Expansion of For-Profit Education Company Sparks Debate
Anchor, CNBC (EMEA)
A Dubai-based for-profit education company GEMS Education is planning a major global expansion as it seeks to secure a larger share of what it believes is a $3 trillion global market, but those expansion plans have also raised questions about the role of for-profit companies.
The company, which currently operates 60 schools across the Middle East, India, Europe, Africa and the U.S. told CNBC's "Access: Middle East" that it plans to invest up to $1 billion over the next five years.
"We're hoping that in the next 3-4 years we should be in about 40-50 countries," Sunny Varkey, chairman of GEMS Education said in an interview.
GEMS Education has a presence in 11 countries and expects the emerging markets in Africa and the Far East to offer the best opportunities for the private education industry, even as both the U.K. and the U.S. remain high on its agenda. With more than 100,000 students from 150 countries enrolled in its schools, Varkey ultimately aims to absorb close to five million children into GEMS Education by 2024.
"Why should the word profit be a bad word when it comes to education? If you look at every industry in the world, you know it's all about profit. But in today's world, it's also about how do you use these profits to improve communities", Varkey said.
GEMS Education has faced criticism in the past for placing profits before its students following sharp increases in annual tuition and closure of unviable schools. It is part of a wider, contentious debate in many countries around the world about the role of for-profit school models.
The firm runs schools with radically varying price points, ranging from just $750 a year to $40,000 for its top institution. Varkey insisted that the quality of education was the same throughout, and that the price disparities came down to facilities.
"The level of education will certainly be higher. But would it be justified in terms of the entire costing between the two? I'm not entirely sure about that," Sanjay Vig, managing director at the investment bank Alpen Capital, told CNBC.
Martin Johnson, deputy general secretary at the Association of Teachers and Lecturers (ATL), was quick to point out that parents were more interested in academic results, as well as the ethos and reputation of the school.
"And that often plays very much against price," he said.
Far more alarming for Johnson was the trend of "concentration into fewer and fewer hands and in particular global education companies."
"That cannot be a good way for education services across the world to be going".
GEMS Education was founded in 1959, and Varkey, who took over the family business in 1980, maintained that his business had remained insulated from global economic swings over the last few decades, describing risks as "literally zero".
But Vig saw the large presence of expatriates in GEMS Education's home turf of the United Arab Emirates, where they constitute the majority of private school students, as possibly the weakest link.
"Anything that can impact the movement of that workforce, could be something that can affect the growth of these schools too," he explained.
GEMS Education may end up concentrating on the countries which are members of the Gulf Cooperation Council, Vig added, where an estimated 20 percent of government spending is on education. That equates to a market size of some $36 billion, of which $5.6 billion constitute private schools, making it one of the most expensive in the world.
Varkey has no regrets. "It's not just about making money. Sure that we need to have a good business operation but at the same time we need to make sure we give value for money to the parents"
This week on "Access: Middle East" an exclusive interview with Sunny Varkey, Chairman of GEMS Education. Find out more about the future of the education industry, whether an IPO is on the cards and how the Varkey GEMS Foundation is helping those who cannot afford an education.