Education in the Mena region needs guidance while it’s young

Vocational training, supplementary learning and investment reform can help the region's education sector to blossom.

The region’s governments and businesses urgently need to develop a workforce that can meet the challenges of growth in the 21st century.

Without workers whose skills match the needs of the labour market, countries in the Middle East and North Africa (Mena) will not only fail to thrive; they leave themselves vulnerable to political and social instability.

One solution to this challenge lies in offering forms of education that are in short supply. The Mena region’s need to develop its education and training eco-system represents an opportunity for education operators and investors worldwide to partner with local governments, to the benefit of both.

To explore this opportunity, the Mena Private Equity Association recently convened a round table, moderated by Imad Ghandour, the managing director of CedarBridge, and Jens Yahya Zimmermann, the managing director at New Silk Route Growth Capital. The round table brought together private-equity professionals specialising in education, school regulators and operators, public servants, lawyers and management consultants.

The participants agreed that although each country is unique, there are a number of common needs throughout the region.

One important area is vocational and technical education, which offers specific, hands-on training in particular skills. This practical approach is a critical component in any national-education agenda intended to boost the skills of the labour force.

But the prevalence of vocational education varies across the Mena region. There has been substantial investment in Saudi Arabia, for instance, whereas UAE employers have been more likely to turn to higher education to develop the labour force.

The UAE is still fertile ground for vocational educators who can developskill sets in sectors such as airlines and telecom. Across the region however, there is a need to link vocational and technical education offerings to the needs of the employer market.

Investors should also look at e-learning, which includes both technology-based tools in the classroom to enhance traditional learning techniques and remote learning for those who do not have access to classrooms.

Higher education offers substantial opportunity for e-learning. One particular bright spot concerns two-year colleges, which could disappear and be replaced by material freely available online.

E-learning can also supplement a traditional college education. For instance, International Horizons liberal arts college, founded in 2011, partnered with the telecoms provider du and built a platform for online assignments. Further, e-learning solutions can be used as a way to upgrade skills in the workforce by offering employees a flexible way to learn new material.

Investors need to be alert to two potential obstacles in the education sector.

The regulatory environment is characterised by instability and a lack of clarity. Governments have issued frequent regulatory changes that make it difficult for investors to plan for the long-term regulatory environment and forecast their investments’ profitability. It is also challenging for operators to use a regional strategy, since regulation varies across countries.

Investors also lack favourable ways to exit public markets. Operators are caught in a conundrum – if they are not profitable, they will not be able to raise funds in public markets. But if they are profitable they are tried in the court of public opinion, which finds it unseemly for entities offering social services to have comfortable margins or high profit, and they may lose customers.

It is clearly in the best interest of Mena governments to support a vital, innovative education sector, which means that governments and their partners must address both obstacles.

In terms of regulation, the frequently shifting regulatory environment, although difficult for operators to navigate, is still fluid and can be developed in ways that are beneficial to all concerned, which is rarely the case in more mature markets. Investors, lawyers and practitioners should work with regulators to define a framework including a clear vision, mission, objectives and priorities.

The lack of exit methods in the form of initial public offerings (IPOs) could be more tricky to manage. Regulators have a role to play in alleviating the stigma against education companies that are pursuing a profit.

They can send the message that profit in education contributes to the greater good by allocating public funds efficiently to create quality education. At the same time, education operators should seek out alternatives to IPOs, such as sukuk and private equity.

Governments and education operators should view each other as partners in the free exchange of information. Governments have critical information on market needs that would benefit operators, whereas operators bring expertise in education that has been honed around the world and could improve the sector in the Mena region.

Collaborating on this critical issue will ensure that young people have the skills they need for fulfilling careers that make a meaningful contribution to the regional economy.