Vision 2020: Sustainable Growth, Economic Development, and Global Competitiveness 13 Funding Higher Education: Analysis from the Context of Developing Country Abd Rahman Ahmad (Corresponding author) Faculty of Technology Management and Business, Universiti Tun Hussein Onn Malaysia, 86400 Batu Pahat, Johor, Malaysia Tel: +607 4533953 E-mail: arahman@uthm.edu.my Ng Kim Soon Faculty of Technology Management and Business, Universiti Tun Hussein Onn Malaysia, 86400 Batu Pahat, Johor, Malaysia ABSTRACT Higher education in most of the country contributes to the human development to promote highly educated society in order to keep stability in economy, social, and political. In order to promote sustainable development, the role of higher education is very important because the governments in most developing countries provide strong funding capacities to their higher education institutions. Therefore, the strategic funding approach that based on the performance based become very popular to be implemented to increase the accountability and transparency. Keywords: Funding, higher education, developing country 1. Introduction Higher education around the world has shown dramatically decreased on the state funding. These challenges require reform for HEIs in order to survive with the increase on costs, complex set of problem, expend roles of higher education, and demand for more accountability in higher education (Altbach, Reisberg, & Rumbley, 2009). Funding reform according to Schiller & Liefner (2006) comprise of government budget cuts, performance-based funding, and diversification of the funding base. In the context of developing countries the major funding sources of funding for higher education come from government. However, in some developing countries, Varghese (2004a) points out that there is strategy to be more independent from the public resources to finance the HEIs activities that includes privatisation of public universities and the promotion of private HEIs. 2. Literature Review Albrecht and Ziderman (1992) pointed out the need for developing countries to provide effective policies for funding mechanisms in order to stabilise the supply of resources and created links between subsidies and higher education admissions. They stated that funding access could be achieved by establishing funding formulas and linking them to access to the labour market. These policies need to generate a diversification of funding resources, not only engaging in one. Therefore, they need to diversify activities of research and development, consultancy, entrepreneurship, patenting, and commercialisation to generate returns for resource funding. In order to implement this policy, HEIs need to be given academic autonomy and control of their own resources. Governments in most developing countries provide strong funding capacities to their HEIs. However, Schiller and Liefner (2006) have argued that although similarities exist in the HEI funding of developed countries, universities in developing countries still experience extreme politicisation of their environments (Jongbloed, 2000). For this reason, there are different approaches to allocations of funding in developing countries. For example, some governments in developing countries use negotiation-based approaches, while others use performance-based approaches or formula-based allocations to determine funding allocations. The higher education system in developing countries experience deficiencies in some area that restrict for the future development. This includes the quality of the faculty, students, and insufficient of resources and autonomy (Mundial-Unesco, 2000; Salmi, 1992). Meanwhile, Tilak (2000) argued