Non-profit schools on the rise

Despite early concerns about its feasibility, non-profit education is gaining ground in Vietnam with both foreign and domestic investors flocking to the burgeoning sector.

It is evident that non-profit education went through a rough start in Vietnam as non-profit institutions were widely misunderstood by the public. The term, admittedly, remains fairly unheard of until this day, even as non-profit schools have only been in Vietnam for less than 20 years and the majority of educational institutions are wholly subsidised by the state. In the late 20th century, many parents and regulators regarded non-profit education in Vietnam as “impossible and unfathomable.”

Most of the confusion stems from the concept itself – many Vietnamese mistakenly thought that non-profit schools were not supposed to make any money at all, or that they operate as charity organisations. The examples below will show that this is far from the truth.

In developed countries such as the US, the UK, Germany or South Korea and Japan, non-profit education has always been a familiar concept thanks to the great number of high-quality institutions that are strictly non-profit. For example, prestigious universities such as Harvard, Yale, Stanford (US), Keio (Japan), and Yonsei (Korea) or medical schools Mayo Clinic, Cleveland Clinic, and John Hopkins Medicine (US) are all non-profit organisations.

While for-profit schools act like corporations and prioritise profit, non-profit universities place the emphasis on the providing the best study environment for students. All profit is re-invested in the schools’ facilities and curricula instead of being paid out in dividends to shareholders. Thanks to the constant investments, the quality of education and research at these non-profit schools improves year after year, helping them attract even bigger endowments from individuals and organisations.

Harvard University, for example, earned a profit of $998 million in the 2016 financial year. Besides tuition fees, the school made money from its subsidiaries Harvard Management Company and Harvard Business Publishing. The latter focuses on selling case studies for schools, businesses or other organisations. Thanks to its business activities, the total assets under management by Harvard University are worth $44.6 billion (June 30, 2016).

Other well-known schools such as Yale or Stanford also frequently receive huge endowments from various individuals or organisations. The schools’ board uses these funds to provide financial aid for students and increase the number of scholarships. These universities also have a sustainable business strategy to make sure that their quality of education and research is not affected by monetary losses.

THE WAVE OF NON-PROFIT INVESTMENT

Despite misconceptions, non-profit investors still took the lead in the Vietnamese education sector, striving to meet the higher training requirements of employers, parents, and students. As the young generation of Vietnamese go for tertiary education and their parents enjoy higher disposable income, opportunities are growing for non-profit educators. Between 2010 and 2013 alone, the number of universities and colleges in Vietnam grew by 6.5 per cent per year, while the number of students grew by 6.1 per cent.

The pioneers in Vietnam’s non-profit education were international schools and private institutions run by local groups, such as FPT Corporation. Many non-profit schools have earned strong reputation thanks to their international curriculum and the high employability of graduates. For example, the United Nations International School is widely known as the number-one school system in Hanoi, providing world-class education for well-to-do families and expatriates.

RMIT University Vietnam, the first international tertiary institution in Vietnam, also made a name for itself after more than 15 years of operation in the country. The average tuition fee for an undergraduate programme at RMIT Vietnam is between VND500 million and VND700 million ($21,700 and $30,400). RMIT’s annual profit margin is 5.5 per cent.

NEW PLAYERS COME TO THE PICTURE

In recent years, the non-profit education sector in Vietnam has welcomed a new competitor in Vinschool. Owned by the Vingroup conglomerate, Vinschool aspires to represent Vietnamese non-profit educators against a throng of international rivals. According to Le Khac Hiep, deputy chairman of Vingroup, right from the start, Vinschool has been designed as a programme for Vietnam’s social and educational development.

As a result, 100 per cent of the profits made by Vinschool are re-invested, which is double the threshold required by Vietnamese laws. In 2015, Vinschool made VND514 billion ($22.35 million) of revenue, taking up 1.5 per cent of Vingroup’s total revenue. This initial success has motivated the school to switch its entire system to non-profit operations.

“Now Vietnam has world-class non-profit schools, and we believe that this is one way to improve its standing in the world,” said Hiep. Since ­September 2016, Vinschool’s network of 10 campuses and 13,000 students has operated in the non-profit direction.

The non-profit business model is doing wonders for Vinschool, and Vingroup broke ground on its first tertiary institution called VinUni in Hanoi last week. The new campus spans an area of 23 hectares, including a ten-storey main building, dormitories, a sports hall, and other areas.

The strategic partners of VinUni are Cornell University and University of Pennsylvania from the US. The university is expected to start enrolment in 2020. Similar to other schools in the Vinschool system, VinUni will be a non-profit institution reaching international education standards.

Hiep said that the conglomerate hopes that Vinschool and VinUni students will gain access to international curricula taught by professors and industry experts from around the world. The ultimate goal is to nurture the next generation of skilled employees for the Vietnamese economy.

“Vingroup’s road to non-profit ­education is not a lonely one due to the large number of existing schools in Vietnam, and we see ourselves as ­latecomers to this exciting scene. To bring international education to future Vietnamese generations, we will strive to create breakthroughs and offer ­students the most advanced ­technologies one can provide in ­education,” said Hiep.

Phuong Oanh report on VIR

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