Higher education in the Gulf: When will the business model(s) implode?

Posted on 05/07/2011


This article is an extended version of a note published by University World News: http://www.universityworldnews.com/article.php?story=20110715164537795


Higher education in the Gulf countries is developing fast. But contrary to the general view, these countries face different issues and constraints and are not a homogeneous block.

There are two main factors of differentiation:

. Only Saudi Arabia, Oman and Yemen have the critical mass of potential students to develop a sustainable higher education system. The other countries need foreign students. In Qatar for example, where projects are flourishing, the local population is only of about 340,000 people. Even if half of them are below 20 years old, it is still not enough compared to the many offshore campuses created. How will they attract students from abroad?

. Only Saudi Arabia, Qatar and Abu Dhabi are oil-rich countries with decades of constant revenues at the current geopolitical conditions. The other countries are either soon to be in trouble or already have to make investment choices. They still have/want to dedicate a lot for their infrastructures, so higher education is not the first priority.

Furthermore, none of these countries has currently enough local academics for their needs. They have to rely on foreign academics. When money is not an issue, it means hiring academics from the “Western” countries, who come mainly because the pay is good, creating a low commitment and a high turnover. When money is an issue, it means hiring academics mostly from Egypt, Sudan, India, Pakistan, and from South-East Asia, with consequences on the academic quality, the best ones either staying at home or being in “Western” universities. This situation is slowly changing as there is a new generation of fresh PhD graduates who were trained abroad thank to local grants and are now coming back to teach and do research in their home countries. But this is taking some time.

These conditions lead to four different situations:

Only one country, Saudi Arabia, has the potential number of local students and the financial resources. The start has been very slow but there are now clear signs of large investments in higher education (http://chronicle.com/article/Saudi-Arabias-10-Billion/128041/). As Saudi Arabia started early, this is also the only country not relying on foreign institutions (although they welcome some initiatives) and less in need of foreign academics. Saudi Arabia, because of its aura in the Muslim world, has the potential to become a hub in the region, serving the needs of its local youth and attracting students from neighbouring countries.

The second group of countries, Yemen and Oman, have the potential number of local students but lower financial resources. I won’t discuss Yemen because of the current situation. Concerning Oman, the authorities have favoured 3 models: the first is the free education model, represented by the only public university, Sultan Qaboos University and a few colleges. The second one is the development of private colleges where the fees are capped (around a maximum of 6000 Euros/year for any type of degree). These institutions have the obligation to twin with foreign institutions. This was done at the start to ensure a minimum recognition abroad of the institutions. The foreign partners are mainly second or third-tier small scale UK and US universities or colleges and are asking for a percentage and/or a lump sum in exchange for the right to deliver double degrees. The equation: capped fees + royalties leads to an uncertain return on investment unless low paid teaching-only academics are hired and little investment is made on the infrastructures. The third model is the allocation of grants to the best students to study abroad, which is not strengthening the local institutions. A real effort is made by the authorities to raise the academic quality; they created a detailed audit process and are now visiting all the private college. Furthermore, some of the reports are publicly available, giving a high level of transparency in the process.  But it does not solve the issue of the long term financial sustainability of these private colleges.

The third group of countries, Abu Dhabi and Qatar (and Dubai before the crisis) don’t have the potential number of local students but have currently the wealth to spend without thinking about any financial return. Through generous grants, they created artificially interesting financial conditions for foreign providers, which are more than happy to benefit from external sources of funding at difficult times at home. For one of the latest branches open, from the information circulating (obviously the details of the contract are confidential), the authorities provided the land for free, the equipped buildings for free and are also paying for the salaries of the academics. This is obviously financially interesting for the chosen institutions. The hope is that these branches will attract enough foreign students to eventually become profitable but the when and how are not really the questions. Are these business models sustainable in the long term? Yes, as long as the authorities have the money and the will to maintain this artificial situation. But if foreign students do not join, how will it look to have facilities for thousands of students filled with only hundreds of them? What image will it give if they fly a star professor to teach for 5 executive MBA students? They have to quickly find a way to create a momentum and make sure that students in large numbers will apply.

The last group (Kuwait; Bahrain; Dubai after the crisis; and the smaller UAE emirates) is heterogeneous. Dubai is a newcomer in this group and still behaves like a third group country. The difference: Dubai started early to invest in higher education, favoured quantity over quality, to quickly reach a critical mass of players, hoping that it will deter the other emirates to invest also in higher education. As a result, Dubai has accepted everybody at first, again mostly from the US and UK (and a few Australians and Indians) and with similar quality issues. There is also an over-reliance on foreign students with the same remaining question: why would they choose to study in Dubai? Dubai is also engaged in an upgrade of the general quality of its institutions but it is difficult to upgrade the quality, which means hiring more expensive academics, and to maintain attractive fees. If the fees are higher than in South East Asia or Europe, it will be difficult to attract students, particularly if the economy does not fully recover.

For the other countries or emirates, they chose not to invest in higher education, except for a few “me-too” initiatives. They have their own pride and would like obviously also to be able to train their youth correctly. Recently, in Bahrain, we could witness that education was at the core of the protests.

The future of higher education in the Gulf is potentially in numbers and quality. Around 160 million new students worldwide will enter the higher education landscape in the next 30 years. But these new students come mostly from India, China, and South-East Asia. And the Gulf countries are not alone to eye on them. If India succeeds in the mutation of its higher education industry and allows foreign institutions to set up operations there, Indian students will remain in India. China is developing its own model so forget the Chinese students. And in the Muslim world, Malaysia is several steps ahead in the building of a hub, in fact attracting already lots of students from the Middle East. On quality, all the local agencies are now clearly engaged in quality-oriented auditing and accreditation processes. This has to be noted as it shows that they are aware of the current issues. But on overall, there is no magic recipe and raising the quality means raising the costs and this goes against most of the business models on which the first institutions were created. And for the high-end institutions (INSEAD and HEC for example), the question of attracting high fee paying students is not easy to solve. The Gulf is a growing part of the world economically speaking, but South-East Asia, India, China, Brazil,… are also very exciting. For an executive MBA student, paying very high fees, the possibility is that this student will prefer to get acquainted with these other parts of the world and not with the Gulf region. This is also a real challenge for the local authorities.