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The education sector in the UAE and the wider is in a high growth phase with many new schools coming up and the student enrollment rate keeping high. With population in the country and the region increasing, the education sector is poised to grow more rapidly with more and more international schools and universities setting up their campuses here.
As Alpen Capital says in its report ‘GCC Education Industry’, “The GCC education sector is witnessing a robust growth in student enrolments coupled with a steady expansion in related infrastructure. Government reforms and spending have played a key role in strengthening the sector.”
Just look at these numbers. The total number of students in the GCC education sector is projected to reach 15 million in 2020, registering a CAGR of 3.6% from an estimated 12.6 million in 2015, estimates Alpen Capital. An expanding base of school and college age population and increase in the Gross Enrolment Ratio (GER) across the education segments is likely to drive the growth. GER is the total enrolment at a particular education level, which is regardless of age and is expressed as a percentage of the eligible official school-age population, corresponding to the same level of education in a given school year.
Further, Alpen Capital’s report says during the forecast period, the number of students in pre-primary (0.9 million in 2020) and tertiary (2.7 million) segments is anticipated to increase faster than that in the other segments. However, students at primary and secondary segments at 11.5 million in 2020 would continue to form over three-fourth of the total students.
The number of students at private schools is projected to cross 3.0 million in 2020, displaying a 5.1% CAGR from 2015. Enrolments at public schools are anticipated to increase at an annual average of 2.6% to 9.3 million. The total number of students in the UAE is projected to grow at an annualized rate of 4.1%, from an estimated 1.1 million in 2015 to 1.4 million in 2020. The demand for schools in the GCC region is likely to increase at a 3.0% CAGR from an estimated 43,903 in 2015 to 50,978 in 2020. This signifies a requirement of more than 7,000 schools in the next five years, most of which is anticipated in Saudi Arabia.
Key Growth Drivers
There’re several factors that will drive the growth of education sector in GCC. One is obviously the growth in population. The GCC population is projected to reach close to 60 million in 2020, of which, the number of people below 25 years of age is likely to surpass 22 million. A large and increasing base of school and college going population is fostering the demand for education in the region.
Another driving factor is high disposable income of people living in the region. A high personal income level alongside a tax-free environment has resulted in additional disposable income among the GCC population. Consequently, the population displays a strong ability and willingness to spend on quality education at international schools, translating into a huge opportunity for the private players.
The third crucial factor is high budget allocations by regional countries on education. According to Alpen Capital’s report, focus on the education sector across the GCC nations has been increasing, in terms of budget allocations and long-term development strategies including five-year plans. This is not only strengthening the local education system but also presenting opportunities for international schools and universities.
The private sector is receiving support from the governments through the investor-friendly policies aimed at augmenting the scale and quality of education in the region. The share of private schools in overall K-12 enrolments increased from 19.0% in 2009 to 22.1% in 2014. The growth is likely to continue as the countries focus more on privatization.
High Student Enrolment
Education in MENA is largely provided by the government. The region allocates on an average 17.4% of government expenditure toward education compared to the world average of 13.9%. Allocation for education is high, particularly in Morocco, Saudi Arabia, Oman, and Algeria. Unfortunately, the results so far, have not been very encouraging for most countries, except the UAE and Qatar, which have exhibited good progress.
“Unfortunately, in the MENA region, provision of education is generally perceived as the government’s responsibility, reducing the role of private sector to a great extent. No wonder, the share of private schools in the total number of schools in MENA stands below 15%,” notes a report by Al Masah Capital on MENA education sector.
However, student enrolment in public institutions is very high in the MENA region and expenditure on education in the region is high by global standards. The MENA region spends 3.8% of GDP on education; comparable to Japan (3.8%) and Singapore (3.2%).
However, with new players coming in the competition is also growing, especially in the school segment. The challenge before the sector is to maintain the quality of education. Another crucial issue before schools is to ensure the teachers are well-qualified to impart quality education.
According to Alpen Capital, the shortage of teachers in the region is the second highest in the world due to an overall dearth of teachers globally coupled with a low pool of nationals inclined towards pursuing teaching as a profession in the GCC. Moreover, the dependence on expatriates, who are transient in nature, is further challenging the availability. The opening of new institutions in the region is not likely to help the situation.
Factors such as increase in the cost of construction, long gestation period, inflation, competition, difficulty in hiring skilled teachers, and regulated fee hikes, among others, are creating operational challenges for the private education providers.
Measures to encourage private sector investments alongside an increasing preference for international curricula amongst residents are attracting renowned foreign education institutes to the region. However, despite its dependence on expatriate teachers amidst a shortage of such skilled professionals world over, the GCC education sector continues to thrive due to its rising school and college age population, high per capita income, and surging demand for quality education, Alpen Capital says.
Another notable trend is that the popularity of international schools in the GCC is rising due to the presence of a large number of expatriates coupled with the desire of the local residents to send their children to institutions offering high-quality education. This has led to the advent of several international educational institutes in the GCC.
In a nutshell, increasing enrolments, emphasis on quality of education, adoption of smart education concepts, focus on streamlining the education system, and efforts to privatize the sector are the key factors invigorating interest in the GCC education sector.