Opportunity – Gulf Education Sector

Something from Enterprise, a newsletter by Zawya and Emirates NBD

 

Opportunity – Gulf Education Sector
Learning the ropes
By Jude Hardy of Zawya

Life as a small business has always been notoriously difficult. Start-ups face hard times trying to establish their trades and even well-established companies sometimes struggle to break into new sectors. The private school market in the GCC is one of the biggest in the world, with annual tuition fees raking in around USD 10 billion in 2010. Private schools are 14% of the whole education market, worth USD 36 billion across the Gulf States, according to a June 2012 Alpen Capital report. By 2016, the GCC will accommodate 11.6 million students and schools are set to increase by a CAGR of 1.6% between 2011 and 2016.

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One education segment that’s performing really well is in the UAE. According to the Parthenon Group, the sector in the UAE alone – and the biggest of the six GCC states’ education sectors – is valued at USD 2.8 billion. Private sector enrollment is growing steadily at approximately 10%; and Western-branded education is growing at 18%. Added to this is the fact that 88% of education in the UAE is designed for expatriate pupils.
Opportunities in this huge sector range from catering and printing to transport and IT. If you think about what and how schools run and then think of what services supporting teachers and pupils could be outsourced, the opportunities are vast. Most companies – including education service providers – prefer to focus on their core business, rather than providing all these services under one roof.

Outsourcing is a major trend to hit the GCC education sector, according to Stuart Curtis at the Links Group. “What we’re seeing is that most people nowadays would like to focus on their core businesses; so if you’re an education provider you would actually focus on providing quality education… Let those people who are good at printing provide them with printing services, those people who are good at catering services provide catering services,” the group managing director said. “If you’re a service provider in that sector, know that it’s a good time for you,” he added.

By 2015, the number of students in the UAE is set to boom to 1.1 million, up from approximately 958,000 in 2011. This boom sits on the back of expected overall population growth – this in fact will be the main driver of growth for the education sector, according to Alpen Capital – which is not something small businesses can afford to ignore. UAE nationals are also likely to choose private schools for their children’s education, Curtis noted.

There are recognizable benefits of working in the education sector, which aren’t just limited to the growth it’s expected to drive. Financial rewards for small businesses working in the sector include regular payments, Curtis continued. “Once you are in with them, they are very, very good payers. The education sector… isn’t fickle. It isn’t like the construction industry where there are challenges with regards to payment,” he said. “So it’s one of those sectors that you want to be in.” If you are a small business or start-up trying to break into or expand in the sector, there aren’t any second chances. Companies must deliver on their promises to education providers once they do get the chance to work in the sector, “because you only get one real chance to make an impression with them,” Curtis noted.

If you are thinking of entering the education space, firstly make sure your business license caters for what you’ll be offering. And second? “Persevere,” Curtis advised. “It is hard work and it can be hard work as there might be legacy agreements in place.” Despite the challenge, it’s still very much worthwhile taking a chance and making the leap into
the education space; especially in the UAE.

“Dubai has come back stronger than ever. It’s certainly become the hub in the GCC, and not just the GCC but the wider Middle East and North Africa region. We’re seeing large capital inflows; we’re seeing growth in the market place. That demand obviously drives the need for healthcare, education, associated services and structure,” he concluded

Article by Links Group on Jan 15th 2013

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