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13. Economic Development Model

13.1. Challenges for the Current Model

Over the past decade (2009–2018), HSE University’s development has been supported primarily through its expansion of traditional forms of rendering services and completing works (in higher education — full degree programmes for Russian citizens; in CPD — provision of services to individuals; in R&D — project works by order of clients and the state assignment), among other things, via consistent diversification of subject areas and expanding the University’s profile (from socio-economic to a classical approach). HSE University’s income has almost quadrupled over this period (from 5.7 billion RUB in 2009 to 21.5 billion RUB in 2018), with the general structure of its income preserved, as the percentage of the given types of income for education and science still accounting for over 85%. At the same time, HSE University ranks among Top-3 largest Russian universities, taking the second position in terms of total income and third position in terms of off-budgetary income.

The further extensive development of HSE University shall be definitely limited by the current situation on the markets and potential of applicable business-models. In particular for the period 2024–2030, the prospects of growth in the total number of students and doctoral students without damage to the quality of admission standards are limited to 10–15%, while income generated by programmes of higher education — to 25–30%. In addition, the ongoing services model for CPD programmes has reached its saturation level, as the scope of services over the last three years has, in fact, remained unchanged. The prospects for receiving further allocations from the budget cannot be regarded as overly positive as well (in 2018, HSE University was second among Russia’s public universities in terms of this ratio).

Altogether, future investments in new drivers of competitive advantages are essential for establishing a world-class university. The annual volume of resources allocated for the University’s development projects shall be maintained around at least 25% of HSE University’s total budget.

13.2. Finding and Engaging in New Opportunities

The qualitative changes planned for HSE University include a move from an extensive to an intensive development model, with a primary focus on capitalizing the University’s accumulated experience and know-how by accessing new or newly forming markets, as well as the utilization of new technologies and related business models.

With respect to education, such opportunities will be implemented in the following priority areas:

  • the global market

HSE University is significantly expanding its admission of international students, e.g., through the promotion of English-taught academic products, offered in traditional (in-class) and online formats; the share of international students will increase 1.5x by 2024, then doubling by 2030.

  • digital learning technologies

In addition to expanding its line of eLearning courses, HSE University plans to develop more integrated products, with a focus on the specific needs of various types of students and learners: target-focused (and, as such, individual) collections of e-courses, along with long-distance educational programmes of various levels and volumes. Such academic platforms will ensure the personalized interconnection between students and teachers with the authors of various types of academic projects, as well as allow them to build individual curricula, e.g., with attention to each student’s ability to comprehend and master course materials.

  • network formats for learning.

HSE University will continue to develop its partner network of academic institutions, research centres and companies in order to offer students better opportunities to combine their knowledge and skills. The University’s courses and programmes offered through its partner institutions, will receive methodological and technical support, coupled with the active inclusion of teachers in the academic process.

  • continuing education and business training.

By focusing on rising demand for in-depth instruction, retraining and enhancement of qualifications, HSE University will provide its partners with access to individualized academic products from its integrated portfolio, of programmes from Bachelor’s degree to EMBA, in partnership with the best business schools around the global, as well as through attracting top experts in business administration to the University’s research centres

In the scientific sphere, there are additional possibilities for growth thanks to expansion of the University’s grants for fundamental research.

Total grants from academic/scientific funds, received by HSE University’s academic centres and researchers through competitions shall more than double by 2024 (upon to 500 million RUB per annum), and this figure shall further double by 2030, which will be one of the best outcomes in enhancing the University’s academic reputation in brand new fields.

Further capitalization of research outcomes shall be possible thanks to expanding applied orders from corporate partners and regional administration, e.g., through HSE University’s participation in setting up sector-focused platforms and joint innovation projects.

Although, by 2024, HSE University’s main revenue stream will come from its services and works, by 2030, the share of revenue generated on new markets and new business models will count for up to 30% of the University’s budget (from its current 6.5%). More detailed information about the new types of services and new markets for the University are described further in this Programme’s sections on education and science.

For 2020-2023, the key investment priorities for HSE University may include:

  • the University’s digital translation as a foundational condition for the further development of its academic model, information infrastructure for research and development, as well as for boosting its administrative processes;
  • developing its online learning and digital education resources;
  • modernizing continuing education and business training.

Overall, these fields will require that the University invest over 4 billion RUB, with the expected return appearing as growth in new types of revenues coupled with enhanced performance starting from 2022.

13.3. Leveraging HSE University’s Internal Resources

With due consideration of the scale of the University’s activities at the moment, significant enhancement of internal performance is a prerequisite for the successful search of resources for development, as well as ensuring near double growth of the income ratio per staff member over the forthcoming decade.

To this end, in 2020–2024, the University will implement a whole set of additional measures for increasing the efficiency of HSE University’s activities on the basis of:

  • enhancing the portfolio of educational programmes and the structure of courses;
  • restructuring “small” programmes to eliminate duplicated content in courses, along with their partial replacement with online formats, etc.; 
  • providing for more flexible and focused pricing policy at HSE University, including through the in-depth segmentation of target groups of students, as well as the economic analysis of educational programmes;
  • upgrading administrative processes on the basis of information technologies, including the integration of registration and processing systems, transition to the use of digital signature in the online document flow relating to operations with staff and independent contractors, organizing unified service centres (i.e., in procurements procedures, academic mobility, etc.), introducing state-of-the-art interfaces for providing administrative services;
  • cutting “non-core” types of revenues, which are not secured by respective sources in the structure of the University’s income.

The latter provision refers to HSE University’s transition to a new model of accommodation arrangements for international students and students from other towns (see Section 11.2 for details), on the basis of its partnership with players on the real estate market in relevant cities, where the University’s role will be focused on organizing services to be provided to students, primarily, international students, looking for suitable accommodation. The transition to the new model is expected to start in 2021. These steps will allow HSE University to mitigate its shortage of dormitory places to a certain extent, while 300-500 million RUB shall be spent every year to solve this issue.

Rooms at HSE University’s own dormitories will eventually be provided on a competitive basis, primarily to students eligible for benefits who are unable to pay for rented accommodation at their own expense. The University will take reasonable steps towards defining the model, which would ensure adequate coverage of expenses for the maintenance and equipment of dormitories by relying on external sources of financing in conjunction with the relevant authorities, in order to avoid spending the University’s revenues from tuition fees.

13.4. Infrastructure-related Restrictions

The transition to a project-based format of study, which is set forth in the Development Programme, sets new infrastructure requirements with respect to students’ research and study work. The deficiencies in HSE University’s infrastructure represent one of the key limitations for its progress, as the University is unable to invest resources to develop new facilities and properties during the entire period of the Development Programme’s implementation.

Owing to its social role and status as a public institution, HSE University is, by definition, unauthorized to generate revenue relating to financial and asset-based capitalization. It has no sources of its own for accumulating proprietary assets. Therefore, HSE University is entirely dependent on its founder to this end.   

13.5. The Development Programme’s Implementation Risks

The Programme has been outlined with reference to the basic scenario of Russia’s social and economic development, as drafted by the Ministry of Economic Development of the Russian Federation under the “Forecast of the Social and Economic Development of the Russian Federation for the period up to 2036”, with due consideration of the following estimates:  

  • in 2024, the working-age population will come to 84.8 million people and go up to 89.5 million people in 2030 (as compared with 82.5 million people in 2020);
  • by 2030, net disposable household income is expected to grow as compared with 2018, reaching 30.6% (or 27.9% as per the conservative forecast).

The dynamics in regard to the scope of research at the University has been planned with due consideration of the indicators fixed in the Russia’s government programme “Research and Technological Development in the Russian Federation”, which foresees an increase in internal R&D expenditures from all sources from 1,110 billion RUB in 2018 to 1,848 billion RUB in 2024, or by 33%, taking into consideration the estimated CPI (consumer price index) in the basic scenario, along with further growth at a proportion of 1.01 to GDP dynamics, which means additional growth by 29% up to 2030.

The basic ratios of HSE University’s development dynamics, in general, correspond to the aforementioned trends under the basic scenario: the annualized weighted ratio of HSE University’s student population will likely go up by 11% in 2024, as compared with 2018, and by 14% in 2030, while the main driver of growth shall be the increased percentage of international students (from 9.1% in 2018, to 14% in 2024, and 20% in 2030); the correlation between the average wages of academic staff members to the relevant ratio for the region’s economy will increase from 225% in 2018, to 260% in 2024, and 310% in 2030.

As the key risk arising in this scenario, HSE University might be exposed to the risk of a significant drop in the purchasing power in higher education. Taking into account the dynamics of household income growth and foreign economic ratios, as provided in the basic scenario from the long-range forecast for Russia, the extent of this risk seems acceptable. However, if the event of the negative scenario, the risk can be mitigated through reducing University's operating expenses and placing limits on internal investment rates.   

Provided that R&D projects account for approximately 25% in HSE University’s total revenues, which corresponds to its model of a research and project-focused university, this factor can be regarded as crucial for the Development Programme’s successful implementation. This assumption means that HSE University’s anticipated returns on its research activities should grow by 97% in 2024 as compared with 2018, and furthermore still by 56% before 2030. This growth shall be achieved through:

  • HSE University’s own efforts with a particular focus on the significant increase in extra-budgetary revenues from R&D projects: as compared with 2018, by 111% in 2024, and by 218% in 2030;
  • expanding the state assignment for scientific research at the founder’s initiative — up to 50% of the state assignment for educational services by 2030; this step will allow HSE University to retain the share of revenues of this type in its total income on the current level (10–11%).

HSE University’s global competitiveness is also largely susceptible to the availability of the world-class infrastructure (see Section 11 “World-Class University Environment”). To this end, the University is expected to eliminate its shortage of classrooms and lab spaces, as well as rooms in dormitories, and ensure access to up-to-date infrastructure. Respective decisions on the part of HSE University’s founder are vital for the Programme’s successful implementation.