Decree to boost investment in schools

The highly anticipated Decree No.86/2018/ND-CP, which took effect in August, has opened new doors for foreign investors and partners into Vietnam’s education sector. Businesses have wasted no time in learning about the decree, which is expected to loosen the red tape related to setting up a new school, seeking domestic partners or hiring teachers. Since the change Nguyen Thi Kim Dung, legal director at Apollo Vietnam and British University Vietnam, has been busy with endless meetings with excited investors, who are eager to see how Decree 86 will benefit their current or upcoming ventures. According to Dung, schools that offer short-term courses now only have to obtain two permits instead of three, which is great news for institutions with non-degree foreign language or IT programmes. Moreover, foreign language teachers at Vietnamese universities are no longer required to own a Master’s degree, which is likely to attract more foreign educators to Vietnam.

Apollo itself is planning to open more branches in Hanoi, Halong, Quang Ninh, Vinh, and Ho Chi Minh City. Dung revealed that in 2019, at least ten language centres in Hanoi and ten in Ho Chi Minh City will be launched, adding to Apollo’s current portfolio of 35 language centres across the country.

Attracting foreign talent

Decree 86 also allows international schools to have 50 per cent of Vietnamese students in each cohort. The threshold was previously 10 per cent for elementary schools and 20 per cent for secondary schools.

Haike Manning, former Ambassador of New Zealand to Vietnam and current advisor of Victoria University in Ho Chi Minh City, could not hide his excitement about this update. Manning believed that more domestic students will be able to study at Vietnam-based international schools thanks to this relaxed rule, minimising the need to study abroad.

Apollo’s Dung believed that Decree 86 will also pave the way for foreign investors to partner with domestic institutions in various ways. They can set up joint programmes, hold examinations on the foreign language ability of students, or launch language centres together. The opportunities for mergers and acquisitions are diverse, said Dung.

When it comes to the decree’s lowered requirements for foreign language teachers, most international schools replied that they bank on a strong team of fully-qualified teachers. Steve Alexander, principal at Saigon Pearl International School, said that parents demand teachers to have at least a Bachelor’s degree in education, or a related field together with a teaching certificate.

Meanwhile, Marcel van Miert, CEO of Vietnam Australia International School, said that the school will not accept any teaching candidate with less than five years of experience, and all teachers must have qualifications on pedagogy.

Learning from experience

Despite these opportunities, industry experts said that the road to success is not always smooth for foreign investors. Cao Ha Phuong, CEO of EF Vietnam, pointed out that Vietnam’s regulations are becoming more open towards private education, but how schools can implement them in real life is another matter.

“Many investors have expressed interest in entering the Vietnamese education sector. EF currently has representative offices in 50 countries and partners from 100. It is not hard to seek a new partner, but to foster a long-term partnership requires a collaborative effort from all sides, and trust from consumers,” said Phuong

A number of foreign investors have indeed failed when trying to break into Vietnam’s education business. The Institute of American Education (IAE) is one example. In 2008, the company received a significant amount of capital from US investment fund Black Horse Asset Management, which was determined to seize opportunities from Vietnam’s burgeoning education sector. The investment made headlines as it was a rare deal at the time, when most investors were still preoccupied with the stock and real estate bubble.

IAE and Black Horse partnered up with Broward College, a public university in the US with community college roots. Broward, which used to be among the top ten American community colleges, was responsible for the curriculum and certificates. The potential was there, but IAE and Black Horse did not manage to attract students and in 2013 Black Horse had to sell its entire stake to iSMART Education and EQuest Academy.

Experts believed that there are three reasons for the failed partnership between IAE and Black Horse. Firstly, IAE only granted associate diplomas, while most Vietnamese parents and students preferred a bachelor’s degree. This means IAE and Black Horse have lacked understanding of local culture.

Secondly, Broward College had to compete against hundreds of joint programmes, both legitimate and illegitimate, in Vietnam. These programmes boasted partnerships with leading institutions from the US, the UK, Australia and Singapore, but in fact only collaborated with online degree mills or non-accredited institutions. Parents and students in Vietnam were overwhelmed and confused with all the options available, and there was no clear guide at the time to assist them.

Thirdly, Black Horse and IAE might have been unrealistic in calculating the returns in Vietnam. According to EF’s Phuong, educators from overseas should not expect earnings in Vietnam to come fast or as high as other countries. It will take at least 10 years of good business for a foreign school in Vietnam to break even.

“Some investors look at Vietnam through rose-coloured glasses and charge very high fees to earn quick money. This is not appropriate for the market and many investors failed to do sufficient research before investing,” said Phuong.

The expert advised foreign investors to come up with high-quality products with affordable price tags, and have a long-term view of at least ten years when entering the Vietnamese education sector.