education in the uae · 2019-11-18 · approved a budget of aed60 billion, with over aed10 billion...
TRANSCRIPT
Education in the UAEOpportunities for investors and operators
EY-ParthenonSeptember 2019
ContentsIntroduction ........................................................................................................ 3
UAE economic context .................................................................................... 3Role of education in the national agenda .......................................................... 4Recent government initiatives ......................................................................... 4Recent investment activity................................................................................ 4
K-12 education ................................................................................................... 6K-12 landscape in Dubai and Abu Dhabi ............................................................ 6Private K-12 market trends ........................................................................... 10Technology in K-12 ....................................................................................... 10Looking ahead: opportunities for investors and operators in K-12 ..................... 14
Higher education............................................................................................... 15Higher education landscape in the UAE .......................................................... 15Overview of IBCs in Dubai .............................................................................. 17Drivers of growth .......................................................................................... 17Dubai IBC market size and trends ................................................................... 19Regulatory developments .............................................................................. 22Looking ahead: opportunities for investors and operators in higher education ...... 23
Glossary ........................................................................................................... 24Endnote ........................................................................................................... 25
2 | EY-Parthenon
Figure 1: Real GDP by sector, Dubai and Abu Dhabi, 2017
Source: Oxford Economics
EY-Parthenon | 3
Introduction
UAE economic context
The United Arab Emirates (UAE) consists of seven emirates with differing contributions to overall domestic economic activity. Abu Dhabi and Dubai, the two most populous emirates, account for approximately 90% of the UAE’s GDP, while the other five emirates contribute just over 10%.1 Abu Dhabi’s economy has a greater reliance on oil than Dubai’s (48% of GDP vs. 2%)2 (Figure 1), which in 2017 led to a divergence in the economic performance of the two emirates. Abu Dhabi’s economy contracted by 0.5%, a result of lower oil prices and production, while Dubai’s economy grew by 3.1%.3 The divergence is expected to have narrowed in 2018 based on the government’s preliminary estimates, with the growth in both Dubai
and Abu Dhabi estimated at 1.9%.4 While the Dubai economy experienced a slowdown in 2018, independent research organizations5 forecast a recovery driven by the construction and real estate sectors, as Dubai Expo 2020-related infrastructure projects are completed and more residential housing supply is delivered to the market.
The populations of both Dubai and Abu Dhabi are expatriate-dominant. Expatriates made up approximately 92% of the population in Dubai in 2018 and grew at 9% CAGR between 2015 to 2018.6 In 2016, expatriates made up 84% of the population in Abu Dhabi and grew at 7% CAGR between 2013 to 2016.7
Other 31%
Financial
7%Real Estate
14%
Oil 48%
Other 27%
Manufacturing 9%
Financial
10%
Real Estate 13%
Transportation
12%
Wholesale & Retail
27%
Oil 2%
DubaiAbu Dhabi
4 | EY-Parthenon
Role of education in the national agendaThe UAE’s Vision 2021 aims to establish the UAE as “among the best countries in the world” with six national priorities representing the key focus areas of government action in the coming years.8 One of the six axes is a “first-rate education system” for which the government has set targets on several parameters, including UAE’s rank in the Programme for International Student Assessment (PISA) and Trends in International Mathematics and Science Study (TIMSS) — standardized assessments conducted globally.
For the fiscal year 2019, the UAE cabinet approved a budget of AED60 billion, with over AED10 billion allocated to education spending, a reflection of the UAE’s commitment to its vision.9 Over the past 10 years, UAE’s “Education 2020” strategy has aimed to transform K-12 programs to ensure that students are university-ready and can compete in the global marketplace. Further, in May 2019, the UAE government launched the “New National Skills Agenda,” which aims to equip Emiratis across all age groups with advanced skills required for the future.
The focus on the education sector is also evident at the emirate level with Abu Dhabi’s “Tomorrow 21” plan, which includes 50 initiatives to stimulate job creation and investment in the knowledge sector, and with Dubai’s “Dubai Plan 2021,” which includes a focus on high-quality education that is accessible to each socioeconomic segment within the “experience” theme.
Recent government initiativesThere have been several developments in the education policy of both Dubai and Abu Dhabi that signal the government’s commitment to investing in human capital. The following provides a brief overview of two innovative initiatives.
Rahhal (Dubai)Dubai’s education regulatory body, the Knowledge and Human Development Authority (KHDA), has rolled out an initiative named Rahhal (meaning “traveler” in Arabic) that aims to bring
flexibility into the school system. As part of the program, students submit a customized learning plan to the KHDA, specifying focus learning areas and a proposed learning schedule (e.g., four days a week of traditional school instead of five). The objective is to provide students greater flexibility and agility in their learning, helping them prepare for the rapidly evolving requirements of the future workforce.
Education partnership schools (Abu Dhabi)In June 2019, Abu Dhabi’s education regulator, the Abu Dhabi Department of Education and Knowledge (ADEK), launched the Education Partnership Schools (EPS) program, a public-private partnership (PPP) through which the management of certain public schools will be taken over by private operators starting in the 2019 through 2020 academic year. In the first year, EPS is being launched across 12 public schools covering 15,000 seats.10 These schools will accept enrollment across kindergarten and elementary education, with more stages expected to be introduced as students progress. To execute this project, the government has selected three private providers through a tender bidding and evaluation. The goal is to establish a model for sustainable schools that encourages competitiveness and boosts efficiency by leveraging the expertise of the private sector.
Recent investment activityThe education sector in the UAE has witnessed several transactions recently, concentrated in K-12 and higher education. In June 2018, Amanat Holdings, a UAE-based investment firm, acquired the real estate assets of North London Collegiate School in Dubai in a sale-and-lease-back deal from PNC Investments, the parent company of UAE-based Sobha Group, a real estate development company. In August 2018, Amanat Holdings acquired Middlesex University. More recently, in June 2019, a global private equity firm announced plans to acquire a minority stake in GEMS Education. The announcement comes a year after GEMS Education cancelled its initial public offering in the wake of a school fee freeze implemented in Dubai by the KHDA.
In 2018, the UAE government announced that it would allow 100% foreign ownership of businesses outside the Free Zones (areas with special tax, customs and regulations) for select sectors, which includes educational services.11 Previously, foreign ownership outside the Free Zones was capped at 49% for educational institutions.12 Relaxation of foreign ownership norms allows K-12 and higher education providers greater flexibility to choose their campus locations.
Figure 2: UAE government policy supporting education sector
Source: UAE Government National Agenda; UAE Government Dubai Plan 2021; UAE Government Accelerators Programme - Ghadan 21; UAE Ministry of Education (MoE)
EY-Parthenon | 5
6 | EY-Parthenon
K-12 EducationK-12 landscape in Dubai and Abu Dhabi
In academic year 2017 to 2018 (AY18), there were approximately 311,000 students enrolled in Dubai and approximately 245,000 enrolled in Abu Dhabi, with private enrollment dominant in both cities (Figure 3). In revenue terms, the private K-12 market in Dubai is sized at approximately USD2.3 billion (AED8.5 billion), while the private Abu Dhabi market is sized at approximately USD1.3 billion (AED4.8 billion).13 Key characteristics of K-12 education in the two cities are as follows:
1. Share of private sector: Private school enrollment makes up a higher share of K-12 enrollment in Dubai compared to Abu Dhabi (approximately 90% vs. approximately 72%).
2. Share of expatriate enrollment: Within private schools, Dubai has a higher proportion of expatriates compared to Abu Dhabi (approximately 90% vs. approximately 75%). In Dubai, expatriate enrollment in private schools has grown faster than Emirati enrollment (3% vs. 2% CAGR between AY15 to AY18).14
3. Average fee: The average grade 8 fee in Dubai private
schools (approximately USD11,000) is higher than in Abu Dhabi private schools (approximately USD7,000). Approximately 25% of private school enrollment is concentrated in schools with a fee higher than USD14,000 in Dubai, whereas the proportion is only 11% for Abu Dhabi.
4. Catchments: In Dubai, premium segment schools
(fee above approximately USD14,000) are largely concentrated in and around Umm Suqeim, Dubai Marina and Arabian Ranches, which are also areas with high rentals and high concentrations of expatriates. In Abu Dhabi, most of the premium segment schools are on the main island where expatriates have traditionally preferred to live. However, premium segment schools have opened in the suburbs that are east and north of the main island, where newer housing developments are attracting expatriates (e.g., Saadiyat Island, Al Reem Island, Al Raha Beach and Yas Island).
5. Quality ratings: The KHDA and ADEK rate schools on a
six-point scale based on the performance of schools and standards set by each regulator. In both emirates, school ratings tend to be correlated to school fees, with higher-fee schools typically receiving better ratings than lower-fee schools (Figures 4 and 5).
6. Emirati share of public vs. private: In both Dubai and Abu Dhabi, approximately 40% of Emirati enrollment is in private schools.15 While in Dubai the share of Emiratis studying in private schools has stayed broadly constant, in Abu Dhabi, the share has grown from approximately 36% (AY13) to current levels, indicating a shifting preference toward private education.
Figure 3: Student enrollment and revenue, by fee segment, Dubai and Abu Dhabi, AY18
*Note: Revenue is calculated using total enrollment and segment average tuition feeSource: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA); UAE Ministry of Education (MoE)
EY-Parthenon | 7
Note: The fee segmentation is based on the classification provided by the ADEK.
(Figures in AED are converted to the nearest thousand USD.)
Very Low: USD <3k (AED <10k)
Medium USD 5k- 8k(AED 20k -30k)
High: USD 8k- 14k(AED 30k-50k)
Premium: USD >14k(AED >50k)
Low: USD 3k-5k(AED 10k-20k)
Student enrollment
Private
Public
311k
Private enrollment
Non-Emirati
Emirati
281k
Enrollment by fee segment
Very low
Low
Medium
High
Premium
281k
Revenue by fee segment
Very low
Low
Medium
High
Premium
~USD 2.3b
Very Low: USD <3k (AED <10k)
Medium USD 5k- 8k(AED 20k -30k)
High: USD 8k-14k(AED 30k-50k)
Premium: USD >14k(AED >50k)
Low: USD 3k-5k(AED 10k-20k)
0%
20%
40%
60%
80%
100%
Dubai
Studentenrollment
Private
Public
245k
Privateenrollment
Non-Emirati
Emirati
177k
Enrollment byfee segment
Very low
Low
Medium
High
Premium
177k
Revenue by fee segment
Very low
Low
Medium
High
Premium
~USD 1.3b
0%
20%
40%
60%
80%
100%
Abu Dhabi
Figure 4: Private schools, by fee, enrollment, curriculum and rating, Dubai, AY1813
Source: Knowledge and Human Development Authority (KHDA
Figure 5: Private schools, by fee, enrollment, curriculum and rating, Abu Dhabi, AY1813
Source: Abu Dhabi Department of Education and Knowledge (ADEK)
8 | EY-Parthenon
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0 5 10 15 20 25 30 35
Fee (USD)
Enro
llmen
t
OutstandingVery goodGood
Acceptable
Weak
UK
US
IB
Curriculum
Rating
Indian
Unrated
Other
Very weak
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0 5 10 15 20 25
Fee (USD)
Enro
llmen
t
OutstandingVery goodGood
Acceptable
Weak
UK
US
IB
Curriculum
Rating
Indian
Unrated
Other
Very weak
EY-Parthenon | 9
Figure 6: Student enrollment, by fee segments, Dubai and Abu Dhabi, AY15–AY18
Source: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA)
10 | Parthenon-EY
Private K-12 market trendsKey trends in the K-12 segment are driven by evolving student preferences and the school offerings.
Enrollment growth has been fastest in the higher-fee segments in both Dubai and Abu Dhabi.
Private school enrollment in both Dubai and Abu Dhabi grew at 3% CAGR between AY15 and AY18. In both markets, the premium fee segment (>USD 14k) witnessed the highest growth, demonstrating resilience to recent economic volatility (Figure 6).
In Dubai, within the high-fee segment (USD8,000 to USD14,000), enrollment growth outpaced capacity additions between AY15 to AY18, bringing
utilization to approximately 88%. In Abu Dhabi, incremental enrollment in the medium-fee segment (USD5,000 to USD8,000) kept pace with capacity addition (both grew by approximately 4,000) such that utilization remains high at approximately 87% (the highest among all segments except the very low segment). These segments present potential opportunities for new investors.
The UAE Ministry of Education (MoE) has supported a number of initiatives promoting the use of technology in K-12, including:
•Madrasa e-learning platform: In 2018, the UAE MoE launched Madrasa, a free e-learning platform for students across kindergarten to grade 12, which contains more than 5,000 videos in Arabic covering topics in mathematics, biology, chemistry and physics. The platform aims to support Arabic-speaking students who face language barriers with existing learning resources, typically offered in English.
•Duroosi YouTube channel: Duroosi is a YouTube channel with tutorials for grades 11 and 12 students. The channel was launched in 2013 through a partnership between the UAE MoE, Etisalat (a telecom provider) and Google with the aim of reducing parent expenditure on private tuition.
With more than 200,000 students enrolled in schools charging a fee greater than USD5,000, Dubai and Abu Dhabi present sizable markets for education technology (EdTech) providers and investors. BYJU’S, a leading Indian EdTech provider, reported 120,000 downloads of its mobile application in the country. 16
Technology in K-12
Dubai Abu Dhabi
0
50k
100k
150k
200k
250k
300k
AY15
255k
AY18
Very low
Low
Medium
High
Premium
281k
93%
87%
74%
88%
79%
Capacity utilization
(AY18)85%
-1%
1%
6%
7%
9%
(15—18)
3%
CAGR
AY15
163k
AY18
Very low
Low
Medium
High
Premium
177k
~100%
80%
87%
77%
64%
Capacity utilization
(AY18)
81%
-3%
1%
4%
5%
13%
(15—18)
3%
CAGR
Very low: USD <3k(AED <10k)
Medium: USD 5k—8k(AED 20k—30k)High: USD 8k—14k(AED 30k—50k)
Premium: USD >14k(AED >50k)
Low: USD 3k—5k(AED 10k—20k)
EY-Parthenon | 11
Figure 7: Student enrollment, by curriculum, Dubai and Abu Dhabi, AY15–AY18
Note: “Others” in Abu Dhabi include IB and SABIS enrollment.Source: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA)
12 | EY-Parthenon
UK curriculum remains the largest in both Dubai and Abu Dhabi. While UK curriculum has seen the fastest growth in Dubai, US curriculum has grown fastest in Abu Dhabi.
The UK curriculum schools have the largest enrollment base within private schools in both cities, with an approximate 36% share in Dubai and an approximate 26% share in Abu Dhabi (Figure 7). These schools have also witnessed one of the fastest growth rates between AY15 and AY18. However, there are a few key differences in curriculum trends between the two cities:
1. UK and International Baccalaureate (IB) curriculum are the fastest-growing curricula offerings in Dubai, growing at 8% and 5% CAGR, respectively (Figure 7).
By contrast, US and UK curricula are the fastest-growing curricula in Abu Dhabi, with enrollments growing at 8% and 4% CAGR, respectively.
2. US curriculum schools in Abu Dhabi are more premium on average than in Dubai: 64% of US curriculum enrollment in Abu Dhabi is in the high and premium segments, while in Dubai, over 70% of US curriculum enrollment is in the low- to medium-fee segments.17
Dubai Abu Dhabi
0
100k
200k
300k
AY15
255k
AY18
UK
Indian
US
IBMOE
Other
281k
84%
88%
81%
78%84%
86%
Capacity utilization
(AY18)85%
8%
0%
1%
5%-4%
3%
(15—18)
3%
CAGR
AY15
163k
AY18
UK
US
Indian
MoE
Others
177k
82%
79%
86%
81%
80%
Capacity utilization
(AY18)
81%
4%
8%
2%
-3%
-1%
(15—18)
3%
CAGR
Figure 7: Student enrollment, by curriculum, Dubai and Abu Dhabi, AY15–AY18
Note: “Others” in Abu Dhabi include IB and SABIS enrollment.Source: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA)
Figure 8: New schools, by fee segment, Dubai and Abu Dhabi, AY16–AY18
Source: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA)
EY-Parthenon | 13
Schools in the premium fee segment have dominated new supply in Dubai, while in Abu Dhabi, new school additions are more balanced across fee segments.
The trends across fee segments and curricula can be explained in part by new school additions in recent years in both emirates. In Dubai, UK curriculum schools and schools in the premium segment have dominated new school additions, while in Abu Dhabi, new supply has been more evenly split across both curricula and fee segments (Figure 8).13
Dubai Abu Dhabi
Fee growth is regulated by both the KHDA and ADEK. While Dubai’s KHDA publishes a fee framework that defines the fee growth allowed by any school, the ADEK currently evaluates fee growth requests on a case-by-case basis.
The maximum allowed fee growth of a school in Dubai is a multiple of the annual Education Cost Index (ECI), an education-specific inflation index. Prior to academic year 2017–18, the ECI multiple was based on the school’s rating such that higher-rated schools were allowed higher fee increases. For academic year 2018–19, tthe KHDA instituted a one-year fee freeze to reduce the financial pressure on parents in the city.18 Later in 2019, the KHDA published a new School Fees Framework effective in academic year 2019–2020 that continues to be based on the ECI but incentivizes improvement in school rating. The ECI has ranged from 2% to 3% since 2016, and the multiple now ranges from 0 to 2 depending on the rating improvement.
In Abu Dhabi, average annual fee growth has historically been close to inflation (approximately 2% to 3%).
Changes to the KHDA school fees framework
0
3
6
9
12
15
AY16
6
AY17
14
AY18
11
0
3
6
9
12
15
AY16
8
AY17
9
AY18
5
Very low: USD <3k(AED <10k)
Medium: USD 5k—8k(AED 20k—30k)High: USD 8k—14k(AED 30k—50k)
Premium: USD >14k(AED >50k)
Low: USD 3k—5k(AED 10k—20k)
1. UAE’s GDP growth is expected to be stable and in the range of 3% to 3.5% over the next five years (to 2024). In Dubai, the expatriate population is expected to grow at a stable rate in line with GDP and likely to continue driving growth in private K-12[1]. In Abu Dhabi, due to the slowdown in the oil and gas sector (resulting in job losses among expatriates in 2017[2]) and the growing preference of Emiratis for private education, the Emirati community will play an increasingly important role in driving private K-12. Operators will need to focus on differentiating themselves based on the specific needs of their target audience.
2. Competitive intensity in the premium segment (greater than USD14,000) is high in both Dubai and Abu Dhabi, and providers and investors will need to differentiate themselves to grow in this market. The high (USD8,000 to USD14,000) and medium (USD5,000 to USD8,000) fee segments in these markets currently present an opportunity for investors given the high utilization of current enrollment capacity in addition to high enrollment growth rates.
3. Given the absence of high-quality schools in medium and below fee segments (<USD kK), and the lack of investor interest due to lower returns, PPP programs along the lines of Abu Dhabi’s EPS could be the way forward for bringing in quality at affordable prices. This may open additional opportunities for private investors and operators.
4. Fee growth in Dubai will likely continue to be in the range of 2% to 4% going forward, but operators and investors will need to bear in mind that highly rated premium schools will have limited opportunity to increase fees above inflation based on the KHDA’s new fee framework. In Abu Dhabi, fee growth is expected to continue being in line with inflation (2% to 3%).
5. Even though UK curricula still dominates both the Abu Dhabi and Dubai markets, investors could consider opening US and IB curricula schools in Abu Dhabi and Dubai, respectively.
6. Population in the micro-catchments around new residential developments in Dubai and Abu Dhabi are likely to see growth, potentially presenting an opportunity for operators and investors. In Abu Dhabi, housing projects are coming up on Yas, Reem and Saadiyat Islands and Al Raha Beach. In Dubai, projects are underway in Deira Islands, Al Khawaneej and Bluewaters Island.
Looking ahead: opportunities for investors and operators in K-12
14 | EY-Parthenon
Figure 9: Types of higher education institutions in the UAE
Source: Abu Dhabi Department of Education and Knowledge (ADEK); Knowledge and Human Development Authority (KHDA); UAE Ministry of Education (MoE)
EY-Parthenon | 15
Higher educationHigher education landscape in the UAEBroadly, there are three categories of higher education institutions in the UAE (Figure 9).
The three types of institutions differ in terms of the licensing and program accreditation process they undergo. The key bodies that regulate higher education in Dubai are the Ministry of Education, Commission for Academic Accreditation (CAA) (a part of the MoE) and the Knowledge and Human Development Authority.
Except for international branch campuses (IBCs) inside Dubai’s Free Zones, all
institutes in the UAE are mandated to obtain a license and accreditation from the CAA. IBCs operating within Dubai typically choose to be licensed by the KHDA and follow KHDA’s quality assurance requirements, but these institutions can also apply for accreditation by the CAA. The CAA accreditation process is longer than the KHDA’s, but the advantage of having a CAA accreditation is that only graduates from CAA-accredited universities are eligible for federal public-sector jobs.
Type of institution
Federal
Local
Internationalbranch campus
Nationality split
Mix of Emirati nationals and expatriates
PredominantlyEmirati nationals
~95% expatriates,~5% Emiratinationals
Licensed by
MoE(Accredited by CAA)
MoE(Accredited by CAA)
MoE(Accredited by CAA)
KHDA(CAA accreditation optional)
Location
No restriction
No restriction
Dubai Free Zones
Outside Dubai Free Zones
*Note: The AY18 enrollment in higher education is estimated based on historical growth rates from AY14 to AY17 for all emirates except Dubai, which is based on reported AY18 data.20
The Federal/Non-Federal enrollment breakdown for all Emirates is as per the Federal Competitiveness and Statistics Authority (FCSA), which appears to define “Government” as federal university enrollment. For Dubai, the FCSA data is supplemented with data from the Dubai Statistics Centre (DSC). Non-Federal institutes include both private institutes and institutes that have an affiliation with an Emirati-level government.Source: Knowledge and Human Development Authority (KHDA); UAE Federal Competitiveness and Statistics Authority (FCSA); UAE Ministry of Education (MoE)
Figure 10: Higher Education enrollment by Federal/Non-Federal, by Emirate, AY18*
16 | EY-Parthenon
While overall enrollment is comparable in the two emirates, the share of non-Federal enrollment (primarily private) in Dubai is higher (85% vs. 50%). Within this segment, IBC enrollment in Dubai is 24,000, which comprises nearly half of the non-Federal enrollment, while in Abu Dhabi IBC enrollment is ~3,000, comprising 10% of total non-Federal enrollment. Given the scale of its IBC sector, this section will focus on Dubai.
The number of international students studying in the UAE grew by 9% CAGR between 2012 and 2016, reaching a total of 77,000 in 2016.21 International students enroll at IBCs and local institutes (both public and private); federal institutes accept very few expatriates. Dubai hosts almost half the international students in the UAE, and international students make up approximately 65% of tertiary enrollment in the city. 22 By contrast, less than 30% of Abu Dhabi’s tertiary enrollment is expatriate.23
In 2016, students from India made up the highest share of inbound students (approximately 17%) and grew at 16% CAGR between 2012 and 2016 (Figure 11). Besides India and Pakistan, the top 10 source countries for international students in the UAE are Middle Eastern.
Source: UNESCO Institute for Statistics (UIS)
Figure 11: Inbound tertiary students by source country (top 10), UAE (UNESCO)
0
4
6
8
12
14
IranIraq
PalestinePakistan
JordanSyria
India
2012 2013 2014 2015 2016
-8%
17%9%
16%0%
10%2%
8%6%
(12—16)CAGR
Yemen
OmanEgypt
16%
0k
20k
40k
60k
Dubai Abu Dhabi
59k
Sharjah
27k
Ajman
11k
Fujairah
4k
Ras Al Khaimah
5k
Umm Al Quwain
1k
24 4 - - - 2 -Number of IBCs
~24k ~3k - - - 1k -IBC enrollment
Federal
Non-Federal
56k
EY-Parthenon | 17
Overview of International Branch Campuses (IBCs) in DubaiThe Government of Dubai has encouraged the establishment of IBCs to provide high-quality international degrees to both citizens and expatriates. The development of dedicated knowledge hubs in Free Zones has attracted 24 foreign universities (as of AY18) to establish campuses in Dubai.24 The Free Zones in Dubai cater to specific business categories and offer several exemptions, such as 100% foreign ownership, repatriation of profits and favorable tax treatment, promoting ease of operation.25 IBCs in Free Zones are given academic authorization by the KHDA. The KHDA’s primary criteria for authorization is quality equivalence, in other words, the academic program delivered in Dubai is the same accredited program taught at the institution’s home campus.
In AY18, approximately 56,000 students were enrolled in higher education institutes in Dubai. IBCs grew enrollment at approximately 4% CAGR between AY15 and AY18, while enrollment in federal and local institutes declined.
Drivers of growthIBCs primarily cater to expatriates, who constitute most of the enrollment. Growth in expatriate enrollment in Dubai can be attributed to various factors, such as establishment of globally reputed institutes, increased employment prospects, diversity in student nationality, quality of life in Dubai and relaxed visa regulations.
In 2016, the KHDA announced that international students can work part time in any of the approximately 4,500 companies in the Dubai Free Zones, increasing Dubai’s attractiveness for international students. Further, in 2018, the UAE Government announced an extended visa scheme for foreign students studying in Dubai. The revised visa policy grants a 10-year residency to foreign students showing exceptional academic performance, while other students are eligible for a 5-year visa (increased from 1 year).26 This move is expected to continue attracting expatriates to study in Dubai.
Figure 12: Key growth drivers for the IBC market, Dubai
Reputation of the programs offered
Employment prospects
Diversity (graduates without borders)
Relaxed visa regulations
Quality of life in Dubai
Infrastructure
Source: Knowledge and Human Development Authority (KHDA)
Source: Knowledge and Human Development Authority (KHDA); university websites
Figure 14: IBC enrollment, by region of home campus, Dubai, AY18
Figure 13: IBC market size, by region of home campus, Dubai, AY18
IBCs in Dubai can be classified as either Asian or Western based broadly on the location of their home campus. (In our analysis, Australian IBCs are classified as Western). Of the Asian IBCs, the four largest by enrollment have home campuses in India. Most Western IBCs are based in the UK and Australia.
The overall IBC market is estimated to be approximately USD400 million in size (AY18), with Western IBCs making up approximately 75% of the market (Figure 13).
Of the approximately 24,000 students enrolled in IBCs in Dubai in AY18, approximately 65% were enrolled in Western universities (Figure 14). While Western universities currently have a higher enrollment share, Asian IBCs grew faster between AY15 to AY18 (9% vs. 2% CAGR), mainly driven by IBCs whose home campus is in India.
0%
20%
40%
60%
80%
100%
Western
Provider 1
Provider 2
Provider 3
Provider 4
Provider 8
Provider 9
Provider 10Provider 11Provider 12
$0.3B
Asian
P r o v i d e r 5
P r o v i d e r 6
Provider 7
Provider 13
Provider 17
$0.1B Total = $0.4B
18 | EY-Parthenon
Asian IBCs are growing at a faster pace than their Western counterparts
Dubai IBC market size and trends
0k
10k
20k
30k
AY15
Western
Asian
21k
AY18
Western
Asian
24k
2%
9%
AY15—18
4%
CAGR
Figure 16: IBC enrollment by discipline, Dubai, AY15–AY18
Source: Knowledge and Human Development Authority (KHDA
Source: Knowledge and Human Development Authority (KHDA)
EY-Parthenon | 19
Business programs are driving growth in Asian IBCs but have stagnated in Western IBCs Business programs have the highest enrollment across both Western and Asian IBCs, but while it is driving growth in Asian IBCs, growth has stagnated in Western IBCs. Information technology and media and design are fast-growing disciplines within Western and Asian IBCs (Figures 15 and 16).
Figure 15: IBC enrollment, by discipline and region of home campus, Dubai, AY15–AY18
Western campuses Asian campuses
0k
5k
10k
15k
AY15
14 k
AY18
Architecture
Business
Engineering
FoundationHumanities
Media and design
IT
Others
15k
-7%23%
-1%
2%
-3%14%
5%
6%
2%
CAGR(' 15-' 18)
AY15
7 . 4 k
AY18
Architecture
Business
Engineering
Media and design
IT
Others9.5k
5%14%6%
11%
1%
13%10%
(' 15-' 18)CAGR
9%
0k
5k
10k
15k
0k
1k
2k
3k
4k
5k
6k
12k
13k
UG
PG
11.8k
12.9k
3.2k 3.3k
1.8k
2.2k
1.4k1.7k
1.1k 1.0k
0.5k0.7k 0.8k 0.7k
0.4k 0.5k0.2k
0.4k 0.2k 0.3k 0.2k 0.2k
-0.08k 0.28k -0.05k 0.15k 0.19k1.16k 0.11k 0.06k0.13k 0.46k 0.32kIncremental enrollment
-3% 10% -2% 5% 7%43% 4% 2%5% 17% 12%Share of increment
Business Engineering Informationtechnology
Architectureand
construction
Humanities Foundation Tourismand
hospitality
Law Natural and physical sciences
Education
AY15
AY18
Media and
design
Source: Knowledge and Human Development Authority (KHDA)
Undergraduate enrollment is growing faster than postgraduate enrollment at both Asian and Western IBCsUndergraduate enrollment has driven growth and gained share over postgraduate enrollment in both Asian a nd Western IBCs. In AY18, undergraduate students made up 74% of enrollment in Asian IBCs, while in Western IBCs, they made up approximately 61%.
Figure 17: Enrollment by level and region of home campus, Dubai, AY15–AY18
0k
5k
10k
15k
AY15
7.4k
AY18
UG
PG
9.5k
12%
1%
9%
CAGR
67% 74%
(15—18)
Asian campuses
Share of undergraduate enrollment
20 | EY-Parthenon
0k
5k
10k
15k
AY15
14k
AY18
UG
PG
15k
3%
-1%
CAGR
58% 61%
(15—18)1.5%
Western campuses
Share of undergraduate enrollment
Source: Knowledge and Human Development Authority (KHDA); university websites
Figure 18: Undergraduate engineering program annual fee, Dubai and home campus, AY18
0k
10k
20k
30k
40k
$50k
Provider 1
Home campus
feeDubai
campus fee
26k
16k
Provider 2
18k 17k
Provider 10
45k
17k
0k
10k
20k
30k
40k
$50k
Provider 5
6k
12k
Provider 6
6k
12k
Provider 7
3k
13k
EY-Parthenon | 21
Western campuses
Asian campuses
Western IBCs generally charge higher fees than Asian IBCs and offer a discount to their home campus, while Asian IBCs are operating at a premium to their home campus feeWestern IBCs command a fee premium over their Asian counterparts (Figure 18). The average revenue per student (undergraduate programs) for Western universities is approximately USD17,000 (AED61,000), higher than the approximate USD12,000 (AED44,000) average revenue per student at Asian universities. Western IBCs typically offer their academic programs at a discount to their home campus, while Asian counterparts have fees that are at a premium to their home campus fee, a reflection of the difference in operating costs in the two geographies.
22 | EY-Parthenon
Source: Higher Education Classification Summary Report 2018-2019; Knowledge and Human Development Authority (KHDA)
Updated CAA guidelinesIn April 2019, the CAA published a new set of guidelines for licensing and accreditation that will apply from September 2019 onward.27 These guidelines outline a new procedure for establishing new institutions and specify required measures for closing or suspending programs at existing institutions. Going forward, all universities will be classified based on quality (measured by international and national rankings, academic history and other factors). Institutions classified as “high-quality” will be subject to fewer reviews by the CAA and lower licensing and accreditation costs. Meanwhile, “lower-quality” institutions will be subject to higher licensing costs and more stringent approval processes.
Higher education institution ratingsIn 2018, the KHDA published the first Higher Education Classification28 report that listed quality ratings for 17 IBCs. The rating methodology was developed in
collaboration with Quacquarelli Symonds (QS) and is measured on a 5-star scale. The Higher Education Classification evaluates universities against a range of performance indicators, including teaching, employability, research and facilities, and provides a subrating for each parameter along with an overall rating. Out of the 17 institutes that were rated, 3 were rated as 5-star (all Western) and 8 were rated as 4-star (Figure 19).
UAE IBC degree recognition by the Ministry of Education, ChinaIn 2016, the degrees offered by IBCs in the UAE were granted recognition by the Chinese Service Center for Scholarly Exchange (CSCSE) under China’s Ministry of Education.29 The collaboration between the KHDA and CSCE is expected to attract more students from China to the UAE.
Figure 19: IBCs ratings, Dubai, AY18
n=16
Regulatory developments
5–star rating
4–star rating
2–star rating
2–star rating
unrated
Western
Provider 12
Provider 11
Provider 2
Provider 4
Provider 8
Provider 14
Provider 19
Provider 3
Provider 15
Provider 23
Provider 9
Provider 20
Provider 16
Provider 10
Provider 1
Provider 24
Asian
Provider 7
Provider 5
Provider 6
Provider 18
Provider 17
Provider 22
Provider 13
Provider 21
n=8
EY-Parthenon | 23
Looking ahead: opportunities for investors and operators in higher education
1. Investors need to decide between opening an IBC in a free zone in Dubai (KHDA-approved) or opening a CAA-accredited university elsewhere depending on the audience they are targeting. Only graduates of CAA-accredited universities are eligible for federal government jobs, making such universities attractive to Emirati students. However, the CAA accreditation has higher investment and more regulatory requirements.
2. Given the sizeable South Asian expatriate population in the UAE (greater than 30% of the UAE’s population30) and the large inbound
South Asian student population, investors can consider partnerships with reputed South Asian universities that would cater to this segment of the population.
3. With the KHDA’s increased focus on quality within IBCs and employability being a key criterion in its new ratings framework, operators must focus on employment-oriented courses, such as media and design, information technology and law.
EY-Parthenon | 23
24 | EY-Parthenon
GlossaryADEK: Abu Dhabi Department of Education and Knowledge
AED: United Arab Emirates dirham
AY: Academic year
CAA: Commission for Academic Accreditation
CAGR: Compound annual growth rate
CPI: Consumer Price Index
CSCSE: Chinese Service Center for Scholarly Exchange
ECI: Education Cost Index
EPS: Education Partnership Schools
FCSA: Federal Competitiveness and Statistics Authority
GDP: Gross domestic product
IB: International Baccalaureate
IBC: International branch campus
IT: Information technology
K-12: Kindergarten to grade 12
KHDA: Knowledge and Human Development Authority
MoE: Ministry of Education
PISA: Programme for International Student Assessment
PPP: Public-private partnership
QS: Quacquarelli Symonds
TIMSS: Trends in International Mathematics and Science Study
UAE: United Arab Emirates
UNESCO: United Nations Educational, Scientific and Cultural Organization
USD: US dollar
EY-Parthenon | 25
Endnotes
1 Oxford Economics
² Oxford Economics
³ Dubai Statistics Center and Statistics Centre – Abu Dhabi
4 Dubai Statistics Center and Statistics Centre – Abu Dhabi5 Independent research organizations that forecast an economic recovery include Oxford Economics, The Economist and the World
Bank6 Dubai Statistics Center7 Statistics Centre – Abu Dhabi (the most recent published data on expatriate population in Abu Dhabi is from 2016)8 UAE Vision 2021, retrieved from https://www.vision2021.ae/en9 UAE Federal Budget 2019, Ministry of Finance, UAE, retrieved from https://www.mof.gov.ae/en/resourcesAndBudget/fedral-
Budget/Pages/budget2019.aspx10 “New system of education announced in Abu Dhabi,” The National, UAE, 19 June 201911 “UAE defines industry sectors eligible for up to 100% foreign ownership,” The National, UAE, 2 July 201912 “UAE Law allowing 100% foreign ownership now in force,” Gulf Business, 5 November 201813 Knowledge and Human Development Authority and Irtiqaa reports; the Abu Dhabi Department of Education and Knowledge14 Market size estimated by adding estimated revenues of each school; school revenues estimated by multiplying total enrollment by
the grade 8 fee15 Dubai Statistics Center and Statistics Centre – Abu Dhabi16 “India’s e-learning App to be offered in Arabic,” Gulf News, 13 November 201717 Knowledge and Human Development Authority and Irtiqaa reports; the Abu Dhabi Department of Education and Knowledge18 “No increase in Dubai school fees this year: Sheikh Hamdan,” Khaleej Times, 7 June 201819 Dubai Higher Education Guide, 2017; the Knowledge and Human Development Authority20 Federal Competitiveness and Statistics Authority (FCSA), UAE21 UNESCO Institute for Statistics (UIS), Global Flow of Tertiary Students22 Dubai Statistics Center23 Statistics Centre – Abu Dhabi24 The Knowledge and Human Development Authority, Cross-Border Education Research Team (C-BERT)25 “Starting a business in a free zone,” Information and Services, UAE Government, retrieved from https://www.government.ae/en/
information-and-services/business/starting-a-business-in-a-free-zone26 “Long-term residence visas in the UAE,” Information and Services, UAE Government, retrieved from https://government.ae/en/
information-and-services/visa-and-emirates-id/residence-visa/long-term-residence-visas-in-the-uae27 Ministry of Education: New Licensure and Accreditation Standards for UAE Higher Education28 Higher Education Classification Summary Report 2018-2019, the Knowledge and Human Development Authority29 Common Questions for Universities, the Knowledge and Human Development Authority30 Embassy of India, Abu Dhabi, United Arab Emirates, retrieved from http://www.indembassyuae.gov.in/eoi.php?id=UAE
26 | EY-Parthenon
EY-Parthenon | 27
AuthorsAmitabh JhinganPartner, EY-ParthenonErnst & Young LLP, [email protected]
Ajay KathuriaErnst & Young LLP, IndiaVice President, [email protected]
Beatrice CernutaVice President, EY-ParthenonErnst & Young — Middle East [email protected]
Janhvi DoshiSenior Consultant, EY-ParthenonParthenon India Private [email protected]
For more information, please visit parthenon.ey.com.
About Parthenon-EYEY-Parthenon professionals are global leaders in strategy consulting. EY-Parthenon teams are committed to bringing unconventional yet pragmatic thinking together with clients’ smarts to deliver actionable strategies for real impact in today’s complex business landscape. Innovation has become a necessary ingredient for sustained success. Critical to unlocking opportunities is the EY-Parthenon balance of strengths — specialized experience with broad executional capabilities — to help you optimize your portfolio of business, uncover industry insights to make investment decisions, find effective paths for strategic growth opportunities and make acquisitions more rewarding. EY-Parthenon methodologies, along with a progressive spirit, can deliver intelligent services for clients, amplify the impact of strategies and make EY-Parthenon consultants the global advisors of choice for business leaders.
EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. For more information about our organization, please visit ey.com.
EY-Parthenon is a brand under which a number of EY member firms across the globe provide strategy consulting services. For more information about EY-Parthenon, please visit parthenon.ey.com.
© 2019 Ernst & Young LLP All Rights Reserved. ED None.
EYG no. 004755-19Gbl
This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.
ey.com
Neha MakkarConsultant, EY-ParthenonParthenon India Private [email protected]
Subhash KuncheConsultant, EY-ParthenonParthenon India Private [email protected]
Mohit MehrotraConsultant, EY-ParthenonParthenon India Private [email protected]