Moves to develop private education offer new opportunities for investors in Saudi Arabia

Spurred on by the government’s efforts to increase the involvement of private players in the sector and a 2018 regulatory amendment allowing 100% foreign ownership of schools, universities and colleges, education is one of the largest recipients of foreign investment in Saudi Arabia. Opportunities continue to emerge in the general, vocational, technical and special educational needs segments: in 2019 the Saudi Arabian General Investment Authority (SAGIA) announced that the number of business licences issued in the education sector increased by 100% compared to the previous year.

Market Dynamics

The Kingdom’s education sector is the largest in the region and accounts for almost 80% of public expenditure on education in the GCC. It is characterised by high levels of state ownership and a limited, but growing, private segment. In 2018 the private segment accounted for 12.6% of the $37.2bn market and 10.1% of general education enrolment. However, the sector’s dynamic is rapidly changing as the government seeks to increase private sector involvement as part of Saudi Vision 2030. To this end, the authorities targeted an enrolment rate of 25% in private schools by 2020 through the construction of new schools, public-private partnerships and subsidies for private investment.

Regional Trends

Market dynamics in Saudi Arabia differ from other GCC nations such as the UAE and Kuwait. Most students are locals, rather than expatriates, and there are very few large regional or international schools operating in the domestic market. The number of students enrolled in international private schools remains limited. In 2018 there were 378,000 students out of a total 6.3m enrolled in these institutions, representing 6% of the countrywide intake. In comparison, in the UAE there were 642,000 students, or roughly 60% of the student body, enrolled in international private schools. However, the number of Saudi nationals attending international schools is on the rise since a 2018 legislative change overturned a ban on Saudi parents enrolling children in private international schools. As a result of recent reforms, Saudi Arabia’s private and international education segment is expected to account for the majority of growth in the GCC market in the coming years. In September 2018 regional media reported that the segment is likely to be worth approximately $12bn by 2023.

Promising Areas

Working alongside SAGIA and the National Centre for Privatisation (NCP), the Ministry of Education is marketing the sector to local and international investors. In January 2020 the NCP concluded a roadshow covering several cities in Saudi Arabia and the UAE to attract private investors to fund, construct and manage schools, and provide educational services in the Kingdom. Following the roadshow SAGIA announced the signing of various investment deals worth a total of SR2.9bn ($773.1m). This included a contract awarded to real estate developer Tatweer Buildings Company to construct, operate and maintain 58 schools with a capacity of 70,000 students. The SR1.4bn ($373.2m) project will involve cooperation with several private sector partners, including Google Education.

There are also considerable opportunities for investors in the technical and vocational education segment. While enrolment rates remain low, at 5.1% as of 2018, the government has prioritised the segment’s growth to ensure that the young population is equipped with the skills needed for future jobs. In the first half of 2019 nine international vocational education companies were awarded investor licences in Saudi Arabia worth a total of $141m. Partner institutions included Niagara College Canada, a vocational and technical education specialist, and Arizona Centres for Comprehensive Education and Life Skills, a US-headquartered non-profit organisation that caters to students with special educational needs.