Saudi government's education allocation focuses on new universities and schools

Education accounted for the highest expenditure of any single sector in Saudi Arabia’s budget for 2015, equivalent to 25% of total anticipated spending. The annual statement does not include defence and security spending, but Jadwa Investment says that examination of Saudi Arabian Monetary Agency figures for 2014 suggests that it accounts for 35%. The 2015 budget also showed a 3% rise in the annual spending allocation for education. The financial outlay represents a continued commitment to Saudi Arabia’s young people, but it was a commitment made against the backdrop of an 11% fall in annual net oil export revenues in 2014.

STUDENT POPULATION: One argument those ministers could employ is the demographic imperative based on the proportion of people in education as compared to the population as a whole. According to Central Department of Statistics and Information figures, there were 5.91m Saudi pupils in government schools in 2013 and a further 167,681 enrolled in state-funded technical training centres, giving a total of 6.08m.

The “National Indicators and International Comparisons” report published by what was then the Ministry of Higher Education showed there were 1.36m students enrolled on university courses in 2013. CDSI figures suggest a total Saudi population, excluding expatriate workers, of 19.84m. Of the roughly 20m Saudi citizens, 7.5m are studying at one of the state’s schools, colleges or universities, or 37.5% of the population. Put simply: a quarter of the budget is spent on teaching more than a third of the population.

The significance of such a youthful population can be seen when Saudi Arabia’s state school expenditure is compared to a developed economy with a different demographic balance. According to Tatweer Education Holding Group, created to implement the King Abdullah bin Abdulaziz Project for Development of Public Education, the Kingdom’s 6m state school children, who represent 25% of the Saudi population, are taught by 600,000 teachers in 34,000 schools. This can be compared to England, where 8.2m pupils in 24,372 schools were taught by 438,800 teachers in 2011. In a country of 53m, England’s school children represent 15% of the population. The proportion of the Saudi population in education is greater than that in England and so improving the standard of the education they receive is likely to significantly impact the future prosperity and well-being of the country.

Tatweer is working with a five-year budget of SR80bn ($21.32bn), but even then it is only working directly with 900 schools. It seeks to spread value by re-training teachers who can teach children, but also help to mentor other teachers by passing on their new-found skills and teaching techniques. “We have started already with STEM [science, technology, engineering and maths] education and we have people from our schools who go into other schools with their iPads and show how these subjects can be taught more effectively,” Tatweer’s CEO, Mohammed Alzaghibi, told OBG.

BUDGET BREAKDOWN: Of the 2015 education budget of SR217bn ($57.8bn), the government gave details for SR48.4bn ($12.9bn) of its spending plans. These included SR14bn ($3.73bn) to be used on 164 existing developments and SR400m ($106.6m) to be spent on the refurbishment of general schools and sports centres. An additional SR12bn ($3.2bn) is being spent on university upgrades and the construction of three new universities, while SR22bn ($5.86bn) will support 207,000 students and their guardians and dependents studying abroad. According to the Ministry of Higher Education’s “National Indicators and International Comparisons” study of the tertiary sector, total public expenditure on education has risen every year since 2009.

SCHOOL BUILDING: Part of the allocation in the 2014 budget was for the construction of 465 new schools and, according to local media reports, the budget would see SR318m ($84.75m) spent on new schools in Bisha, Asir, Mahail, Tabuk, Hail, Qunfudha, Ahsa, Wajh, Laith and Medina while maintenance contracts were awarded for work on schools in the Asir, Riyadh, Medina and Dawadmi regions. In addition, new safety devices, water coolers and air conditioning units were being installed at 100 schools across the country. There were also reports that Tatweer was planning to condense the time frame for a SR42bn ($11.2bn) project to construct 3200 new schools from five years to three, resulting in construction of 1000 new schools a year instead of the 645 it originally planned to build. A Tatweer source told reporters in December that it hoped to construct 10,000 schools in the next decade.

NEW UNIVERSITIES: Part of the SR12bn ($3.2bn) upgrade for the university segment includes the creation of three new universities. In April 2014, the universities, which would increase the geographical spread of tertiary education across the country and so meet the Kingdom’s goal of increasing spatial diversity. Khalil Al Ibrahim, rector of Hail University, told OBG, “Every university should have its own personality by focusing on and building on its strengths. Specialisation is how we will create top-level universities in Saudi Arabia.” The three new universities, which were ordered by the late King Abdullah, were to be at Hafr Al Batin, Bisha and north Jeddah and operate on a wheel-and-spoke basis, with hub campuses supporting satellite colleges. The University of Hafr Al Batin would be formed from two branches of King Fahd University of Petroleum and Minerals (KFUPM) and the University of Dammam and would support 12 satellite colleges in Al Olaya, Al Nisiriah and Al Khafji, according to the Saudi Press Agency. Branches of King Khaled University in Bisha would be merged to form Bisha University, which will have 13 satellite colleges. The King Abdulaziz University branch in north Jeddah will become Jeddah University with 13 satellite colleges.

UNIVERSITY SPENDING: The 2014 “National Indicators and International Comparisons” study of the university sector shows how spending commitments to this growing part of the Kingdom’s educational landscape have evolved. It showed that from 2009 to 2013 the proportion of public expenditure on education allocated to higher education rose from 25.2% in 2009 to 46.5% in 2013. Over the same period expenditure grew by 152.2%, or a compound annual growth rate (CAGR) of 26%, while the number of enrolled students grew by 79.3%, or a CAGR of 15.7%. Average public expenditure per higher education student increased by 40.7%, or a CAGR of 8.9%, and stood at SR58,897 ($15,696) in 2013. Public expenditure on higher education was 2.9% of GDP in 2013, the highest among Arab countries.

RECURRING EXPENSE: The “National Indicators and International Comparisons” report also explains that the proportion of that expenditure devoted to current spending, rather than capital costs in higher education, increased from 68.8% in 2009 to 72.4% in 2013. This demonstrates that while the government may have the discretion to freeze new capital projects in the future, an increasing proportion of its budget will be accounted for by recurring ongoing costs. In 2013 total expenditure was SR80bn ($21.32bn) and so 72.4% of that equates to SR58bn ($15.46bn). Of that, 54.2%, or SR31.4bn ($8.37bn), was devoted to salaries and allowances. In 2009, when the total budgeted higher education spend was SR31.7bn ($8.45bn), current expenditure accounted for 68.8%, or SR21.8bn ($5.81bn), and of that salaries were 50.1%, or SR10.9bn ($2.9bn). Thus, the recurring salaries and allowances bill in higher education went up from SR10.9bn ($2.9bn) to SR31.4bn ($8.37bn) in five years, an increase of 188%. When Jadwa Investment gave details of the 2015 budget increase it explained that the SR5bn ($1.33bn) in the entire national budget was entirely due to higher current spending, while investment spending was reduced and that larger wages and salaries were included in this. This was partially explained by the Hijri ( Islamic) calendar, which includes an extra month’s pay in 2015, but the calculation was made before King Salman bin Abdulaziz Al Saud granted two months’ extra salary to all public servants after his accession to the throne.

FUTURE SAVINGS: Saudi Arabia’s huge foreign reserves provide a fiscal buffer for many years ahead. However, there are options open to Azzam Al Dakhil, the minister brought in from the private sector to run the merged education super-ministry, if he chooses to use them. Consumer demand has seen the proportion of students enrolled in private secondary schools rise from 17% in 2012 to 18.5% in 2013. A more open market in private education might nurture growth in this sector and ease the burden on state schools.

In the Saudi higher education sector, nine out of 34 universities are private. With the introduction of three new state universities, that proportion will become nine out of 37, or less than 25%. The state universities are spreading to more areas of the Kingdom, but they remain centralised in administration terms and this can reduce their ability to adapt their teaching, courses or focus. “It can currently take central government two years to validate a new programme at one of the country's government universities,” Tatweer’s Alzaghibi told OBG. Greater autonomy for some of these universities might lead to more interest from private sector investors or research institutions and longer-term savings.