Vietnam’s Education Sector: A Rising Opportunity for Foreign Investment

Vietnam’s education sector presents immense potential for foreign investors, driven by increasing demand for educational services, favorable government policies, and attractive tax incentives. With the anticipated implementation of Decrees 124 and 125 on November 20, 2024, the framework for foreign investment in education will evolve, emphasizing better oversight and operational clarity. In this article, we explore the intricacies of the Vietnamese education system, the role of private institutions, market dynamics, regulatory landscape, and emerging investment opportunities.

Government Initiatives and Private Sector Growth

The Vietnamese government is actively promoting private sector involvement in education. In 2019, it launched Resolution 35/NQ-CP, aiming to mobilize societal resources for educational and training development. The resolution set ambitious targets: private educational institutions were expected to account for 8.75% of the total by 2020 and 13.5% by 2025. However, achieving these goals requires robust strategies to improve the investment environment, leveraging both local and foreign expertise.

Targeted Proportion of Private Educational Institutions

The following table illustrates the projected increase in private educational institutions across various categories:

Source: Resolution 35

To bolster this initiative, specific measures have been introduced to streamline visa processes for foreign educators and business entities, enhancing Vietnam’s attractiveness as an investment destination.

Market Demand for Private Education in Major Cities

Demographic Insights

Vietnam’s school-age population is substantial, with 39% of Hanoi’s residents falling into this category, alongside significant figures in Ho Chi Minh City and Binh Duong. High foreign direct investment (FDI) levels, coupled with a growing economy, have heightened the demand for quality education, particularly as over half of international school attendees are foreign nationals.

Rising Middle Class

Incomes are rising, with the middle class projected to expand by 36 million by 2030. This economic growth is reflected in increasing disposable incomes, which in turn fuels expenditure in services such as private education. From 2014 to 2020, average income levels rose significantly, fostering a more affluent consumer base willing to invest in quality education.

Current Supply of Private Schools

As of 2022, the supply of private schools is still limited compared to public institutions. For example, in Hanoi, out of 2,801 schools, only 41 are private, while in Ho Chi Minh City, the number is 55 out of 2,346. A significant portion of these private schools focuses on preschool and compulsory education, with private senior high schools typically charging steep tuition fees, often exceeding $20,000 annually.

Tuition Fees for International and Bilingual Schools

Tuition costs vary significantly across institutions. Here’s a snapshot of the average annual fees for some prominent schools in Hanoi:

Source: Fiingroup

Regulatory Framework for Foreign Investment

Understanding the regulatory landscape is crucial for foreign entities looking to establish educational institutions in Vietnam. Educational institutions can be classified as public or non-public, with the latter encompassing semi-public, individually founded, and private schools. Compliance with national curriculum requirements and local laws is mandatory.

Investment Registration Process

Setting up a foreign-owned educational institution involves acquiring an Investment Registration Certificate (IRC) and an Establishment Registration Certificate (ERC), followed by approvals for operational licenses. Recent decrees have tailored the requirements for foreign educational institutions, particularly Decree No. 86, which allows foreign ownership and delineates investment thresholds.

Recent Regulatory Updates: Decrees 124 and 125

On October 5, 2024, the issuance of Decrees 124 and 125 brought significant updates to the investment landscape for education in Vietnam. Both decrees aimed to enhance regulatory clarity, focusing on foreign educational institutions and domestic entities, respectively.

Enhanced Transparency and Partnership Requirements

Decree 124 emphasizes increased transparency for foreign institutions, mandating clear public disclosure of educational programs and staff demographics. It also stipulates that partnering foreign entities must have been operational for at least five years and align with Vietnam’s educational goals.

Domestic Regulatory Updates

In contrast, Decree 125 updates the oversight framework for domestic institutions, ensuring they meet quality standards while also streamlining their supervision through simplified disclosure requirements.

Investment Opportunities and Incentives

Foreign investment in Vietnam’s education sector enjoys several incentives, as detailed in the Law on Corporate Income Tax (CIT) and the Law on Value-Added Tax (VAT). Key incentives include a reduced CIT rate on investment incomes and various exemptions for reinvested income.

Outlook for the Education Sector

Investing in Vietnam’s educational sector promises robust returns, but It also involves navigating complex regulations concerning capital, infrastructure, and operational requirements. Looking ahead, trends indicate increased investment in kindergartens, K-12 establishments, and vocational training programs, alongside a rising focus on online education.

Conclusion (Note: No conclusion included as per request)