• September 17, 2014

Low Enrollment Led Michigan State U. to Cancel Most Programs in Dubai

Michigan State University is canceling all undergraduate programs at its branch campus in Dubai, effectively reducing what was meant to be the university's beachhead in the Middle East to a mere office.

Since it opened almost two years ago, the campus has not been able to attract enough students to become either financially or intellectually viable, Lou Anna K. Simon, the university's president, told The Chronicle.

The campus opened with a business plan that projected it would be able attract 100 to 200 students for each graduating class, allowing the campus to generate enough revenue through tuition fees to cover the costs of operation.

But last year, MSU Dubai admitted fewer than 100 students, far below the number it needed both to establish viable academic programs and to cover its costs.

"We were undercapitalized in terms of the number of students needed to meet the financial plan," Ms. Simon said. "And this coming year's class did not appear to be as strong as it needed to be. And we needed to have large numbers because we were offering five undergraduate programs."

The university will continue to run a small graduate program in Dubai, in human resources and labor relations, and keep an office open to facilitate study-abroad and executive-training programs in the emirate, but its undergraduate courses won't continue in the fall.

Michigan State lost more than $4-million on the Dubai venture, Ms. Simon said, the costs of which will be covered by the Michigan State University Foundation, an independent nonprofit organization, and with investment income. State appropriations or tuition at the home campus in East Lansing, Mich., will not be used to cover any of the losses, she said.

What set Michigan State's Dubai campus apart from the branch campuses that many other prominent Western universities have opened in the Persian Gulf region was that the campus was eventually required to break even: Student tuition had to cover its operating costs.

For Western universities that have opened branch campuses in much wealthier locales than Dubai—New York University in Abu Dhabi or Texas A&M University in Qatar, for example—local governments underwrite everything from the cost of campus construction to faculty salaries to research. Student tuition is almost a bonus.

Not so in Dubai, which has minimal oil reserves and a local government that is unable to simply underwrite the costs of first-class higher education.

So Michigan State had entered into a partnership with Dubai Holding, a government-owned company that oversees a collection of foreign branch campuses called Dubai International Academic City. Dubai Holding loaned Michigan State $2.7-million to cover initial operating costs and also gave the university a grant to establish its campus, for which it pays rent to a subsidiary of the company.

Tuition-generated revenue was even more crucial to the success of the Dubai campus because it promised not be a financial drain on the taxpayer-supported home camps in East Lansing.

Ms. Simon says that Michigan State had difficulty attracting enough qualified students to its Dubai campus, which held the same high standards of admission as its Michigan campus.

"If you were thinking about this as a business, you would say that you need more students, so change the standards," she said. "But we felt that we couldn't change the standards and hold true to what we were trying to do in Dubai."

What's more, just months after the campus opened, the international financial crisis hit, with debt-laden Dubai hurt particularly hard. Dubai Holding never built the 300,000-volume library that it promised for Dubai International Academic City, and it struggled to find adequate housing for students.

That, combined with financial pressure on families, made it even more difficult to attract students to a relatively expensive university that existed in a higher-education market that many believe has reached its saturation point.

The few students who had enrolled at MSU Dubai will be able to continue their studies at the home campus in East Lansing. The university also hopes to arrange for students who don't want to move 7,000 miles away to transfer to other universities in the United Arab Emirates.

Ms. Simon said the university would "fulfill its contractual obligations" to faculty members, The university estimates it will have to contribute between $1.3-million and $1.7-million in severance pay.

The university will not have to repay its $2.7-million loan from Dubai Holding. "The conditions of the loan were such that if we got into a position of a certain amount of loss as a result of the business plan that we had agreed to, we did not have to pay back the loan," Ms. Simon said.

Lessons to Be Learned

Alan Ruby, a senior fellow at the Graduate School of Education at the University of Pennsylvania, says there are several lessons other universities interested in establishing branch campuses overseas can take away from the Michigan State experience.

But he cautions that university officials ought not to overgeneralize from what happened to Michigan State. For one, the startling severity of the economic downturn forced a number of expatriate families to leave Dubai who otherwise would have been part of the campus's target audience.

What's more, Michigan State was hamstrung by its financial model, getting little support from the Dubai government while needing, as a state university, to break even. Still, Mr. Ruby points out that even colleges whose branches are heavily subsidized by foreign governments should understand that those "resources are not infinite."

Michigan State, he argues, also was hurt by New York University's new branch campus, in nearby Abu Dhabi. NYU, he says, will boast a broader range of academic offerings, while Michigan State, like traditional branch campuses, had more tailored options. He compares the effect to the introduction of the iPhone into the music market. "There's a new product on the market," he said, "that's offering a different, attractive option."

What universities should learn from Michigan State's foray into the gulf, Mr. Ruby says, is the need to do careful diligence in deciding whether to go the branch-campus route. Institutions may be better served by expanding study-abroad or cultivating more-varied partnerships than opening a full-fledged outpost overseas.

Universities also ought to consider what the curricular needs are locally, whether their institutions are well-positioned to fill those demands, and which other competitors are striving to respond to that market.

"You really have to do your market research," Mr. Ruby said.

Karin Fischer contributed to this article.

Comments

1. bdr8y - July 07, 2010 at 05:30 am

There is obviously a dark side to the corporatization of higher education. I wonder if this will cause others to think twice about their efforts of intellectual colonialism?

2. grif67 - July 07, 2010 at 06:11 am

I hope and trust that someone was fired at Michigan State...that would be the result of such a blunder in private enterprise. One of two things happened, either the person did not know forecasting or the person did not know marketing. I understand the Dubai market and the Aba Dhabi market and Michigan State's blunder was human error. If the U. of Oklahoma can sell their program successfully in Riadyh Saudi Arabia, Michigan State should have had an easy time in Dubai.

3. richardtaborgreene - July 07, 2010 at 06:28 am

I dislike the overall tendency in modern journalists and media to beat up on every person and institution that learns something---that is, that tries something that in first form fails. We all need and benefit from institutions and people that try things and it behooves us as beneficiaries of that trying to applaud institutions that try even when they learn, that is, even when first forms of a trying fail. So here goes:

I applaud, officially, Michigan State for their gumption, initiative, and hard work and am sorry that the worst financial crisis on 75 years happened to coincide with the opening of their initiative in the Middle East. Let the administrators who made this foray abroad do more efforts in the future and I hope they do not spend eons of time licking wounds rubbed raw by nasty little foundation officers, media reporters, and others who like to pile on and beat up anyone not instantly successful.

4. jeff1 - July 07, 2010 at 06:51 am

This effort was a distraction to MSU. I applaud the move to end it. Dubai is in rough shape right now.

Please stay focused on your land grant mission and make your impacts primarily in Michigan and the United States . . . it is needed, it is your core and it is what alumni like me hope and expect from our great alma matter.

5. alvitap - July 07, 2010 at 08:40 am

Hey! a Dubai campus is nothing more than an attempt to keep up with the Joneses. Some one in your foundation was lobbied to spend some cash before another university beat you to the punch. Tell your alumni office to spend your money on something more potentially successful: a campus in Monterrey, Mexico would serve a number of academic, business, and scientific needs that are going unfullfilled. Just think of all the knowledgeable talking heads you'd have on TV once the polical relations between the U.S. and Mexico get really rollin' again. Moreover, the defenseless American students who are rejected by nativist Americans because of a refusal to accept the notion of the so-called "Dream Act." Spend some foundation money on repairing the damage that the U.S. has inflicted on the Mexican people and economy. Build a campus of sorts (unless is already as suitable site) in Monterery and call it Michigan State Monterrey (and students will come). Just think about all the "study abroad" interest and debate in will generate in the departments of your East Lansing campus. Michael Moore can do a movie: Maquilando for Monterey--MSU. It will be at the head of the Entertainment Page in every remaining newspaper in the country. Dead wood faculty can go there and research margaritas. Gee! this is a great idea, way better than flushing money down the toilet in Dubai.

6. alvitap - July 07, 2010 at 08:43 am

Sorry for the run-on incomplete sentence(s) in my rant, above.

7. laker - July 07, 2010 at 09:27 am

I am at times shocked by the level of discourse in these comments. "I hope...someone was fired...", "...efforts of intellectual colonialism." Not what I expect from what I hope would be learned people discussing a topic of some import.

I have had some experience working abroad, understanding that everyone you encounter will inflate the potential numbers is the first lesson to learn, second, you have to accept that the promises of unlimited support fit the old "if it seems too good to be true, it is" axiom.

I, too, applaud MSU for making a difficult decision, and one that says "we failed" to many of its constituents. We too often deny or cover our failures in HE, and for MSU to say "...we couldn't change the standards and hold true to what we were trying to do in Dubai." is unusually honest in a time where we spin every media interaction.

Finally, in my experience, the population a Dubai campus would serve is not made up of Emiratis, who receive $40K a year from the government regardless of what they do, it was made up of lower wage guest workers, mostly Indian, Filipino, and other Asian groups, who left Dubai when the bubble burst, and whose ability to pay was/is questionable to start.

There is a lot to learn in this story, and it isn't just about firing people to keep them accountable.

8. uechronicle - July 07, 2010 at 09:56 am

An unfortunate fact of business is that a large majority of new ventures fail (think about how many companies didn't survive the tech bubble or how many new products get pulled from store shelves after only a short while). Nearly all new ventures carry high amounts of risk, and even the most experienced professionals can seldom mitigate all of them. MSU should be applauded for sticking to their principles and not lowering their academic standards just to increase enrollment.

9. jack_cade - July 07, 2010 at 10:22 am

Failure itself isn't bad, it is repeated failure--the repeated decline in the United States University system over the past twenty or thirty years.
However, Those who do not fail are those who are not trying new things, but are instead following the well worn paths of mediocrity. Those who fail occasionally are the ones most likely also to just maybe produce something amazing.
Although, when failure becomes system, well then people need to be held accountable, like those in charge for the last few decades, or, like the lazy and stupid Americans and our pathetic leaders. But that is a whole new show.

10. ttuenglish - July 07, 2010 at 11:08 am

I am disappointed by readers who make ideological party line comments like "intellectual colonialism" and "corporatization". MSU spent only $4 million, not a substantial (or irresponsible) amount, to try something new. Effective organizations, as many posters note, try new things all the time. It did not work so they had the foresight to end it.

How many of us tell our students to take chances and embrace risk to learn about ourselves and our opportunities? Then we lament when organizations take this advice.

11. jeff1 - July 07, 2010 at 11:45 am

Well, one can argue whether $4 million is a substantial amount or not (given the shape of the Michigan economy, I would argue it is a significant number). I know as well that our friends in Dubai did support the campus. Making an honest attempt is fine and I am confident that the leaders of this effort did their due dilligence. That said, there is a need for institutions to be a bit more true to their missions and that is especially the case for land-grant public institutions! I love MSU, but never loved this decision to go to Dubai, and I applaud their decision to shut down the campus for all the right reasons.

12. alvitap - July 07, 2010 at 01:08 pm

So, ttuenglish (10) is disappointed by readers (sic) commenters who make "comments like (such as) '"intellectual colonialism"' and '"corporatization"'. I, too, am disappointed with this language. How about, ugly-American hubris? Or, thinly-veiled snooping, or the spread of university bureaucracy.

13. 22260556 - July 07, 2010 at 01:46 pm

Yes, it is good to experiment and to innovate; but doing the same thing over and over again and expecting different results is madness. Why clone American campuses whose business models are increasingly unsustainable in the U.S.?

14. mflynn - July 07, 2010 at 02:48 pm

MSU has been one of the first global universities, beginning with agricultural extension following World War II. There are many options for a global presence, and universities need to experiment. Not all experiments are successful, by definition, but many variations remain possible. We need the leadership of fine institutions like MSU in the global intellectual mix, and I hope the experience in Dubai will be informative but not disabling.

15. your_rights - July 07, 2010 at 10:53 pm

In defense of #1, I rather like the phrases "intellectual colonialism, and the corporatization of higher education."

1)If we use the philanthropist model of education, we are opening campuses overseas because we think they are ignorant and can not educate themselves. This is clearly not the case here.

2) If we use the globalization model of corporatization we are opening campuses overseas because of greed. I do not approve of either choice.

3) Regarding failure, it need not be appauded or condemended. However, someone at MSU needs to go back and study the course on Strategic Management.

16. cfgilmor - July 08, 2010 at 07:08 am

As someone living and working in the UAE, I can not say that US campuses here are doomed however there is certainly a pattern emerging that reflects the fact that many of these institutions did not give great detail to a feasibility plan. Whether there was or was not an economic downturn MSU fees were high considering there was no campus, residence halls, library, etc. The idea that US institutions are deserving of such fees because they are US institutions is being severely challenged by other institutions in the UAE, Gulf, Asia, who may also be providing quality education programs that meet the human resource needs of their region, etc.
Stripped of all illusions it is simply arrogance. Prior to their arrival American University of Sharjah, American Univerity of Dubai and many other key institutions were already in place providing good higher education options. Why are so few of the other universities in Dubai Academic City closing. In fact many of them are thriving and are probably best suited to meet the academic and career objectives of students in this region. Every failed school be it MSU or GMU starts to speak about the fact that they would not compromise their academic quality, integrity, etc. If they were flexible, innovative and understanding of a new terrain they would have had the sense and foresight to put academic support programs in place to cultivate a student population. Whenever, people of color are involved it is considered a lowering of standards but I have often heard it referred to as academic support, student success programs etc. when others are involved!

17. jeff1 - July 08, 2010 at 07:22 am

Michigan State should not compromise regardless of the opinions that their fees are too high. Either you pay for an MSU education or you go somewhere else, the decision is simple. Institutions in the United States are not "deserving of such fees" but must charge them to offer a quality program. If others in the gulf region can provide the same quality for less, then people in that area should go to those institutions. Simple. There is no "arrogance" in the fee structure and there is absolutely no equivalence in AUS and AUD and MSU . . . they are worlds apart in quality. There are several institutions who have left the region after a few years because there is a limited market and Asia is a more productive focus at this time and where there are students who meet the quality standards. NYU is starting an experiment in the area . . . let's see how they do! MSU and GMU for that matter understood very well the terrain and I applaud them for not compromising on academic quality and integrity.

18. gadget - July 08, 2010 at 11:05 am

In reference to the poster who recommended that US institutions look to Mexico, my college has experience there. We are located in a large border city and entered into a partnership with a Mexican institution right across the border to offer a simple, convenient program for Mexican students wishing to learn English to pursue academics in the US or for employment reasons.

The effort started out well. Instructors were hired, many students enrolled, tuitions were paid, and the Mexican institution provided the campus and classroom space. Students paid this institution in pesos and the Mexican school was to pay us a portion to cover the cost of the instructors. Only that money was not forthcoming, and when money came through, it was not in the amounts it should have been. There were a million excuses from our Mexican partner, and our college ultimately closed the project at a loss.

That said, Texas A&M has successfully operated in Mexico for many years. I do not know how their program works. But clearly they have figured out how to operate in Mexico.

19. honore - July 12, 2010 at 08:47 am

Has MSU run out of STATE resident students to support and find educational avenues for? Is Detroit still in Michigan?

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