With a large population of over 94 million and a young age structure, demand for education in Vietnam is large, particularly when the economy is requiring a more skillful labour force. However, education supply in Vietnam lacks both quantity and quality: the number of students electing studying abroad over domestic education; state-owned universities and colleges only have capacity for 600,000 of the 1.8 million candidates who undertake the national university entrance examination. This opens up investment opportunities in this industry, especially for foreign investors as Decree 86 raised the limit of local enrolments in foreign-invested schools.
Strong Potential
Evolving toward a more modern structure, approximately one million Vietnamese moved annually between 2014-2017, from agriculture to service and industrial sectors. Rapid urbanization will continue, thus national education development is a priority to improve the skills of the labor force and increase productivity.
With a large population of over 94 million and a young age structure, Vietnam is well placed for expansion of the education sector, however needs to emphasise advancing the quality.
With the 3rd largest population in ASEAN and young age structure, the education industry in Vietnam has great investment potential”
As domestic education often fails to meet international standards, many wealthy households elect to educate their children abroad. According to UNESCO Institute for Statistics, Vietnam outbound students increased by an average of 12% pa 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 this sector.
Opportunities
Due to heavy workloads, lofty expectations and chequered delivery at public schools, it is common for students to participate in private classes and training courses, in addition to their everyday schooling. The ambition of Vietnamese students desiring 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 HCMC have many Vietnamese children awaiting admission, however are prevented due to government regulations limiting domestic students in international schools.
Taking effect 01/08/2018, Decree 86 raised the limit of local enrolments in foreign-invested schools. This Decree now accepts 50% Vietnamese students in international schools. The ratio was previously capped at 10% for the primary/elementary level and 20% for the secondary/high school level.
Graphic 1: Legal update
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Decree No. 73/2012/ND-CP |
Decree No. 86/2018/ND-CP |
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The decree update 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 Hanoi and Ho Chi Minh City, which attract fewer expatriates, yet are home to wealthy Vietnamese willing to invest in their children’s education.
“The international school market in Vietnam is expected to see a surge in enrolments following a new decree uncapping local student admissions”
English training center developments have grown significantly in the last few years. HCMC and Hanoi have approximately 450 English language centers; in which, ILA is the market leader, whilst the emerging APAX is rapidly increasing market share. In the Education First English Proficiency Index (EFEPI) 2017, Vietnam ranks 7th in English Proficiency, indicating the ambitious nature of the country.
Cognita, an education fund, purchased International School of HCMC (ISHCMC) and Saigon Pearl Primary School. The North Anglia fund bought British International School, whilst TPG, an US investment fund, acquired the Vietnam-Australia School (VAS). EQT invested in ILA, a popular chain of English centers. IFC poured money in the Vietnam-USA Society English Centers (VUS); Mekong Capital in the YOLA English Center; and IAE in Western University. This high level of investment into foreign schools shows the potential for international education development.
"Investor interest in language centers has increased due to strong demand from students in order to meet new national labor requirements"
State-owned universities and colleges in Vietnam only have capacity for 600,000 of the 1.8 million candidates who undertake the national university entrance examination, showing the vast demand for domestic higher education.
Local graduates have struggled to find jobs in their respective fields, as they are not well equipped with the necessary practical skills. Although the government prioritises collaboration with international universities and attempts to provide a wide range of options for local students, the number of Vietnamese seeking education overseas has steadily increased, with students choosing to complete university in USA, Australia, Japan and France. Thus, proper tertiary options with internationally recognized degrees as well as relatively competitive tuition fees is a promising investment.
Challenges
There are several challenges to overcome when investing in education in Vietnam. Education is still recognised as one of the most poorly governed industries within Vietnam, with bribes for school entrances, examinations and good grades appearing across all school levels. Plagiarism in higher education, cheating in tests and examinations, counterfeit academic degrees and falsifying educational budgets for personal interest are frequently reported cases, 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 foreign investment required for each type of institution and partnership; staffing requirements and lengthy and complicated approval procedures are entry barriers for any investor. The newly implemented Decree 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% of the population aged within the "golden demographic" (<24 years old) and with rapidly increasing HNWI’s 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, the question is; what scale and form will the new supply take?