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The Chinese University of Hong Kong

Task Force to Advise on Institutional Integration

Report Submitted to the University Council

March 2003

Foreword

Executive Summary

Table of Contents

Chapter

1

Introduction

2

Global Competition

3

Quality and Quantity: Aspiration for Growth

4

Alternatives

5

Goals

6

Models of Integration

7

Issues, Pros and Cons

8

Recommendations

Appendices

A

Membership and Terms of Reference

B

Consultation Paper

C

Examples of Integration

D

Extracts from HKUST Statements

Foreword

The Task Force to Advise on Institutional Integration hereby submits its Report to the University Council.

The Task Force is grateful to all members of the University who have provided comments and views. Prof. Leslie Lo and Prof. David Kember of the Faculty of Education have helped to direct our attention to works in the academic literature on university mergers. Colleagues in various administrative units have helped with the collection of data.

Our gratitude goes to Mr. Jim Luk and Mr. Wen Zhonglin, Ph.D. students in Education, for helping with the research that has gone into Chapter 3 and Appendix C. Editorial support and translation was provided by Miss Amy Leung and other colleagues in the University Secretariat.

1. Introduction

Executive Summary

The Task Force is asked to advise on the desirability and feasibility of integration between CUHK and HKUST. It has deliberated on the issues with care in 10 meetings, and has sought views from staff, students and alumni through a wide-ranging consultation.

2. Global competition

The Task Force begins with the proposition, put forward in the Sutherland Report and accepted by the Government, that our universities must strive for excellence and compete globally, and that the only way to do so is to focus resources on a small number of outstanding universities. CUHK should aim to be among these elite institutions. The status quo is not sustainable.

3. Quality and quantity: aspiration for growth

Given the way public universities are funded (especially in Hong Kong), the pursuit of excellence has to rely on the economies of scale and critical mass associated with relatively large institutional size. Current CUHK student and staff numbers are less than optimal, so that programmes and departments are small; this is validated by benchmarking with top public universities elsewhere. If natural expansion is unlikely, then integration could be considered.

4. Alternatives

While there may be other possible avenues for improvement, and for securing resources for improvement, most of these have relatively limited potential, are already exploited, but most importantly should be pursued whether or not there is integration; in this sense these factors are not relevant in weighing the pros and cons of institutional integration.

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5.

Goals

The goals that CUHK wishes to pursue are examined. While the impact of integration with a strong partner that shares our vision and standards will be positive in many dimensions (e.g., research, diversity of offering, influence), there are also areas of concern (e.g., intake quality, general education).

6. Models of integration

Various models of integration are examined. It is argued that a voluntary alliance will have limited effect, while a federation will achieve modest efficiency gains at relatively little cost and pain. It is suggested that the model to be explored should be a federation evolving towards a unitary university. Groups of subjects could be placed on the two campuses; the need for student travel should be small, but a price will be paid in the diversity of informal contacts for students.

7. Issues, pros and cons

In pursuing possible integration, attention should be drawn to issues including the quality of education, non-formal education and individual care for students, our institutional ethos and tradition, staff worries over conditions of service, workload and distraction, the University’s brand name, the danger of increased bureaucracy and the cost incurred in the transition. Implementation will require care.

However, the merged institution would come to be recognized as a premier university in Hong Kong and enjoy regional reputation. The increased size would allow a wider menu of subjects to be offered, and efficiency gains would free up resources for improvements. Critical mass would be achieved.

On the other hand there would be costs: more bureaucracy, less personal care, dilution of traditions, and segregation of subjects across two campuses. More onerous will be the cost of transition in both financial and human terms.

In order to address these concerns, certain conditions must be understood if a formal dialogue is to be opened with the Government: allowing freed up resources to be retained for improvement, identification for focused and

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enhanced support, provisions for the transition and most importantly a stable and nurturing policy.

8.

Recommendations

In the light of all these considerations, the Task Force recommends to the University Council that it should affirm its wish to pursue discussion with the Government and HKUST on the way forward, in order to come to an understanding on the many issues that need to be resolved before a decision can be made; and that the Council Chairman and the Vice-Chancellor should be authorized to initiate formal dialogue with the Government in the first instance and to report to the Council thereon, within the following parameters:

(i)

that the Government should first formally affirm that the purpose of the proposed integration is to improve quality and create a university capable of competing at the highest international levels, rather than to reduce cost, and that, in particular, the unit of funding per student will not be adjusted downwards for increased size or efficiency gained, so that the integrated institution can have the resources to achieve its goals;

(ii)

that in addition, the Government and the UGC agree to consider the integrated institution, provided it satisfies certain conditions to be agreed, as the primary candidate for the focused and enhanced public and private support cited in the Sutherland Report, with such public support to start once integration plans are accepted by all parties;

(iii)

that the Government further pledges to support, in principle, the added administrative cost incurred during the transition (as front-end loading for a new university) and the capital spending needed to build extra teaching and office space for decanting of departments and programmes, with the level of such support to be negotiated;

(iv)

that the scenario to be explored is initially a federal structure evolving over a period of time to a single unitary university; and

(v)

that the Government recognizes the issues and concerns presented in this Report, and pledges that these will be seriously addressed in any integration plans.

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The Task Force further recommends that, subject to favourable indications from the Government on the above issues and at a time judged by the Council Chairman to be suitable, the Council Chairman and the Vice-Chancellor should be encouraged to initiate dialogue also with HKUST on any and all matters concerning a possible integration between the two universities, with a view to improving communication and mutual understanding, and where appropriate also with a view to joining hands in discussions with the Government on the way forward.

Implementation is beyond the Task Force’s terms of reference. In any case, implementation should not be considered in detail unless and until all parties have reached agreement in principle. However, the Task Force wishes to draw the Council’s attention to the need for thoroughly considered, unhurried, and sensitive plans for implementation – wherein most of the concerns lie.

The Task Force also recommends that the University should at appropriate intervals report on and account for the progress of discussion to staff, students, alumni and other members of the University, whose views should be heard throughout the process.

The Task Force further recommends that, having submitted its Report, it should now be dissolved.

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Chapter 1

Introduction

The formation of the Task Force and its work leading up to this Report are described.

1.1 This Report is submitted by the Task Force to Advise on Institutional Integration of The Chinese University of Hong Kong (CUHK) to the University Council, in discharge of its duties under the Terms of Reference to advise on the desirability and feasibility of a proposed merger or institutional integration between CUHK and the Hong Kong University of Science and Technology (HKUST).

BACKGROUND

1.2 The idea of some form of collaboration between CUHK and HKUST was first raised in the late 1990s by the then heads of the two universities after consultation with their respective senior colleagues. Both universities wished to establish closer links in order to cooperate in making greater contributions to tertiary education. In September 1999, the two universities agreed to form a strategic alliance to carry out the following activities:

(a)

offering students opportunities to enrol in each other’s courses;

(b)

conducting joint research activities;

(c)

organizing joint seminars, meetings and conferences; and

(d)

sharing academic materials.

1.3 To a limited extent, the two universities have cooperated in academic exchange (e.g. teaching in mathematics) and research (e.g. Chinese medicine). Although large-scale collaborations have not yet occurred, the benefits that could be derived from an academic partnership have been recognized.

1.4 In March 2002, the University Grants Committee (UGC) released its Report on Higher Education in Hong Kong (the Sutherland Report) [1]. Its very first recommendation is “That a small number of institutions be strategically

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identified as the focus of public and private sector support with the explicit intention of creating institutions capable of competing at the highest international levels” – a theme to which we shall repeatedly return. In the face of intense global competition, CUHK (and likewise HKUST) responded to the recommendation by exploring ways and means to leverage upon its strengths in order to make even more significant contributions to higher education and to the community-at-large.

1.5 In this climate, the heads of the two institutions had, on various informal occasions in 2002, exchanged views on closer cooperation, including the possibility of integration and merger. Senior members in CUHK were apprised of these discussions, and were aware of their informal and exploratory nature. CUHK was also given to understand that senior members in HKUST were in the picture in a similar way. However, all parties were conscious that a formal discussion could not be properly launched without an indication from the Government that institutional integration is within the envelope of public policy options and that the Government would at least encourage a formal process to study the issue. This view was brought to the attention of the Secretary for Education and Manpower.

1.6 On 4 October 2002, at an informal media gathering, the Secretary for Education and Manpower endorsed the concept of a merger between the two universities. In reply to media enquiry about implementation, the Secretary for Education and Manpower mentioned a possible time-frame of approximately one triennium. This generated interest, concern and strong responses from various quarters on and off the two campuses.

ACTION TAKEN AT CUHK

Formation of Task Force

1.7 CUHK recognized the need for a careful study of institutional integration based on a rational and solemn analysis of the issues. A Task Force to Advise on Institutional Integration was established by the Chairman of the University Council and the Vice-Chancellor to explore the desirability and feasibility of

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institutional integration. The composition and terms of reference of the Task Force are set out in Appendix A.

Meetings of the Task Force

1.8 The Task Force held 10 meetings between November 2002 and March 2003, with the earlier meetings given to understanding the background and enumerating the issues, and the later meetings given to analyzing the views received (see below), and, in the light of all the information in hand, coming to a view on the recommendations to put forward.

Consultation paper

1.9 A consultation paper was issued on 29 January 2003 to all members of the University, including the Council, staff, students and alumni. The consultation paper (Appendix B) set out the main considerations underlying the proposal for institutional integration, and clearly stated the objective of the Task Force as follows:

In any event, the Task Force is unlikely to make a simplistic recommendation on integration/merger; rather, it will lay out all the considerations for and against, and advise whether there is at least a prima facie case for CUHK to open a formal dialogue with the Government and other parties, and if there is, under what conditions and addressing what concerns.

1.10 The consultation paper then invited views on three topics:

(a) Given the present constraints, how can CUHK, as a public comprehensive research university, attain the right size, critical mass and economies of scale, secure more resources, and thereby achieve excellence and leadership in the Asia-Pacific region? In the present circumstances, can CUHK achieve these goals by way of institutional integration? Are there other ways and means the Task Force should consider in its deliberations?

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(b)

With regard to the pros and cons of institutional integration, are there any other issues or serious difficulties that the Task Force should take into consideration in its deliberations?

(c)

If CUHK were to enter into discussions with the Government, are there any other conditions that need to be set or issues addressed?

Consultation process

1.11 Four hearings were organized, on 15, 17 and 24 February (two sessions), with one conducted in the CUHK Teaching Centre in Central, two on campus, and one at the Prince of Wales Hospital. Members of the University were invited to attend and to express their views and, where appropriate, to seek factual clarifications. In addition, members of the University were invited to submit views in writing to the Task Force. All written submissions and a transcript of the hearings are posted on the website of the Task Force. The views expressed were considered by the Task Force and the most important points raised have been incorporated into this Report.

1.12 The Task Force is pleased to report that members of the University have approached the issue with reason rather than emotion, and have shown respect for different points of view. The University should be proud that valid concerns about the welfare of individuals have not overwhelmed the need to view the matter also from the vantage point of the community as a whole.

1.13 The Task Force thanks all members of the University community for putting their views forward. This has helped the Task Force to identify issues and assess the importance attached to different factors by various sectors. Moreover, areas where possible misunderstanding have arisen have been identified and given particular attention and a more detailed exposition in the Report.

The Report

1.14 The Task Force has taken half a year to produce this Report, because the importance of the issue deserves a careful study of the facts, a rational analysis of the issues and a process of wide consultation. The University, as a learned

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institution, also expects an analysis with a degree of intellectual rigour, rather than merely an assessment of sentiments and wishes. We hope that the substance of this Report will help members of the University, and indeed all those interested in this matter, to be able to see the way forward with more clarity and understanding.

RESPONSE OF HKUST

1.15 A similar Task Force appointed by HKUST has submitted its interim Report to HKUST’s Council, which endorsed it on 8 December 2002. An extract of HKUST’s press release issued on that date is set out in Appendix D. The HKUST interim report states inter alia that “in the current economic climate, the possibility of creating an institution that would be the focus of public and private support through the merger of two of Hong Kong’s best universities suggests a way forward that deserves serious consideration.” We note that HKUST will approach the Government for clarifications regarding such critical issues as the objectives of a merger and the funding implications to enable HKUST to further consider the matter, and welcome this development.

1.16 On 1 March 2003, it was reported that the Secretary for Education and Manpower had paid an informal visit to HKUST and had met its senior staff, to provide the clarifications sought by HKUST. It was reported that HKUST would reactivate its internal discussion on the possibility of integration. An extract from the open letter from the Council Chairman and President of HKUST to staff, students and alumni is also given in Appendix D.

ORGANIZATION OF THIS REPORT

1.17 The rest of this Report is organized as follows. Chapter 2 examines the global competition and the need to improve and excel. Chapter 3 argues that institutional size is a necessary condition for excellence for a publicly funded comprehensive research university, and provides data to show that the present size of CUHK is less than ideal. Chapter 4 examines other ways of improvement, or of seeking resources for improvement, and argues that these have limited potential and can in any event be pursued whether or not there is institutional

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integration. Chapter 5 examines the goals that CUHK seeks, and how each of these might be affected by integration. Chapter 6 outlines the possible models of integration and sketches one scenario that might be worthy of further consideration. The issues, pros and cons of integration are discussed in Chapter 7. These then lead to the recommendations in Chapter 8.

[1] Sutherland, S.R., Higher Education in Hong Kong, a Report of the University Grants Committee commissioned by the Secretary for Education and Manpower,

2002.

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Chapter 2

Global Competition

The higher education sector in Hong Kong must face global competition, as does the community as a whole. This calls for the creation of an institution capable of competing at the highest international levels. The need to improve quality and competitive- ness lies at the heart of the Task Force’s considerations.

GLOBAL STAGE FOR HIGHER EDUCATION

2.1 As we enter the 21st century, the higher education sector in Hong Kong must be prepared to face the region and indeed the world. We already recruit staff trained in the best institutions worldwide; they conduct research with the expectation that the results are to be judged by international peers. Our staff have been elected to national and international academies [1] and fellowships of leading academic bodies [2], and some colleagues are among the most cited academic authors in the world [3]. Even though simplistic rankings should not be taken too seriously especially as they relate to minute differences, it is gratifying that three universities in Hong Kong have been placed among the top 10 in Asia [4], and individual programmes have been rated as number one in the Asia-Pacific [5]. Students from some of the most prestigious universities in the world come on bilateral exchange or to enrol in our courses [6]. In many ways, the best universities in Hong Kong are already players on the global stage.

2.2 Our universities must compete globally in part because our graduates are launched into careers in the global economy. They vie with graduates (of both Hong Kong and overseas origin) from the leading universities of the world for the most desirable jobs; once launched into these careers, they have to work side- by-side with graduates from around the world, and be judged against them. Our graduates have done well, at least in Hong Kong, but increasingly their horizon must stretch beyond the confines of a single city; their academic credentials will have currency abroad only to the extent that their alma mater enjoys reputation worldwide.

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2.3

Research universities in particular must have a global perspective, for the advancement of human knowledge is a universal endeavour.

GLOBAL COMPETITION FOR HONG KONG

2.4 But the global competition in higher education concerns more than the professoriate and the students. The way forward for higher education is inseparable from the future of the community as a whole. With the vision to be one of Asia’s world cities [7], Hong Kong must compete globally in the knowledge economy, in which the only constant is the certainty of change. The difficulties besetting Hong Kong – deflation, unemployment and fiscal deficits – point to an acute need to restructure the economy, so that more knowledge- intensive jobs will create higher added value. There is no room for complacency:

we either succeed in restructuring, or decline into just another China coastal city. Very strong universities are key ingredients in this drive, to train the high-level manpower that is needed, especially postgraduates, and also to attract the best and brightest to come to Hong Kong.

GOVERNMENT POLICY

U(P)GC Reports 1993 and 1996

2.5 As early as 1993, the then University and Polytechnic Grants Committee (UPGC) in its Interim Report already urged an outward-looking stance for higher education in Hong Kong [8]. This recommendation was re-iterated by the University Grants Committee (UGC) in its 1996 report Higher Education in Hong Kong [9] (emphasis added):

In our Interim Report we offered three possible scenarios for the future of our own institutions. With small modifications those scenarios might also apply to non-UGC HEIs. They were:

(i) the institutions should limit their interests to local student recruitment and the local labour market. Teaching might gradually be given more and more in Cantonese. In time the

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institutions could become indistinguishable from many similar ones in the neighbouring province;

(ii)

the institutions should limit their interests to local recruitment and the local labour market, but should make a positive stand on bilingualism. This would require much more effort than is being made at present. Their graduates would be distinguished from those in the hinterland primarily because of their communication skills (including fluency in English) and this would help to maintain Hong Kong’s international position; and

(iii)

the institutions should incorporate centres of excellence having local, regional and international functions. They should provide very high quality bilingual manpower for both Hong Kong and the hinterland and should act as points of reference, particularly in Business and Social Studies and in innovative science and technology for developments in Southern China and more widely. Some undergraduate students and many postgraduate students would be recruited from outside Hong Kong.

… The first of these options more or less represents a policy of drift. The second requires modest additional resources and, more important, an effort of will on the part of the institutions. The third option is the one favoured by the U(P)GC, since the Committee believes that if Hong Kong is to retain a leading position in the commercial and industrial development of China and the Pacific rim, it will need world-class higher education institutions. The only justification for the additional resources which would be needed for this option is the benefit to Hong Kong itself.

Higher Education Report 2002

2.6 In its report Higher Education in Hong Kong (the Sutherland Report) [10], the UGC in 2002 stressed very much the same points [11]:

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… Our focus is not just local, but also regional and international. … For higher education in Hong Kong to be internationally competitive, we will require …

In all developed communities the shape of the future will significantly determine the future shape of universities. Equally, the shape of its universities will partly determine the community’s future.

The ambition to be Asia’s world city is a worthy one, but there is no doubt that realisation of that vision is only possible if it is based upon the platform of a very strong education and higher education sector.

Equally, to compete with Singapore and Shanghai for example, is to enter upon the world stage, and to be measured by the most exacting international standards. A higher education sector which is fit for the future purposes of Hong Kong will operate at all three levels of community.

2.7 But going beyond the 1993 and 1996 reports, the UGC this time sounded an alarm: our competitors are pouring concentrated resources into their premier universities [12]:

There is one consequence of seeking international level excellence which has been understood by some of Hong Kong’s neighbours, and which must be confronted at the outset. International level excellence is an elusive and, it has to be said, resource intensive flower. Singapore recognised this some years ago, and has made significant investment in the National University of Singapore with the intention of creating internationally competitive centres of activity. The People’s Republic of China has explicitly identified a small group of universities to be resourced as the flagships of China’s higher education sector, able in due course to be measured alongside the best in North America and Europe.

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In one way or another, international competitors have been, or now are, in receipt of privileged support which is seen as a condition of competitiveness at the highest levels. The message for Hong Kong is clear: to aspire to be Asia’s world city is to aspire to compete internationally in all relevant areas including universities.

2.8 The only way for Hong Kong to stay in this regional and international race is likewise to focus resources. Thus the Sutherland Report goes on to make a key recommendation [13]:

That a small number of institutions be strategically identified as the focus of public and private sector support with the explicit intention of creating institutions capable of competing at the highest international levels.

2.9 The Government, in accepting the UGC’s recommendations in November 2002, made particular reference to role differentiation in order to [14]

… build the critical mass necessary for institutions to compete at the highest international levels.

SWOT ANALYSIS

2.10 In order to compete, we need to analyse our own strengths, weaknesses, opportunities and threats (SWOT).

Strengths

2.11 The higher education sector in Hong Kong has very good staff and facilities. The institutions are largely autonomous, free from political and administrative interference, and therefore responsive to changes in a flexible way. Research performance, especially in recent years, has been remarkable despite the limited resources available. The entire system is open to and benchmarked against the rest of the world.

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2.12

For CUHK, our particular strengths lie in tradition, excellence in teaching and research, as well as a comprehensive offering. Some of these attributes we share with the other two research universities in Hong Kong.

Weaknesses

2.13 Hong Kong spends a pitiable percentage of its GDP on research and development; the best estimates range from 0.3% to 0.5%, substantially below the 2% to 3% range common in knowledge-driven economies. Until this situation is improved, there is little hope for universities in Hong Kong to move into the top tier. Secondly, student recruitment, especially at the undergraduate level, is still largely confined to Hong Kong itself. Until the catchment area is enlarged, development will also be constrained. Finally and most directly relevant to the task at hand, our institutions are not large enough (as will be argued in detail in the next chapter) to enjoy economies of scale or to command critical mass. We therefore do not project a strong image or exert a strong influence outside Hong Kong, which in turn impacts student recruitment from a wider area.

2.14 The comprehensive nature of CUHK can also be a weakness when commensurate resources are not available for us to discharge this obligation to society.

Opportunities

2.15 The greatest opportunity is the rapid economic development in China, and the benefits that accrue to Hong Kong. The higher education sector has the chance to become the premier provider of high-level manpower and the knowledge engine for the country, or at least for the southern part. Again, with reference to the task at hand, there is now the opportunity to build a very strong university through integration. It is of course for the Task Force to examine the pros and cons; but if the assessment should turn out to be on balance positive, this opportunity would not come again.

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Threats

2.16 The rapid economic development of China and its universities is itself a challenge to universities in Hong Kong. With a high rate of growth in GDP and in government revenue, and with a significant part of education and research resources being preferentially channelled to a very small number of universities, and most importantly with a rightly confident and aggressive attitude in these institutions, the threat is real that universities in Hong Kong, if they all continue on their present paths, will soon be overtaken. If one were to identify the top five universities in all of China in 20 years’ time, will any Hong Kong institution be on the list? Unless drastic action is taken, the answer is likely to be no, simply because one cannot compete with the concentration of national resources when the gap in per capita GDP narrows. And if the answer is no, then Hong Kong’s aspiration to be one of the leading world cities of Asia may also be jeopardized. This consideration, more than any other, gives a sense of urgency to the matter at hand.

BACKDROP FOR THE TASK FORCE

2.17 The policy to focus resources in order to create an institution capable of competing at the highest international level is a key element of the backdrop against which the Task Force conducts its deliberations. The Task Force must assess whether some form of institutional integration is one of the ways to create such an institution. The future well-being of the entire community could be at stake if such a flagship institution fails to materialize; therefore the Task Force is conscious of its responsibility not only to CUHK, but also to Hong Kong as a whole.

2.18 To create an institution at such a level would be no easy feat: 20 or even 10 years ago, this goal would have been a pipe dream. But the phenomenal progress of the higher education sector in the past decades has now put this goal within reach – if only the community would focus its attention and resources upon what it regards as important.

2.19 Nevertheless it is unlikely, if not downright impossible in the short to medium term, that such an ambitious goal could be reached by merely incremental

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improvements. Bold decisions need to be made, and made in concert by all stake holders – upon hard facts and objective analysis that it is the duty of the Task Force to supply.

CONCLUSION

2.20

Global competition, both for Hong Kong as a whole and for our universities, gives us no choice but to aim for a small number of institutions that can compete internationally. How this goal is to be achieved, whether institutional integration is one option, and indeed whether CUHK should be among these nascent flagship institutions are matters for discussion in the rest of this Report.

[1]

[2]

For example, among CUHK staff are members of the Chinese Academy of Sciences, Academia Sinica Taipei, the European Academy of Sciences and the Euroasian Academy of Science. For example, in engineering there are nine fellows of bodies such as IEEE, IEE

[3]

and ACM. Colleagues in medicine hold over 100 fellowships in various Royal Colleges. For example, one CUHK staff member is among the 10 most cited mathematical

[4]

scientists in the world; see Science Watch, 13(3), May/June 2002. Asiaweek, 20 June 2002, pp. 38-53.

[5]

Asia, Inc. ranked the CUHK MBA as number one in the Asia-Pacific in 2002.

[6]

Financial Times ranked the CUHK EMBA as number one in Asia in 2001 and 2002, and within the top 20 globally. HKUST has also won good regional rankings. Notable examples of CUHK bilateral exchange partners include the following. North America: University of California (system), Chicago, Columbia, Cornell, Illinois (Urbana-Champaign), North Carolina (Chapel Hill), Pennsylvania, Washington; British Columbia, Toronto, Western Ontario. Europe: Copenhagen, Sciences Po, HEC-Paris; Bonn, Heidelberg, Humboldt; Lund, Stockholm; London Business School. Asia-Pacific: Fudan, Peking, Tsinghua, Taiwan; Keio, Kyushu, Waseda; Korea, Yonsei; Melbourne, Monash, New South Wales,

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Queensland. Our International Asian Studies Programme receives students from, e.g., Brown, Dartmouth, Harvard, Princeton and Yale on their junior year abroad programmes.

[7]

1999 Policy Address by the Chief Executive, para. 52 “To realise our vision of

2002.

[8]

Hong Kong as a world-class city , it is first and foremost necessary to cultivate and retain a critical mass of talented people.” University and Polytechnic Grants Committee, Higher Education 1991-2001, An

[9]

Interim Report, November 1993, paras. 25-26. The University Grants Committee, Higher Education in Hong Kong, October

[10]

1996, Chapter 29, para. 29.5. Sutherland, S.R., Higher Education in Hong Kong, a Report of the University

Grants Committee commissioned by the Secretary for Education and Manpower,

[11]

Ibid., Overview and List of Recommendations, and Chapter One, paras. 1.2, 1.3,

1.10.

[12]

Ibid., Chapter One, paras. 1.18, 1.19.

[13]

Ibid., Overview and List of Recommendations, Recommendation 1.

[14] Legislative Council Brief: Higher Education Review and Rolling Over the 2001/02 to 2003/04 Triennium to the 2004/05 Academic Year (EMB CR 3/21/2041/89). See www.legco.gov.hk/yr02-03/english/panels/ed/papers/

embcr3_21_2041_89_e.pdf.

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Chapter 3

Quality and Quantity:

Aspiration for Growth

The case for further expansion of CUHK is examined. It is argued that the present size of CUHK is less than optimal, and unfavourable for global competition. Economies of scale could free up resources for quality improvements. The advantages due to the critical mass in a larger university are outlined.

QUALITY AND QUANTITY

Quality and quantity not in opposition

3.1 The mission of CUHK is to assist in the preservation, creation, application and dissemination of knowledge by teaching, research and public service in a comprehensive range of disciplines, thereby serving the needs and enhancing the well-being of the citizens of Hong Kong, China as a whole, and the wider world community. CUHK aspires to be acknowledged locally, nationally and internationally as a first-class research university whose bilingual and bicultural dimensions of student education, scholarly output and contribution to the community consistently meet standards of excellence.

3.2 In short, CUHK aspires to quality. It is sometimes thought that quality and quantity are in opposition, that small is beautiful. A central thesis in this Report is that this is not the case for a publicly funded comprehensive research university. One only has to consider the development of CUHK over the last 40 years; without question the quality of staff, students, programmes, research, facilities and impact have all improved as the University grew in size.

3.3 The reason is simple: it takes resources to achieve quality and excellence. Good academics are in demand worldwide; to attract them requires not only competitive salaries, but also good facilities, support for research, opportunities for interaction with and stimulation by peers from around the world, and a teaching load that is not onerous, leaving time and energy for reflection,

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scholarship and innovation. All these require resources, as does the provision of a pleasant campus environment conducive to learning, and a range of support (e.g., IT facilities, library holdings, student services) that enhances the learning experience. Therefore one has to first understand how public universities are funded.

University funding

3.4 The recurrent budgets of tertiary institutions in Hong Kong (with the exception

of the Academy for Performing Arts and the Open University) are provided by

the Government through the UGC. In very much simplified terms, the funding

to each university is calculated by

Funding = (number of students) x (unit of funding)

where the unit of funding is the same for all universities (for students in the same discipline), without regard to their mission or size. A number of complications that do not affect the essence of the arguments below can be glossed over: (a) the unit of funding is different across disciplines and levels; (b) an assumed income from tuition and other sources is deducted; (c) the research portion is moderated by performance, but is in any case proportional to institution size, i.e., the number of students in a broad sense; and (d) other adjustments for performance are expressed as a percentage of the budget, and are therefore proportional to student numbers. In short, the above formula captures the essence: a larger institution will receive proportionately more funding, which can then be deployed in the pursuit of excellence.

Overseas comparisons

3.5 The same is true in public universities elsewhere. But the situation in Hong Kong takes a more extreme form: because of the virtual absence of research funding from other agencies (such as the Ministry of Science and Technology or its equivalent in most economies), the education funding which scales with student numbers is the main source of support for universities.

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Economies of scale

3.6 To illustrate this key concept of economies of scale as it applies to university funding, consider one single class (say in the first year of university) with 50 students, taught by one teacher. If there were 100 students instead, twice the funding allows for two teachers, but only one would be needed for lecturing, even though the class is larger. The other teacher can then be deployed to other duties: research, small group tutorials, or offering more upper-year electives that would not otherwise be possible – all of which would contribute to better quality.

3.7 For this reason, quantity translates into and supports quality, and for this reason, much of this chapter will be about size and quantity, not because quality is secondary, but because at the level of strategic planning, one should first of all be concerned with securing the resources and the capacity for quality improvements.

GROWTH OF CUHK

A history of growth

3.8 The history of CUHK has been a story of growth, and indeed of merger. In 1963 CUHK was founded with only 1,375 students (595, 493 and 287 respectively in Chung Chi, New Asia and United) [1]. By the time the Colleges moved to one campus in 1972, enrolment had grown to 2,826 [2]. In the academic year 2002- 03, the student number stands at 16,072 headcounts [3], or 14,031 full-time- equivalent (FTE) students [4]. In the following, we shall refer to CUHK as having ~14,000 students, since FTE is a better measure of the teaching load. Over this time, the 10-fold increase in numbers, together with more favourable funding per student, the advancement of Hong Kong as a modern city, visionary University leadership and the dedication of the staff, have propelled dramatic improvements in quality, standards and reputation. Professional schools in engineering and medicine have been established, and research has moved from the periphery to the core.

3.9 A thesis that the Task Force needs to study is whether advantage would be gained from further expansion – either by natural growth or by institutional

3-3

integration; in other words, whether the present size of CUHK is less than optimal. We approach this question in two ways: by examining internal numbers at CUHK, and then by comparing with universities elsewhere.

3.10 Several points need to be stressed upfront. First, even if the optimal size is larger, it does not necessarily follow that institutional integration is the appropriate route to growth – this being the issue to be examined next. Second, insofar as the present discussion is more about size than about specific mergers, the arguments remain valid if integration with different institutions were one day to be explored as well. Third, the optimal size relates to the specific context, namely a public comprehensive research university, given the funding situation in Hong Kong. We shall draw attention to the pitfalls of simplistic comparisons with universities in other contexts.

CUHK numbers and trends

3.11 Figure 1 shows that the number of first-year first-degree places (FYFD) at CUHK (i.e., the size of each undergraduate cohort) has nearly doubled in 15 years, with rapid expansion up to 1995 and consolidation thereafter. Figure 2 shows that the number of teachers has increased as well. But FYFD has grown 79% (from 1,632 to 2,917) whereas teachers have increased by only 47% (from 566 to 830). This productivity gain contrasts with other education levels and puts to rest the myth that universities have become lavishly funded.

3.12 Figure 3 shows that the number of undergraduate programmes offered at CUHK has also increased steadily over the years. However, since 1995, new programmes have been launched without any additional student numbers allocated by the UGC, in other words without extra resources from the public purse. This has only been possible by paring the enrolment (and resources) of existing programmes almost every year to make way for new offerings. The University has deliberately and selflessly chosen to do so, to accommodate emerging and often crucial societal needs. For example, undergraduate programmes launched since 1995 include nursing, language education, molecular biotechnology, risk management science and internet engineering.

3-4

FYFD (actual) vs Year 3500 3000 2500 2000 1500 1000 500 0 Year 1988 1989
FYFD (actual) vs Year
3500
3000
2500
2000
1500
1000
500
0
Year
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
FYFD

Figure 1

The number of first-year first-degree places (FYFD) at CUHK.

No. of Teachers vs Year

1000 900 800 700 600 500 400 300 200 100 0 1988 1989 1990 1991
1000
900
800
700
600
500
400
300
200
100
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
No. of Teachers
1997
1998
1999
2000
2001
2002

Year

Figure 2

The number of teachers at CUHK.

3-5

No. of Ug Programmes vs Year

60 50 40 30 20 10 0 1988 1989 1990 1991 1992 1993 1994 1995
60
50
40
30
20
10
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
No. of Programmes

Year

Figure 3

The number of undergraduate programmes offered at CUHK.

3.13 But there is of course no free lunch: this development comes at the expense of class size. Figure 4 shows that the average FYFD per programme (as a surrogate for class size) has declined from a high of nearly 78 in 1994 to 58 in

2002. More seriously, some programmes are below the average size. Figure 5

shows the changes over the years in the number of large, medium and small programmes (FYFD at 60 or more, between 30 and 59, and below 30 respectively). The number of small programmes – which are certainly not cost- effective – has increased from a low of 6 in 1995 to 14. These trends point to an evident and serious loss of economies of scale, and are very worrying.

3.14 Figure 6 shows the average number of teachers per undergraduate programme offered. The trend is alarming: whereas on average 25 teachers serviced one programme in the early 1990s, now 17 have to discharge the same task. Economies of scale have been eroded and colleagues are overworked.

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FYFD/Programme vs Year

90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1988 1989 1990 1991 1992
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
FYFD/Programme

Year

Figure 4

The average FYFD per undergraduate programme at CUHK.

No. of Programmes vs Year

30 25 20 15 10 5 0 1988 1989 1990 1991 1992 1993 1994 1995
30
25
20
15
10
5
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
No. of Programmes
1998
1999
2000
2001
2002
1993 1994 1995 1996 1997 No. of Programmes 1998 1999 2000 2001 2002 size < 30

size < 30

1993 1994 1995 1996 1997 No. of Programmes 1998 1999 2000 2001 2002 size < 30

Year

size 30-59

1993 1994 1995 1996 1997 No. of Programmes 1998 1999 2000 2001 2002 size < 30

size 60 +

Figure 5

The number of small, medium and large undergraduate programmes at CUHK, according to FYFD

3-7

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Teacher/Programme vs Year

30.0 25.0 20.0 15.0 10.0 5.0 0.0 Teacher/Programme
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Teacher/Programme

Year

Figure 6

The average number of teachers per undergraduate programme offered at CUHK (i.e., the total number of teachers divided by the total number of undergraduate programmes).

3.15 In the years to come, there will be pressure to launch yet more programmes to

satisfy the needs of society. Yet overall student numbers at CUHK (or at our

sister institutions) are not likely to increase by natural growth. Thus the

problems will only be aggravated, unless bold action is taken.

3.16 Indeed, just about every department or programme at CUHK would welcome

more students, and the university administration is constantly faced with the

thankless and painful task of turning down legitimate and well-justified requests,

simply because there are no numbers to go around. We are confident that if a

50% increase in student numbers (with commensurate resources) were offered to

any CUHK department, the extra numbers would be happily accepted. There can

be no better argument that the present size of CUHK is substantially less than

optimal. We also believe that if planners starting from scratch today to design a

comprehensive research university in Hong Kong were given the choice between

(a) two institutions of 14,000 and 7,000 students respectively and (b) one single

institution of 21,000 students, they would opt for the latter, precisely for these

reasons.

3-8

Obligations of a public comprehensive university

3.17 The dilemma of having to offer many programmes is peculiar to public comprehensive universities, especially those in Hong Kong, and it is important to avoid the pitfall of inappropriate comparisons.

3.18 A public university is obliged to offer every subject within its span that society demands. The demands escalate as society becomes more sophisticated – subjects such as internet engineering and risk management did not exist a decade ago. A comprehensive university in particular has to respond to demands in every sphere. On several recent occasions CUHK was required by the UGC to expand certain subjects to supply graduates especially to the public sector, and to do so without extra student numbers or resources, by trimming enrolments in other programmes. Private universities, such as many in the US, can pick and choose their offerings. Moreover, the first-degree course in the US is much more general, with professional specialization deferred to graduate school. So especially in elite private universities, many students pursue a broad, liberal undergraduate curriculum, and the number of majors offered, as well as the number of required courses within each major, could be less than the case at CUHK.

3.19 For these reasons, it would be fallacious to point to small prestigious private universities in the US and argue that size is not necessary for quality in the

This theme is further developed

context of public universities in Hong Kong. below.

SIZE COMPARISONS

Student numbers

3.20 The present size of CUHK can also be benchmarked externally. Reference is made primarily to the US, which has the most diverse spectrum of universities, including without question some of the best in the world; data are also most readily available. The top 50 universities in the US are chosen as the reference sample [5], in order to reveal clues as to what makes an excellent university.

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3.21 Figure 7 shows the distribution in size of this sample. First, good public universities are larger than good private universities (medians in the sample being ~24,600 and ~10,300 respectively). The smallest prestige institutions are private, such as Caltech with under 2,000 students and Princeton with about 6,500, while the largest ones are public. One reason for this contrast has already been alluded to: public universities tend to offer a wider range of programmes. Another reason lies in the source of funding: prestigious private universities in the US derive significant incomes from their endowments [6] and very high tuition fees [7], and therefore need not rely on economies of scale. (All top US universities, public or private, also receive huge federal research grants [8].)

3.22 It is evident that CUHK (~14,000 students) is small compared to top public universities in the US (median of ~24,600 and lowest quartile of ~18,700 in the sample). It is true – but for the reasons indicated above irrelevant – that CUHK is not small in relation to top private universities in the US.

3.23 CUHK is also small compared to Peking University (~21,000 students) [9] and Tsinghua University (~20,000 students) [10], likely to be our most formidable national competitors. Other regional competitors include Taiwan University (~27,000 students) [11], the National University of Singapore (~32,000 students) [12], Tokyo University (~28,000 students) [13] and National Seoul University (~32,000 students) [14].

Staff-student ratios

3.24 The staff-student ratio (SSR) is a commonly used indicator of the academic staffing level. An SSR of 10 would be extremely favourable in the present age, whereas an SSR above 20 or even 25 would indicate either a low level of provision or very high efficiency. The SSR, or more precisely its reciprocal, is a good measure of the cost of education, expressed in a manner that largely removes differences in the cost of living and hence the cost of hiring each teacher. To provide a perspective, CUHK has ~14,000 students on an FTE basis and ~830 teachers [15], for an SSR of ~17.

3.25 Figure 8 shows the SSR versus student enrolment in thousands for the top 50

Public universities are on the whole larger and have

universities in the US.

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Figure 7 Distribution in size (as represented by student number) of the top 50 US

Figure 7

Distribution in size (as represented by student number) of the top 50 US universities. Public and private universities are shown separately.

Public and private universities are shown separately. Figure 8 The staff-student ratio (SSR) versus the student

Figure 8

The staff-student ratio (SSR) versus the student number of the top 50 US universities. Public and private universities are shown separately.

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higher SSRs, while private universities tend to be smaller and have lower SSRs. The overall trend confirms the intuition that there could be efficiency gains when size increases. There are however too many confounding variables to justify a more refined analysis.

3.26 This graph demonstrates a range of models for excellent universities, and two extreme ones on the continuum may be described as:

(a) small universities (say size of ~10,000) that are expensive on a per-student basis (say SSR of ~16), or ((bb)) large universities (say size of ~30,000) that are relatively inexpensive on a per-student basis (say SSR of ~21).

3.27 It is generally difficult (more precisely it would not accord with the trend line) to operate an excellent university that is both relatively inexpensive and small.

Role models

3.28 The two possibilities described in paragraph 3.26 can be stated vividly as two different role models for universities in Hong Kong: a small private university such as Yale for example, or a large public university such as the University of California at Los Angeles (UCLA). The broad parameters using 1996/97 or 1995/96 data are as follows [16]:

 

CUHK

Yale

UCLA

a Student number (FTE)

11,913

10,739

34,608

b Expenditure (HK$ million)

3,023

6,835

10,032

c Unit of funding = b/a (HK$’000)

254

636

299

Table 1: Comparison of three universities

3.29 Since the possibility of institutional integration in Hong Kong was first publicly mooted in October 2002, views (which we regard as uninformed) have been expressed in the media citing the small but prestigious private universities in the US to argue that size is not a prerequisite for excellence. We have already

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explained why private universities in the US are not appropriate benchmarks. The two examples here underscore this point quantitatively. Table 1 shows that the small elite private university, if it is to achieve excellence, requires very high unit costs – something like two to three times the level enjoyed by CUHK. Thus we have to reject it as a role model, not because these institutions are anything other than truly distinguished and admirable, but simply because we cannot afford to emulate them. On the other hand, the large public university in the US, though still somewhat more expensive than Hong Kong institutions, is a more realistic role model – but this model requires a substantially larger size. In any event, both models require two to three times the total resources at CUHK’s disposal.

3.30 These role models demonstrate that to have a chance at excellence, Hong Kong institutions must have either a much higher unit of funding or a much larger size. The size of a small private university coupled with the unit of funding of a large public university cannot easily achieve excellence.

3.31 This point is so central that it is worth re-stating in a slightly different way. First, for the sake of the entire community, the higher education sector in Hong Kong cannot stay with the status quo; we must improve, and do so rapidly. If that is the case, then there are only two choices:

(a)

substantially increase the unit of funding for at least one university; or

(b)

substantially increase the size of at least one university.

ECONOMIES OF SCALE

3.32 The analysis presented above is essentially one of economies of scale: a larger university requires less input per student to achieve the same acceptable band of quality (e.g., within the top 50 US universities). In this section, we examine two further issues: (a) assumptions about the deployment of the resources that could be freed up through efficiency gains, and (b) a rough order-of-magnitude estimate on the likely scale of these freed-up resources, with particular reference to a hypothetical integration of CUHK (~14,000 students) with HKUST (~7,000 students).

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Deployment of freed-up resources

3.33 When there are efficiency gains, one could either achieve the same output with less input, or achieve better (or more) output with the same input. The first option implies, in the present discussion, that freed-up resources are to be clawed back by the Government, while the second implies that resources are to be retained for quality improvements.

3.34 The Task Force has unequivocally assumed the latter – not because we belittle the financial difficulties faced by the Government at this juncture, but because we are convinced that elevating the standard of universities (or at least of one flagship university) is one of the keys to the restructuring of Hong Kong into a knowledge economy, and thus one of the factors that will, albeit only in the longer term, contribute towards economic growth and thereby help to restore fiscal health. We are hopeful that our political leaders have the wisdom to share the same vision; indeed the Secretary for Educational and Manpower has been quoted as saying that institutional merger is not proposed to cut costs, but to improve quality [17]. Nevertheless we would welcome an official Government statement to this effect.

3.35 The HKUST report on this issue [18] has likewise asked a fundamental question about the objective of the proposed merger. We believe that neither university would be willing to consider integration for any purpose other than the improvement of quality and global competitiveness.

3.36 In the midst of the Task Force’s deliberations, it became apparent, with an abruptness that is perhaps surprising, that Government policy to deal with the very serious fiscal deficit will place unprecedented pressure on university funding over the next few years. Even though this difficulty should be regarded as temporary and should not affect long-term planning, budgetary stringency does add urgency to measures that could produce efficiency gains.

Scale of efficiency gains

3.37 It would be useful to have some order-of-magnitude estimates on the likely scale of the efficiency gains, assuming a merger between CUHK and HKUST.

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3.38 The largest efficiency gain would be in academic departments, simply because increased student numbers in the same programme can be accommodated by larger lecture classes rather than proportionately more teachers. An efficiency gain of 10% would seem to be a reasonable working hypothesis [19].

3.39 Two administrative sectors were also studied in a very crude way. The CUHK Library estimates that journal titles duplicated at CUHK and HKUST cost about HK$10 million per year for each set, out of a total journal spending by the two

institutions of about HK$50 million per year. After allowing for the price of e- journals to increase with institution size, one could hope for say 15% of the journal budget to be saved [20] and deployed for other uses. The Personnel Office estimates, based on an internal Management Efficiency Review conducted

a few years ago, that 25% of its work is policy-related (which to a first

approximation would not scale with size) and 75% is case-related (which would scale with size). Thus, a hypothetical merger might free up about 15% [21] for other uses. It is sometimes said that a combined institution can be served by one administration instead of two, with 50% savings. Such statements are naive.

3.40 Other items would see less efficiency gains, for example campus maintenance. There could also be additional costs, e.g., transport between two campuses, or an added layer of administration in a federal model of integration (see Chapter 6).

The Task Force is not the appropriate party and now is not the appropriate time, ahead of decisions-in-principle, to attempt a detailed analysis, but since teaching

is the largest component of cost in a university, it seems not unreasonable to

hope for an efficiency gain of up to 10% overall. This number is offered only to indicate that one is not talking about gains of merely 1% to 2%. Moreover, this

estimate refers to the steady state (not reached for some years), and there could

be very heavy transitional costs.

3.41 We have to caution that the accounting for the amount of resources freed up (or efficiency gains) could be subtle, and depends on the level of aggregation at which the accounts are viewed. As an example, suppose HK$10 million saved by eliminating duplicate journals is used to support additional student exchange. The University administration would see the HK$10 million explicitly as resources saved from one sector and deployed to another. However, the Government or an external party viewing the University as a whole would see the total expenditure unchanged, with apparently zero efficiency gain – that

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would of course miss the point. As a second example, suppose there are two

identical departments in the originally separate institutions, and that each has 20

teachers, 300 students, and offers 40 courses (2 courses per teacher on average).

The two departments merge, and over a number of years the staff strength is

allowed to diminish by natural attrition from 20 + 20 = 40 to 35. The university

administration would see 1 – 35/40 = 12% staff salary freed up, which could be

deployed for other uses. But the combined department certainly does not need to

offer 40 + 40 = 80 courses; suppose it offers 60 courses instead. The average

teaching load becomes 60/35 = 1.7 courses instead of 2 courses per teacher,

implying time freed up for say research. This may be quantified as an

additional (1 – 1.7/2.0) = 15% efficiency gain, which is not apparent at the level

of the university as a whole. No attempt need be made for a detailed analysis,

except to say that there could be significant additional benefits over and above

the efficiency gain readily identified at central university level as dollars and

cents.

3.42 It may be useful to give some numbers and examples to illustrate, in very rough

terms, what a hypothetical 10% efficiency gain might mean. The two institutions

have a combined annual budget of ~HK$5 billion, so 10% translates into

~HK$500 million that could hypothetically be deployed for other uses. Without

in any way implying that these are the priorities, we give below some examples

of possible improvements and their likely costs, to calibrate against the sum

mentioned above.

Example

HK$ million

Send an extra 500 students per year on exchange [22]

5

Increase student services by 30% [23]

9

Improve intra-campus transport by 30% [24]

1

Increase internal research grants by 30% [25]

12

Increase salaries of top 10% of teachers by 10%, to attract the best scholars [26]

14

Table 2: Some possible ways to deploy resources freed up

Capacity for improvement

3.43 Efficiency gains free up resources. But the Task Force is conscious that

resources do not equate to and do not guarantee quality – with the wrong policies,

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resources could be squandered. But resources freed up do create the capacity for improvements, in exactly the same way as additional allocations do. We believe this is one of the most powerful arguments for expansion – whether by natural growth, for which there is relatively little cost, or by institutional integration, for which the heavy transaction cost will have to be carefully assessed.

Leveraging

3.44 There will also be opportunities for leveraging upon any resources freed up. For example, many external grants and increasingly also donations demand internal matching; freed-up resources could come in. Moreover, there is the hope of entering a virtuous cycle of resources leading to improvements, which then generate more resources through performance-based allocation and from benefactors keen to support excellence.

3.45 Most importantly, on account of the improvements achieved out of this capacity, or indeed already on account of the capacity itself, such an institution will rightly claim to be a flagship university in Hong Kong and thus be in a position to receive the focused public and private sector support promised by the UGC in its 2002 report Higher Education in Hong Kong.

CRITICAL MASS

3.46 Another powerful argument for a larger university can be summarized in two words: critical mass, namely that there are certain things that a large institution can do better.

Diversity of offering

3.47 A small department has the resources to teach only the core of each subject. Two such departments give an illusion of diversity and choice, but in reality would offer much the same core courses and little else, whereas a larger merged department can offer a more diverse menu. For example, two relatively small business schools in Hong Kong would probably both focus on China business, but cannot cover say Southeast Asian business; a merged school would have the resources for the latter as well. Two relatively small economics departments

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would not offer say health economics, which, though important in Hong Kong at this time, is not in the core of economics as a discipline; a larger merged department would be able to do so.

Research teams and facilities

3.48 There is the need for large and inter-disciplinary teams to do research these days, and to train students in interdisciplinary approaches. This argument is stronger in the more technological areas (science, engineering, medicine) and less so for the humanities. In a situation that parallels course offerings, two relatively small departments would duplicate core equipment but lack those of secondary importance; a larger merged department can have just one set of core equipment, and deploy the savings to acquire secondary facilities.

Recruitment of staff

3.49 CUHK faces some difficulties in recruitment, because in each research specialty we can only afford one to two teachers, often not enough for a credible team. A larger institution with larger departments would be much better able to recruit.

Global/regional positioning and competition

3.50 A larger university will have better recognition and impact, and would be better able to compete at least regionally. The difference between perceived and actual quality (especially outside of the primary home market and among less informed parties who nevertheless matter) is irrational but real, and should not be discounted.

CONCLUSION

3.51 The present size of CUHK is small by international comparison. Caught between capped student numbers and societal demands, many small programmes have to be serviced, compromising efficiency. Unless the unit of funding could be increased, expansion is the only option for significant quality improvements in any fundamental way. Expansion, by growth or by integration, will give the economies of scale and the critical mass for CUHK and its partner(s) to start to compete regionally.

3-18

3.52

Any discussion at this level is necessarily focused on numbers and on resources. What one does with those resources is a separate matter, and will be discussed in Chapter 5.

[1]

Number as at 1 October 1963; data from Senate paper, The Chinese University of Hong Kong.

[2]

Data from The Chinese University of Hong Kong Calendar.

[3]

The student number is by headcounts, as of 30 September 2002, consisting of 9,653 undergraduates and 6,419 postgraduates (including 170 undergraduates and 14 postgraduate associate students).

[4]

Since there is no standard formula for conversion to FTE for self-financed programmes, we have simply used a uniform factor of 1 part-time student = 0.5 FTE.

[5]

The sample is based on the 2003 ranking of US doctoral institutions by US News and World Report, www.usnews.com/usnews/edu/college/rankings/brief/

natudoc/tier1/t1natudoc_brief.php.

However, data for these universities are

taken from the Integrated Postsecondary Education Data System, nces.ed.gov/ ipeds/data.html.

[6]

For example, Princeton has an endowment of ~US$8.4 billion as of 30 June

2001 (see, e.g., report by (US) National Association of College and University Business Officers, in www.nacubo.org/accounting-finance/endowment-study/

2001/press-release.pdf).

This translates to ~US$1.3 million per student.

At a

yield of 4%, this would provide an annual income of ~US$50,000 per student.

[7]

Typical tuition fees are US$30,000, which alone would be comparable to the average unit cost for higher education in Hong Kong (~HK$235,000, estimated using the 2000-01 UGC recurrent grant of ~HK$13.3 billion for ~68,800 students, assumed to account for 82% of cost, the other 18% being tuition). The error is sometimes made, both by casual observers and by those who should know better, of comparing US tuition costs with Hong Kong total costs. In private US universities, tuition is only a small portion of the income.

3-19

[8]

For example, MIT has a total R&D expenditure in science and engineering alone of US$400 million in 1998 (see, e.g., presentation by K.F. Koster, Director of Corporate Relations, MIT, 11 June 2001, Amsterdam, Holland). In comparison, the total research grant available to all universities in Hong Kong is about US$100 million (RGC of ~HK$500 million, ITF of ~HK$200 million, plus a number of smaller schemes).

[9]

[10]

[11]

www.ntu.edu.tw (11 January 2003).

[12]

www.nus.edu.sg (11 January 2003).

[13]

www.u-tokyo.ac.jp (11 January 2003).

[14]

www.snu.ac.kr (11 January 2003).

[15]

Teachers mean assistant lecturers and above.

[16]

Liu, P.W., “Comparison of Unit Costs: Universities in Hong Kong and the US” (unpublished), 2001. Raw US data are taken from the Integrated Postsecondary Education Data System, nces.ed.gov/ipeds/data.html. Only 1995-96 data were

available at the time the report was compiled.

Hong Kong data are taken from

UGC tabulations. similar trends.

More recent data are not readily available, but would show

[17]

See, e.g., Ta Kung Pao, 5 December 2002, p. A01.

[18]

Exploration of the Idea of a Merger Between the Hong Kong University of Science and Technology and the Chinese University of Hong Kong, Report of

the Task Force established by the President in consultation with the Council Chairman of the Hong Kong University of Science and Technology, November

2002.

[19]

This would be broadly consistent with the rule-of-thumb adopted internally at CUHK: increases in student load are resourced at a marginal rate that is 0.75 of the average value. If this is applied to the institution as a whole, then a 50% increase in numbers (from 14,000 to 21,000) could be serviced by 37.5% more resources, giving an efficiency gain of (1 – 1.375/1.50) = 8%.

[20]

The University Librarian reported two estimates of the cost of duplicate journal titles: HK$8.64 million and HK$14.0 million, using two different methodologies.

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A conservative estimate of HK$10 million is therefore adopted. Some HKUST numbers are estimated, assuming the same pattern of usage of library funds as in CUHK. Duplication in book titles would be smaller, because the universe of books is larger.

[21]

The estimate proceeds as follows. The policy load at CUHK is say 0.25 units, the case load 0.75 units. The policy load at HKUST is assumed to be also 0.25 units, and its case load 0.75 x (7000/14000) = 0.38 units. So the two separate institutions would have a total personnel load of (0.25 + 0.75) + (0.25 + 0.38) = 1.63 units. The hypothetical merged institution would have a policy load of 0.25 units, and a case load of 0.75 + 0.38 = 1.13 units, for a total personnel load of 1.38 units. The savings would be (1 – 1.38/1.63) = 15%. Of course, policy work does increase somewhat in complexity for a larger institution, but on the other hand, case load also has some economies of scale: it does not take twice the effort to recruit two clerks compared to one.

[22]

The average subsidy for each exchange is assumed to be HK$10,000.

[23]

Total one-line budget of the CUHK Office of Student Affairs is HK$21 million. We assume corresponding expenditure at HKUST to be HK$10 million (roughly scaling with student number), so that the total cost for student services is ~HK$31 million.

[24]

Total cost for CUHK intra-campus transport is HK$4 million per year.

[25]

Total CUHK expenditure on internal research grants is HK$27 million. It is assumed that the corresponding figure at HKUST is HK$13 million (scaling with student number).

[26]

Assume total academic staff strength of 1,400, and an average salary of HK$1 million per year.

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Chapter 4

Alternatives

It is argued that other avenues for improvement, or for seeking resources for improvement, either (a) have limited potential, (b) should be pursued in parallel with proposals for integration, or (c) can be even more effective if considered together with integration.

4.1 In the course of the consultation hearings, it was suggested that the University should instead consider other avenues for improvement, and in particular other avenues for seeking resources for improvement. While these suggestions have considerable merit, the Task Force believes that they do not materially alter the case for or against integration. Chief among the many reasons is the limited potential; more importantly these other strategies should be pursued in addition to and not instead of possible integration.

LIMITED POTENTIAL

4.2 It has been suggested that the University should seek donations for an endowment, research grants, commercial income from technology transfer activities, or income from operation of non-local programmes. One short answer is that the potential in any of these areas is limited, given the circumstance of Hong Kong. Many commentators (including public officials) fail to understand the constraints, and are too ready to blithely assume that these sources will bring significant additional revenue to Hong Kong universities.

Donations

4.3 CUHK is very fortunate in having the generous support of many benefactors in the community, including many alumni. In recent years, the donations received annually amount to about a few percent of total expenditure. Much of this is designated for buildings and scholarships; only a small fraction is unrestricted, and an even smaller fraction can go into building up an endowment. As the alumni body gets larger and more mature, and as the reputation of CUHK grows, there is little doubt that CUHK will enjoy even more community support.

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Nevertheless, there is no way for CUHK to raise an endowment whose income could account for a sizeable percentage of its budget. There are many factors beyond the University’s influence: the very weak tax incentive, the ease with which estate duty is legally circumvented in Hong Kong, the Chinese tradition of preserving and passing family fortunes on to the next generation, as well as the attraction of the mainland for donations (the greater need, the allegiance to ancestral villages and communities especially on the part of the older generation, the ability to achieve much more for the same dollar amount, as well as business connections that may ensue).

4.4 These factors make it essentially impossible for CUHK (or any Hong Kong institution) to emulate the likes of Harvard and Princeton in raising sizeable endowments. For example, Princeton’s endowment is about HK$50 billion, equivalent to several hundred years’ donations received by CUHK, even assuming all the donations were to be channelled into endowment and not spent. It should not be forgotten either that fund-raising by these private institutions is tied in subtle ways to student admission, a practice that would not be acceptable in a public university. Indeed, even in the US, no public university is able to command the level of endowment enjoyed by the Ivy League institutions. It also should not escape attention that among the thousands of private universities in the US, only a very small number are able to attract significant endowments.

Research grants

4.5 The best universities in many parts of the world attract very significant research grants to support their activities, and it has been suggested that CUHK should do the same.

4.6 CUHK is already doing very well in this area, typically running first or second among all Hong Kong institutions in the amount of grants received from agencies such as the Research Grants Council (RGC), the Innovation and Technology Fund (ITF) and the Quality Education Fund (QEF). In a typical year, CUHK would capture anything from 1/4 to 1/3 of these grants – a very credible performance given eight universities of which three are research-intensive, and especially when CUHK spans subjects (e.g. the humanities and social sciences) that by their nature do not usually attract very large grants. The total amount

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received from research grants is typically a few percent of the University’s expenditure.

4.7 Since CUHK already attracts a disproportionate share of all research grants available, the room for growth will be very modest. In fact, there is one over- riding constraint, already mentioned in Chapter 2: Hong Kong spends only 0.3% to 0.5% of its GDP on research and development, versus 2% to 3% in most knowledge-intensive economies. Moreover, in most of these economies these resources are heavily concentrated in a small percentage of universities. In the US, the bulk of research funding is concentrated in ~50 research-intensive

universities out of a total of ~3,000 colleges. In Hong Kong, the ratio is 3 out of

8.

4.8 Research grants in Hong Kong, unlike those in many other systems, only pay for the marginal costs of research; space and infrastructure, a portion of the salary of the professor reflecting time spent on the project, utilities and administrative overhead are all excluded. Because of this situation, every research grant secured actually means extra net expenditure rather than net income.

4.9 The Executive Council of the HKSAR Government has recently ordered that Government agencies should pay full costs for research conducted in local universities, but this is not likely to result in rapid or substantial changes. In any event, since the total research budgets of these agencies are for all practical purposes fixed, payment of full costs will not result in more income to universities, only in fewer projects being funded, each at a higher level.

4.10 Overseas alumni have suggested that CUHK should tap into major national research projects. We are happy to report that CUHK staff have already won four “863” grants as principal investigators, the first such cases since this scheme was opened to application from Hong Kong. However, the terms of the grant are such that funds can only be used for activities on the mainland. This is only reasonable, as Hong Kong does not pay national taxes under “one-country, two- systems”.

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Technology transfer

4.11 CUHK has generated some income in recent years through the exploitation of its inventions. The sums generated annually are modest, in part because of the small local market and the near absence of high-tech industries and venture capital in Hong Kong, and because of the low level of research funding, which is in the end the foundation upon which inventions are based. In fact, with very few exceptions, no university anywhere generates any significant income from technology transfer. The best that one can realistically hope for is to cover part of the direct cost of commercialization (legal fees, patent costs, marketing costs) and provide a small incentive to staff.

Non-local programmes

4.12 CUHK has begun to offer a number of programmes outside of Hong Kong, and these have been extremely successful in expanding the reach and enhancing the reputation of the University. The University is firm in the belief that these must be the primary motivations, with revenue generation only a by-product; in some cases, where there is a strong justification, the University will even inject private funds at its disposal, so that in sheer monetary terms the endeavour may well carry a loss, at least in the short term. The University will not sacrifice academic standards for income, and does not expect to raise any significant net amount from these programmes.

Extra students

4.13 It has also been suggested during the consultation hearings that CUHK could consider taking in extra students on a self-financed basis in order to generate income. The total annual expenditure of CUHK is over HK$3 billion, translating into an average cost of at least HK$200,000 per student; it is unlikely that the true marginal cost is less than HK$100,000 on average. Unless one could charge tuition at this level, any large-scale recruitment over and above funded student numbers would imply cross-subsidy and overall erosion of quality. A small over-enrolment can however be considered in certain subjects (e.g. business, clinical medicine), provided (a) the Government agrees that the extra tuition

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income can be retained, and (b) such recruitment is restricted to non-local students to avoid controversial back-door entry by wealthy local students.

EXISTING EFFORT AND COMPETITION

4.14 Moreover, it must be recognized that there is already very strenuous existing effort in all these directions, and unless one is to believe that there are gross inadequacies, these avenues for generating income must be already well exploited, so that the room to generate additional resources cannot be large. This is not to say that further efforts should not be expended, but only that hopes should not be unrealistically pinned on such avenues.

4.15 Other institutions have of course embarked on the same paths, so pursuing these initiatives cannot give us much competitive advantage.

4.16 In enumerating the constraints and difficulties, it is not the intention to be negative or to find excuses for non-action. On the contrary, it is important to understand all the constraints in order to be able to take forceful but realistic action to achieve excellence.

4.17 But finally, the most important point is that there is no mutual exclusivity: all these other avenues for raising resources should be and will be vigorously pursued whether or not there is integration. In this sense, they are not alternatives to integration, and should therefore be set aside in weighing the pros and cons of going forward with institutional integration.

4.18 The same goes for improvements in areas not related to resources: improving efficiency, improving teaching, recruiting better staff, rewarding good performance, reaching out to establish better academic links – all these are pursued already to the utmost extent possible, which means that additional improvements can only be slow and incremental. But most importantly all these will be vigorously pursued whether or not there is integration.

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MUTUAL REINFORCEMENT

4.19 But in one sense many of these other avenues of improvement are not just parallel and independent efforts; at least in some cases, they could find mutual reinforcement and synergy with institutional integration. The most obvious would be in research grants and technology transfer, both of which could be improved if CUHK were to merge with another research-intensive university and thereby achieve critical mass. Research grants from industrial and non-local sources should in particular benefit. Another area is private support that would be focused upon any university that stands out (as suggested by the Sutherland Report) – and the strength of a merged institution might be one way of achieving that status.

GOVERNMENT POLICY

4.20

It was also suggested that CUHK should seek expansion, and the associated resources, through the natural growth of the university sector. But according to Government policy, there will be little expansion for universities, with extra student numbers going predominantly into community colleges.

44.21.

There is also a suggestion that the Government should be persuaded to alter its funding formula, so that CUHK could be awarded more resources without necessarily having more students. The Task Force believes that this is unrealistic, except in a context where CUHK itself is seen to be making extra and unique efforts at improvement.

INCREMENTAL CHANGES

4.22 There is also the possibility of not taking any forceful action at all, relying only on incremental changes as the University has done over the last 40 years. If there were no competition, this would be a viable option. But when others, especially the key universities on the mainland in China, are making dramatic progress as a result of reform and concentrated resources, CUHK will almost certainly be overtaken – and Hong Kong also faces the threat of being overtaken by major cities in China.

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STATUS QUO

4.23 A view has also been expressed during the consultation that CUHK should not aspire to further advances towards excellence, but should be content with the status quo. We believe this suggestion is not worthy of the ideals of the University, and must be rejected outright.

CUTTING BACK ON PROGRAMMES

4.24 In response to data given in the consultation paper which indicate that the average size of programmes has been eroded over time, several commentators in the consultation hearings suggested that CUHK should accept that it does not have the size to be truly comprehensive, and should therefore eliminate certain programmes in order to achieve critical mass in the rest. The University may indeed be forced to consider this route if growth in any form is not possible and funding becomes very tight. It would however be a very painful option, more painful than the vexations associated with institutional integration. In any event, consolidation of programmes would not alter the fact that CUHK will have only ~14,000 students.

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Chapter 5

Goals

This chapter examines whether and how the goals of CUHK are helped or hindered by institutional integration. Given present constraints, the primary goal – a fundamental advancement in standards in a relatively short time – cannot be realized without integration with a partner of comparable strength. Apart from efficiency gains releasing resources for the pursuit of the University’s goals, the specific effects of a hypothetical integration on individual goals are also considered.

5.1 In Chapter 3 we studied the benefits that would accrue to the University from having a larger student body and the attendant resources. Here we consider more specifically the goals that CUHK wishes to pursue, and how these might be affected, for better or for worse, by integration with another institution.

PRIMARY GOAL

5.2 The goals of CUHK in education, research and service to the community cover a broad range. Without going into details, the primary and indeed urgent objective at this time is to make a fundamental advance in quality and reputation, in order to consolidate our position as one of the leading universities of the region. We have argued in Chapter 2 that this goal is important not only to CUHK itself, but also to Hong Kong as a whole.

5.3 Over the last 40 years, CUHK has achieved fundamental improvements in quality, by a series of small increments that accompanied the growth in student numbers and the improvements in funding. If we could afford another 40 years, if student numbers would increase gradually and if public funding were to continue in an upward trend, then another series of incremental improvements would no doubt lift quality to the next level. But global and regional competition does not give us the luxury of time; many institutions in Asia will surpass CUHK if decisive action is not taken soon. Moreover, student numbers are not likely to

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increase significantly, the energy and resources of the community being now channelled to the community college sector. Public funding is also under severe pressure, at least in the medium term.

5.4 Given these constraints, there is no viable alternative to institutional integration if CUHK wishes to see a quantum jump in quality within the short term.

5.5 More specifically, we examine in more detail how institutional integration would (or would not) help with the attainment of individual goals. For simplicity, we consider only the case of a full merger into a unitary institution (see Chapter 6), with all effects (positive and negative) diluted for a partial or evolutionary integration.

INDIRECT EFFECTS

5.6 Chapter 3 has already argued that integration will lead to efficiency gains and therefore free up resources (perhaps to the tune of 10% in the steady state); these resources, if appropriately deployed, will make it easier to achieve the University’s goals, whatever these might be.

DIRECT EFFECTS

5.7 To consider the more direct impact on CUHK’s goals, we refer to the Ten-Year Vision Statement adopted by the University in 2003. The main points in that statement are summarized below, with a commentary on the likely effect that institutional integration will have on each of these goals. To be definite, HKUST is taken to be the hypothetical partner.

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Goals

Commentary

Attract best local students

Positive: merged institution will have better reputation. Negative: the excellence of intake of CUHK may be compromised, especially if intake numbers are increased.

Attract best non-local students

Very positive: better reputation outside of Hong Kong.

Quality of teaching

Concern: whether excellent CUHK tradition can be preserved.

Specialist education

Positive: larger institution can offer wider spectrum of subjects.

General education

Slight concern: whether long and excellent tradition of CUHK might be diluted; college system will help to enhance general education.

Good careers for students

Slightly positive: stronger institution will have better reputation; larger institution will enjoy wider network.

Bilingual and multicultural dimension

Concern: tradition and values of CUHK may be diluted; but better international reputation and outreach should help multicultural diversity in student mix.

Offer broad range of programmes (both subjects of intrinsic value and subjects that respond to market needs)

Positive: larger institution can offer wide menu.

Programmes to be among best in Hong Kong

Positive: more likely to achieve quality because of critical mass.

Some programmes should achieve regional and even global recognition

Very positive: adding strength to strength. For example, the combined MBA programme will be unrivalled in Asia.

Offer programmes outside Hong Kong

Very positive: critical mass needed in these ventures.

Postgraduate programmes

Positive: larger enrolment, better research coverage.

Normative length

Neutral

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Non-formal education, services for students

Serious concern: personal care may be at risk in a larger institution; need to be addressed in any institutional integration plan; but college system will solve many problems.

Lifelong education

Neutral

Student body more diverse

Positive: size allows better negotiation with exchange partners; merged institution better known outside Hong Kong.

Research

Very positive: critical mass; HKUST has good research standards.

Chinese culture

Concern

Collaboration and alliances

Achieved

Governance and management should be effective

Serious concern if a mix of two systems, but opportunity for major improvement if redesigned for new institution.

To be one of the leading universities in the region

Very very positive

Table 3

The likely impact of institutional integration on CUHK’s goals.

CONCLUSION

5.8 In conclusion, while the impact of institutional integration will be positive in

many dimensions, there are also areas of concern that need to be addressed. This

then leads naturally to a discussion of the possible models and scenarios, and of

the issues, pros and cons of institutional integration.

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Chapter 6

Models of Integration

This chapter considers two issues: (a) the nature of the proposed integration and the objectives that are targeted, and (b) the different degrees of integration. It is suggested that the only scenario worthy of further exploration is a federation leading to a full merger.

NATURE OF PROPOSED INTEGRATION

6.1 University integration takes many different forms, each with a different nature and a different set of objectives.

Merger with a specialist school

6.2 In many ways, the easiest type of merger is that between a comprehensive university and a typically smaller specialist school, e.g. a medical school, to round out the former’s subject offerings. There are many examples.

Imperial College with the Royal Postgraduate Medical School and the Charing Cross and Westminster Medical School in 1997. Royal Melbourne Institute of Technology (RMIT) with Melbourne Institute of Textiles in 1999. Peking University with Peking Medical University in 2000. Zhongshan University with Zhongshan Medical University in 2001. Drexel University with MCP Hahnemann University (a medical school) in

2002.

6.3 In these cases, the larger comprehensive university gains a specialist arm – usually one that is not easy to build from scratch (medical schools being expensive and agricultural colleges requiring large tracts of land). The specialist school gains access to basic arts and science, as well as opportunities for a

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broader education for its students. Elite programmes such as the MD-Ph.D. may also become possible.

6.4 In these examples, the accent is on complementarity. This is not the model contemplated for CUHK and HKUST.

Merger with a less established institution

6.5 There have also been examples where a stronger, larger university merges with one or more smaller, specialized and less established institutions, possibly without university status, e.g. community colleges, technical schools or teacher training colleges. Examples include the following.

University of Tasmania with the Tasmania State Institute of Technology in

1991.

Massey University with Wellington University in 1999.

Homerton College merged into Cambridge University in 2001.

6.6 The primary purpose is to elevate the standard of the less established institution. The benefit to the larger, stronger institution lies only in some possible economies of scale, but there may not be much opportunity for quality improvements.

6.7 A possible integration between CUHK and the Hong Kong Institute of Education (HKIEd) has also been suggested, and would fall into this category. The Task Force has not considered this possibility, and expresses no views, for or against. However, because the objectives would be totally different from a hypothetical integration of CUHK and HKUST, this possibility should only be considered at a later time, as a totally separate proposal, in order not to confuse the issue and lose focus.

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Merger between equally strong institutions

6.8 Mergers between two equally strong institutions, each already covering a fairly broad span of subjects (even though one or both institutions may not be fully comprehensive) are less common. Examples include the following.

Zhejiang University with Hangzhou University (and also Zhejiang Agricultural University and Zhejiang Medical University) in 1998. Sichuan University with Chengdu University of Science and Technology (and also West China University of Medical Sciences) in 2000. Tianjin University with Nankai University, actively pursued but later abandoned. Imperial College with University College London, broached in 2002 but not proceeded with. The University of North London with London Guildhall University to form London Metropolitan University in 2002. Manchester University with the University of Manchester Institute of Science and Technology (UMIST), scheduled for 2004.

6.9 This type of merger could be more difficult, if only because two strong partners are more likely to have “personality” clashes. But the potential reward is also higher – had the Tianjin/Nankai or Imperial/UCL mergers gone ahead, the results might well have been among the strongest institutions in each country.

6.10 This type of merger, where strength is added to strength in partnership, is the version being contemplated for CUHK and HKUST. The objectives are to improve quality and competitiveness, and to achieve critical mass and impact.

6.11 Complementarity, at least in a simplistic sense, is not the prime motivation. For example, most subjects offered at HKUST are already offered at CUHK (though the reverse is not true). There is however complementarity at the level of sub- specialties; for example, the two mathematics departments may have respective strengths in geometry and computational mathematics. Complementarity at this level is just as important, but would not be readily discerned by the layman, or even by fellow academics viewing the scene from a distance.

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6.12

On the contrary, where complementarity does not exist, namely where offerings overlap, there will be the opportunity to eliminate the overlap and free up resources.

CHOICE OF PARTNER

6.13 As outlined in Chapter 1, the possibility of institutional integration was brought to public attention through a statement by the Secretary for Education and Manpower making specific reference to CUHK and HKUST. Nevertheless we should step back and ask: If CUHK is to seek growth, critical mass and quality through integration, what would be the ideal partner?

6.14 The strategic aim of CUHK is always quality; quantity and size, though important, are only means to that end. Therefore whenever we look for collaboration – not only in institutional integration but in whatever form – we always seek to add strength to strength, working with partners who share our goals and standards, and in particular our views on the centrality of research. Within Hong Kong, only two other institutions have roles and missions (as agreed with the UGC) that are broadly the same as those of CUHK (apart from subject coverage). Of the two, only HKUST is within a reasonable geographic distance (even though the separation is large enough to be a matter of concern to be considered). Moreover, CUHK and HKUST both have relatively broad and flexible curriculum structures based on the credit-unit system.

6.15 These considerations, though not always made explicit, are of course behind the decision several years ago to explore and initiate collaborations, and behind the specific integration proposal now being examined.

6.16 We have noted that other partners need not be ruled out if different objectives were to be pursued, but those wider considerations are best left to a separate occasion.

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DEGREES OF COLLABORATION OR INTEGRATION

6.17 Even given two specific institutions, namely CUHK and HKUST, there can still be many degrees of collaboration or integration. It is important to map out the distinct possibilities – for which the pros and cons could be quite different. We shall discuss in turn (and in increasing degrees of tight integration) four different scenarios:

(a)

no formal relationship;

(b)

academic partnership or strategic alliance;

(c)

federal structure; and

(d)

full integration into a unitary structure.

NO FORMAL RELATIONSHIP

6.18 Two universities can collaborate, especially in individual research projects, without any formal institution-level relationship. Such collaborations need not be exclusive, and CUHK expects to collaborate in this manner with all sister institutions in Hong Kong, and with overseas partners. The collaboration between CUHK and HKUST has already moved beyond this stage.

ACADEMIC PARTNERSHIP

6.19 In an academic partnership, two universities would agree to share resources, jointly operate courses, mutually recognize credits, allow students to cross- register, and even work together in academic planning. Academic partnership or a strategic alliance has been suggested as a fruitful way for CUHK and HKUST to collaborate, without many of the costs and difficulties of a merger. By the agreement signed in 1999, CUHK and HKUST have already taken small steps in this direction. For example, a scheme has been set up to allow students to cross- register, and to transfer credits. However, little student movement has occurred under the umbrella created. It is crucial to understand the reasons – whether the obstacles are of the sort that would frustrate a more formal integration, or

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whether, on the contrary, the obstacles could be removed by a more formal structure.

Intense competition

6.20 Although there are 10 degree-granting institutions in Hong Kong (with eight under the aegis of the UGC), there is in effect a group of three to which CUHK belongs, by virtue of the similarity in roles and missions. When there are only a few players – and especially when these players seek resources and rewards predominantly from one body in a zero-sum game – there would be little inclination to collaborate.

6.21 In larger systems with dozens (perhaps even hundreds) of nearly equal players, the benefits of collaboration are more apparent. This basic structural difference between large and small communities – rather than any perversity on the part of Hong Kong academics – makes it very difficult for two independent entities to be whole-hearted collaborators. Genuine collaboration will only come when very large carrots are offered, or when a structure is formalized.

Mismatch of cost and benefit

6.22 Another factor often escapes attention: the mismatch between cost and benefit.

6.23 Suppose two universities decide to share a lecture course. Teaching load is reduced, and resources are freed up for other purposes, for example, overseas student exchange. But those who take the shared course are in general not the same as those who will go on exchange; so left to themselves, students would not choose to incur the inconvenience of travelling to another campus in order to allow others to reap the benefit of overseas exchange.

6.24 Likewise, two departments could decide to share, say, one expensive spectrometer. Even if the host institution and host scientist (the “owner”) are entirely fair and magnanimous, users from the other institution would suffer inconvenience to say the least. The expenses saved in not duplicating the facilities go to other projects, and are of no direct concern to the spectroscopists.

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FEDERAL STRUCTURE

6.25 If some formal structure is necessary, the next possible level of cooperation would be a federation, wherein there will be an organizational structure (the federal university for short) arching over the two constituent institutions.

6.26 CUHK itself went through a federal structure upon the amalgamation of the three constituent Colleges. For the benefit of those who may not be familiar with the history, it is useful to highlight at least a few key features. Between 1963 and 1976 [1], there were three Departments of Chinese, three Departments of Mathematics, etc., and correspondingly three Department Chairmen in each subject. Over and above the departments would be a Board of Studies in Chinese or Mathematics as the case may be, headed by a Chairman of the Board. By the early 1970s, a single curriculum was offered in each discipline, and all teaching duties were shared. Academic functions shifted to the Boards of Studies, which later metamorphosed into the University’s academic Departments. The process was not without complication and sometimes controversy and pain, but the final outcome, seen from the vantage point of the 1980s and beyond, is of course positive. A more detailed account of CUHK’s history of merger can be found in Appendix C.

6.27 A federal union helps to preserve traditions and is less difficult and painful to achieve (compared with a unitary structure). There would be some cooperation contributing to critical mass, and some efficiency gains. But these advantages would be modest: duplicate courses would still be offered on the two campuses; research teams miles apart would enjoy critical mass more in name than in substance. The added layer of administration (two departments reporting to a coordinating board, two university administrations reporting to a federal administration) would incur cost and compromise flexibility and agility.

6.28 One possibility is to think of a federal model as an intermediate step, with the authority wielded at the federal level increasing over time. The full benefits of a merger would be reaped only eventually, but the difficulties could be ameliorated in an evolutionary process.

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UNITARY MODEL

Evolutionary process

6.29 A sudden merger into one unitary institution might create major dislocations. We therefore believe that a full merger should only be considered as the final destination in a relatively slow and evolutionary process of integration, in the course of which consensus and a common sense of purpose have to be developed.

6.30 However, if it is decided to take this route, then there has to be a clear agreement and well-formulated plans from the very beginning about the ultimate target and the time frame for attaining it. Evolution does not mean taking one step before deciding on the next.

6.31 A suggestion has been made that integration might proceed first in certain academic areas where the benefits are most evident and the costs least onerous. For example, a joint MBA programme will be acknowledged to be the undisputed leader in Asia, and such a joint programme offered in town to part- time students would not even require relocation of staff. Such pilots could build trust and support.

Two campuses

6.32 If CUHK and HKUST were one day to become fully merged, there would be one single university spread over two campuses. Efficiency gains would not be realized if each department and its activities were also spread over the two campuses, or if substantial student travel became necessary.

6.33 A suggestion was made during the consultation hearings by one individual (not a member of the Task Force) to relocate all units to one single campus and to release the other campus for land sale to recoup the building costs. This suggestion displays a lack of sensitivity and should be rejected.

6.34 Another possibility is segregation by level. For example, Zhongshan University houses all its first-year students on the Zhuhai campus; Peking University has

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tried a similar arrangement. A suggestion was heard during the hearings that perhaps one campus could be devoted to research and the graduate school, and the other to undergraduate studies. However, our students have a more flexible

and varied pattern of course selection, not entirely defined by year of study, with upper-year undergraduates often taking graduate-level courses and participating

in research. The benefits of research activities and a research atmosphere on the

undergraduate curriculum – key advantages enjoyed by the three research

universities in Hong Kong in attracting the best undergraduates – would then be lost. Moreover, such an arrangement gives the two campuses the appearance of

a senior and a junior partner, and for that reason alone would probably be unacceptable.

6.35 A more realistic option is segregation by subject: one cluster of cognate

disciplines housed in Sha Tin and another in Clear Water Bay. A small number

of teachers may have to travel to the other campus to offer general education and

elective courses. Student travel between the two campuses would then be an exceptional arrangement, incurred only if, for example, a science major were to minor in philosophy.

6.36 This is not yet the time to attempt a more detailed assessment, except to note that travel for students can be limited to a low level but not completely eliminated, and that therefore there will be the need to provide transport. More importantly, students will experience a less rich mix of disciplines in their informal education, which will inevitably be organized mainly on each campus separately.

Subject profile

6.37 If a unitary university is formed by a straightforward amalgamation of like units, then overlapping departments would become very large, while those departments not originally represented in strength in both institutions would be reduced to a small relative presence. The former group may be unwieldy and the latter may feel marginalized. During the consultation, concern was expressed on the perceived likelihood of such an uneven subject profile emerging as a result of integration.

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6.38 However, it must not be assumed that the subject profile will be frozen in time. On the contrary, it would be natural to assume that overly large units will be allowed to shrink through attrition, releasing resources for small units to achieve a more appropriate size. The challenge is to manage the transition in a reasonable time scale while respecting job security.

CONCLUSION

6.39

The proposed integration between CUHK and HKUST should be conceptualized as one between two strong and equal partners. For CUHK, complementarity should be sought at sub-specialty level rather than in broad subject categories. In many areas there is overlap rather than complementarity, but this could represent opportunities for efficiency gains.

6.40

Voluntary academic partnerships will have limited impact because of the competition among a small number of players, and more importantly because of the mismatch between the party incurring the cost and the party reaping the benefit. If more collaboration is to be achieved, then some order would have to be imposed. A transitional stage with a federal structure leading to an ultimate unitary structure appears to be the only scenario that merits further consideration.

[1]

A federal structure lasted until December 1976, when legislation was passed to give effect to the second Fulton Report and to define a new structure for CUHK.

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Chapter 7

Issues, Pros and Cons

The issues of concern as well as the pros and cons of institutional integration are considered. CUHK will need to set certain conditions if a formal dialogue is to be initiated.

ISSUES

7.1 If discussion is to be launched on integration, the University would need to pay attention to a number of key issues, in order to safeguard CUHK’s interests.

Research

7.2 CUHK has enviable strength in research and an established track record. The choice of a partner with comparable strength and more importantly a similar vision will be advantageous to the research effort as a whole. However, integration may well imply some consolidation of efforts, in the course of which existing thrusts in research must not be compromised, nor intellectual pursuits of quality sacrificed for mere efficiency. Research activities that rely heavily on facilities may face serious disruptions during relocation. Very careful planning will be required.

Education

7.3 CUHK needs to ensure that the quality of teaching and the commitment to teaching are rigorously maintained. General education is a component of our curriculum that is highly valued, and must be preserved and indeed enhanced with the additional resources made available. The bilingual and multicultural dimensions of the University must also be guaranteed. In particular, Chinese culture as an integral part of the University’s very being should continue to be treasured.

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7.4 The larger size of a merged university will require special attention to non- formal education and individual care for students. The college system allows the close contact of a small community to co-exist with the critical mass of a larger institution, and must be not only preserved, but enhanced.

Institutional ethos

7.5 We attach great value to CUHK’s tradition and ethos: a high degree of collegiality in the conduct of our affairs, a very thin and effective administration (with a correspondingly large percentage of resources devoted to teaching and research), prudent financial planning and practices leading to a healthy balance sheet even as external funding is squeezed, a tradition of propriety in scholarship, honesty in the portrayal of our own successes, and a concern for the well-being of the community over and above the self-interest of the institution itself. These values need to be preserved.

Staff concern and sentiments

7.6 Any change will be unsettling, and it is very important to allay anxieties on the part of staff. The concerns are likely to revolve around two areas: worries about job security and conditions of service, and increased workload to deal with the transition. On the former, any integration proposal must take into account the existing contracts with staff, which are legally binding. On the latter, resources must be made available to spread the workload. Moreover, academic staff are concerned that their hard-earned status should not be compromised by relaxed academic standards that may come to be applied.

7.7 However, the Task Force has observed during the consultation process that even though there may be substantial concerns, even anxiety, at the practical, emotional and micro level about how an integration might proceed, and in particular how it might affect the welfare of individual staff members, there was little disagreement with the theoretical, rational and macro case that CUHK needs to excel, or with the thesis that growth by integration is one viable route. This ambivalence is not surprising, and has been found in experience elsewhere (see Appendix C); it calls for great caution in the implementation plans and sensitivity in communication.

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Brand name

7.8 There are concerns about preserving the brand name of CUHK. The possibility of retaining in the merged institution the name “Chinese University” in some form should at least be put forward and seriously explored – just as the corresponding wish on the part of our partner should equally be respected. Alumni have stressed that the brand name goes beyond sentimental attachment, but has real value in terms of recognition, networking and even the ability to raise donations.

7.9 However, the brand name is an expression of the values that CUHK (its students, alumni and staff) cherishes; a far more important objective is to preserve the values themselves.

7.10 On the other hand a view has also been expressed that sentimental reasons should not obstruct real improvements, if the latter could be demonstrated.

7.11 The existence, names and identities of the Colleges must be preserved in any integration. We believe this should not be controversial, and can easily be achieved. The size of each College should not be allowed to increase much further, and it is for consideration whether to establish new Colleges to cater to larger student numbers, so that more personal care can be delivered even in a larger institution.

Administrative organization

7.12 A larger institution (especially one with an extra federal layer) will be much more prone to bureaucracy and rigidity. Any integration plan must be vigilant in this regard; indeed, the opportunity of creating new procedures in a merged institution should be seized in order to simplify regulations and reduce bureaucracy to below even the present level.

Financial cost of integration

7.13 Integration will incur financial costs during the transition. Though small compared to the eventual benefits, extra resources will need to be provided, in order to ensure that staff do not become even more overloaded.

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Prudent financial management

7.14 CUHK has a tradition of prudent financial management, which is not only right and proper in the use of public funds, but also a necessity as we face times of stringency. This tradition must be preserved if the integrated institution is to earn the trust of the public as the target of focused funding by the Government and the private sector. CUHK financial reserves also need to be protected in any integration plans.

Implementation

7.15 Views were expressed during the consultation hearings, with which the Task Force agrees, that great care need to be taken in drawing up implementation plans. Proposals that cannot be faulted in the abstract could falter on real or perceived practical difficulties and iniquities.

7.16 There were comments on the lack of implementation details in the consultation document. In answer to this criticism, it has to be said that the process must go through several stages (with the possibility of aborting at any stage if conditions are not satisfied): (a) discussion and decision on whether or not to pursue a dialogue first with the Government and where appropriate also with HKUST, (b) negotiations on matters of principle with the Government and HKUST and (c) formulation of implementation plans and scenarios. We are now only in stage (a).

PROS

7.17 If the concerns could be addressed and resolved, and if the two universities were indeed integrated, what advantages would the community see, and in particular what advantages would the students and staff of the two institutions see? These have been discussed at length earlier, and are briefly recapitulated below.

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7.18 First and foremost, the merged institution will come to be recognized as a premier university in Hong Kong and will also enjoy reputation outside of Hong Kong. This will put the institution in a good position for regional and global competition. The most obvious example that comes to mind would be the unrivalled combined MBA programme, which will become a magnet regionally for students. The knock-on effects of a regionally competitive university will in the long term be inestimable for Hong Kong as a whole.

7.19 Internally, the larger university (~21,000 students even without further expansion) will allow a wider menu of subjects to be offered. Efficiency gains will free up resources for quality improvements. Critical mass will be achieved for research and other activities that require large teams and major facilities.

CONS: LONG TERM

7.20 The advantages will not come without cost. One can foresee several disadvantages. First, the larger size will very likely mean more bureaucracy and less personal care; this problem can be reduced but not eliminated. Second, the traditions that CUHK are proud of will inevitably suffer some dilution – it is for debate whether this would be compensated for by the acquisition of attributes which our partner can contribute.

7.21 Perhaps the most serious disadvantage in the long term is the segregation of subjects across two campuses. Students will not easily reap the full benefits of being in a nominally comprehensive university, not so much in terms of formal courses (for which arrangements can be made) but in terms of the range and depth of informal contacts that are so important to university education. Some travel between the two campuses will also be necessary for at least a minority of students.

CONS: TRANSITION

7.22 But possibly the greatest disadvantages lie in the cost – in both financial and

The very

human terms – associated with the transition to a single institution.

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prospect of change will inject a measure of uncertainty for staff, and will distract them from their normal pursuits; these problems again can be ameliorated by communication, sensitivity and a more measured pace of transition, but cannot be altogether eliminated. Apart from uncertainty, there will be increased workload, in forging a single system of administration, in formulating new academic regulations and curricula, and simply in learning and adapting to new circumstances and cultures. The headaches will be substantial even with the best of will.

7.23 Unless the integration process is meticulously planned, students may also be subject to uncertainty and deterred from applying for admission.

PROS AND CONS FOR PARTNER

7.24 We have confined the discussion largely to the pros and cons for CUHK (and also for the community as a whole). It is of course for our sister university to assess the pros and cons for itself, but we believe that much of what we say in this Report – including both the vision and potential for excellence as well as the issues and difficulties – applies, mutatis mutandis, to HKUST as well. In the end, if a decision is reached to go ahead with some form of integration, the advantages must be seen as accruing to the federal or merged institution rather than to one constituent part, and the difficulties must be faced and resolved together in a spirit of camaraderie.

CONDITIONS

7.25 Given the concerns, if CUHK is to enter into a formal dialogue with the Government (and HKUST) about some form of integration, conditions must be set and understood by all parties.

Financial commitments

7.26 First and foremost, the Government must make it very clear that the proposal to merge CUHK and HKUST is to improve quality and to create an institution

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capable of competing at the highest international level; the purpose is not to cut cost. That being the case, there has to be an undertaking that the basic funding per student will remain the same as other UGC institutions (funding comparison made at the same time), except for performance-related or mission-specific allocations. To be specific, in the context of the current UGC funding methodology, this means that the unit of funding for each student in any subject should be the same for every institution (of the same mission), without regard for size (as has always been the case so far), and that there is no ad hoc downward adjustment for large size. The merged institution must have the freedom to deploy the savings to improve quality.

7.27 In recent months, the urgent need to reduce public spending has become apparent. Rightly or wrongly, university budgets will be squeezed over the next few years, though the size of the cut is still not clear. In this context, it has to be explained what is meant by the statement that institutional integration is not for the purpose of cost reduction.

7.28 Suppose the level of Government funding per student now is 100 units, and suppose over the next few years this level decreases to 95 units. We do not imply that the proposed integration per se should exempt CUHK or its partner from such reductions that apply to the entire higher education sector. However, if the merged institution, because of economies of scale, can achieve ~10% efficiency gain and deliver the same output and services at 85 units, then the difference of 95 – 85 = 10 units should be retained by the institution. The Government should undertake that the purpose of integration is not to save that extra 10 units, and that the merged institution will be entitled to the same level of funding per student as sister institutions (not merged), compared in the same year, namely 95 units in this hypothetical example.

7.29 Government financial support has to be secured in two other areas. As stressed above, the transitional stage will be onerous, with heavy workload to effect the integration of systems and curricula. This needs to be recognized and compensated for. The UGC has a standard mechanism of allocating a front- end loading when new institutions are created, and the creation of a merged university should not be an exception to this rule. The relocation of departments will require the building, alteration and fitting-out of some

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premises; this needs to be provided for. A small excess of teaching and office space (over and above the usual norms) will also be needed for decanting, as programmes and departments are moved from one campus to another. The teaching space will find good use after the transition, as the conversion back to a four-year normative undergraduate course will see increased student numbers.

7.30 The scale of these resource requirements will need to be quantified in due course, but the principles have to be agreed upon before any serious discussions can be launched.

Policy commitments

7.31 But more than anything else, CUHK (and HKUST) will need to see from the Government evidence of a firm commitment to higher education, and a correspondingly stable policy that works to nurture the sector. Integration between two particular institutions must be part of a coherent blueprint for higher education as a whole. Words must be accompanied by deeds, and the rhetoric of giving privileged support to a small number of outstanding institutions must not be diluted by a false egalitarianism that has unfortunately been prevalent.

Addressing the concerns

7.32 There will need to be a commitment to address the issues and concerns raised in this Report: the quality of teaching, general education, a bilingual and multicultural environment, the high standards of research and scholarship, care given to individual students, staff concerns on conditions of service and overload, and protecting the institutional ethos.

REWARD FOR THE COMMUNITY

7.33 Given that the Government has to be prepared to inject extra resources to help with the transition, and eventually to provide resources to bring the new merged university to a higher level, one must ask what is then the

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corresponding reward for the community. The answer is of course the creation, for the community, of a university that is at least regionally competitive and among the top-tier universities in China. This flagship university will by example help to set elevated standards for the higher education sector as a whole. Such an institution will also attract talent to Hong Kong, with economic and cultural benefits that cannot begin to be measured. In the end, it will be these benefits to Hong Kong as a whole which would justify the integration.

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If CUHK (and HKUST) were to receive policy and financial support to integrate, then their staff would have the responsibility of delivering this promise – namely to create such an institution for the benefit of the community.

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Chapter 8

Recommendations

The Task Force recognizes a prima facie case for integration but sees many practical difficulties that CUHK cannot deal with on its own. The Task Force therefore recommends that the University Council should pursue a discussion first with the Government and where appropriate also with HKUST on the way forward.

NATURE OF ADVICE

8.1 The Task Force will not recommend either yea or nay on the proposed merger with HKUST. We first need to explain