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Education sector open to investment

Released at: 14:37, 25/11/2018

Education sector open to investment

Photo: Viet Tuan

Sector offers major opportunities for investors with the right approach.

by Mr. Troy Griffiths / Deputy Managing Director, Savills Vietnam

Evolving towards a more modern structure, approximately 1 million Vietnamese moved annually between 2014 and 2017 from the agriculture to the service and industrial sectors. Rapid urbanization will continue, so national education development is a priority to improve the skills of the workforce and increase productivity. With a large population of over 94 million and a young age structure, Vietnam is well placed for the expansion of its education sector but needs to emphasize advancing quality.

As domestic education often fails to meet international standards, many wealthy households elect to educate their children abroad. According to the UNESCO Institute for Statistics, outbound Vietnamese students has increased by an average of 12 per cent each year, from 50,000 in 2012 to approximately 80,000 in 2016. These numbers suggest alternate choices in local education are needed and highlights the potential for investment in the sector.

Opportunities

Due to heavy workloads, lofty expectations, and checkered delivery at public schools, it is common for students to attend private classes and training courses in addition to their everyday schooling. The ambition among Vietnamese students for higher education often exceeds global levels. 

Ho Chi Minh City is one of only 27 cities worldwide with over 50 international schools. These foreign schools not only provide education for expatriate children but also local families wishing to enroll their children in an institution providing international qualifications. The majority of foreign schools in the city have many Vietnamese children awaiting admission, but they are prevented from doing so due to government regulations limiting domestic students in international schools.

Taking effect from August 1, 2018, Decree No. 86 raised the limit on local enrolments in foreign-invested schools from 10 per cent at the primary/elementary level and 20 per cent at the secondary/high school level to 50 per cent.

The decree represents a great opportunity for investors wishing to develop international schools in Vietnam. The limit on local students was previously a major barrier for foreign investment within the education sector, particularly in provinces outside of Hanoi and Ho Chi Minh City, which attract fewer expatriates yet are home to wealthy Vietnamese willing to invest in their children’s education. 

Challenges

There are several challenges to overcome when investing in education in Vietnam. Education is still recognized as one of the most poorly-governed sectors within Vietnam, with bribes for school entry, examinations, and good grades appearing across all levels. Plagiarism in higher education, cheating in tests and examinations, counterfeit academic degrees, and falsifying educational budgets for personal interest are frequently reported but not the entire picture. There has been significant recent media attention focusing on these transgressions. Urgent involvement, transparent investigations, and harsh punishments are required to alleviate this entrenched, ongoing issue.

Strict regulations from local governments may be a challenge for foreign investors. High taxation, the minimum capital requirement of foreign investment in each type of institution and partnership, staffing requirements, and lengthy and complicated approval procedures are entry barriers for any investor. The newly implemented Decree No. 86 allows for five types of foreign-invested institutions: short-term training institutions, pre-school education establishments, high school institutions (elementary, middle, high and mixed-levels), higher education institutions, and branches of international higher education institutions.

Outlook

With 41 per cent of the population aged within the “golden demographic” (<24 years old) and with rapidly increasing high net-worth individuals (HNWIs) and middle-class families, Vietnamese will be soon be able to pay more to provide their children with higher education standards. Strong demand for high-quality education is anticipated, but what scale and form will new supply take? 

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