Prepared By The Parthenon Group For

UK Education in Dubai: What Works, London, 2013

x

Private Education in Dubai:Opportunities for Continued Growth

Parthenon’s Education Practice

On-the-Ground Education Sector Projects Completed by Parthenon

Agenda

Regional Drivers

K-12

Higher Ed

Early Years

GCC Countries Seek to Increase the Economic Contribution from Non Oil Sectors

$28B $202B $79B $196B $652B $386B

0

20

40

60

80

100%

Bahrain Kuwait Oman Qatar SaudiArabia

United ArabEmirates

GDP 2012Estimated

79%

86%

52%

57%55%

68%

43%

65%

49%

60%

69%

74%

2012

2017E

Proportion of Non Oil GDP (Current Prices)

Significant Investment is Required in Education Infrastructure in GCC Countries

0%

20%

40%

60%

80%

100%

$0 $20,000 $40,000 $60,000

PPP Adjusted GNI per Capita

Tert

iary

En

rollm

en

t R

atio

Bhutan

Tanzania

Pakistan

Myanmar

BangladeshGhanaBurundi

Laos Cape Verde

Uruguay

United States

Ukraine

Switzerland

Sweden

Slovakia

Romania

NorwayNew

Nepal

Mexico

Lithuania

Latvia

Jordan

Italy

Israel

Hungary

Hong Kong (China), SAR

Greece

France

Finland

Estonia

Denmark

Czech Republic

Cyprus

Brunei Darussalam

Belgium

Belarus

Azerbaijan

Australia

Armenia

Algeria

Republic of Korea

Portugal

Zealand

NetherlandsIreland

Iceland

Brazil

El Salvador

Tajikistan

Kuwait

BahrainUAE

OmanSaudi Arabia

Tunisia

Lebanon

Morocco

Turkey

Croatia

Chile

Bulgaria

Poland

Austria

Colombia

Madagascar

Burkina Faso

Vietnam

Indonesia

Guatemala

China

India

Ethiopia

Uzbekistan

R2 = 70%

Ratio v/s PPP Adjusted GNI Per Capita, 2007

What are the Drivers of Private Education in GCC Countries?

• 55% of the population in UAE, KSA, Kuwait, Oman and Qatar is below 30 years old

• GDP per capita for UAE, KSA , Kuwait, Oman and Qatar have grown by 5-10% between in last 5 years

• Premium International and Mixed Curriculum market in UAE is 5X of that in India and similar to China

• Higher Education Enrolment in Western Private Colleges has grown the fastest in last 3 years in UAE

• Private international schools in Riyadh, Jeddah and Sharqiah have grown faster than the market

• Expats account of ~30% of the population in GCC countries and ~80% in the UAE

• The number of expatriates living in GCC countries have increased by nearly 20 per cent over their number in 2005

Specifically, Dubai offers a real opportunity for private education operators

Young Population Increasing AffordabilityNeed for International

EducationGrowing Expat

Community

UAE has the largest market opportunity in K-12 and Higher Education

UAE Singapore Malaysia China

K-12

Market Size of International Private

K-12

$1.9B $0.7B $0.3B $1.7B

Can Locals attend international schools?

Yes No Yes No

Higher Ed

Market Size of TNE $148M $520M $385M --

International Student Growth 6% -11% -4% --

Agenda

Regional Drivers

K-12

Higher Ed

Early Years

What do K-12 operators look for?

Market Opportunity

MarketStability

Clear, TransparentRegulations

0

25

50

75

100

$125B

2008

$92B

2010

$92B

2012F

$97B

2014F

$104B

2016F

Finance

Business Services

Manufacturing

Wholesaleand Trade

Transport

Other

Govt. Services

Construction

$111B

('08-'12)

3%

CAGR

('12-'16)

4%

CAGR

Non-oil sectors in Dubai have been growing at 3% since 2008

Dubai Market Growth by Sector, 2008-16F

Both Emirati and non-Emirati enrolments are growing in K-12 in Dubai

0

100

200

300

2008

Non-Emirati

Emirati

157K

2009

178K

2010

182K

2011

193K

2012

207K

6%

7%

('08-'12)7%

CAGR

K-12 Dubai Private School Enrolments, 2008- 2012

0

20

40

60

80

100%

Pe

rcen

tOfT

otal

British

School XSchool X

School XSchool X

School X

School X

School X

School X

School X

School X

School X

School X

School X

School X

School X

School XSchool X

School XSchool X

$274M

IB

School X

School X

School X

School X

School X

School X

$95M

American

School X

School X

School X

School X

School X

$80M

20K 8K 5KTotalEnrolment

Total =$450M

$14K $14K $17KAverage Fee

11% 8% 9%EnrolmentGrowth

2% 3% 3%Fee Growth

The premium market is large and growing Dubai Private Premium K-12 Market Size, By Curriculum, 2012

(Premium Schools > $13K

Parents in Dubai prefer British curriculum schools

0

20

40

60

80

100%

Premium school parents

British

IB

American

100%

Q: Please rank the top preference for type of curriculum for your child?

British/British + IB curriculum is the most in demand amongst parents

0.0

0.0

0.1

0.1

0.2

Real GDPGrowth

6.0%

3.2%

-2.4%

2.4%

1.8% 9.3% 5.1% 3.6%

2001 - 2007 2008 2009 2010

Spread BetweenGDP Growth andEnrollment Growth

Even through the economic turmoil of the recession, K-12 enrolments have continued to grow

Private Non Emirati Enrollment Growth

K-12 Dubai Private Non-Emirati Enrolment Growth and GDP Growth, 2001-2010

What are investors looking for in a regulatory system?

Transparency Quality Pricing Mechanism

KHDA’s pricing mechanism ensure operators and investors of a clear, transparent regulatory system

Regulators determine a baseline index of education costs

% of Schools Receiving Ratings

Baseline Index Of Education Costs

UtilitiesTeacher Costs

Rent

Sample Costs Included in determining baseline index

0

20

40

60

80

100%

Fair

Poor

Excellent

Good

Baseline Index x 3

Baseline Index x 2

Baseline Index

Baseline Index

Approved Price Increase Amount:

Mechanism to regulate price increase if instituted needs to be transparent and should encourage investors and private operators to invest in building quality institutions

Regulators conduct annual quality ratings of

each school

1. Excellent2. Good3. Fair4. Poor

Academic PerformanceAttendance

FacilitiesTeacher QualityRetention Rates

Quality Rating Scale

Sample Rating Factors

1 2School fee increases are allowed based on quality

ratings, and pegged to baseline cost index

3

Before entering Dubai, schools should understand how their offerings fit into the market

• Enrolment No.

• Tuition Fee

• Grades

• Curriculum

Market Size

Define Market & Competition

Define Market & Competition

Competitive BenchmarkingCompetitive

BenchmarkingCatchment Area

AnalysisCatchment Area

Analysis

School Enrolment Potential

School Enrolment Potential

Fee Growth PotentialFuture Enrolment

PotentialCost Improvement

Potential

Key

Considerations

Key

Output

Revenue

Accurate Assessment of Local Supply and Demand Determines success in K-12 Sector

0

20

40

60

80

100%

City A

Target Schoo l

OutsideCity A

School 1

Facilities

School 2

TargetSchool

School 3

TargetSchool

CompetitorSchool

CompetitorSchool

CompetitorSchools

AdjustmentforLocations

• Facilities and

infrastructure

• Parent Satisfaction

• Drive Times to school

and parent preference

• Income distribution of

settlement population

• Expected Share of

Forecast Demand

Agenda

Regional Drivers

K-12

Higher Ed

Early Years

The TNE market in the UAE is large and growing quickly

• 2012 Revenue: ~US$30M

• 2012 Revenue: ~US$150M

• 2012 Revenue: ~US$105M • 2012 Revenue:

~US$385M

• 2012 Revenue: ~US$40M

• 2012 Revenue: ~US$520M

Revenue CAGR (‘08-’11)

Size of the bubble represents the total revenue of acquirable assets

5-10%

<5%

10-15%

>15%• 2012 Revenue:

~US$148M

Vietnam

UAE

Malaysia

Brazil

India

Indo-nesia

Singapore

Australia UK US Other

Many institutions have already entered Dubai to set up branch campuses

-15

-10

-5

0

5

10%

Malaysia

Growth Rate('10-'12)

-11%

Singapore

Growth Rate('10-'12)

-4%

UAE

Growth Rate('10-'12)

6%

The UAE has potential to attract international students to branch campuses

Dubai Singapore Malaysia

Complexity of Regulations

Time Required to Obtain Approvals

3-6 months 9-12 months 24-30 months

Foreign Ownership

Types of Offerings Allowed

Approval Body

Ease of Entry

Attractive Unattractive

Dubai offers the most favourable regulations for setting up an institution

The most successful universities offer employability related courses

Engineering

Business/Mgmt

ComputerScience

OtherHealth Science

100%

~70-80%

Private Western

Placement rate of 70-80% compared with other

institutes at ~50%

Foreign branch campuses can improve their appeal by offering transfers to the home campus

Year 1 Year 2 Year 3 Year 4

Students have the option of completing a part of the

program at Heriot-Watt campus in Edinburgh

If the student completes final year in India or UK, a UK

degree is awarded

Students at other private western universities can

articulate only after year 3

Herriot-Watt

University of Wollongong in Dubai

Middlesex University

Canadian University of Dubai

Private Western

Public UniversitiesPublic

ArticulationOption

A transfer to a Western home campus improves a student’s job prospects both at home and abroad

Agenda

Regional Drivers

K-12

Higher Ed

Early Years

0

20

40

60

80

100%

Super Premium (>$9K)

School XSchool X

School X

SchoolXSchoolX

School XSchool XSchool XSchool X

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School X

School X

School X

School X

School X

Premium ($7-9K)

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School XSchool X

School XSchool XSchool X

School X

School X

SchoolXSchoolXSchoolXSchoolXSchoolXSchoolXSchoolX

School XSchool X

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School X

School X

Medium($4-7K)

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School XSchool XSchool XSchool XSchool XSchool XSchool XSchool X

School XSchool X

School XSchool XSchool XSchool XSchool X

School XSchool XSchool XSchool XSchool X

School XSchool X

School X

School XSchool X

School X

School X

Low(<$4K)

School XSchool XSchool X

School X

School XSchool XSchool XSchool X

School XSchool XSchool XSchool X

School XSchool XSchool X

School XSchool X

School XSchool XSchool X

School XSchool XSchool X

School X

School X

School X

School X

26 45 45 27Number of Nurseries

3.0K 5.2K 4.0K 2.4KTotal Enrolment

$10.2K $8.2K $6.5K $3.4KAverage Fee

21% 35% 22% 16%Revenue CAGR

Total =$108M

The early years market is small and fragmented…

Market Size of Dubai Independent Private Nurseries, By School, By Price Point, 2013

But all segments are growing quickly

0

5

10

15

2010

Super Premium

Premium

Medium

Low

8.7K

2013

Super Premium

Premium

Medium

Low

14.7K

10%

17%

29%

17%

87 143Number ofNurseries

10%

17%

29%

17%

87 143Number ofNurseries

2010-13

19%

CAGR

2010-13

19%

CAGR

Enrolment in Independent Private Nurseries in Dubai, By Price Point, 2010 and 2013

EYFS is the most popular curriculum option – the source of most incremental enrolment growth

0

5

10

15

2010

Other

International

Montessori

EYFS

8.7K

EYFSIncremental

EYFS

4.5K

MontesorriIncremental

Montessori

0.4K

InternationalIncremental

International

0.4K

Other*Incremental

Other

0.7K

2013

Other

International

Montessori

EYFS

14.7K

23%

10%

14%

15%

CAGR

87 37 2 2 15 143Number ofNurseries

23%

10%

14%

15%

CAGR

87 37 2 2 15 143Number ofNurseries

2010-1319%

2010-1319%

Enrolment in Independent Private Nurseries in Dubai, By Curriculum, 2010-13

Parents want English as the language of instruction, even in early years

0

20

40

60

80

100%

Expats Preferred Language

English

BilingualArabic

Emirati's preferred Language

English

Bilingual

Arabic

Q: What is your preferred language of instruction for your child?

UK Education in Dubai: Opportunities Across Sectors

K-12 Higher Education Early Years

• Robust market characterized by strong demand for British curriculum

• Dual demand for British and local curriculum from Emiratis and expats

• Clearly defined licensing and regulatory system

• Significant opportunities for TNE/foreign branch campuses

• Scope for international student growth

• Supportive regulatory environment

• Nascent market with strong growth in enrolment

• Preference for EYFS and English medium

• Regulatory environment required to support growth

Thank You

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www.parthenon.com