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Given that schools make most of their revenue up front and in a short period of time as fees come in, liaising with the tax departments to phase payments of employer contributions and other taxes remains a work in progress. But if Vietnam is anything, it is a land of opportunity.
It will take more than a pandemic to disrupt the workings of the behemothic Vietnamese education system. Indeed the number of international schools in the two major metropolises of Vietnam, namely Hanoi and Ho Chi Minh City, is staggering when you consider that neither city unlike, say, Hong Kong or Singapore is particularly well-known as a destination for expatriate workers.
Ho Chi Minh City alone has over 50 international schools and Hanoi is not far behind. And there are certainly more in development. The reason for this is simple. It is not the small expatriate population that is driving the need for international schools but Vietnamese mums and dads. The local education system struggles as a result of chronic underinvestment, and there is a view that the curriculum is old-fashioned and not equipping youngsters with skills that are necessary for working life.
Vietnamese families are, therefore, willing to mortgage their homes, sell the family gold, and forego holidays and fancy trips, to pay for their children to go to a good school. Many students and graduates and their parents and grandparents go to evening and weekend classes to improve their English and learn new skills.
Combine that with the hard facts: 1 Vietnam is a country with almost million people, 70 per cent of whom are under the age of 35 and 40 per cent of whom live in fast-developing cities; and 2 the population is growing at a rate of 1 million people a year, and the economy until recently at 6. The potential for education businesses, whether they be schools or other forms of teaching, such as edu-tech, is still very strong in Vietnam.
The Vietnamese government over the past ten years or so has softened its approach to foreign investment considerably. Although foreign ownership limitations still exist for a number of industries, education is a sector where there is no foreign ownership limitation. It is however a sector where the government still has approval rights over foreign investments.
Nevertheless, it is possible for a foreign investor to own per cent of an education business. Foreign investors normally invest in schools that can teach a foreign curriculum. The most popular foreign curricula are US, Canadian, Australian and British but other options are available. As always there is a or indeed several slight catches. Under Decree 86, the key piece of legislation that applies to foreign-owned education institutions or FOEIs for short , the proportion of the students studying at an international school teaching a foreign curriculum who are Vietnamese may not be greater than 50 per cent.
To be fair, this marks a noticeable improvement on the old law where there were a number of proportional limits depending on the stage of education i. Indeed, even before COVID, education providers from overseas were providing their teaching programmes to children here. Unfortunately, Decree 86 is not designed to regulate this mode of training as it contemplates only brick-and-mortar education businesses.
Certain companies in the market have become comfortable operating in this grey area by opening one or more brick and mortar locations in Vietnam that do comply with the requirements of Decree 86 to obtain the relevant education licences and, at the same time, provide online training programmes. In practice, therefore, foreign companies may provide online training platform for Vietnamese students on a cross-border basis and establish an onshore representative office or local company to support the business.
At the moment, there is no clear evidence that the regulators support such activities. However, so far as we know, they have not taken any action to prevent this practice either. Thinking of setting up or buying a school? You should bear these key points in mind. There are numerous rules and requirements when it comes to schools.
Decree 86 contains numerous requirements for FOEIs but it is only part of the picture. If you want to set up or acquire a school here, you should bear at least the following in mind. Deal structure — requirements and conditions applicable to an FOEI are much higher than those applied to local private schools. If you want to set up a new school i. Most of the foreign investment transactions in models 2 and 3 are done by acquiring existing local private schools already set up by Vietnamese shareholders.
You may need to do this in a way which means the acquired school is not technically an FOEI. Land — what is the deal on the land? Trial Try full digital access and see why over 1 million readers subscribe to the FT. For 4 weeks receive unlimited Premium digital access to the FT's trusted, award-winning business news.
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