The ?27 million loss at the University of Reading¡¯s Malaysia branch campus last year should provide lessons about?the challenges associated with opening overseas outposts, according to sector experts.

¸é±ð²¹»å¾±²Ô²µ¡¯²õ , published in November, reveal that the Malaysia campus¡¯ deficit pushed the institution as a whole into the red to the tune of ?20 million for the year ended July 2018. They state that a detailed financial review of the outpost had concluded that ¡°the current loss-making position would continue for around four years¡± before the campus breaks even.

However, an internal document seen by?³ÉÈËVRÊÓƵ?suggests that the shortfall was far more significant than anticipated: a report from ¸é±ð²¹»å¾±²Ô²µ¡¯²õ chief financial officer in February 2017 forecast an ?8 million loss for the campus in 2017-18. It opened in 2016.

The document says that a review by KPMG highlights that the university had already invested ?21 million and ¡°this will get to between ?50 million and ?70 million over the five-year period¡± between 2016-17 and 2020-21. It adds that the campus ¡°could physically exit/close down on 1 June 2021, having invoked the lease break a year earlier¡±, but whichever decision is made ¡°at least a further ?40-45 million of funding will be needed for Malaysia over the coming five years¡±.

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The report notes that the outpost ¡°opened later, and cost more than planned¡± and is located ¡°in an area that doesn¡¯t have the best reputation in Malaysia¡±, close to the Singaporean border, which has made recruitment difficult.

It also highlights Malaysia¡¯s visa regime, economic difficulties and degree accreditation process as reasons for the loss, claiming that ¡°the crucial law degree (around which much of the initial business case was constructed) [is] now looking unlikely to be approved¡±.

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?of the university¡¯s council meeting in November 2017 state that the executive board recommended continuing with the campus ¡°subject to significant conditions¡±, including capping the university¡¯s total investment in the outpost.

But one source told THE that there had been ¡°weak accountability and no transparency over business planning and financial projections¡± for the Malaysia campus.

¡°Reading was naive in how it approached Malaysia and ignored the warning signals that were there at the very early stage,¡± the source said. ¡°It is a salutary lesson. You can¡¯t make a quick buck opening overseas campuses.¡±

Jason Lane, director of the Cross-Border Education Research Team at the State University of New York Albany, said that ¸é±ð²¹»å¾±²Ô²µ¡¯²õ Malaysia campus?was ¡°illustrative of the challenges many international branch campuses have faced over the years¡±.

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¡°These are essentially start-up organisations that higher education leaders have limited experience creating ¨C particularly in a foreign environment. Universities tend to overestimate enrolments and underestimate the difficulty in navigating the local environment,¡± he said.

Paul Hatcher, president of ¸é±ð²¹»å¾±²Ô²µ¡¯²õ University and College Union branch, said that the ¡°continual cost of Malaysia¡± was a ¡°common concern on campus¡± and was fuelling ¡°resentment¡± among staff, particularly in the wake of the announcement of a voluntary redundancy scheme.

Vincenzo Raimo, pro vice-chancellor of global engagement at Reading, said that ¡°a high level of investment was always anticipated in the start-up phase of our Malaysia campus¡±.

¡°We have made no secret of the fact that the environment is more challenging than originally forecast and so the campus has not grown as quickly as anticipated,¡± Mr Raimo said. ¡°We are fully committed to the students enrolled at our Malaysia campus and to our position as a global institution. As with any major investment, we continue to monitor the development of our Malaysia operations to ensure that the desired outcomes can be achieved.¡±

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ellie.bothwell@timeshighereducation.com