Fiji has made a strong and commendable commitment to tertiary education, unmatched by any small developing country in the world. Public investment in universities and training institutions reflect a recognition that human capital is central to productivity growth, economic diversification, and social mobility. In a small island economy with limited natural resources, education is not a luxury, it is a necessity.
However, good intentions do not automatically translate into good policy outcomes. Fiji’s current tertiary education financing model, where government provides operational grants to institutions, capital grants to state-owned universities, and tuition scholarships to students across both public and private providers, has created a set of incentives that risk double subsidisation, surplus leakage, inefficient use of public infrastructure, and weakened accountability for public funds.
If these issues are not addressed promptly, Fiji risks spending large and growing sums of public money while its own universities remain underutilised and public funds quietly accumulate private assets.
The structure of Fiji’s tertiary system
Fiji has two public universities: Fiji National University and the regional University of the South Pacific, which Fiji partly owns and heavily supports. Alongside these are several private tertiary providers, operating either as charitable trusts or private companies.
All recognised tertiary education providers receive government operational grants.
The two public universities additionally receive capital grants. At the same time, students enrolled across all universities — public and private — receive government-funded tuition scholarships.
On paper, this appears generous and inclusive. In practice, it raises serious questions about efficiency, fairness, and value for money.
The first problem: Double subsidy and blurred accountability
The most fundamental question is this: If the government is already paying a student’s tuition, what exactly is the operational grant paying for? From a public finance perspective, tuition fees paid by the government are already a form of operating revenue for universities. When an institution receives both full or near-full tuition paid by the State and an additional operational grant, there is a real risk that public funding exceeds the cost of delivering education.
There is a clear and defensible rationale for this arrangement in the case of public universities.
The government may intentionally keep tuition fees below cost to promote access and equity. In such cases, an operational grant simply fills the gap between tuition revenue and the true cost of delivery.
This is common in public systems worldwide. But this logic does not automatically extend to private universities. Private providers enter the sector on the premise that they have independent financial capacity, price programs close to cost recovery, and assume commercial risk in return for autonomy and ownership.
When private institutions receive both full tuition subsidies and operational grants, the operational grant is no longer gap funding.
It risks becoming pure margin. This surplus per student in private universities are not regulated and thus becomes discretionary surplus.
Public money vs private capital
A second and deeper concern is the conversion of public money into private capital.
The problem intensifies when surplus generated from public operating funds is used for capital expansion. Some private providers, who can generate operating surpluses from budgets funded by government tuition and operating grants, transfer those surpluses into land acquisition, buildings, and long-term assets that remain privately owned.
From a public accountability standpoint, this raises a fundamental question: Why should public recurrent funding be allowed to build private capital stock for which the state does not retain ownership, equity, reversionary rights, or enforceable public-interest claims over assets that are indirectly financed by taxpayers?
The third inefficiency: Funding duplication while public capacity sits idle
The third issue is about system-wide efficiency.
The government has already invested heavily in staffing and infrastructure at its own universities, particularly FNU, across TVET, accounting, business, education, and applied professional programs. Yet students can receive government-funded tuition to study the same programs at private institutions, even when public universities have unused capacity.
This creates a classic case of what economists term it as “allocative inefficiency”. The government pays to build and maintain public capacity and pays again for parallel delivery elsewhere.
A simple example: suppose USP/FNU has a capacity for 800 students in Accounting. Only 500 enroll, leaving 300 seats empty. The government then pays tuition for 300 students to study the same program at a private provider.
The result, USP/FNU’s fixed costs (staff, facilities) are still fully funded. The government incurs additional variable costs by paying private tuition.
Even if tuition fees are identical, total system cost rises because public capacity is underutilised.
How other countries manage these trade-offs
International experience shows that these problems are not inevitable, they are managed through clearer funding rules.
In Australia, public funding for teaching is largely channeled through Commonwealth Supported Places (CSPs) under the Commonwealth Grant Scheme.
The government explicitly subsidises a defined portion of tuition, while students pay a regulated contribution (often deferred through HECS-HELP).
Crucially, the subsidy is clearly defined as a teaching subsidy, not an open-ended operating grant layered on top of full tuition.
Private providers may access student loan schemes, but do not receive blanket operating grants, and capital funding remains overwhelmingly a public-university responsibility. The principle is clear: public teaching subsidies are transparent and bounded.
In New Zealand, tertiary funding is largely based on EFTS (Equivalent Full-Time Student) funding, administered through the Tertiary Education Commission.
Funding is formula-based, linked to delivery volumes and eligibility rules, and subject to explicit conditions. Private training establishments may receive funding for approved delivery, but capital formation remains tightly constrained, and funding instruments are clearly separated. Across both countries, one lesson stands out, public funding is designed to purchase outcomes, not to accumulate private assets.
What reform could look like in Fiji
The solution is not to oppose private providers. They play a very important role in offering low-cost, high-quality education at levels 1 to 4 (within the qualifications framework) in particular with public universities providing qualifications level 5 and above.
Furthermore, Fiji needs a competitive, diverse, and innovative tertiary education sector that provides choice to students, as well as teachers, trainers, and lecturers. The solution is to align funding instruments with public objectives.
First, the HEC should identify which programs are needed for the country and not offered by Government owned Universities, and these could be left to the private provider with quality guidelines.
The provider must provide the unit cost of delivery of these programs, and an operating grant must be provided for these programs, either in full or as a subsidy, with students eligible to get government tuition assistance.
Second, for those programs that the government cannot provide fully, then a full tuition scholarship be provided to students at the private providers. All programs must be of quality and accredited by an appropriate accreditation body. Last, the government may direct the private provider to offer the program at locations not covered by its Universities.
When TISI Sangam wanted to establish its School of Nursing in Suva, the Government directed them to offer it in Labasa instead of Suva and in return, students will be eligible to get scholarships, the Government will provide its curriculum for free and allow its hospitals for student placement.
There was no commitment for government grant at that time.
Where operating grants are provided, their use should be restricted to teaching delivery, student support, and agreed public-interest objectives. Conversion into private capital should be prohibited unless accompanied by strong public safeguards. Furthermore, all providers receiving public funds should be asked to publish comparable cost and utilisation data. The government should publish the cost per graduate, completion and employment outcomes, utilisation rates of public facilities, and total public funding received by each provider.
Concluding remarks
This debate is not about public versus private education. It is about proper, accountable and efficient utilisation of public funds. A well-designed tertiary funding system should avoid paying twice for the same outcome, prevent public funds from quietly becoming private wealth, ensure public infrastructure is fully utilised, and deliver maximum educational value per dollar spent.
If Fiji tightens these rules now, it will not reduce access. Instead, it will protect taxpayers, strengthen its public universities, ensure private providers play a complementary role, and restore coherence to tertiary education financing. At a time of fiscal pressure, Fiji cannot afford a system where public money works twice as hard—but delivers only once.
DR MAHENDRA REDDY is a Senior Fellow at the Graduate School of Business at the University of the South Pacific. The views expressed in this article are his and do not represent those of his employer or this newspaper.
