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May 26, 2015
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Axact and diploma mills

Opinion

May 26, 2015

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The New York Times expose earlier in the week showing that Axact Technologies’ is not the ‘World’s Leading IT Company’ but allegedly a front for a massive fake degree scam was nothing short of sensational.
If the NYT’s allegations are proven, then how Axact was able to operate its ‘business model’ in the fashion it did for more than a decade below the radar of Pakistani officialdom beggars belief. The company’s ascent seemed plausible enough as computer software and the business possibilities of the online world have created billionaires not only in Silicon Valley but also in India and China; Axact tapped into this meme by projecting itself not only as riding the new wave of technology but being at the very forefront of innovation. In other words, a Pakistani success story at the global level.
The presence of an ambitious CEO only added to the halo around Axact since no one gets to be richer than Bill Gates (the Axact CEO’s professed aim) by being shy and humble. The naysayers who murmured their misgivings about all not being quite right with Axact were dismissed as conspiracy theorists driven by envy, who didn’t get how the world had changed for ambitious entrepreneurs willing to harness technology to achieve their globe spanning aims.
In their follow-up editorial, ‘A rising tide of bogus degrees’, the NYT cites a source indicating that there are 3300 “unrecognized” universities worldwide. They also say that Axact is connected to about 370 education websites of which around 100 have been identified by the NYT as providing post-secondary school educational “certificates”.
It would appear that Axact accounts for around three percent of the worldwide population of universities existing in name only – a significant if not overwhelming percentage. In revenue terms if we use the figure given by the NYT of over 50,000 PhDs being ‘awarded’ each year by these online ‘universities’ and if each PhD given costs on

average $4,000 to the recipient then total revenues generated annually in this ‘segment’ are around $200 million of which Axact’s share could be around $6-$10 million if we assume it has a 3-5 percent market share based on the NYT numbers.
How much revenue Axact generated from its online diploma platforms is of course moot but the NYT article cites a former employee claiming that Axact was generating at least $120,000 a day – or over $35 million annually (assuming weekends off for employees). If true, this is greater than the combined current annual revenues of two leading Pakistan based IT companies, Systems Ltd and Netsol Technologies as indicated by their financial statements.
The profit margins must be staggeringly high since there are no expensive faculty on the payroll, no buildings and stadia to maintain and no direct or indirect taxes to pay since revenues are booked in tax-free locations such as the British Virgin Islands, Belize and Dubai where the majority shareholder (s) is based. Given that revenues are earned in dollars while expenses are incurred for the most part in rupees there is the strong likelihood that profit margins and overall profits have been swelling by substantial amounts since the rupee has been depreciating consistently against the dollar over the past several years.
Aside from reports of boiler-room sales tactics, the issue now is whether what Axact is alleged to have done breached any criminal laws in Pakistan or in the jurisdictions where its servers are being hosted (if proved, the forgery of John Kerry’s signature and the US State Department seal constitutes a serious criminal offence anywhere). The matter, however, is not as clear cut as many may believe since what is unethical is not necessarily illegal. Thus if there were no boundaries between ethics and legality then we would undoubtedly find a large number of, say, used car dealers in jail.
As far as university education is concerned some countries have strict guidelines. For instance in Australia it is a criminal offence to use the word university and claim to offer degree and diploma courses without governmental authorisation. Similar prohibitions apply in countries as diverse as India, South Korea, Malaysia, Germany, Switzerland and the UK.
Pakistan, however, does not categorically make the use of the word ‘university’ by an online provider a criminal offence. What the HEC does do is publish a list of accredited universities and degree awarding institutions on its website. It is for employers whether in the public or private sectors to determine whether the degree-holder has a genuine diploma from a recognised institution of higher learning.
The US position is somewhat ambivalent and is more or less a ‘caveat emptor’ attitude. Given that the provision of education there falls within the purview of state governments it is not surprising that there is no uniformity of approach as far as the requirements for accreditation are concerned. Some states such as New York clamp down hard on unaccredited universities whereas others such as California are fairly lenient letting the market decide the fate of myriad educational institutions.
One can infer that the clients and patrons of shell universities are to a large extent willing to go along with the purveyors of fraudulent degrees and therefore cannot be entirely absolved of blame. Surely if there is no coursework, no home assignments, and no tests or exams to take then the person is only deluding himself or herself if they believe that they have achieved an educational milestone by purchasing a certificate. Most likely, the buyers in turn are motivated by rational considerations such as getting a better job or meeting some residency or citizenship requirement and try and achieve their goals by taking the quickest and, to their minds, cheapest route possible.
The intriguing case in the NYT story is that of the Saudi man who reportedly spent over $400,000 (about Rs41 million) to get fake degrees. What did he aim to achieve in exchange for the substantial amount of money spent on worthless pieces of paper? A cabinet position? One doubts that it was on account of a sense of personal fulfilment since he could have gone to the Coursera or EdX websites to achieve his moment of bliss and that too at no financial cost since most of the large number of excellent courses offered by these two Massive Open Online Course (MOOC) providers involving the world’s leading universities are offered for free.
Notwithstanding the question marks over Axact’s future prospects, the issue is whether we as a nation are going to do something about the rash of fake degrees in our midst – whether in politics, academia or the professions. This is where the government has to take the lead in legislation. However, given the number of parliamentarians who have dubious educational credentials this is about as likely as turkeys voting for Christmas.
The writer is Group Director for Business Development at the Jang Group.
Email: [email protected]

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