Speaking at a recent meeting on PPP, Le Hoai Nam, deputy director of the city’s Department of Education and Training, said the country’s membership in the World Trade Organisation (WTO) had opened up investment opportunities in the private sector over the years.
The Government has allowed investors to expand their brand by opening other campuses in the same city or in other cities.
Nguyen Thanh Phong, chairman of the municipal People’s Committee, said the PPP model would be one of the main solutions for capital mobilisation in the education sector as city funds were limited.
Currently, nearly all education projects are in the Build-Operate-Transfer (BOT) form.
However, HCM City lacks land-use planning for PPP projects in education, including insufficient information about available land.
A lack of awareness about the role of the private sector in education also exists, while the tendency to rely on Government subsidies or grants persists, experts said.
Moreover, investment procedures remain complicated, hindering investment promotion activities.
Cao Thanh An, deputy head of the PPP Division under the Department of Planning and Investment, said that profitability was a top priority for investors. “Foreign investors or domestic enterprises with less capital will prioritise areas that do not require substantial capital or new technology, and which promise a short payback period.”
The initial investment required for the construction of a school is relatively high, and in order to recover the costs quickly, investors usually impose high tuition, which means only better-off families can afford the schools.
The payback period is too long compared to the profit expectations of businesses.
Senior Economist Dilip Parajuli from the World Bank, who is also a senior economist for Education Global Practice, said there were risks that investors need to be aware of before they invest in the education sector.
There is a delay in acquiring land, which will increase costs and delays in construction of schools and educational facilities. And, besides an interest rate increase, another risk is that the project will not be able to generate sufficient cashflow to meet its financial obligations, he said.
In addition, the laws or regulations can change in a way that adversely impacts the project.
According to a report from the Technical World Education Investment and Development Corporation, the Government’s policies to encourage PPP investment in education would create enabling conditions for investors.
PPP investment would help to develop a healthy and competitive environment for teaching and learning by addressing the latest trends in global education and training, according to the report.
Education usually requires long-term investment and low profit margins, which explains why businesses often have to offset their operating costs in the first few years to maintain the quality of teaching, curriculum and staff members, the report said.
Investors should be able to enjoy investment incentives such as loan interest rates, it recommended.
Most public universities in Vietnam depend on the State budget and tuition fees, according to the Ministry of Finance. Their income from services, research and technology transfers remains low.
The ministry said the Ministry of Training and Education should work with universities to offer suitable tuition range, ensuring benefits for both universities and students.
Students should also receive more financial support under the form of credits, scholarships or assistance.
In addition, the Ministry of Finance has asked public and private universities to set up financial plans, seek revenue, and control their spending, instead of waiting for funding from the State.
Ousmane Dione, Country Director for the World Bank in Vietnam, said that PPP would fail if private and public partners did not share both risks and successes.
Dione recommended that legal, regulatory and institutional frameworks remain robust to enable investors to accept risks over the long term.
“To maintain its economic competitiveness and to meet the challenges stemming from an ageing demographic, the city needs further investment in infrastructure, especially in areas like transport, health, education and the environmental sectors,” he said.
Like most cities across the world, public investment alone will not be sufficient to meet the city’s large infrastructure and service delivery needs.
Every year, the city government allocates on average about 2.7 trillion VND (116.4 million USD) to invest in school facilities. The total number of classrooms in the city is nearly 45,700, according to the Department of Education and Training.
For the 2018-19 school year, the city has 2,253 schools, from kindergartens to high schools. Among these are 1,321 public schools, accounting for 58.7 percent.
Despite decent investments, school facilities still fall short of the actual development requirements in the sector.
In recent years, the number of students has increased at a rate of about 65,000 per year. Having sufficient space to accommodate all students remains a huge challenge to the education sector.
Every year, the city spends about 26 percent of the total city budget on education and training, but that amount has not met the needs of the sector.
The city has approved an investment policy for other 198 projects to ensure sufficient classroom space by 2020, according to the Department of Education and Training.