Chapter 6. Financing higher education in Kazakhstan

This chapter identifies policies to improve the financing of higher education. It analyses investment levels in higher education and resource allocation mechanisms. It discusses how to build the system’s capacity in this area, improve efficiency and integrity, and delineate clearly the private sector’s involvement. The chapter finds that recent incremental investments have failed to deal directly and adequately with fundamental weaknesses in the system as a whole. It places particular emphasis on areas of priority for Kazakhstan such as improving low overall levels of public funding and addressing the inefficiency of the state grant system. The chapter also points out the detrimental effect of a high degree of financial control and audits of higher education institutions.


How is higher education financed

Around the world, there are five broad sources of funding that finance institutions of higher education: appropriations from governments; payments from students for tuition fees and other fees associated with their education; philanthropic donations; private payments to universities for goods and services provided; and investment capital provided to capitalise for-profit institutions.

The first two sources, appropriations from governments and payments from students, typically provide by far the largest share of revenues (OECD, 2015). Philanthropic donations (often, but not always from alumni) play a significant role in a few countries which have many private institutions, and where there are traditions and tax incentives which encourage charitable giving. Private payments for research or other services provided by institutions are usually a small part of higher education revenues. Investment funding is used to capitalise for-profit institutions, which currently account for a small but rapidly growing share of student enrolments world-wide. For-profit institutions depend on student tuition fees for revenues, but often rely indirectly on governmental appropriations that help students finance their higher education from grants and loans.

Governmental appropriations for higher education may be provided as direct grants to institutions for instruction, research or public service; as grants to students to enable them to pay tuition fees and/or living costs while studying; as loans to students for tuition fees and living costs; or as payments to institutions to finance particular research projects or other services. Governments may directly or indirectly support both public and private institutions through these various means, but direct governmental support mostly flows to publicly owned or publicly controlled institutions.

The significance of student tuition fees as a source of revenue for higher education varies greatly among countries. Some countries require students to pay little or nothing for tuition, and others require students to meet all or near the full cost of their education.

In 2015, the average tuition fees for public institutions ranged from approximately USD 9 000 in the United Kingdom (with the United States a bit above USD 8 000) to approximately USD 5 000 in Japan, Canada, Korea, Australia and New Zealand, to under USD 2 000 in Italy, Switzerland, Austria, Belgium and France. No tuition fees are paid by public institution students in a number of countries, including Denmark, Finland, Norway, Estonia, the Slovak Republic and Sweden (OECD, 2015). In countries that require students to pay tuition fees (including some where fees are modest) governments usually provide need-based subsidies to low- and moderate-income students to help them meet these expenses. Differences across countries reflect long-standing policy debates about the relative responsibility of the state or of students to cover the costs of higher education (Box 6.1).

Box 6.1. What should students pay, what should the state pay?

A classic higher education policy study was released by the Carnegie Commission in 1973: Higher Education: Who Pays? Who Benefits? Who Should Pay? (Carnegie Commission, 1973). The questions in the title convey the difficulty of determining the balance between the public benefits and the personal, private benefits of higher education. Some argue that the public benefits of higher education justify very low tuition fees for students or no fees at all. Others argue that the private benefits (higher income and social status) are so significant that all students should pay (or be able to borrow and later repay) the full costs of their higher education. This latter argument observes that, because higher-income students are more likely to attend higher education, providing free or low-cost higher education to them at public expense amounts to regressive taxation.

The Carnegie Commission consulted with a number of economists and concluded: “No precise – or even imprecise – methods exist to assess the individual and societal benefits as against the private and public costs.” An analysis of the status quo in the United States at that time suggested that, on average, students and parents were paying one-third and the public was paying two-thirds of the direct monetary outlays for higher education and living expenses during study. However, when the opportunity costs of not working while enrolled in higher education were added to the direct costs, students and parents were paying two-thirds of the total. The Commission judged this status quo to be reasonable, but suggested small modifications: providing need-based assistance to lower-income families; charging less for the first two years of higher education and more for advanced undergraduate and graduate study; narrowing the gap between the tuition fees in public and private institutions; and developing more progressive tax systems.

In the decades since the report was written, continuing policy changes suggest that nations continue to struggle with these issues. The expansion of participation in higher education has made it difficult for most countries to pay all the direct costs of higher education. At the same time, the full individual and social benefits of higher education remain notoriously difficult to estimate in monetary terms. Moreover, estimates of “average” benefits fail to capture the full range of individual outcomes.

Some countries continue to provide full or near full public funding for higher education. Other countries, such as the United Kingdom, Australia and New Zealand, have introduced tuition fees or allowed fees to rise but have moved to provide income-contingent loans. These enable students to borrow to pay their fees, while forgiving the loan in part or in whole if, as graduates, their later income does not reach certain threshold levels. Still other countries provide a combination of need-based grants and loans to help lower-income students pay tuition fees and living costs. Finally, a number of jurisdictions (e.g. Canada) have experimented with publicly subsidised and sponsored savings plans to meet later higher education costs.

This variety of approaches, and the continuing evolution of country strategies for financing higher education, underscores the difficulty of designing a definitive tuition policy. Nevertheless, widely acknowledged criteria for evaluating policy options have emerged. These include:

  • Is the level of successful participation in higher education high enough to meet the needs of the national economy?

  • Are the revenues generated by tuition fees and direct public appropriations adequate to support the quality that is necessary?

  • Are public policies demonstrably enabling all groups within the society to participate in the benefits of higher education?

  • Can qualified students at every income level afford higher education without accumulating excessive debt (i.e. debt that will have disproportionately negative effects on their later outcomes)?

Sources: Carnegie Commission on Higher Education (1973), Higher Education: Who pays? Who benefits? Who should pay?: A Report and Recommendations, McGraw-Hill.

The purposes of financing higher education

The purposes served by higher education are naturally closely tied to the interests of those who finance it. Traditional-aged students, for instance, are willing to pay for higher education because it provides preparation for a profession or employment that will generate higher income and social status; opportunities to socialise with other young people; and enjoyable opportunities to make the transition from dependence on parents to adult independence. Alumni and other charitable donors support higher education to express gratitude for benefits received, and to contribute to its broader societal benefits. Businesses may provide support for higher education programmes and research that provide direct or indirect benefits to their bottom line. Investors in for-profit higher education are primarily interested in returns on their financial investment, although they may have an affinity for higher education based on their familiarity with it or a belief in its intrinsic value.

The purposes that motivate governmental support for higher education are very much related to those that motivate students to enrol. A higher education system that enhances the capabilities of youth, and that also helps older workers develop or refresh their skills, is an important public priority. Governments are also motivated to support higher education systems that meet broader public purposes and needs for:

  • skilled workers and leaders required by employers in a wide range of sectors

  • entrepreneurs who will create new businesses and employment opportunities

  • scientists, engineers, scholars, and practitioners who can generate innovative solutions to problems and contribute new knowledge

  • educators who can develop the capabilities of successive generations in primary, secondary and higher education

  • cultural leaders who enrich and preserve the cultural heritage

  • civic and political leaders with the understanding and skills required for advancing the welfare of the nation

  • research and innovation to support economic growth and well-being.

Achieving and sustaining such an educational system is a never-ending task for every country. Effective systems must be deeply institutionalised in society. The schools, colleges and universities that make them up must have independent initiative, energy and capabilities. They need a sense of responsibility to their missions, and a commitment to anticipate, articulate and address broader social and economic needs.

Ultimately, financial policies for higher education are measured by their effectiveness in advancing national objectives and their efficiency in doing so (Zumeta et al., 2012). Effective financial policies will:

  • provide sufficient money to meet objectives

  • monitor results, learn from experience and adapt budgets in order to advance the attainment of goals

  • properly balance supports and incentives in order to meet objectives

  • build the capabilities of the institutions and individuals who play essential roles in meeting these objectives by providing essential supports, professional training, delegation of responsibility and operational flexibility.

Efficient financial policies will avoid waste, pursue cost-effectiveness and be responsive to changing needs. Such policies will:

  • allocate funding differentially among institutions and purposes in order to reflect differences in the cost of different missions

  • allocate resources to priorities, and use analysis to identify and respond to unproductive allocations of resources for activities whose results are below acceptable standards

  • avoid over-reliance on formulaic approaches to budgeting and resource allocation, which can foster inflexibility and reduce the ability to adapt to changing needs

  • ensure integrity through appropriate financial controls and audits.

When financial policies fall short of their objectives, performance can be improved by changing policies to more faithfully respect these criteria. Each of these criteria is a useful lens for viewing and evaluating financial policies, even though most are interrelated. These interrelationships will become evident as each criterion is discussed individually.

Increasing system effectiveness

A variety of approaches can help steer higher education towards more effectively meeting public policy objectives. These approaches will serve as a reference later in this chapter for the analysis of higher education in Kazakhstan.

Provide sufficient money to meet objectives

No system of higher education can be effective if the money available to it is inadequate to meet its purposes. However, it can be difficult to determine what constitutes an “adequate” amount of money. Three perspectives can be useful in answering this kind of question.

  • Often policy makers and educational leaders discuss adequacy in comparative terms, asking questions such as “what do other countries spend as a percentage of GDP?” or, “how much money do highly respected institutions have to spend?” This approach can be helpful in generating insights, but it cannot yield a conclusive answer.

  • Another approach is to examine particular dimensions of finance within a higher education system. Are faculty and staff salaries competitive with the salaries of other comparably qualified employees in the rest of the labour market? Are facilities and equipment adequate in size and in an appropriate condition for the work that they support? Are staffing levels appropriate for the workload, in comparison to conditions in other institutions or sectors of the economy?

  • A third view of the adequacy of resources considers whether the system is obtaining the desired results. Are sufficient numbers of students enrolling and graduating? Are they well-prepared for their lives after graduation? Is the system generating the research and service that meets the needs of the nation? If the outcomes of the system are less than desired, it may be necessary to invest additional resources to obtain better results.

Monitor results, enable learning from experience and adapt budgets in order to advance the attainment of goals

Both determining resource adequacy and improving effectiveness requires information, analysis and adaptation. A well-designed and effectively utilised management information system can serve this purpose. The quality of information in the system must be high, and its content and quantity must be fit-for-purpose (Lingenfelter, 2016). While to some extent all information is relevant to decision-makers everywhere in the system, certain kinds of information are especially important for guiding national policy, and other kinds are especially necessary for improving institutional effectiveness or enhancing the learning of individual students.

Often, though, more data are collected and disseminated than can be understood and used by decision-makers. When large amounts of data are collected and reported, frequently too little time is allocated to focusing on important issues and distilling meaningful information from data that can be used for improvement. When the purposes for which data are collected and used become more intentional and explicit, decision-making at every level – government, system-wide and within institutions – can become more effective (Jones, 1982).

Properly balance supports and incentives in order to advance goal attainment

The need to balance incentives and supports in budgeting is a universal issue. A desire to improve results has periodically led to budget strategies that emphasise incentives and competition among students, faculty and institutions. These efforts raise a number of considerations.

An incentive is not efficient if it does not increase productivity on the margin. When resources are allocated based on performance, budgets run the risk of simply making high-performing institutions better off, without any additional gains in productivity or quality beyond those already obtained. At the same time, such an approach may allocate resources away from lower-performing institutions that need them to improve productivity and quality.

After-the-fact rewards for achievement can be useful in sustaining an individual’s morale and productivity, and for inspiring others to higher achievement. Offering formulaic “bonuses” in advance, though, has not been demonstrably effective. In fact, some behavioural economics research indicates that “high stakes” conditional rewards generate stress and dysfunction and that systematic bonuses do not improve performance (Ariely, 2010.) An “efficient” reward typically achieves the benefits of recognition and encouragement with a relatively small sum.

The use of formulaic budgetary incentives for institutions can be problematic as well. It is natural to encourage institutions to do well and to recognise them for their achievements. However, the efficient use of public money must also be a high priority. Sound principles of public policy suggest that funds should be provided to institutions for explicit public purposes, not simply as a reward for past services. It can be good budgetary practice to provide resources to a high-performing institution to expand its services or improve further the quality of its work. It can be equally good practice to provide resources to a lower-performing institution to improve its productivity and quality. In either case, though, the objective is to obtain more value for money, not to pay more for value already delivered.

In this regard, one key issue that affects Kazakhstan and other countries is the increasing use of national and international rankings of institutions, often based on various indicators of prestige and research productivity. Many institutions have allocated significant effort and staff time to understand these rankings and develop strategies to improve their position in them. The popular appeal of such rankings is undeniable, and they have clearly focused the attention of many universities on the criteria on which the rankings are based.

In most cases, rankings criteria emphasise indicators such as research funding, faculty awards and publications, and citations of faculty publications in the scholarly literature. For various reasons, however, it is difficult to conclude that rankings have unambiguously improved higher education – and in some respects they have been harmful:

  • No rankings system is based on the full range of factors that determine institutional quality and effectiveness. Many of them are based on a set of factors closely associated with selectivity and research prestige, which reflect established marketplace advantages and wealth more than actual or improved effectiveness. Institutions with modest resources but that do a good job educating average students rarely achieve high rankings.

  • In ranking systems, the “deck” is stacked in favour of those at the top. Significant gains in rankings in the top levels are rare, and small changes are more likely to be caused by measurement noise (or data manipulation) than by actual differences in performance over time. While a new ranking scheme with different factors and weights may yield different results from an established one, it is extremely difficult for an institution to move up rapidly over any significant distance in rankings. Rankings are more volatile among institutions farther down the list, but year-over-year changes rarely signify substantial differences that need to be taken seriously.

  • Real progress in higher education comes not from improving in comparison to others (as measured imperfectly by various ranking schemes), but rather from improving in terms of absolute indicators of achievement such as the acquisition of knowledge and skills, and the use of knowledge to solve problems and spur innovation. Every person and every institution can improve and be successful on these absolute scales. While comparisons may be inevitable, and competition for recognition may help motivate achievement, movement on a scale in comparison to others is no substitute for actual achievement.

Build the capabilities of the institutions and individuals who play an important role in meeting objectives: provide them with essential supports, professional training, delegation of responsibility and operational flexibility.

The effectiveness of a system of higher education depends on a high degree of competence and capability at every level. While some jobs are more demanding than others, nearly every job in a college or university requires sophisticated knowledge, problem-solving capabilities, independent judgment and adaptive capabilities. An effective system will recruit and retain competent people for these jobs; provide ways to help them build their capabilities; and give them the flexibility and support that professionals need to succeed in complex tasks.

This does not imply autonomy without accountability. Effective systems are clear about objectives, and they work to improve performance. However, they acknowledge the importance of professional expertise and do not attempt to prescribe how the complex tasks of higher education should be accomplished. Instead, they recognise that more than one approach to a problem can be successful, and that freedom to pursue different pathways frequently produces greater innovation and improvement.

Increasing system efficiency

Efficient financial policies will avoid waste, enhance cost-effectiveness and be responsive to changing needs. The next four criteria address these issues.

Allocate funding differentially among institutions and purposes, in order to reflect differences in the cost of different missions

The effectiveness of a system of higher education requires that sufficient resources be provided for the success of each individual mission within the system. However, the costs of different missions differ, and they cannot all be funded at the same level. For instance, graduate instruction is more expensive than undergraduate instruction, primarily because class sizes are smaller. Disciplines that require laboratories and expensive equipment are more expensive that ones that do not. Travel expenses are needed for some kinds of research and not for others. Faculty who have advanced qualifications and research expertise can command higher salaries.

Developing an appropriate and accepted basis for financing the varied missions of colleges and universities can be a difficult challenge for government financial policy. Evidence, tradition, debate and negotiation will all play a role in determining what resources are made available for different purposes.

While evidence certainly should be the most important factor in determining the costs of different programmes, there is no authoritative standard against which to measure the cost of instruction for different disciplines and levels of instruction. Nevertheless, data are available to support comparisons. Where formulas are used for budgeting, different estimates are often provided for different disciplines and levels of instruction. For example, a number of states in the United States have analysed actual costs over a number of years, and a summary of results of their studies has been published by the State Higher Education Executive Officers (SHEEO, 2010). These studies show some consistency in patterns across disciplines and levels of instruction but considerable variation as well.

Instructional cost studies, coupled with the examination of funding approaches in other countries, can be used as a point of reference for examining the different levels of funding provided for different programmes and different types of institution in any given country. However, no amount of study can produce a flawless formula, that is, a procedure for allocating resources by “automatic pilot.” Cost analysis can and should be used to inform budgetary decisions, but the decisions themselves should not be wholly delegated to an analytical procedure. In the end, success will depend not on good budgetary formulas but on analysis of the effectiveness and needs of each particular programme. The responsive management of resources, based on solid analysis, can help a system and the institutions within it become more successful.

In considering the differential allocation of funds for different purposes, one fundamental question seems particularly relevant: is the country getting the results it needs from all of the missions of higher education? Every legitimate mission – whether teacher education, technical education, the arts and humanities, applied research, fundamental research or graduate education – needs adequate resources. A comprehensive financial policy will take seriously all of these needs and make sure funding differentials are justified.

On the other hand, institutions and programmes in every system of higher education are tempted by “mission creep” – the desire to expand missions to include more expensive and prestigious functions. This might include more research, more doctoral education, more advanced professional programmes, etc.

When graduate education and research are dispersed across too many institutions, both the efficiency and effectiveness of higher education are likely to be compromised. It is difficult to achieve excellence in fundamental research without establishing a critical mass of faculty and advanced graduate students in a few places, and it is difficult to achieve excellence in instruction when faculty, whose primary responsibility is instruction, are encouraged to generate publishable research but are not explicitly rewarded for instructional excellence. However it is also possible to err by over-concentrating graduate education and research in too few institutions. Truly excellent systems of higher education are not created and sustained via simplistic decision rules and formulaic approaches. They are shaped through thoughtful decisions about resource allocation based on an analysis of priorities and on the potential contributions of every institution in the system.

Ernest Boyer’s Scholarship Reconsidered: Priorities of the Professorate argues for an expansive view of scholarship which includes four categories: the scholarships of discovery, of application, of synthesis and of teaching. All faculty should be involved in scholarship of some kind, but experience suggests that only a small number of faculty are capable of doing high-quality scholarship to discover new knowledge. The motivations for “mission creep” may be diminished if the value of all forms of scholarship are more explicitly recognised and rewarded (Boyer, 1990).

Allocate resources to priorities, and identify unproductive allocations of resources for activities where results are below acceptable standards

Every organisation or system that has existed for more than a few years has an established pattern for allocating its resources. That pattern, the status quo, has enormous power for shaping future resource allocations. Aaron Wildavsky’s The Politics of the Budgetary Process famously documented the power of incrementalism in budgeting in the United States Congress, and that is observed in democracies around the world (Wildavsky, 1964).

Although budgetary incrementalism is often derided as a drag on progress, it can also be a force for stability and predictability, which are necessary conditions for organisational effectiveness. Effective financial policies must find a means of putting resources behind priorities. They must respond to emerging priorities and identify programmes whose importance is fading. They must also recognise changes in organisational circumstances that indicate that additional or fewer resources are justified.

To give one example: staffing ratios and faculty workload need to be systematically examined in order to determine whether they are both effective and as efficient as possible. Increases in efficiency can help provide resources to improve faculty workloads and salaries or to finance emerging priorities. An examination of administrative costs and positions can often discover opportunities to make better use of existing resources. Furthermore, an analysis of institutional workloads and resources might find opportunities for reallocation and change that would improve system effectiveness. For instance, Box 6.2 gives a final example of how student financial support has been reallocated in the Netherlands to enhance efficiency and effectiveness.

Box 6.2. Recent changes to student financing in the Netherlands

Prior to September 2015, all Dutch higher education students, regardless of parental income, were entitled to a monthly block grant from the government of EUR 100 if they lived with their parents or EUR 279 if they did not live at home. However, the Dutch government eliminated these grants and reallocated the USD 1 billion in savings to income-contingent student loans and grants, and to investments that seek to enhance the quality of teaching, learning and research.

New students now have the option to take out an income-contingent student loan with lenient repayment terms. Also, approximately EUR 200 million to EUR 300 million per year will be allocated as grants to students whose families earn less than EUR 46 000 a year.

Sources: Ministerie van Onderwijs, Cultuur en Wetenschap;

Avoid over-reliance on formulaic approaches to budgeting and resource allocation that foster inflexibility and reduce the ability to adapt to changing needs

The advantages of using formulas to distribute resources make these a popular tool in governmental policy. Formulas are often based on an analysis of need and workload that gives a sense of rationality and fairness. They make it possible for institutions and agencies which depend on governmental funding to have a reasonable measure of funding predictability from year to year. However, it may become impossible or impractical to allocate resources on anything but a formulaic basis when a governmental programme supports many entities.

In some respects, then, resource distribution by formula is inescapable. Yet inherent disadvantages come along with the advantages of this approach. Formulas have a tendency to create incentives that may not be fully productive. Some governments, for example, have moved away from measuring workload for funding and moved towards measuring course completions. This happened as it became clear that certain institutions with high dropout rates were enrolling students but not providing the supports necessary for completion.

Formulas also have a tendency to presume uniformity where it does not exist or to impose uniformity where it is not functional. It is difficult to construct a formula that properly reflects the diversity of needs that exist within a set of higher education institutions. In striving to reflect diversity, formulas typically become quite complex – and perhaps even incomprehensible to all but those who work with them on a daily basis.

Although rapid change can be disruptive and dysfunctional in a system, it may be possible to improve the effectiveness and efficiency of resource allocation by critically examining with stakeholders the basis and consequences of fiscal policies that operate by formula. Significant improvements might be achieved by addressing areas where adjustments are warranted. Many effective organisations subject routine processes to such a critical review almost continuously.

Ensure integrity through appropriate controls

Financial integrity is not automatic in any system. It can be assured only through systematic procedures to prevent abuse, and to discover and correct abuse when it has not successfully been prevented. Financial controls and audits are indispensable. Yet different approaches to financial control have different consequences, and what is “appropriate” will depend on the setting and circumstances.

Assuring financial integrity by controlling transactions before they occur – a pre-audit system – is inherently much less efficient that a post-audit system that establishes general standards for financial integrity and that exercises control and assures compliance by auditing to determine whether those standards have been observed. Post-audits have typically found that only a sample of transactions need be audited to assure reasonable and adequate levels of compliance.

A pre-audit system can lead to redundant numbers of decision-making staff. A post-audit system gives individual decision-makers both latitude and responsibility for making cost-effective decisions, and for strictly avoiding self-dealing, bribery or the misappropriation of funds. If the standards are not observed, decision-makers are held accountable, and in serious cases they are terminated or prosecuted.

Clearly a post-audit system requires both well-understood and widely observed standards of practice, and a well-trained, experienced auditing profession of demonstrated integrity. Most governments employ both pre-audit and post-audit financial controls, depending on the size and nature of particular transactions. Pre-audit financial controls, however, are more costly and cumbersome than post-audit controls, and they do not avoid the need for after-the-fact audits. If pre-audit controls can be reduced without sacrificing essential financial integrity, the efficiency of the educational system will be improved.

Observations on higher education finance in Kazakhstan

The 2007 study of higher education in Kazakhstan undertaken by the OECD and the World Bank and the 2013-14 Roadmap Project (Nazarbayev University Graduate School of Education, 2014), identified a group of core financial issues that remain relevant for this review:

  • total levels of investment in higher education

  • the use of private institutions as a major provider

  • the extent to which private sources finance higher education, as compared to public supports

  • the adequacy of funding for research and development

  • the mechanisms used to allocate resources and to achieve efficiency and accountability.

Figure 6.1 summarises the specific recommendations of the 2007 OECD/World Bank review and the status of their implementation in early 2016. Many of the recommendations have not been implemented, but this is perhaps unsurprising to students of financial policy. Because of funding’s central importance and the number of stakeholders that it affects, it is difficult to make rapid, non-incremental change in the way governments distribute it. For these very same reasons, though, it is important to develop clear, purposeful strategies to improve financial policy and to pursue these strategies over time.

Figure 6.1. Implementation status of the 2007 OECD/World Bank recommendations

Sources: OECD/The World Bank (2007), Reviews of National Policies for Education: Higher Education in Kazakhstan,

Levels of investment in higher education

Kazakhstan’s public spending for education stood at 3.6% of Gross Domestic Product (GDP) in 2014, with spending for higher education representing about one-tenth of this, or 0.3% of GDP. In absolute terms, public higher education spending stood at about KZT 133 billion, or roughly USD 400 million at mid-2016 exchange rates. These levels of investment as a percentage of GDP are substantially lower than in many peer countries and far below the average investment in OECD countries1 (OECD, 2015).

Private funds, which flow primarily through tuition fees, account for the largest share of financing for higher education in Kazakhstan. In particular, private funds are the predominant source of revenue for private institutions, where 88% of students are self-financed or supported from non-public sources. Even at public institutions, though, more than half the students (51.4%) are self-financed. Overall, private spending on higher education in Kazakhstan represents about 0.7% of GDP: the addition of private spending thus still does not bring the country up to levels anywhere near those of most of its peers or aspirational peers.

Public funding of higher education will be the prime focus of this chapter. The percentage of GDP allocated as public funding to education is a relevant indicator for the policy makers. However, absent an analysis of how money is spent or of how money might be spent more productively, it does not provide much policy guidance. Simply spending more is unlikely to advance national objectives.

In higher education Kazakhstan’s current allocation of public resources is concentrated on three objects (Figure 6.2):

  • providing state tuition grants and stipends for students with high scores on the Unified National Test who enrol in selected academic programmes

  • supporting international study through the Bolashak programme and other related institutional activities

  • supporting student grants and other expenses at Nazarbayev University.

Figure 6.2. Overview of the public higher education budget in Kazakhstan in 2015

Sources: Ministry of Education and Science of the Republic of Kazakhstan, Statistics (2015).

Public funding finances capital improvements – primarily, but not exclusively at public institutions – and it is also the principal source of support for research and development. As noted in Chapter 5 of this review, funding for research and development in Kazakhstan, despite recent growth, remains quite small in comparison to most other countries.

The nation’s financial strategy for higher education has been focused on two over-riding objectives – internationalisation and financial support for the most academically able students. These objectives are clearly central to broad national goals for higher education, but they concentrate resources at the top of the system. It is unlikely that these kinds of targeted investments will by themselves yield the results needed for the nation as a whole. Additional priorities warrant attention and greater financial support.

Many areas of the instructional component of higher education could be strong candidates for additional public investment, but three stand out as priorities based on the OECD review team’s observations and on previous studies of education in Kazakhstan:

  • Faculty compensation. According to the National Report on the State and Development of the Educational System of the Republic of Kazakhstan, salaries in education at every level, including higher education, fall below the national average (JSC Information-Analytic Center, 2015a). Because educational attainment is high among employees in the education sector, the salaries of educators are almost certainly below the compensation for workers with similar levels of knowledge and skill. Kazakhstan cannot achieve a world-class education system without attracting and retaining highly talented people as teachers and researchers. More competitive compensation is an essential step toward achieving national educational goals.

  • Tools for assessing quality and improving instruction and student learning. In the 20th century, and especially in the United States, multiple-choice tests and measurements were used to identify students likely to be successful in higher education. While these instruments have become quite sophisticated in design, they are increasingly falling out of favour for a number or reasons, including their inability to assess problem-solving abilities, creativity, and critical thinking; the potential for some students to improve test scores through coaching on test-taking skills without actually achieving high levels of knowledge and skill; and their inadequacy for helping students and teachers improve student learning. Such assessments are also a weak basis for assuring the quality of instruction in colleges and universities. Accordingly, multiple-choice examinations are increasingly being abandoned or supplemented by assessments that emphasise the direct examination of student work in terms of more complex and authentic learning objectives.

  • In Kazakhstan, multiple-choice examinations are being used as a high-stakes basis for university admission and eligibility for state grants, and as a quality assurance indicator of the attainment for graduating students (see Chapter 3 for more detail). These examinations do not attain the level of quality of the multiple-choice tests traditionally used for these purposes in other countries – and in any event, highly respected institutions around the world tend not to rely solely on such tests for important decisions. Better assessments of student learning (including better standardised tests) are needed in Kazakhstan to improve learning and enable more robust quality assurance. The costs that would be involved in this are comparatively low, and public investments would pay substantial dividends in terms of national goals.

  • The net price of higher education. Tuition and fees at public and private universities in Kazakhstan represent a substantially higher fraction of per capita GDP than in most countries. Current policies now provide free higher education for approximately 30 000 students through state grants, but this represents only about one-quarter of the cohort of students who complete the 11th grade. Thus, most students in higher education must pay both living expenses and tuition and fees. As Chapter 3 outlines, there is a lack of financial assistance to help students meet these expenses. It was reported to the OECD review team that private costs undoubtedly prevent qualified low- and moderate-income students from enrolling; they are likely also a factor causing many who enrol to drop out without completing a credential.

Reducing the net price of higher education for those who face affordability challenges is not the same as reducing posted tuition fees. Rather, it implies targeted investments that can achieve real incremental gains – helping students who could not otherwise attend higher education.

Resource allocation mechanisms: support for instruction and access to higher education

The principal governmental mechanism for supporting higher instruction is through “state grants” that are awarded to a set number of students and are allocated among academic programmes throughout the country. Students receiving a state grant receive full tuition payment plus a stipend to cover their living expenses.

While the procedure for system-wide grant allocation was not completely transparent to the OECD review team, interview evidence suggests that institutions bid on new state-funded spots, and that state and national institutions currently control the majority of these spots. Some private institutions reported to the team that they “did not participate” in the state grant system. At any rate, while students at both public and private institutions are in receipt of state grants, a much larger percentage of students attending private institutions pay their own fees. These students (like students at private institutions overall) are often concentrated in areas where state grants are comparatively rare (e.g. social sciences and law).

Students can obtain a state grant based on their score on the Unified National Test (UNT) or the Complex Test (CT), and on their willingness to pursue a degree in a field to which a specified number of state grants is allocated. The use of competition for the allocation of resources is a common feature of budgeting in Kazakhstan. The provision of state grants to students with the highest scores on the UNT who apply to specific programmes of study is the most prominent and significant of these competitions. Research grants are also awarded on a competitive basis. The competitive allocation of research funding has been consistently encouraged as an effective budgetary strategy, but recent reviews have questioned the state grant system as it exists in Kazakhstan (OECD, 2007; Nazarbayev University Graduate School of Education, 2014). It is useful to explore the reasons for such conflicting advice.

Employing a competitive peer review process for awarding research grants is widely considered to be an effective way of allocating limited resources. Normally the proposed research is unlikely to be pursued without financial support. The effort of preparing a proposal builds the research capabilities of those applying, even if they are not awarded a grant in the current round. The judges of the competition can also assess the potential value of the research as well as the capabilities and motivations of those preparing the proposal.

The Kazakhstan programme of state grants has some similar characteristics, but there are offsetting considerations. This programme provides very generous support to students with high scores on the UNT and who apply to academic programmes for which state grants have been allocated. The use of an objective test reduces the risk of favouritism and the appearance (though perhaps not the reality – see Chapter 3) of unfair advantage. The programme may induce some students to stay in the country for higher education who might otherwise go elsewhere – although it was reported to the OECD review team that families which have sufficient means often prefer to send their children to study abroad. The programme also steers students toward fields that are deemed a state priority. Inefficiencies, opportunity costs and in some cases perverse incentives may be offsetting the value of these two outcomes.

The state grant is inefficient to the extent it spends public money with limited influence on student behaviour. The grant is certainly not the only factor motivating academic achievement, which has many intrinsic and extrinsic rewards on its own account. In many countries, nearly all high-achieving students whose families are able to pay for higher education enrol and pay their own way without state support: the financial and social rewards of a higher education credential are sufficient motivation for enrolment. High-achieving students often do receive scholarships and grants to recognise their academic merit, but unless they can demonstrate financial need they rarely have their full tuition and living costs paid.

Kazakhstan’s approach to funding students is inefficient because it forfeits the opportunity to encourage the higher education enrolment of academically able, lower-income students who have lower UNT scores. Every able student who fails to enrol in higher education or drops out because he or she cannot afford to pay for it is a loss to the nation. Both the weaknesses of the UNT as a measure of academic potential, and the sharp distinction it makes between students just above and just below the cut scores for state grants, contribute to these opportunity costs.

Finally, some of the employers interviewed by the review team suggested that students choose academic majors based on the probability of receiving a state grant, rather than on the basis of their interests. These students then become unmotivated workers in internships associated with their academic programme, but they cannot transfer programmes without losing their grant. The “steering” of students toward fields of study that may not be intrinsically of interest to them is unlikely to be productive in the long run. It is more likely to produce a waste of instructional resources and of the student’s time, and may contribute to non-completion.

In summary, Kazakhstan’s decision-makers should review five central issues concerning state grants:

  • The number of grants may be smaller than justified by the nation’s education needs.

  • Although there are some set-asides for vulnerable groups and low-income students, grants are typically provided without any consideration of financial need. An appreciable number of lower-income students without grants, but who would be able to succeed in higher education, are likely not enrolling in academic programmes.

  • The amount of the grants, full-tuition and fees plus a stipend, is almost certainly higher than what is needed to motivate the enrolment of higher-income students, and it is expensive for the state.

  • Tying the grants to a specific academic programme may cause students to choose fields of study for financial reasons rather than their actual interests, and it locks them into a choice that might not persist as they cannot easily change.

  • Scores on the Unified National Test may not be the best, fairest predictor of academic ability and postsecondary success.

These issues involve judgments about financial need; the ability to benefit from higher education; the fairness of the current system; the likely influence of the current state grant policies and practices on student behaviour; and about whether it is truly feasible to anticipate future labour market needs and meet them by allocating places in a higher education system. Other countries have addressed these issues in a variety of ways – some with income-based loan repayment systems, some with a combination of merit-based and need-based grant aid, some with combinations of loan and grant programmes (OECD, 2008; Johnstone and Marcucci, 2010).

Most countries have found that student responses to real signals in the labour market work as well or better than central planning or heavy-handed incentives that seek to match labour market supply and demand. Fairness of access, fairness in pricing, support for academic ability and affordability are all clearly relevant issues for this policy discussion. Of course, no country has found a perfect solution to these complex issues. Continuing evaluation of the effectiveness of the current institutional funding system in Kazakhstan, and a willingness to explore improvements, should thus be important priorities for policy makers.

Functional and dysfunctional uses of formulas

The Government of Kazakhstan, like most governments, takes both formulaic and non-formulaic approaches to allocating higher education funding. They include, for instance, decisions about whether to build facilities or whether to change the status of a higher education institution. It is evident that many decisions about allocations within the system are made by formula, predetermined by policy, or governed by law. The OECD review team met some institutional leaders who argued that particular laws or formulaic policies are impractical, unfair, or unworkable. The team also met many more, though, who simply accepted the law and rules as they exist, and emphasised that the rules were being faithfully observed. Eventually, such non-critical compliance can work against systemic effectiveness.

The current budgetary system in Kazakhstan has a number of explicit categories that distinguish funding for different purposes, but these differences sometimes appear to be based on coarse-grained decision rules that are applied in a mechanical way. For example, the pay for faculty and all staff at national universities is 1.7 times the pay for faculty and staff at state universities in similar job classifications. Although legitimate justifications for differential salaries may exist, it seems unlikely that every position of every kind in a national university is worth 70% more than similar positions in a state university. As a result of this policy, substantially different amounts of funding are provided for undergraduate and master-level instruction at national universities compared to other universities. The basis for these differences appears not to be well understood among universities, and it is difficult to believe that they actually reflect differences that would emerge if salaries were negotiated in an open market for each university. These differences thus represent an inefficient allocation of resources.

Allocating resources to priorities and assessing effectiveness

At the national level, Kazakhstan’s budgeting for higher education has demonstrated both a commitment to innovation and a vision for a better future. The creation of the Bolashak programme and Nazarbayev University are bold initiatives to leverage the resources and expertise of the international community to improve higher education in Kazakhstan. Ongoing efforts to enhance the quality of research, to integrate research and teaching in national universities, to expand early childhood education and improve secondary education, to encourage students to study in regions where there are employment needs, and to reduce the cost of vocational education are likewise indicators of responsive budgeting to meet national priorities.

Thus far it appears that the principal financial strategy for improving and expanding higher education has been to undertake new initiatives, largely as additions to the existing system. These include promoting the development of the private education sector and the creation of the Bolashak programme, Nazarbayev Intellectual Schools, Nazarbayev University, etc. Adding new initiatives is a natural strategy for a system of education seeking rapid improvement.

Careful evaluation of new initiatives can lead to a refocusing that generates improvements over time. This has been occurring in Kazakhstan, and it is likely to become increasingly necessary as the nation seeks to diversify its natural resource based economy. Examples include the “optimisation” of the private sector, and the refocusing of Bolashak scholarships to emphasise graduate education after the creation of Nazarbayev University.

Kazakhstan could further improve the effectiveness of the higher education sector by continuing the careful evaluation and refinement of new initiatives, and by probing more deeply into the effectiveness and efficiency of long-standing practices. For instance, while it is widely hoped that the contributions of Nazarbayev University will significantly benefit the entire educational system, it is also clearly acknowledged that its financial model cannot be replicated in other places. Furthermore, the OECD review team had trouble identifying concrete instances of how the Nazarbayev University model has been used to make substantial improvements at other universities in Kazakhstan. This calls into question whether the significant investments that are being made in the new university are generating the benefits that might be expected of them.

The National Report on the State and Development of Educational System in the Republic of Kazakhstan (JSC Information-analytic center, 2015b) offers another example of a practice that would benefit from evaluation and possible reconsideration. The report employs an elaborate rating of educational performance in each region of the country based on a number of factors. While it produces rankings from year to year, it is not evident from the report why performance varied from year to year. Nor does the report provide much analysis explaining the differences in performance among regions. It would be necessary to explore the underlying causes of these differences in order to use data to improve the performance of institutions and the system as a whole. Measuring performance to develop rankings is not enough to improve performance, especially when the validity of the measures and the causes underlying them are not fully understood.

Finally, the extent of centralised control over higher education in Kazakhstan is a damper on initiative and creativity at the institutional level. At the national level, goal setting and a spirit of experimentation have resulted in significant actions to improve the system. The OECD review team observed a similar level of energy and initiative at a few institutions and among some faculty, but it was not widespread. Frequently when asked about certain institutional practices, the response was “we follow the law.” Providing space for priority setting and reallocation at the level of schools and colleges should lead to system improvements.

Building the capacity of the system

Kazakhstan’s recent initiatives, especially the Bolashak programme and the creation of Nazarbayev University as a comparatively autonomous institution, are investments in developing the capabilities of education professionals. The Bolashak programme sends some of the very strongest students in Kazakhstan abroad for their education. Nazarbayev University provides in-country higher education for strong students; it draws on advice from internationally respected universities and employs faculty from abroad. Nevertheless, realising the nation’s educational aspirations will require an intentional strategy to develop a much higher-level of administrative and professorial capability throughout the higher education system.

The Bolashak programme appears to be infusing an international perspective into higher education and other sectors of Kazakhstan; people to whom the OECD review team spoke generally considered it successful. For the future, the challenge will be to create the conditions necessary to retain the Bolashak grant recipients after the completion of their mandatory service and to integrate these talented and well-trained individuals into leadership roles in the country – including in the higher education sector.

For its part, Nazarbayev University is clearly too expensive to be a scalable model for other universities in Kazakhstan. Moreover, given the limitations on the current public education budget, the university generates significant opportunity costs for the rest of the system. It is too early to know whether the lessons learned from developing this university will successfully benefit other universities in ways that are financially feasible. Without question, though, additional resources will be required in other parts of the higher education system in order to meet national goals.

Kazakhstan clearly has the resources and potential to achieve its educational goals: many talented individuals work in the system. Promising seeds have been planted and the potential for them to grow is evident. The maturing of the system, however, will take time and call for some risk-taking. It will require that policy makers give faculty and staff the freedom to do things differently. The maturing of the system will also require professional development opportunities and changes to provide more discretionary authority at the campus level. Further delegation of the responsibilities previously or currently held by the MESRK to institutions and boards of trustees is likely to advance progress.

A rapid, dramatic transformation of Kazakhstan’s higher education system is neither desirable nor possible, but the inertia present in all organisations will slow or even prevent positive changes unless concrete, deliberate actions are taken to achieve them. Changes in financial policy as well as in the governance framework will help build capabilities of the people in the system.

Achieving efficiency and assuring integrity

Achieving efficiency and assuring integrity are two facets of a fundamental purpose – the desire to use resources well and avoid their deliberate or unintentional misuse.


By inviting multiple outside reviews, Kazakhstan has demonstrated openness to learning and innovation in its approach to budgeting and financial policies. The Country Background Report prepared for this review (JSC Information-Analytic Center, 2015a) and the National Report on the State and Development of the Educational System of the Republic of Kazakhstan (JSC Information-Analytic Center, 2015b) suggest that an enormous amount of information about the system is being collected. Apparently most of the data collection is used to assure compliance with law and regulation.

It would be helpful, though, to evaluate the current role of information in the system and to consider how information might be more effectively used to reach national goals. Although a great deal of higher education information is collected, the OECD review team noted important data deficiencies, and observed that data and information may not always be used effectively to ground policy decisions. As institutions progressively take more responsibility for their internal operations, both they and the Ministry will discover the need for new analytical tools.

Financial controls and audits

The scope of this review was too wide, and the amount of time on site too brief, to develop a comprehensive understanding of the system of financial controls and audits employed for higher education in Kazakhstan. However, the review team’s impression is that decision-making is predominately centralised, either through a system of required approval before purchase or via extensively detailed regulations. Chapter 7 discusses these matters in more depth.

Public institutions cannot retain revenues, so it is common for virtually all but an insignificant fraction of revenues to be spent every year. This policy removes natural incentives for efficiency and cost effectiveness, since there is no benefit to be gained from not spending available resources. If institutions were able to retain funds, to take more responsibility for managing their own revenue streams and to build endowments, incentives for cost-effectiveness and planning for long-term improvement would be created (see Box 6.3).

Private institutions complained about the level of governmental regulation but agreed that, in the area of procurement at least, they have much more flexibility than public institutions. Without exception, researchers in public universities questioned the necessity of the level of control involved in public procurement processes. One faculty member commented that it is far easier to raise money for research than to spend it.

Box 6.3. Financial regulations and retention of revenues

A survey of 29 European countries identified the following statistics regarding the ability of higher education institutions to keep any surpluses they generate.

  • Only 4 countries do not allow higher education institutions to keep their surplus: Cyprus1, Greece, Ireland and Lithuania.

  • 15 jurisdictions allow the surplus to be kept without restrictions: Austria, Denmark, Estonia, Finland, France, Hesse, Hungary, Iceland, Italy, the Netherlands, North Rhine-Westphalia, the Slovak Republic, Spain, Switzerland and the United Kingdom.

  • 3 countries allow higher education institutions to retain their surplus up to a maximum percentage: the Czech Republic, Norway and Sweden.

  • 5 countries require approval of an external authority for higher education institutions to keep their surplus: the Czech Republic, Latvia, Luxembourg, Portugal and Turkey.

  • 3 jurisdictions allow higher education institutions to keep their surplus, but its allocation is pre-determined by an external authority: Brandenburg, Poland and Turkey.

  • One jurisdiction allows higher education institutions to keep their surplus kept but imposes other types of restrictions: Belgium-Flanders.

1. Notes by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

Sources: This and other information on (financial) autonomy in Europe can be found at:

It is evident that observing financial regulations is a significant requirement in all major decisions – for hiring staff, purchasing equipment, letting a contract, etc. This is particularly the case for public institutions. Prior approval from an external authority is often required before a transaction can be completed.

There are of course perennial debates over the appropriate and necessary degrees of governmental regulation of institutions of higher education, and these occur in every country. In the specific case of Kazakhstan, though, the findings of this current review are consistent with those of the 2007 OECD/World Bank review and the Roadmap report team in 2013-14. Government regulations and financial practices provide very little flexibility and limited incentives for institutions to become innovative and more efficient.

The role of the private sector

The creation of many private higher education institutions in the post-independence period was initially part of a strategy to rapidly increase higher education opportunities and reduce youth unemployment. Most of the revenues of these institutions were, and continue to be, provided through self-paid student tuition and fees. By 2005, private institutions accounted for 61.4% of the institutions in Kazakhstan, and 46.3% of postsecondary enrolment (OECD/World Bank, 2007).

Over the past ten years, there has been a sharp decline in the number of institutions in Kazakhstan. This stems in part from an effort “to improve quality and efficiency and assure diversity” in the system of higher education (Nazarbayev University Graduate School of Education, 2014). The reduction occurred almost entirely in the private sector where the number of institutions fell from 130 in 2004 to 77 in 2014 (JSC Information-Analytic Center, 2015a). It was reported to the OECD review team, though, that the reduction in the number of private institutions is more apparent than real: much of it stemmed from institutional mergers, not closures. The share of students studying in private institutions has not fallen. In fact, it has increased.

Although most OECD countries rely primarily on public institutions to provide higher education, the private sector plays the predominant role in Japan and Korea. It also plays a significant role in the United States, where approximately 30% of enrolments are at private institutions. In the past quarter century, Kazakhstan has gone from a higher education system that was small but virtually entirely publicly owned and operated to one where most institutions and slightly more than half the enrolments are in the private sector. Without question, the growth of the private sector has created educational opportunities that would otherwise not be present. Private institutions are contributing significantly to the human capital of the nation. It is difficult to imagine the future of higher education in Kazakhstan without a significant role for the private sector, but how that future unfolds is an important question.

Policy deliberations on the future will need to consider the respective roles, responsibilities, and privileges of public and private institutions. Are their responsibilities parallel and similar or somewhat different and distinctive? Is the national interest served by these sectors playing complementary or competitive roles? If the former, in what ways and along what dimensions should they be distinctive and complementary? If the latter, in what areas should they compete and what should be the ground rules for competition?

From the point of view of finance, the following questions arise: what should be the role of the state in financing public and private institutions? Should there be different criteria for public and private institutions? Should the state provide more assistance to students attending institutions with higher costs, be they public or private? Should different kinds of assistance be provided to students attending different institutions?

It is evident from the review team’s visits to public and private institutions that these questions are very much on the mind of educational leaders in both sectors. The seeds of a vigorous, competitive public debate between the sectors have been planted.


This chapter has raised questions, discussed issues and suggested actions that might improve the effectiveness and efficiency of Kazakhstan’s higher education in meeting national goals. The following recommendations distil the main themes of the chapter, which have also been explored to some extent in preceding chapters of this review.

The size of the public investment in higher education should be increased, bringing it more in line with levels in peer countries that Kazakhstan seeks to emulate.

  • Kazakhstan’s public investments in higher education do not match the country’s ambition to develop world-class skills and knowledge. Private sector investment, while greater than public investment, does not make up the gap.

  • New public investments should be carefully allocated in ways that: help attract and retain the talent essential for a strong system of higher education; reduce artificial barriers to higher education; and ensure that sound student assessment practices foster the development of skilled graduates.

The national government should now and at regular intervals in the future re-assess its financing strategies for higher education in the context of national goals.

  • An ongoing, systematic and strategic review process should ensure that financial resources are adequate, and that they are effectively allocated to achieve these goals for all institutions in the system.

  • This process should actively engage a wide range of stakeholders, to ensure that it is based on sound sectorial intelligence.

The effectiveness and efficiency of the state grant system in serving national purposes should be re-evaluated.

  • Kazakhstan’s current system of providing students with grants for “excellence” represents a significant deadweight loss in the higher education system. Given already low public investment levels, this is something that Kazakhstan cannot afford. The grants system also has unintended effects on student choice.

  • Modifications to the system, including providing grants based on the financial need of qualified students and expecting greater financial contributions from higher-income students, should be strongly considered.

The level of financial controls on institutions should be significantly reduced.

  • Kazakhstan should emphasise post-audits rather than pre-audits, and it should allow institutions to retain and accumulate funds over time in order to strengthen their financial stability and flexibility, and to provide incentives for greater efficiency and effectiveness.


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← 1. The average tertiary spending as % of GDP for OECD countries stands out at 1.6% (OECD, 2015). It is important to note however that the OECD data covers all tertiary education and not just higher education.