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Already struggling to keep student numbers up amid an ever-shrinking pool of high school graduates, private universities now face a new threat — stock exchange-listed companies entering the fray of running institutions of higher learning.

Tokyo Legal Mind K.K., which runs a prep school for the highly competitive bar and other national-level exams, this month will open one of Japan’s first stock company-run institutions of higher learning.

“Regular universities have not satisfied the needs of the public,” said Katsuo Sorimachi, who serves as president of both the company and the newly established LEC Tokyo Legal Mind University. “The goal of our university is to enable all students to find employment when they graduate.”

Tokyo Legal Mind and Digital Hollywood Corp. obtained approval in February to operate institutions of higher education in government-designated special deregulation zones in Tokyo’s Chiyoda Ward and the city of Osaka, in line with Prime Minister Junichiro Koizumi’s structural reforms.

While meeting the government-required university academic criteria, the two institutions plan to also teach extra skills amid the nation’s hiring slump, including the legal knowledge considered effective in the real business world.

Digital Hollywood, which runs a multimedia business school, is debuting the Graduate School of Digital Hollywood in Chiyoda Ward to foster producers and engineers for television, film and video game businesses.

LEC, which is opening a campus in both Chiyoda Ward and Osaka, is offering a career development course to arm students with the skills to work in the corporate world, and to pass national-level exams, including for the legal, accounting and civil service professions.

According to LEC, 141 applicants successfully passed its first entrance exam held in March — well above its initial enrollment limit of 110. It plans to hold a second exam in April to bring in at least 70 more students.

The establishment of the two stock company-run schools is something of an experiment for Japan. And education authorities are most concerned about how they will be managed.

The Education, Culture, Sports, Science and Technology Ministry required the two companies to beef up their management to ensure the financial stability of their fledging institutions.

Universities up to now have banked on their prestige, research endeavors and the ability to give students a broad range of academic knowledge — as well as subsidies.

The government is thus requiring firms that run the new private universities to have stable management.

Established private universities are prohibited from pursuing profits and are legally required to meet certain financial standards. They are meanwhile supported financially by government subsidies and enjoy favorable tax treatment.

More than 90 percent of private universities receive government subsidies. The rest either opt not to seek or are denied the money, either because of improper financial management or student numbers that fall outside government-set limits, an education ministry official said.

In a sense, private universities have been protected, and critics have charged that this has discouraged them from pursuing innovative programs.

The new company-run institutions are not entitled to government financial support.

However, Sorimachi said his firm will be able to expand its university business, noting that LEC will be able to attract students who want to acquire both a bachelor’s degree and professional qualifications at the same time.

LEC also plans to form alliances with other universities so that students can transfer credits, and it will let students at its prep school attend classes at the university for a fee, which will be an additional source of revenue.

“We are confident we can manage the university successfully because we have the experience of running a prep school for nearly 30 years,” Sorimachi said, adding that the university hopes to turn a profit by fiscal 2005.

One major concern of Sorimachi’s was a regulation requiring universities to keep any new course curricula basically intact for at least four years so that students have consistent programs.

“Just like manufactures launch new products . . . we need to continue to offer programs, textbooks and teachers who can meet the changing needs of customers,” he said. “If we fail to do this, we cannot survive.”

LEC is in talks with the education ministry, hoping to be able to shorten the four-year period to one year and thus maintain an innovative edge.

In this way, it hopes to give established universities a run for their money, as they all vie for a shrinking number of students amid the nation’s declining birthrate.

This may prove a tall order.

About 28.2 percent of 521 private universities surveyed failed to fill their projected freshmen numbers in fiscal 2003, according to the government-affiliated Promotion and Mutual Aid Corporation for Private Schools of Japan.

Yuichiro Anzai, president of Keio University and chairman of the Japan Association of Private Colleges and Universities, said the stock companies’ entry may pose a threat to private universities, although he doesn’t foresee a drastic rise in company-run institutions.

“Stock companies can cover losses made from their university businesses by other profitable businesses. So if they can offer better education programs at lower rates, even our university would be threatened,” he said. “We have to obtain higher evaluations” based on our academic programs.

Tokyo Legal Mind meanwhile plans to increase its presence gradually.

LEC plans to file applications with the education ministry to open new campuses in Tokyo’s Shinjuku Ward and Matsuyama, Ehime Prefecture, in April 2005 and is considering setting up two graduate schools — one for law and the other for accounting.

“We aren’t worried about a sharp drop in the number of children” because the university student market is still big enough for LEC, Sorimachi said. “We are not competing with other universities. We are only trying to offer better services that can satisfy consumer needs.”

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