Overhaul or overkill? Gulf countries to spend $150 billion on education reform
The GCC is expected to experience a recurring spend of $150 billion in its education sector over the next few years, according to a report by Alpen Capital.
Buoyed by a growing population of both locals and expats, the total number of schools in the region is expected to grow at a compound annual growth rate (CAGR) of 2.4 per cent from 2013 to 2020. The total number of students in the region is expected to reach 13.7 million by 2020, growing at a CAGR of three per cent over the same period, the report said.
“The education sector in the region is growing at a fast pace and presents opportunities for private investors,” said Mahboob Murshed, managing director, Alpen Capital.
“M&A activity in the sector has picked up in recent times. Private players, both local and international, are attracted to segments such as the K-12 and higher education in recent times, which are the largest sector within the sector,” he added. “Further the new and promising industry specific, niche sectors such as vocational training, finishing schools, child-skill enhancement, and e-learning are also receiving investor attention due to their growing demand.”
The UAE is the most developed education market in the region while Saudi Arabia is the largest market in the region, accounting for more than 75 per cent of the gross enrollment within the GCC, the report found.
Alpen Capital also noted a rising demand for private schools offering international curriculum in the region.
“A growing expatriate base has been spurring the setting up of private schools in the region,” the report said. “Sensing the potential, several international schools are setting up their branches or are entering into affiliations with the existing private institutions in the region.”
However, the sector also faces a number of challenges such as the shortage of skilled teachers and regulation of fees that obstruct the growth of the education industry in the long term.
“Setting up of a private school in the region is capital intensive, due to rising real estate prices, electricity expenses, licensing costs, salaries, and visa expenses,” the report said.“Additional education projects involve a long gestation period. Regulations such as cap on the fee structure also make it challenging for investors to evaluate the investment opportunity.”
Despite such challenges, private school operators have been cashing in on the boom in the education market mainly bought about by the population growth. Dubai-based school operator GEMS Education revealed plans earlier this year to build almost six schools and aims to create around 10,000 new school places a year.
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