The increasing number of higher education institutions (HEIs) in developing Asia can lead to improved prospects for development. However, the rapid expansion can undermine external efficiency---the alignment of higher education with the external environment. This publication focuses on tackling three key challenges in strengthening external efficiency: (i) improving students' readiness for higher learning; (ii) fostering in graduates knowledge and skills that meet the needs of labor markets; and (iii) pursuing fresh strategies for productive partnerships not only for top-tier HEIs but also for 2nd and 3rd tier HIEs, to bring the necessary diversity in the higher education scene and benefit local communities.