GCC education spend to hit $150 billion in 2 years

The recurring spend on education in the GCC is poised to reach $150 billion in the next couple of years as the market presents big prospects for new private players and consolidation opportunities for existing ones, Alpen Capital said in a report that ranks the UAE as the most developed education market in the region and an emerging education hub.

The UAE and Qatar rank high as preferred education destinations by students in the Middle East. Factors such as simple visa procedures and the presence of international education institutes are enhancing the appeal of these two nations among students in the region who are increasingly turning to Dubai, instead of the UK, to obtain quality international-level education. According to the Unesco, Dubai has become the third most popular destination, after France and the US, among Middle East students.

With the total number of students in the GCC region expected to grow at a three per cent compound annual growth rate between 2013 and 2020 to reach 13.7 million, the number of schools is expected to rise at a 2.4 per cent during the period, Alpen said in its GCC Education Industry Report.

The report presents the growth prospects of the GCC education sector, based on the current developments within the sector, key market dynamics, and the existing investment opportunities in the region. The scope of the report encompasses the pre-primary, primary, secondary, tertiary, and vocational training segments across all GCC nations.

“The growth of the GCC education sector is driven by factors such as population growth, increasing number of expatriates, the rising importance of high-quality education in the society, and a growing spending propensity. The sector is gaining additional momentum from governments across the GCC that are acknowledging the need for an education system capable of producing industry-ready graduates. Thus, with increased focus on improving the quality and reach of education in the region, the sector presents an interesting investment opportunity,” said Sameena Ahmad, Managing Director, Alpen Capital

“The education sector in the region is growing at a fast pace and presents opportunities for private investors. The M&A activity in the sector has picked up pace in recent times. Private players, both local and international, are attracted to segments such as the K-12 and higher education, which are the largest within the sector. 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,” said Mahboob Murshed, Managing Director, Alpen Capital.

Enrolment increase at private schools is expected at a 6.7 per cent between 2013 and 2020, due to the quality of education they offer and the favorable demographics in the region.

The contribution of the pre-primary segment to the total enrolments in the industry is expected to increase from 5.8 per cent in 2013 to 7.4 per cent in 2020. Also, the tertiary segment is likely to see a surge in its share of the total enrolments from 14.8 per cent in 2013 to 16.5 per cent in 2020. The primary and secondary segments are anticipated to drop their share to 76.0 per cent in 2020 from 79.4 per cent in 2013, Alpen report said.

The UAE is the most developed education market in the region and is an emerging education hub. The Saudi Arabian market is the largest, accounting for more than 75 per cent of the gross enrolment within the GCC. Both the nations account for relatively mature K-12 and tertiary education segments.

By the end of 2014, the GCC population is expected to reach 50 million. With a rising population base and increasing number of expatriates, the region is expected to see an increase in the demand for education, the report said.

Based on purchasing power parity, the GDP per capita across the region is expected to rise at a 3.1 per cent between 2012 and 2019. With rising GDP levels, the disposable income of the middle-class across the GCC is expected to surge, presenting the prospect of this segment of the society turning to the expensive, high-quality education of private schools. Enrolments at private institutions in the UAE accounted for 69 per cent of the total enrolments in 2012, up from 39 per cent in 2000.

According to consultants Booz & Co., the number of private schools in the GCC is set to double over the next five years as education providers cater for a growing population in the region and parents seek higher teaching standards for their offspring.

In a recent report, Booz & Co. estimates the number of schools in the Gulf to grow from two million in 2012 to four million before 2020, driven by increased demand in Saudi Arabia and the UAE. In spending terms, Booz estimates parents alone would spend $15 billion to $20 billion in 2020 on their children’s education, compared with just $5 billion in 2010.

“This is not only fuelled by increasing populations but a shift from public to private schools,” said Maya El Hachem, a senior associate for Booz.

• issacjohn@khaleejtimes.com