International Finance

Nguyen Xuan Tung

Table content

Executive summary I. II. Introduction: Singapore risk analysis: 1. Political risk: 2. Economic risk: 3. Financial risk: III. Evaluation when establishing a campus in Singapore: IV. Conclusion: Reference

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International Finance

Nguyen Xuan Tung

International Finance
A country risk assessment of a prominent US University establishing a campus in Singapore

Executive summary This report delivers the understanding about country risk assessment when a prominent US University wants to establish a campus in Singapore. In the first part, the background information of demand to use international strategy of US Universities is represented. The second part is the risk assessment by important examining political, economic and financial risk of Singapore. The third part outlines the evaluation of the situation, the partnership between US Universities and Singapore. Finally is the conclusion to conclude points that have been mentioned and give some recommendations.

International Finance

Nguyen Xuan Tung

I. Introduction: Today, many prominent US Universities want to attract more students and increase the university's reputation so they use the international strategy. There are many different strategies but the most common is creating a branch campus in other countries of the world. However, it is not easy or cheap to make it happen. There are number of campuses in trouble and several even closed. Country risk is one of many reasons of the failure. Country risk is a group of risks associated with the investing in a foreign country. It includes political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, which is the risk of capital being locked up or frozen by government act. Country risk differs from one country to the next. Several countries have high risk to discourage many foreign investments (Alan, 2010). This report discusses the country risk assessment for a prominent US University establishing a campus in Singapore.

II. Singapore risk analysis: Although many professors discount their importance, they recognize that political and economic factors also involve to the decisions of U.S. institutions to open campuses overseas. Evaluation of the level of political and economic risk associate with doing business in another country is considered as country risk analysis (Sergey, 2010). Singapore risk analysis can be point out as:

(Source: http://www3.ambest.com/ratings/cr/reports/Singapore.pdf)

International Finance

Nguyen Xuan Tung

1. Political risk: Singapores Political Risk is relatively low. Following to the research of Political and Economic Risk Consultancy (PERC), Singapore has the lowest political risk in Asia. The Singapore government is control by one party only, the Peoples Action Party (PAP). The PAP has founded in 1959 and despite its long and virtually unchallenged rule, it is generally stared as efficient and has produced stable political and economic environments. The

government has constantly comprised a pragmatic and long-term approach to policymaking. Its policy responses also have been rapid and critical for countering economic challenges. Although the PAP had its weakest success to date in the 2011 general election, people dont expect the government to deviate from its track record of pragmatic policymaking. Singapore is a democratic country that has elected representatives to rule the nation. It has since independence, enjoyed relative political stability, which has transformed into better business opportunities for the nation.

2. Economic risk: Singapore is a regional business center, dependent upon international trade for economic growth and upon its regional neighbors for critical commodities. Singapore economy is an instance of a vibrant free-market economy that is developing at a speedy pace. The income of Singapore is the highest in ASEAN. The business area has been maintained and

strengthened by a corruption-free situation, an educated and motivated workforce, and wellestablished legal and financial business basis.
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International Finance

Nguyen Xuan Tung

When emerging from the recession with a recover of nearly 15% in 2010, growth is controlling to about 5% in 2011. Growth is predictable to be about 4.4% in 2012. In latest years, the Singapore government has spent deeply in expanding the economy. This led to growth in the tourism, the medicinal industry with a specific attention on biotechnology, financial, business consultation services, education, multimedia, retail and leisure, and the medical technology industry. Singapores trade-oriented economy is rather weak to external economic conditions, but its important growth prospects are strong. It has been inflationary stress edging higher in 2010 and 2011, encouraging tighter monetary policy

3. Financial risk:

III. Evaluation when establishing a campus in Singapore:

Building a branch campus has some potential benefits. An institution will likely have more control and able to guarantee the value of its courses. But that assumes it can find the resources, students and the support of foreign government. There are many universities have learned the hard way.

Furthermore, there are other barriers that have to overcome when an American institution adapts to the branch-campus route. First in this regard is the problem of opportunity cost; that is the value of that which must be forsaken in order to obtain, acquire, or achieve something else. Opportunity costs in some circumstances have been reduced through subsidies and incentives by foreign partners willing to
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International Finance

Nguyen Xuan Tung

prominent American institutions. Actually, in a few cases, highly prominent colleges in the US have even made profit by establishing international branches.

The meaning of a partnership will be different from case to case. But it always contains the sense that the partnership extends to several sections at a university, if not through the entire university; includes facility members, graduate students, undergraduates, and others; and is multidimensional, with research, teaching, and possibly even service modules.

For example, the North Carolina University has the relationship with the National University of Singapore (NUS). According to many dimensions and classifications, Singapore is generally considered one of the best universities in Asia. The relationship began more than 20 years ago, the result of direct efforts by people at institutions, unplanned circumstances. For example, in the early 1990s one of the authors of this essay had a friendship in Southeast Asia. He established scholarly relationships with NUS, and, once back in North Carolina, he kept it up. Time by time, he presented people from each university to another, and this often led to fruitful partnerships and relationships.

Moreover, U.S Universities may face with many competitors. Singapore is focused on many international schools from countries around the world, but also a place famous for its advanced education system of some famous local schools such as National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore Management University (SMU), Singapore University of Technology and Design (SUTD). In addition, there are not the only US universities open campuses in Singapore. Motivated by reduced government funding and a growing demand for English-language education through the Asia-pacific region, Australian universities are in the front of institutions that are establishing campuses outside their own borders, especially in Singapore. The example is the associate of SCU and MDIS. More prominently, differences in institutional cultures had to be recognized and accommodated. The NUS grew out of the English university tradition with three-year degrees and tutorials. Chapel Hill followed the American model. As a result, the relationships almost always reflect cooperation between different learning systems. As we know, U.S universities or U.S education has a modern education and culture distinct difference compared to other Asian countries, Singapore is not the exception. The risk would occur if the program, activity or teaching system of the U.S university, contradictory and inconsistent with cultural and educational system of a Singaporean. That became a problem for U.S. universities to think before examination to establish the basis here.

International Finance

Nguyen Xuan Tung

IV.

Conclusion:

In conclusion, it is necessary to understand country risk before invest into the foreign country, in this case is a prominent US University establishing a campus in Singapore. The political risk, economic risk, financial risk and even social, cultural and competitive factors will affect directly to the operation of investors. After understand all of the factors, US universities can find the best ways to enter in Singapore, they will continue to grow in numbers. This worldwide expansion of branch campuses will play an important role in internationalization of higher education. International branch campuses gain profit the creating university by attractive its international outline and by providing teaching and learning opportunities to its ability and students. Simultaneously, they fill a gap in the market by answering to the request for foreign higher education that happens in many parts of the world.

International Finance

Nguyen Xuan Tung

Reference Books: Websites: