Saudi Arabia commits to spending on quality education

Saudi Arabia’s private school sector is expected to grow in the coming years because of the country’s demographics and greater willingness on the part of parents to pay more for education.

As the government pares its budget, education is one area where an increased role for the private sector could prove fruitful.

“There is an emerging public awareness in the region about the current poor quality of education,” according to Nrupaditya Singhdeo, chief financial officer and partner at Al Masah Capital. “International student assessments such as [Trends in International Mathematics and Science Study, or TIMSS] repeatedly rank public education systems in the country among the lowest in the world.”

For example, the average mathematics score ofeighth-grade pupils in 2011 as per TIMSS was 394 for Saudi Arabia, just ahead of Morocco, Oman and Ghana. The TIMSS scale average is 500. The Saudi score compared with 456 for the UAE. South Korea had the highest score at 613.

Despite the Saudi government’s budget being hit hard amid low oil prices, the kingdom is allocating 192 billion Saudi riyals (Dh188bn) for education and training, down from 11.7 per cent from 217 billion Saudi riyals last year.

At 23 per cent of total expenditure, education is nonetheless the biggest allocation after military and security services.

“[While] education and training, and health and social development budgets are down year on year, there are a number of projects which are being funded from previous budget’s surpluses, indicating that both these sectors will continue to benefit from investment,” according to a report from Jadwa Investment in Riyadh.

“[To] ensure that the private sector can create a larger share of jobs, the government plans to improve the investment environment related to the private sector, which will include overcoming legislative, regulatory and bureaucratic obstacles.”

The K12 (kindergarten to 12th grade) schools and training sectors are expected to attract more foreign investment than higher education, Mr Singhdeo said.

Saudi nationals comprise 85 per cent of the pupil roll in the K12 level. The kingdom’s population has a high percentage of youths, with 9.6 million of its 28 million people under the age of 18 in 2012, according to Unicef. The population expected to increase at 1.3 per cent a year between 2012 and 2030, it said.

The private school sector is expected to grow over the next decade due to the demographics and parents’ increasing willingness to fork out more in school fees, according to a 2012 Booz & Co report.

With the relaxation of regulations, some regional private school players such as GEMS in Dubai and Lebanon’s SABIS have already entered the country. Other private players include local companies such as Alrowad International Schools, Ma’arif and Kingdom Schools.

“The ministry of education is actively inviting private sector providers, such as GEMS Education, to come and invest in building schools across the country,” said Dino Varkey, group executive director and board member at GEMS. “We see the budget cuts as a significant opportunity for increased private sector partnership in education in Saudi Arabia.”

GEMS signed its first contract with Kingdom Schools in 2010, and now has 2,400 pupils and 237 teachers in the Riyadh school. It started managing The World Academy at King Abdullah Economic City in 2012, and have 454 pupils and 41 teachers there.

Saudi Arabia has the lowest percentage of pupils enrolled in private schools in the Arabian Gulf region – about 725,000 pupils in 3,500 schools, compared to 4.4 million pupils attending nearly 30,000 public schools, according to the Booz & Co report.

The size of the private school market is roughly US$2.2bn in terms of operational expenditure, compared to $24bn for the public schools.

While Al Masah has no investment in the sector in Saudi Arabia, it is not ruling out an entry in the country.

“Access to land through the relevant private school regulator is still an issue in Saudi Arabia,” Mr Singhdeo said. “We might need the right local partner who has access to education real estate assets in strategic location to expand in this region.”

Saudi Arabia also needs to work on some of the current obstacles to attract more foreign investments such as attracting quality teachers, improving the living conditions, improving operating environment, lack of scale and professional management, he said.

“The country also has to invest more on training national teachers to meet even the needs of their public schools,” Mr Singhdeo said.

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