintains the PHEI, and (iii) that the PHEI is not a separate entity but is part of the company establishing it, a proposition that is now supported by the Court of Appeal decision in Eagle One Investment Ltd & Others. v. Asia Pacific Higher Learning Sdn. Bhd.[1]

2.      Confusion over the identity of the PHEI was again an issue in Limkokwing University of Creative Technology International Sdn. Bhd. v. Mahkamah Perusahaan Malaysia & Others.[2] In this case, litigants who brought an action in the name of the PHEI were granted leave by the court to amend the claim by substituting the company establishing the PHEI.

3.      The Court of Appeal’s decision in the Eagle One case settles the law that in any legal action concerning the PHEI, the proper plaintiff or defendant is the company establishing the PHEI. Any legal action arising from the activities of a PHEI must be initiated by the company or be brought against the company and not in the name of the PHEI, which to labour a point, is not an entity that can either sue or be sued in a court of law.

4.      If a Private Higher Education Institution (PHEI) is owned by the company establishing it, and is part of the company, then logically, and in keeping with the underlying scheme of the Act, the company is the PHEI. The company enters contracts to carry out the business of the PHEI, whether to build the facilities to support the PHEI and recruit students, demand, refund fees, employ staff or deal with any other contractors.

Any legal action arising from any of these transactions, whether by or against the PHEI must be brought in the name of the company and not in the institution's name. The courts have clarified this much in the cases mentioned earlier and those decisions are in alignment with the Act’s intended scheme of the Act. However, as will be seen, the statutory provisions dealing with the control of the PHEI deviate from the underlying scheme of the Act which places the company establishing the PHEI in control of the institution.

The Act Regulates the PHEI, not the Company

5.      The Act, in many of its provisions treat the PHEI as if it is a legal entity that can be regulated separately from the company. If the PHEI is not a legal entity, it is trite that regulations cannot be directed at it. It must be directed at the company, or any natural person involved in the institution’s operations, but not at the PHEI. The Act, however, directs most of its provisions at the PHEI as if it is a legal entity. Whilst there are also provisions directed at the company and individuals overseeing the institution's operations, most of the regulations are directed at the PHEI. For instance, s. 18(1) provides that the prior approval of the Minister shall be obtained before a private higher educational institution establishes a branch or affiliates, associates or collaborates with other higher educational institutions. It is submitted that this and other similar sections are unenforceable because a PHEI lacks the legal capacity to do any of the actions stipulated. It cannot establish a branch or affiliate or associate with or collaborate with any other institution. Such actions can only be taken by the company establishing the PHEI. Section 18 must therefore be directed at the company and not the PHEI.

6.      As they now stand, many of the Act’s regulatory provisions are unenforceable because they are directed at the PHEI and not the company establishing the PHEI. However, it is submitted that these discrepancies can be overcome if the term ‘private higher educational institution’ is redefined as proposed in the previous article. The proposed definition defines the PHEI as ‘a company carrying on the business of higher education.’ As the proposed definition treats the PHEI as the company, any provision directed at the PHEI will, in effect, be against the company.

Governance, management, and the control of PHEIs

7.       A more vexing question, one that cannot be solved by the proposed definition of PHEI concerns the governance, management, and control of PHEIs. If a PHEI is established and owned by the company, it must follow that management and control must necessarily rest with the company. Regulatory control of the institution (PHEI) must be directed at the company and not the PHEI. All this is obvious from the general scheme of the Act which only allows a company to establish a PHEI. Part III of the Act which deals with the establishment of PHEIs is unambiguous about the role of the company in ensuring adequate facilities for the PHEI, establishing a system of governance and management of the PHEI, and even maintaining standards of education in the proposed PHEI. Notwithstanding these foundational expressions, the Act veers away from them when it deals with the management of PHEIs under Part VI. Instead, the Act attempts to regulate the PHEI through the Minister, the bureaucracy of the ministry, and a statutory appointee with the title of chief executive of the PHEI. Under these statutory provisions, the company’s role in the control and management of the PHEI is minimal.

8.      The two main instruments of control of the PHEI are the constitution of the institution prescribed by the Act and the chief executive who is an officer appointed under the Act to manage the PHEI.

The Prescribed Constitutions

9.      Under s. 30(2) of the Act, PHEIs are to be managed in strict accordance with their constitutions. Before the 2017 amendment of the Act,[3] the contents of the constitution were left to be determined by the company subject to approval by the Registrar General. The changes effected by the 2017 amendments require the constitution to contain provisions that may be prescribed by the Registrar General.[4] The Private Higher Educational Institutions (Constitutions) Regulations 2017 (Constitutions Regulations)[5] issued to give effect to the 2017 changes, prescribe two constitutions, one for universities[6] and the other for colleges.[7]

10.  The prescribed constitutions are based on the model constitution[8] of the Universities and University Colleges Act 1971 (UUCA) which is an instrument designed for institutions that are fundamentally different from PHEIs. The UUCA University is established as a corporate body through an incorporation order initiated by the Yang di-Pertuan Agong. The UUCA Constitution is the sole instrument that regulates and animates the UUCA University. There is no other regulatory structure imposed by the law than that specified by the First Schedule Constitution. The PHEI, on the other hand, is established by a registered company whose regulatory structure is determined by the Companies Act 2016.

11.  Under the Companies Act 2016, the business and affairs of a company must be managed by, or under the direction of the Board of Directors of the company.[9] Since the sole object of a company establishing a PHEI is to establish and manage a PHEI, it must follow that the PHEI is managed by the Board of Directors. Contrary to these provisions, the prescribed constitutions based on the UUCA constitution, attempt to impose a bicameral system of governance over the PHEI. The two prescribed constitutions separate general governance (Board of Governors) from academic governance and management (Senate). The UUCA University functions and operates through two such organs.

12.  A registered company operates through its shareholders and Board of Directors (BOD). These organs are bound by strict fiduciary duties under the Companies Act and company law, as interpreted by the courts over the past two centuries. Directors, both individually and as a board, are responsible for fulfilling their duties towards the company. However, introducing a separate management structure, such as a BOG and Senate, between the company and the PHEI creates confusion. This is because neither the Companies Act 2016 nor the prescribed constitutions provide clear provisions to reconcile the governance and management structure.

13.  Importantly, no reference is made to section 11 of the Act which makes approval to establish a PHEI dependent on the applicant company’s ability to provide adequate facilities, for the PHEI, adequate and efficient management and administration for the proper conduct of the PHEI and to maintain the standards of education provided by the PHEI and establishing a proper system of governance of the private higher educational institution with a constitution that shall be approved by the Registrar General. Section 11 is unambiguous about the company’s responsibilities for the facilities, governance, management, administration, and academic standards of the PHEI it seeks to establish. It is also clear that the object of the constitution required by s. 11 is to tie the company to the responsibilities stipulated in the same section.

14.  The failure to align the management of the PHEI with the company’s management structure inevitably results in the creation of two separate management regimes, each with different roles and functions that would lead inevitably to uncertainties over questions of legal responsibility and liability.

15.  The preamble to the draft constitutions declares that ‘for the purposes of establishing and managing the University, there has been incorporated a company in Malaysia under the Companies Act 2016’. That declaration is undermined by the rest of the constitution because, if the purpose of the company is to manage the university, then the university must be managed by the Board of Directors of the company, which is where the management powers of the company reside. If, as is provided in the Act, the company is required to manage the university through a constitution, that constitution must be authorised by the company’s Board of Directors and be linked to the company if it is to have any legal effect.

16.  Even if it is to be inferred that the company will adopt the prescribed constitution through its Board of Directors, the terms of the constitution place no such obligation on the company. Yet, it is the company that established the PHEI and is the entity that carries the financial responsibility for the maintenance and operation of the institution. The Act is even silent on the company’s responsibility to maintain the institution financially other than the stipulations on minimum paid-up capital at the establishment of the institution. Nothing in the Act lays down the company’s duty to maintain the operations of the institution or any duty to its employees, or students.

17.  What ensues from these and the provisions relating to the chief executive is an attempt to wrest control over the PHEI from the company and place it under the control of the regulatory authorities. This, it is submitted, is neither practical nor prudent, because it would mean that the ministry by usurping control over the PHEI will end up assuming responsibility for the conduct of the PHEI.

The Chief Executive

18.  The role and position of the chief executive add to the confusion over who controls the PHEI.

19.  The company establishing a PHEI is required under s. 31 to appoint a chief executive whose appointment is subject to the approval of the Registrar General.  The chief executive occupies an enigmatic if not an invidious position under the current provisions of the Act. Straddling the PHEI, the company and the MOHE, the chief executive has to balance many loyalties and navigate through a maze of obligations that are imposed on him by law.  Although appointed by the company, he is subject to directions from the Registrar General and Minster. He is vested with powers that he may exercise without consulting the company yet he is an employee of the company.

20.  The statutory role of the chief executive is, among other things, to exercise general supervision over the arrangements for instruction, administration, day-to-day affairs, welfare, and discipline in the private higher educational institution and all its branches.  Stated in such broad terms, the chief executive is effectively in charge of all the functions and activities of a higher education institution. The company cannot appoint any other person to oversee the operations of the PHEI because under s. 31(4) the duties or functions of a chief executive cannot be carried out by any other person who is not registered as a chief executive. Any person who contravenes the provisions of subsection (4) shall be guilty of an offence.

21.  Although the Act requires the company to appoint the chief executive, it does not describe the chief executive’s relationship or responsibilities to the company. On the other hand, various provisions of the Act hold the chief executive accountable to the Minister and other officials in the Ministry thereby placing the chief executive in a position of conflict.

The Act does not require the chief executive to be appointed to the board of directors of the company but fails to recognise that the chief executive may legally be regarded as a director of the company because of the definition of director in the Companies Act 2016. A director includes a ‘person primarily responsible for the management of the company. . .’ Since the company’s sole object is to establish and manage a PHEI, the chief executive as the manager of that business will legally be a director of the company, whether that was intended by the statutory provisions relating to the chief executive’s appointment.

22.  As mentioned earlier, the intention of the Act in its provisions on the constitution and the chief executive appears to be to place control of the PHEI in the hands of the regulators. This conflicts with the general scheme of the Act as laid down in other provisions of the Act, which is to establish and regulate PHEIs through the agency of registered companies. The registered company provides a ready-made regulated legal entity that is eminently suited for managing a public good such as higher education. Unfortunately, that efficiency is whittled away by those provisions of the Act that were discussed earlier

Conflicting policies

23.  The controls and the uncertainties they engender can be traced to the two conflicting policies on higher education that the Act attempts to resolve.

a.      The first of these was the liberalization and privatization of higher education which put an end to the government’s monopoly over higher education. Two decades earlier the government, through litigation carried to the highest court in the land, resisted a petition brought by a group to establish a private university under the Universities and University Colleges Act 1971 (UUCA).[10] The decision in the Merdeka University case ended the possibility of private universities being established outside the control of the government.

The Act reverses that position. In its preamble, it recognises the role of private institutions in providing efficient higher educational infrastructure and increasing capacity to meet the demand for higher education.

b.      But the same preamble also emphasizes the need to regulate private education, which is the other policy underpinning the Act. In 1996, when the Act was passed, there was already a large and vibrant private higher education sector which through its initiatives had expanded higher education capacity in the country. Although private colleges could not award degrees, innovative arrangements with local foreign universities allowed them to teach degree courses from those universities. Some even offered courses that allowed local students to complete postgraduate programmes from foreign universities without having to travel to those universities. Despite the great strides made in the sector, private higher education was not regulated by any specific legislation at that time but fell under the insufficient provisions of the Education Act 1961.

The tone of the Act and its regulatory provisions appear to have been formulated to control the sector as it was in 1996 rather than what is made possible by its provisions to create a whole new regime for the regulation of these institutions. The regulatory approach of the Ministry, supported by the inconsistent provisions of the Act, attempts to regulate private higher education in the same manner they were regulated before the enactment of the Act.

What is urgently required is a re-examination of the provisions of the Act to give effect to the purpose of the Act. A new thinking must be developed to support the private sector of higher education to make it more competitive in the rapidly changing environment of global higher education. This requires a clearer streamlining of the regulatory framework.

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[1] [2020] 2 MLRA 659

[2] [2023] 5 MLRH 575

[3] Private Higher Educational Institutions (Amendment) Act 2017

[4] Section 30(1) of the Act.

[5] When first passed, the Act allowed the company to determine the terms of the PHEI’s constitution. However, amendments to the Act introduced by the Private Higher Educational Institutions (Amendment) Act 2017 require the constitution to contain provisions that are prescribed by regulations made under the Act. Under the Private Higher Educational Institutions (Constitutions) Regulations 2017 two template constitutions are provided, one for colleges and one for universities that are established under the Act. The (Constitutions) Regulations 2017 are not yet in force.

[6] Subregulation 3(1)(a).

[7] Subregulation 3(1)(b)

[8] Section 8 of the UUCA and the First Schedule to the Act

[9] Section 211, Companies Act 2016

[10] Merdeka University Berhad v Government of Malaysia, [1982] 2 MLJ 243. Although the main grounds for the High and Federal courts’ rejection of Merdeka University’s challenge of the rejection of the petition were the status of universities under the UUCA as statutory authorities and the issue of the language of instruction that was to be used, there was also a judicial view that the government bore a duty to maintain even private universities that were in financial distress.

Private Higher Educational Institutions: Confusion Continues Over Their Status

The Private Higher Educational Institution Act 1996 (Act 555) (the Act) has been in force for more than 25 years, but confusion continues over the relationship between the higher educational institution (the PHEI) and the company that established it. Are they two separate entities or is the PHEI only an extension of the company? Even the courts have faltered on this question.

This article examines the nature of the confusion and its causes and proposes a simple amendment to the Act that would remove the confusion.

The source of the confusion

The confusion stems from the way PHEIs are established. The Act requires a registered company to establish a PHEI.[1] The underlying scheme of the Act is for PHEIs to operate through the agency of the company that establishes it. This is a speedy and efficient alternative way to incorporate PHEIS.

However, once established, the PHEI, often with a name different from that of the company, is the entity that is visible to the world. It is the name of the PHEI that appears on the premises that house the educational activities, not the name of the company. Advertisements on billboards and newspapers display only the name of the institution and are not required to display the name of the company.[2] Documents emanating from the PHEI tend to bear the name of the PHEI and not the company. It is not surprising then that those dealing with the PHEI, whether as students or staff, or even ordinary contractors, think that the PHEI is a legal entity with the capacity to act.

The reality is that the PHEI is not a legal entity. It does not have the legal capacity to contract. Hence it cannot enter any transactions such as employing staff, recruiting students, or purchasing materials or services. It can neither sue nor be sued. All these actions must be carried out through the agency of the company that establishes the PHEI. [3] Any legal action arising from the operations of the institution, such as an action for wrongful dismissal by an employee, must be brought against that company.

Attempt to remedy the flaw

Despite the intended scheme, the Act fails to make explicit the relationship between the company and the institution leading to a general confusion about the status of the PHEI. Different committees appointed over the years to review the Act have recommended a correction of the anomaly, but no action was taken on the matter until the amendments introduced by the Private Higher Educational Institutions (Amendment) Act 2017.

The Amendment Act introduced a new section that attempts in a general way to shift the obligations imposed on the PHEI by the Act to the company establishing the PHEI. The new section 75A reads as follows.

75A. Where the Act requires a private higher educational institution to do or prohibits it from doing something, the obligation to comply is imposed on the company to which approval has been given to establish the private higher educational institution.

With respect, the new section falls short of what is needed to avoid the confusion. It only shifts the burden of statutory obligations from the PHEI to the company. What is needed is a clearer statutory stipulation that the company and the institution it establishes are one.

Court of Appeal’s decision on the point

The practical difficulties that arise from the ambivalence in the provisions of the Act manifested in a line of cases starting with Tai Chooi Yu v Curtin University of Technology Sarawak Campus, Malaysia & Anor.[4]

The company-PHEI relationship was examined more recently by the Court of Appeal in Eagle One Investment Ltd & Others. v. Asia Pacific Higher Learning Sdn. Bhd.[5] This was an action for defamation brought by Asia Pacific Higher Learning Sdn. Bhd. (the company that established Lincoln University College (LUC)) for defamatory statements made against the university college by the appellant in an article that it published. The company was not named in the defamatory statements, hence, one of the issues that the court had to consider was whether the company could sue for defamatory statements made against the PHEI that it established.

The Court of Appeal, after examining the statutory provisions relating to the establishment of Lincoln University College held that the plaintiff company was the registered owner and licence holder of LUC as required under the Act. Hence, any monetary damage suffered by LUC due to the injury to its trade reputation was wholly suffered by the plaintiff.

“Having regard to the peculiar relationship between LUC vis-a-vis the plaintiff, it is our considered view that the (defamatory) article would reasonably lead those acquainted with the plaintiff, such as those in the same business or industry as the plaintiff, LUC's students, would-be students, and other stakeholders would invariably conclude that the impugned article indeed referred to the plaintiff. Likewise, the article would lead to the tendency that people who were acquainted with the plaintiff would come to the conclusion that the article verily referred to the plaintiff.”

The Court of Appeal’s decision in Eagle One Investment Ltd. goes some way in removing the confusion over the company-institution relationship. It decides, for instance, that the company’s relationship with the PHEI is that of a registered owner and licence holder of the PHEI, but it leaves the important question about the status of the PHEI unresolved. The judgment talks about the monetary damage suffered by the PHEI, which cannot be the case because PHEI is not a legal entity. The monetary damage caused to the PHEI can only be suffered by the company.

The Court of Appeal’s decision in Eagle One Investment Ltd. appears not to have been cited in Nalliah David Pragasam v. AIMST Sdn. Bhd.,^[6] where the Industrial Court held that the company and the institution are separate legal entities. In that case, the applicant’s action was for wrongful dismissal from his position as Assistant Bursar at the Asian Institute of Medicine, Science & Technology (AIMST University).

The facts of the case pertinent to this note are that the claimant filed his action against Aimst Sdn Bhd (the Company) which established AIMST University, (the PHEI). The Company contended that the claimant was never its employee, but the employee of AIMST University which it claimed is a separate legal entity from AIMST Sdn Bhd. In support of its contention, it said that the claimant's Letter of Appointment was issued by the university and not the Company. It further contended that each entity was registered under separate Acts - the Company, under the Companies Act 1965, and AIMST University under the Private Higher Educational Institutions Act 1996. The Company, it claimed, is run by a Board of Directors, whereas AIMST University is run by a Board of Governors.

Accepting the company’s arguments, the court held that the Company and AIMST University where the Claimant was employed are two separate entities. The claimant was employed by the university and not the company. The court said the claimant had confused the University with the Company and brought the action against the wrong entity. The court did not consider the question of whether the PHEI had the legal capacity to enter into a contract with the applicant.

The Proposed Amendment

The present confusion will continue unless the Act is amended to make explicit that the company and the PHEI are one. This is already implied in many of the provisions of the Act. For instance, under the establishment provisions in Part III of the Act, the Minister in granting approval to establish a PHEI must be satisfied with the company’s capability of providing educational facilities, setting up a system of governance and maintaining standards of education in the PHEI that it proposes to establish.

Other conditions are imposed on the applicant company once approval is granted by the Minister.^[7] These relate to the paid-up capital of the company, equity participation, and the composition of the board of directors of the company. The company may only alter these matters with the approval of the Registrar General of Private Higher Educational Institutions.

The statutory provisions on the closing down of PHEIs under Part XI of the Act reinforce the position that the company and the PHEI are not separate entities. Under these provisions, a PHEI is required to cease its operations if, among other matters, the board of the company decides to cease its educational operations or if the company is wound up.

Despite poor drafting of the statutory provisions quoted above in terms of the language used, these sections clearly show that the PHEI is not a separate entity distinct from the company establishing it but is part of the company. Section 19 of the Act emphasizes this by restricting the company from entering into any arrangement or agreement to sell, dispose of, reconstruct, or take any action which will affect in any material way ‘its business relating to education’ (emphasis added).

As noted earlier, under Act 555, a PHEI can only be established by a registered company. Act 555 does not incorporate the PHEI as is the case with universities established under the Universities and University Colleges Act 1971 and other legislation establishing institutions of higher education. Instead, the legislative design of Act 555 is to make the PHEI part of the company that establishes it. The company animates the PHEI. There can be no PHEI without the company as the closing down provisions clearly show. The company and the PHEI are one. An analogy can be drawn with banks established under the Banking and Financial Institutions Act 1989 where the term bank is defined as a company carrying on the business of banking. Similarly, the PHEI is a company carrying on the business of higher education as regulated by the Act.

Despite the primary scheme, the Act in many of its sections attempts to regulate the PHEI separately from the company that established it. This is futile because the PHEI does not have the legal status to be regulated except through the company.

The confusion on the status of PHEIS can be corrected by a simple amendment to the current statutory definition of a private higher educational institution in the following terms.

“private higher educational institution” means a company that has established and maintains by whatever name a higher educational institution approved and registered under this Act.

The proposed definition integrates the company and the PHEI and synchronises with the definition of “company” in the Act, which reads as ‘a company incorporated under the Companies Act 1965 establishing a private higher educational institution under this Act.’ The definition will overcome the present confusion that the PHEI is a separate entity from the company establishing it.

A Remaining Issue

This article has only looked at the confusion over the status of the PHEI. There remains another issue, which is the division of powers between the company and the PHEI. This is an issue that has troubled those appointed as Chief Executives to manage PHEIs. Here again, the problem arises from provisions of the Act that are ambivalent as to where power lies with respect to the management of the educational enterprise of the company. This issue will be covered in another article to be published soon.

 

 

 

 

 

 

 

 

 

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[1] Private Higher Educational Institution Act 1996, s. 6.

[2] There is no requirement under the Act or the relevant regulations for advertisements to publish the name of the company establishing the institution.

[3] Most institutions understand the difference and are careful to transact in the name of the company that established the institution.

[4] [2004] MLJ 375. See also Siti Habibah Shafiai v. Kuala Lumpur University (Malaysian Institute of Marine Engineering Technology) [2018] MELRU 741, Tan Ah Gek v. Maritime Intelligence Sdn. Bhd. [2018] 2 MELR 35, Abdul Halim Abdul Jalil v. Asia Pacific Higher Learning Sdn. Bhd. [2021] MLRHU 764

[5] [2020] 2 MLRA 659

[6] Nalliah David Pragasam v. AIMST Sdn. Bhd. [2022] MELRU 2494 (Industrial Court).

[7] Private Higher Educational Institutions Act 1996, s. 12.

Dormant Policymaking Body Unsettles the Malaysian Higher Education System

 Dormant Policymaking Body Unsettles the Malaysian Higher Education System

By

U K Menon LLM, Barrister and Lee Yin Su, MBA (UTAR)[1]

 

Abbreviations used in the article

EA - Education Act 1996

ITM Act – Universiti Teknologi Mara Act 1976

MQA Act –Malaysian Qualifications Agency Act 2007

NCHE Act - National Council on Higher Education Act 1996

PHEA - Private Higher Educational Institutions Act 1996

The Council – The council established under the NCHE Act

UUCA - The Universities and University Colleges Act 1971

Warisan Act - Akademi Seni Budaya Dan Warisan Kebangsaan Act 2006

 

Introduction

The National Council on Higher Education (the Council) is the policymaking component of the higher education system in Malaysia. The statute establishing the Council, the NCHE Act, is the only unifying instrument in an utterly diverse system that has at least four different acts of parliament regulating the establishment and governance of higher education institutions. Each set of laws manifests a different purpose and a different governance model. None pays any heed to the actual delivery of higher education or to student interests. The Council was to have played a coordinating role focusing on policies and strategies for the development of higher education. However, despite its important role, the Council has not been active for over 10 years. Without the Council to coordinate policies, higher education in the country will continue to be pulled in different directions with no prospect for a unified approach to the development of this most important engine of human development.

In this article, we examine the composition and functions of the Council and propose that the Council be reactivated. The Minister of Higher Education, announced in September 2021, that the National Council on Higher Education Act 1996 (Act 546) was being reviewed.  There is still no news of the fate of the Act or the Council.

Background

The National Council on Higher Education (the Council) was established through the NCHE Act. The NCHE Act was part of a package of legislation passed that year to restructure the higher education system in the country.[2] The Council’s role was to formulate national policies and strategies for higher education which the Minister of Education was required by law to implement. The other statutes in the package were the EA, the PHEA, and the National Accreditation Board Act 1996 (Replaced by the MQA Act in 2007). Changes were also made to the UUCA to enable the corporatization of public universities by expanding their commercial powers. The regulatory system that emerged from the reform had three distinct components – the Council as the policy formulating body, the National Accreditation Board as the body to set standards on higher education, accredit institutions and higher education programs, and the Ministry of Higher Education (with new roles added to it by the aforementioned legislation) as the implementing and monitoring body.

If each of these authorities functions in line with the legislative intent, the three components will add checks and balances to the higher education regulatory system, ensuring its legitimacy, fairness in its operations, and predictability of its processes. Together, the higher education legislation covered policy formulation and implementation, the establishment and regulation of higher education institutions, and the accreditation of higher education courses and institutions. Together they established  a sustainable system to develop higher education in the future.

The system, however, did not function to intended expectations. Legislation alone, it is revealed cannot ensure efficiency of systems. It requires the commitment of leaders. Despite the demarcation of roles, the Ministry encroached into the policymaking preserve of the NCHE, issuing new policies, and changing existing ones through circulars and subsidiary legislation. What is even more surprising is that the role of the Council is completely ignored in the report that was intended to be the most important review of higher education – the Malaysian Education Blueprint 2015-2025 (Higher Education).  The Blueprint, ignoring the provisions of existing laws, blithely declares the Ministry as the policymaker. The authors of the Blueprint were either not aware of the structure of the higher education system or simply ignored it.

In 2000, the Institut Teknologi Mara was upgraded to a university through the ITM Act. Whether the upgrading of the former Institut Teknologi Mara to a university was a matter that was placed before the Council is not clear.[3] However, the ITM Act proclaims the university as being established under Article 153 of the Federal Constitution as an institution established to serve the purpose of Article 153.[4] Other provisions of the ITM Act incorporates the university and confers on it powers that are identical to universities established under the main legislation on universities, the UUCA. Although the ITM Act specifically states[5] that the provisions of the UUCA shall not apply to the Universiti Teknolgi Mara, there are no provisions in the Act to exclude the university from the jurisdiction of the Council.

In 2006, the Akademi Seni Budaya dan Warisan Kebangsaan Act established the Akademi Seni Budaya dan Warisan (ASWARA) was established through the Warisan Act. ASWARA is a higher education institution with powers equivalent to that of a university, but its founding legislation makes it an institution sui generis. The Warisan Act expressly excludes the EA, the UUCA and the PHEA in the regulation of ASWARA. However, as in the case of Universiti Teknologi Mara, there is nothing to indicate that the establishment of ASWARA was considered by the Council.  

The role of the Council in higher education was also ignored when legislation was passed in 2007 to replace the National Accreditation Board which was formed in 1996 with the Malaysian Qualifications Agency. Unlike its predecessor, the MQA does not make any reference to the NCHE Act or the Council.

Finally, sometime in 2011 or 2012, the NCHE itself was made dormant. As the Council is not an incorporated body, it can only function if members are appointed to it and meetings are convened. The Council is made up of 14 members.[6] Six are appointed by virtue of their official position.[7] The remaining 8 members are appointed by the Minister from the universities, both public and private.[8]

The National Council on Higher Education

The Council’s functions over higher education policies are defined broadly under s. 12(1) (a) of the Act, which is to plan, formulate and determine national policies and strategies for the development of higher education.  Higher education is defined in the NCHE as education provided by a higher educational institution.[9] Higher educational institutions are defined to include ‘educational institution whether or not established under any written law and including a private educational institution providing higher education leading to the award of a certificate, diploma, degree or the equivalent thereof.’[10] These definitions give the Council a jurisdiction over higher education that is wider than that of even the Minister as it includes institutions that are not established under any written laws. The prescribed composition of the Council reflects its broad remit. Council members are appointed from both public universities and private higher education institutions.[11]

The policymaking functions of the Council are listed in s. 12(1) of the Act. The functions appear to cover every aspect of higher education from the formulation of higher education policies to determining policies on the entry of students, the areas of studies to be undertaken and even setting guidelines on fee structures. Although the functions do not expressly include questions concerning the establishment of higher education institutions, their numbers or location, such functions may be implied from 12 (1) (a) and (c) as shown below. The full list of the functions of the Council is;

(a)          to plan, formulate and determine national policies and strategies for the development of higher education;

(b)          to co-ordinate the development of higher education;

(c)           to promote and facilitate the orderly growth of institutions of higher education;

(d)          to determine policies and set criteria for the allocation of funds to higher educational institutions;

(e)          to determine policies relating to the entry of students to higher education institutions;

(f)           to determine policies and set guidelines on matters pertaining to the salary structure and personnel management system of Universities and University Colleges established under the Universities and University Colleges Act 1971;

(g)          to determine policies and set guidelines on fee structure;

(h)          to determine policies and set guidelines on the areas or courses of study to be undertaken by higher educational institutions;

(i)            to determine policies and set guidelines on the conduct of any course of study or training program by higher educational institutions jointly or in association, affiliation, collaboration or otherwise, with any University or institution of higher education or other educational institution or organization within or outside Malaysia;

(j)           to determine policies and set guidelines for the involvement in business activities by universities in accordance with the powers conferred under the Universities and University Colleges Act 1971; and

(k)          to take such actions or do such things as it deems fit or necessary to enable it to carry out its functions and powers effectively.

The Minister and the Council.

Our view, with respect, is that the Minister in charge of higher education will be unable to exercise his powers over higher education except in accordance with the policies and guidelines issued by the Council.

The Minister’s role in higher education is specified in several of the legislation on higher education. Under the EA,[12] the parent legislation on education, the Minister bears the responsibility for higher education and the general direction of higher education. Section 70 of the EA provides that the,

‘Minister may provide higher education in higher educational institutions, ‘in accordance with any written law relating to higher education.’

This is distinctly different from the way the Minister’s powers over the other levels of education are stated in the EA. The Minister has a duty to provide primary education[13] and secondary education,[14] and discretion to provide post-secondary education and establish vocational colleges.[15] Under the EA, the Minister is also vested with the discretion to establish and maintain colleges and polytechnics other than colleges with the status of a university or university college established under the UUCA. As for teacher education colleges, the Minister’s approval is required for their establishment and maintenance, but the Minister may establish and maintain such colleges.

The implications of section 70 when read in conjunction with the other provisions of the EA are first, the Minister has no powers to establish higher education institutions other than those provided for in the Education Act, and that as far as higher education is concerned, the Minister is bound to act in accordance with any written law relating to higher education. The other implication of s. 70 is that the provision of higher education in the country is to be determined by specific legislation creating such institutions.

The two main legislation establishing higher education institutions are the UUCA and the PHEA. Each of these two acts describes the role of the Minister in almost identical terms and they echo section 70 of the Education Act. Under section 3 of the UUCA, the Minister is responsible for the ‘general direction of higher education and the administration of the Act, which shall be in accordance with the national policies, strategies and guidelines on higher education formulated or determined an authority established under any written law for such purpose (emphasis added).’ Under section 4 of the PHEA, the Minister is empowered to give directions to the Registrar General of Private Higher Education on matters that are not inconsistent with the provisions of the Act[16] and that the directions may be in relation to matters in which national policies, strategies and guidelines on higher education are formulated or determined by the Council.[17]

Section 12 (2) of the NCHE Act reinforces the provision in section 70 of the EA. The subsection states that ‘upon the formulation or determination by the Council of the national policies, strategies, and guidelines in relation to its functions under paragraphs (1)(a) to (k), the Minister shall implement the policies, strategies and guidelines accordingly (emphasis added).’

The National Council on Higher Education is, therefore, a vital part of the national higher education system, particularly in relation to the powers of the Minister. Without the Council the system is incomplete, and the Minister may not be able to act on matters concerning higher education under any of the legislation if they concern policy over which the Council has jurisdiction.

The Council was established in 1997. The establishment requires the appointment of members to the Council as stipulated in the NCHE, which is the statutory duty of the Minister. The Council is made up of the Minister, who is the chairman and other members who are appointed by the Minister. As such, it is the Minister’s duty under the Act to appoint the members of the Council (see s.3 and s.4 of the NCHE). Not establishing the Council amounts to non-compliance with the NCHE Act. The Minister has no discretion on the matter. Section 4 of the NCHE Act stipulates the individuals who are to be appointed as members. It must be emphasized that the appointment of members to constitute the Council is not a discretionary matter for the Minister. It is a requirement of the law.

However, at some time in 2011, the Council ceased to function. This could only have happened if members were not appointed to the Council and those acting in ex-officio capacities failed to fulfil their obligations under the NCHE. It would appear from the report in the Star[18] that there are doubts about the membership of the Council because of a confusion of ministries. When the NCHE was passed, there was only one ministry in charge of education. With the establishment of the Ministry of Higher Education, there are now two ministries with oversight on education. Some of the ex-officio appointments to the Council under the NCHE Act are of officials from the Ministry of Education when the appropriate ministry now is the Ministry of Higher Education. This is a matter that could have been resolved by an amendment to the NCHE Act. It cannot be a reason to suspend the NCHE Act and the Council. Such amendment was proposed by the committee appointed by the Minister in 2019 to review the higher education system and recommend provisions for harmonization of the laws.

The same news item that was mentioned earlier reports that the functions of the Council are now being performed by a committee described as the Higher Education Advisory Committee (JPPT). This would only exacerbate the situation because there will now be a group of persons purporting to perform statutory functions of the Council without legal authority. Any policy or actions emanating from the JPPT will clearly be open to challenge. The statutory functions of the Council cannot be performed by any other person or entity. The Ministry will be usurping the powers of the Parliament by attempting to do so.

Reasons for reactivating the Council

The reasons for reviving the National Council on Higher Education must be obvious from what has been discussed so far. But there is also some urgency in restoring the Council because, without the Council, policies that have been made in the interregnum when the Council was not functioning may be open to legal challenge and made void. The absence of the Council may also draw criticism that the Minister is avoiding the oversight of a council established by Parliament to formulate policies and guidelines for higher education. Also, because of the integral role a policy-making body plays in the system of higher education, its absence leaves the system weak if not dysfunctional.

 

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[1] The authors are CEO and Executive Manager respectively of Espact Education Services www.espact.com.my

[2] Surprisingly, there is no single official document to explain the purpose of the several acts that were passed especially since it was the first attempt to give legislative shape to the higher education system. Also, and more importantly, the establishment of private universities which was being facilitated by the Private Higher Educational Institutions Act 1996 was a policy move that abrogated government monopoly over the establishment of universities in the country. The closest to an official statement on the reforms that were being made appears in a keynote address delivered on 22 April 1996, by the then Minister of Education, Dato’ Seri Najib Tun Abdul Razak at a seminar on the management of higher education institutions at the Petronas Training Centre in Kajang. The Minister described the passing of the five acts as a ‘great milestone in the history of higher education in Malaysia’ and that there had never been a reform of the scale that was being attempted with the five acts of parliament. However, his address does not go on to explain how the different acts would lay the foundation of a higher education system. Instead the rest of his comments deal mainly with the changes being made to the UUCA and what appears to be concerns he perceived in the proposal to corporatize public universities. His answers to these concerns were that corporatization will make universities more efficient and improve the salaries and working conditions of those who worked there. He also allayed concerns that the move might lead to universities charging fees. The Minister makes no mention of the important systemic changes that the statutes would bring about or how there would be a separation and balancing of the powers over higher education.

[3] One of the weaknesses of the NCHE Act is that its actions are not transparent. There are no provisions imposing any obligation on the Council to publish its policies or issues raised before it. The Council’s functions under s. 12 of the NCHE Act, including the determination of policies and guidelines do not create any obligation on the Council to publish its decisions.

[4] Article 153 of the Federal Constitution makes it ‘the responsibility of the Yang di-Pertuan Agong to safeguard the special position of the Malays and natives of any of the States of Sabah and Sarawak and the legitimate interests of other communities in accordance with the provisions of this Article.’

[5] ITM Act, section 3A.

[6] NCHE Act, section 4.

[7] The six members appointed by virtue of their official position are the Minister as Chairman, the Secretary General of the Ministry of Education the Director General of Education, the Secretary General of the Ministry of Finance, the Director General of the Economic Planning Unit and the Attorney General.

[8] The other eight members, appointed by the Minister of Education are three Vice-Chancellors of any of the Universities or University Colleges established under the UUCA, not more than two persons who are the chief executive officers of any private higher educational institution and not more than three persons who because of their knowledge and experience would in the opinion of the Minister be of assistance to the Council.

[9] National Council on Higher Education Act 1996, section 2.

[10] Ibid.

[11] National Council on Higher Education Act 1996, section 4.

[12] Similar provisions are found in the Universities and University Colleges Act 1971 and the Private Higher Educational Institutions Act 1996.

[13] Education Act 1996, section 27.

[14] Education Act 1996, section 30.

[15] Education Act 1996, sections 33A-33D.

[16] Private Higher Educational Institutions Act 1996, section 4(1).

[17] Private Higher Educational Institutions Act 1996, 4(2).

[18] Please refer to footnote 1 above.