Saudi Arabia's education sector offers investors into the education sector a potentially lucrative market to tap into, but only if they can overcome regulatory and other hurdles, a new report has said.

The study, by United States-based LEK Consulting, says that despite the fact that Saudi Arabia has more children of K-12 school age (between 5-17 years) than the rest of the Gulf combined, the share of students who go to private, international schools is much smaller.

There are 6.7 million students of K-12 age in Saudi Arabia, compared with just 3.1 million in the rest of the Gulf, but the total amount spent on international schools (charging fees of $5,000 or more) is just $1 billion in Saudi Arabia, compared with $5.6 billion across the rest of the Gulf - $2.7 billion of which is in the United Arab Emirates.

LEK Consulting's report, which was initially presented at an event organised by Saudi Arabia's General Investment Authority last month, pointed out that although there are just 160,000 students enrolled in international schools in the kingdom, some one million are enrolled in the wider private schools market, with most attending schools offering the local curriculum.

“In Saudi... the government has really focussed on building local curriculum schools - a lot of it publicly-funded," the report's author, Ashwin Assomull, told Zawya in a telephone interview on Sunday.

Assomull, a member of LEK Consulting's global education team, said that under Saudi Arabia’s Vision 2030 plan, the government has set a target to increase the number of students attending private schools to 25 percent, up from a current level of around 16 percent.

“Overall, there's a growing demand for international (schools), because as incomes increase, people would like to study abroad for higher education,” Assomull said.

“There's a view, even among Saudi parents, that we have to prepare our kids for the wider world. As Saudi opens up as well, the international curricular (schools) have a more international view of the world and prepare our kids for a better run for jobs within Saudi and jobs outside Saudi.”

He also said international curriculum schools were preferred for parents who plan to send children abroad to study at higher education institutes in other countries.

LEK Consulting’s report pointed to government promises to open the market to the private sector, which has included statements from ministers promising 100 percent foreign ownership of companies working in Saudi Arabia’s private education market.

At the Future Investment Initiative event in Riyadh last year, Dubai-based schools operator GEMS Education signed an agreement pledging to invest 3 billion Saudi riyals ($800 million) into schools in the Kingdom. The Memorandum of Understanding with Hassana Investment Company –  a company owned by Saudi Arabia’s General Organization for Social Insurance – commits to building a network of schools for up to 130,000 students.

Speaking about the kingdom’s appetite for private sector involvement in its schools, Assomull told Zawya: “I think it is greater than it was”.

“We've seen in markets over time where even where there's been a great deal of public provisions, there's a feeling that ‘we've got to give the private sector a chance, because there's a good chance that they can manage and run it better than we can’.

“I think Saudi's waking up to that as well - whether through PPPs or allowing private operators to come in wholesale”.

LEK Consulting’s report highlighted a number of hurdles that operators need to think about before committing to investment, such as researching the market properly, finding a partner with access to land who shares a long term view of the sector, making sure good sites are selected and building strong relationships with regulators.

A report published by Dubai-based Alpen Capital in November stated that the total number of students in all schools across the GCC is set to increase by 2.3 percent per year over a five-year period to 14.5 million in 2022 - up from 12.9 million in 2017. However, demand for private school places is likely to increase by 4.1 percent per year, compared with just 1.3 percent for public school places between 2017 and 2022.

“The growing preference for private education continues to drive the demand for international schools and universities across the GCC region,” a press release accompanying the firm's report said.

“Currently, UAE and Qatar are the leading countries with shares of private school enrolments above 60 percent respectively, however, other regional nations are likely to witness a gradual rise in private sector enrolments.”

(Reporting by Michael Fahy; Editing by Mily Chakrabarty).

(michael.fahy@refinitiv.com)

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