The Saudi educational sector: Where are the opportunities?
Given the promising growth in the education sector highlighted in my previous articles, investors will have a high appetite for the sector, encouraging well-positioned local schools in the country to go for initial public offerings (IPOs).
So far there has been no educational institution in the country listed on the stock exchange. However, with the government showing support for the sector, listed institutions will definitely have a large warm welcome from investors. Once they are listed, these institutions will enjoy a faster track for growth through mergers and acquisitions, joint ventures and partnerships. And later on, some could even seek to expand their franchise businesses overseas.
As another channel for IPOs, the Saudi government is planning in its Vision 2030 to privatize some government schools and academic institutions as part of a plan to cut public spending and diversify income. The transfer of ownership will be done in several forms, including direct transfer or through IPOs.
Saudi Arabia’s private schools are expected to account for the lion’s share of growth in the GCC region. The private education market is poised to more than double, from $5 billion in 2016 to $12 billion in 2023. It is estimated that the share of students in private schools is set to increase from 18 percent in 2017 to 30 percent by 2023, and the government has offered incentives to support this increased enrolment.
Ahlia schools (private schools delivering the national curriculum) will start to differentiate and complement their offerings with international curricula, new learning resources, and extracurricular activities. This opens up a very attractive compromise for Saudi students who still want the national curriculum in addition to the enriched offerings of private schools — all in a very Saudi-centered cultural environment.
Also, Saudi nationals are now allowed to enroll in private international schools and the country is allowing 100 percent foreign ownership of companies in the education sector. The Education Evaluation Commission, Saudi Arabia’s quality assurance agency, has already begun inspections of schools, and it is expected eventually to make its outcomes available to the public. This information is likely to motivate more families to enroll their children in private schools.
I believe that the integration of academic and business excellence with strong results-oriented leadership and management, as well as teaching and learning quality, are critical to the success of private schools going public via IPOs. Late next month, the investing public in Saudi Arabia will anticipate the first IPO in the educational sector. Let’s see how the market will react to it.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.