Market intelligence for international student recruitment from ICEF
15th Aug 2016

Foreign providers work to overcome early losses for Saudi branch campuses

Early results from an ambitious expansion of vocational training in Saudi Arabia offer a cautionary tale in international branch campus operations, with a number of branch colleges in the Kingdom struggling to meet enrolment targets and some even winding up operations. Saudi Arabia launched its Colleges of Excellence initiative in 2012 with a budget in the US$ billions and a mission to expand access to vocational training for Saudi students. The main goal of the programme is to improve skills development and job prospects for Saudi youth, and to do so in partnership with foreign Vocational Education and Training (VET) providers. In the years since, 37 contracts have been established with foreign providers, nearly half going to colleges or consortia from the UK and the balance to providers from the US, Spain, Germany, Canada, and New Zealand. The initial contracts were greeted at the time as a "£1 billion exports win" for UK educators alone. Saudi students may participate in training at one of the resulting colleges free of charge, with all fees paid by the Saudi government. The Saudi Colleges of Excellence agency (CoE) also provides campus facilities and administrative and marketing supports for foreign providers setting up operations in the country. Foreign educators are responsible for staffing the colleges, and for operational and maintenance costs. However, the partnership model hinges otherwise on the ability of the CoE system to meet its enrolment targets, and of individual colleges to meet established retention and attendance targets. To be more specific, foreign providers do not receive fees for students who drop out or who do not attend 80% of their scheduled classes. In the midst of building out a new college system in Saudi Arabia, this is where some educators have run into trouble. The original 2012 bid documents set high expectations for student demand from the outset, stating that, "Enrolment numbers are unlikely to be of concern. Currently there is far greater demand for vocational training in the Kingdom than supply. Only a quarter of applications are currently accepted for this reason." As of March 2015, however, CoE reported an enrolment of under 12,000 students across the 37 colleges established to that point. Anecdotal commentary around the progress of the branch colleges in Saudi Arabia suggests that this enrolment is not evenly distributed. Some institutions, particularly those in larger urban centres, have had better success in building student numbers. Others are reportedly close to empty. "You get paid on a per pupil basis and in some of our colleges there isn’t enough volume to support the core faculty staff,” an unnamed provider said to Education Investor in December 2015. "You’re also paid for attendance - if students attend 80% of their anticipated hours - but dropout rates have been very high." Lower-than-expected enrolment, high attrition rates, and poor attendance have left a number of foreign providers struggling to meet the costs of mounting their branch campus operations in Saudi Arabia. Some have gone so far as to withdraw from their contracts with the Saudi government. This includes Pearson, which had been contracted to run three campuses in the Kingdom but left the programme in June 2015. The UK’s Lincoln College received a £250 million (US$322 million) contract award from Colleges of Excellence in March 2014. Less than two years later, in January 2016, it announced that it would close two of its three Saudi campuses as the “number of students able to participate…is not sufficient.” The college has incurred a financial loss in its first years in the CoE programme. However, it still reported anticipates a net gain over the five-year contract term. There are indications as well that another UK consortium operating in Saudi, the Hertfordshire Vocational Education Consortium (or "Hertvec"), has also incurred significant losses in its first years in the programme. However, in an official statement to FE Week the consortium said, "We believe that the success or otherwise of a business like Hertvec should be considered over the medium to long term." "As should be expected for a contract of this nature our first year was a challenging one, from which we take many invaluable lessons. Over that period, we have also made huge progress in building three vibrant institutions in the Kingdom of Saudi Arabia working with local employers and stakeholders…We remain committed to our work in the Kingdom and are working with CoE to make sure that the programme realises its objectives." Most recently, Canada’s Algonquin College announced this month that it would transfer responsibility for its Saudi campus in Jazan, first opened in 2013, back to CoE. The campus returned a small profit in its first year of operations but has since accumulated a loss of CDN$1.6 million (US$1.2 million). College officials anticipate that winding-up costs will add another CDN$4.3 million (US$3.3 million) to the project deficit. "We’re following the entrepreneurial creed," said Algonquin’s Vice-President for International Doug Wotherspoon, "which is to be bold, be innovative, be courageous, but when it doesn’t work, move on." There is some indication that decisions to withdraw from the programme are not entirely financial as the ethics of operating a campus in Saudi have been roundly debated in academic circles, and especially so following the inception of the CoE programme. Even so, and even with persistent questions regarding the preparedness of students to participate in advanced technical programmes, the need for skills training in the Kingdom remains substantial. Indeed, the stakes are high for both the country and for foreign education providers. When the first bid documents for CoE were released in 2012, less than 10% of Saudi workforce participated in vocational training. This compares to a global average of closer to 40%. The Kingdom has set a target to provide VET programmes for up to 45% of its workforce, and to increase the capacity of the country’s vocational training system to 250,000 students by 2020 (more than doubling the 110,000 students it could accommodate in 2012). As a 2014 report from Arab News noted, "The Saudi private sector is in urgent need of technical and professional disciplines, and this would make the Saudi economy shift from excessive dependence on expatriate labor to rely on national employment."

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