M&A Foreign Capital Dominates, Pouring into Education
Foreign investors are interested and want to invest in Vietnam education market.
Foreign direct investment (FDI) into education sector from August 2018 – the time when Decree 86/2018/ND-CP takes effect – reached 97 million USD in October 2019, of which M&A activities, in particular buying shares in education sector accounted for 37%.
This figure shows that foreign investors are more interested in a more collaborative strategy to reduce risks in education investment.
Regarding the trend of attracting foreign capital into Vietnam’s education market, FDI into this field will continue to increase, in which the trend of cooperation is a key strategy.
In 2018, the education sector had two important Decrees: Decree 135 and Decree 86. These two decrees have simplified conditions for investment in the education sector for both domestic and foreign investors.
In particular, Decree 135 has simplified the legal and operation requirements, shortened administrative procedures, while Decree 86 has reduced the requirement for personnel and increased the enrollment limit for Vietnamese students.
Overall, education accounts for less than 2% of total FDI into Vietnam. High tax costs, personnel requirements, minimum required capital for foreign investment, besides a complex approval process are some of the significant barriers for foreign investors.
It is still too early to fully assess the impact of Decree 86, but it can be seen that the level of foreign investors’ interest in Vietnam’s education market has increased significantly.
Before the effective date of Decree 86, foreign investors faced many barriers when investing in education, such as limiting the percentage of Vietnamese students: 10% for primary school and 20% for high school level. International schools in Vietnam therefore depend heavily on the enrollment of foreign students.
After this Decree came into effect, international schools took advantage of opportunities and promoted the enrollment of Vietnamese students. This move has certainly affected the attraction of foreign investors considering the attractive opportunities of the international education market in Vietnam.
The number of international schools in Vietnam with affordable tuition is quite limited, but often, schools with small and old campuses and basic facilities will have a modest tuition fee. ExpatFinder’s latest international school fee survey shows that the average annual tuition of international schools in Vietnam is 17,940 USD, ranking 13th in the world and 5th in Asia. Countries with higher fees may include China, Singapore, Hong Kong and Australia. However, there is always a significant source of demand for international schools in Asia, because this is the stepping stone for their children to apply for prestigious universities in the Western countries.
In addition, the recruitment needs of children from foreign experts in Vietnam are also increasing. Vietnam will attract more FDI after the signing of trade agreements and become an ideal alternative destination for multinational companies in the context of the US-China trade war.
The number of foreigners working in Vietnam will increase, bringing with them their families, thereby creating a significant demand for international education, especially in cities that attract a lot of FDI. In 2018, Vietnam had more than 320,000 foreign workers, an average increase of 8% per year since 2008. A survey of HSBC’s foreign workers in 2019 showed that Vietnam rose from the 19th position to 10th on the ranking of countries with “attractive working and living environment” because of low living costs and rising incomes.
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