Schools face catch-22 for fees



DUBAI // The gap in quality between schools catering to the rich and those catering to the poor is widening because of restrictions on fee increases, say educators.

In 2009, the Knowledge and Human Development Authority (KHDA) aligned fee increases with inspection results, so that the top performing schools were allotted a 12 to 15 per cent increase, while those faring less well were limited to a seven to 10 per cent increase.

Critics of the policy say this means facilities performing less well are caught in a catch-22 situation, whereby to boost performance they need more funds, but to secure more funds, they must first boost performance.

Last year, the Dubai authority barred all schools from upping their fees, saying it was unjustifiable in the tough economic climate.

However, that decision was over-ruled by the Ministry of Education in the case of the two largest education groups, Gems and Taaleem.

According to a three-year agreement with the ministry in 2010, Gems would be allowed to increase fees by 10 per cent for three years until 2012 in five of its Asian schools, where fees are currently around Dh15,000. Annual fees at Gems schools vary widely, but can be as high as Dh72,000 for a Grade 12 student at a school rated outstanding by the KHDA.

Explaining why two schools under the Taaleem umbrella had also applied for a fee increase this year, Clive Pierrepont, the director of communications, said: "This is to cover inflation through higher costs of utilities and facilities maintenance, staff salary increments for the current and coming year and annual rent escalations on long term land and building leases."

The KHDA is still considering how to allot fee increases this year, but school operators say these should be decided on a case by case basis.

Meanwhile, schools with lower ratings and lower budgets are struggling to make basic changes to improve the standard of education they offer.

SSU Tabrez, the principal of the Emirates English Speaking School, said his school was operating on "a shoe-string budget" and could not make necessary educational changes without increasing fees. The school was allowed a 10 per cent increase in 2009 but chose not to take it because of the effect of the economic downturn on parents. This year, the principal said the school had to apply because it was suffering losses.

"Linking the fee increases with inspection results defeats the purpose of trying to improve schools with few resources at their disposal," he said.

The school's annual fees range from Dh3,000 to Dh5,000. Mr Tabrez said raising them would burden several parents who were already struggling to meet the current cost.

"But what other option do we have?" he asked. "Essential areas and facilities have suffered because of our inability to fund changes. This reflects on our performance in the inspections too."

The principal said if the school's request for a fee increase were approved, the funds would go towards refurbishing the science and computer labs and giving pay increases to staff.

"Our teachers have not seen a pay raise in years. It is getting hard to recruit good teachers on such low salary packages."

Another principal, Vatsala Mathai of the Elite English School, said high rents had forced an increase in fees.

"Rent is a massive cost to us and if the authority starts regulating that, then providers would not seek regular fee increases either," she said. The school charges between Dh4,000 and Dh6,500 annually.

Mike Hynes, a managing partner at Kershaw Leonard, a consultancy that draws up the annual Cost of Living in the UAEreport, believes each school should be required to submit their financial report to the KHDA for assessment on a case-by-case basis..

For schools unlikely to be granted any increase, and struggling because of a lack of resources, Mr Hynes suggested a grant scheme.

"It is a common practice by governments in other countries like the UK, where some low-performing schools are offered grants to improve."

Mr Tabrez agreed, and said financial support from the Government would make quality education accessible to low-income families: "This can be a requirement-based aid, where we are funded for a lab upgrade or teacher training."

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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