The Saudi educational sector: Where are the opportunities?
I believe that, like health care, the educational sector provides promising high-growth opportunities to local and international investors, both directly and indirectly.
Back in 2004, a friend of mine who is a seasoned businessman in Saudi Arabia told me: “I have been involved in so many businesses throughout my adult life but the most rewarding one which paid me the highest returns is education.” Fourteen years on, investment opportunities in the educational sector are even greater and wider.
Investing in the educational sector is not limited only to the setup of the “learning environment” through schools and universities, but also includes other businesses and sectors, such as construction, furniture, catering and human capital.
One of the main pillars of Vision 2030 is the educational sector, with a special focus on enabling the private sector to play an active role in its development. The government aims to increase the participation of the private sector from the current 14 percent to 25 percent. Furthermore, the government will be encouraging the creation of new companies which will start consolidating with existing ones via mergers and acquisitions.
To do so, the government will be taking certain measures, including: Preparing a comprehensive strategy to reinforce the participation of the private sector, improving the legislative environment with related governmental bodies, developing electronic systems for supporting private education, establishing offices to provide investors with services, and updating the regulation of private education.
Obviously, whenever we are talking about the investment environment for any sector or business we also try to list the challenges. There are inherent challenges in the educational business itself and there are challenges related to the market dynamics. As for the first set of challenges, these include: A weak educational environment in terms of innovation and creativity, a lack of personal skills and critical thinking skills among students, negative stereotyping about the educational profession, a lack of teacher assessment skills, etc. As for the other set of challenges, the most obvious one, for private schools, is the short-term impact of the departure of expatriates’ families which noticeably affected the demands for private schools. Another challenge, is the availability of approved venues set out by the Ministry of Education.
In this first article on the educational sector opportunities, I have tried to take a generalist approach, before zooming in on particular segments of the educational sector in future articles. Having said that, wearing my investment banking hat, as part of Vision 2030, the educational sector will be an active feeder of capital market transactions in terms of initial public offerings (IPOs) in which a key educational group is planned to be listed this month, mergers and acquisitions (M&As), real estate investment trusts (REITs), and other transactions.
• Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.