Vietnam’s School Education Sector: Foreign Investment Scope and New Regulatory Changes

Vietnam’s school education sector presents significant potential for foreign investment, driven by rising demand, government policies, and tax incentives. With a large proportion of school-aged children and a growing middle class, Vietnam is seeing increased demand for both private and international education. The government’s focus on improving the education system and encouraging private sector participation has created a favorable environment for foreign investors. However, recent updates, particularly through Decrees 124 and 125, introduce important regulatory changes that investors need to consider before entering the market.

Overview of Government Policies and Foreign Investment Potential

Vietnam’s government aims to significantly increase private sector participation in the education industry. In 2019, the government introduced Resolution 35/NQ-CP, which targeted raising the share of non-public educational institutions from 8.75% in 2020 to 13.5% by 2025. This goal is driven by the recognition that the private sector can help address key gaps in the education system, particularly in higher education and vocational training.

By 2022, private higher education institutions accounted for 27.68% of total higher education, though still falling short of the 2020 target. The government is expected to ramp up its efforts in the coming years, making the next few years a crucial period for foreign investment in Vietnam’s education sector.

Market Demand and Supply Dynamics

Vietnam’s population is young and growing, with a significant portion of the population in school-age groups. According to research by Savills, 39% of Hanoi’s population was school-aged as of 2019, while Ho Chi Minh City (HCMC) and Binh Duong had 36% and 38%, respectively. This demographic trend, combined with a booming middle class, has resulted in increased demand for quality private education, particularly international schools.

The rise in incomes and urbanization further support this demand, as families seek better educational opportunities for their children. The expansion of the middle class, expected to grow by 36 million by 2030, is driving disposable income levels, which in turn fuel the demand for private schooling.

Regulatory Changes and the Impact of Decrees 124 and 125

On October 5, 2024, the Vietnamese government issued Decree No. 124/2024/ND-CP and Decree No. 125/2024/ND-CP, which took effect on November 20, 2024. These decrees significantly update the regulatory framework for both foreign-invested and domestically invested educational institutions in Vietnam.

Decree 124 focuses on enhancing transparency for foreign educational institutions. It mandates that foreign schools must publicly disclose detailed information about their programs, foreign teachers, and student demographics. These institutions must also demonstrate that their educational offerings align with the national curriculum and academic standards of Vietnam.

On the other hand, Decree 125 governs domestic institutions, including preschools, universities, and vocational schools, and seeks to streamline the regulatory oversight of local entities. While this decree does not impose the same transparency requirements as Decree 124, it does introduce measures to ensure quality assurance for domestic schools.

Investment Opportunities and Requirements

Foreign investors looking to set up educational institutions in Vietnam must navigate various regulatory requirements. For example, foreign higher education institutions are required to make significant capital investments, with a minimum of US$21.5 million for large-scale institutions. The required capital investment varies by the type of institution, with pre-schools needing a minimum of US$1,200 per child, and K-12 schools requiring at least US$20,000 per student.

Foreign investors must also obtain an Investment Registration Certificate (IRC) and an Establishment Registration Certificate (ERC) before operating. Furthermore, the government offers incentives to foreign investors, including a 10% corporate income tax rate and tax exemptions on undistributed income, which enhances the attractiveness of the market.

Key Trends and the Future Outlook

Looking ahead, experts predict that the Vietnamese private education sector will continue to grow, particularly in the kindergarten and K-12 segments, with opportunities for new schools, mergers and acquisitions, and private equity investments. Increased focus on higher education and vocational training is also expected as Vietnam continues to build its knowledge economy and address skills shortages.

The regulatory changes under Decrees 124 and 125 aim to create a more transparent and efficient investment environment, providing opportunities for foreign players to tap into the rapidly growing demand for quality education. As Vietnam continues to develop as a regional hub for international education, the next few years offer significant potential for investors.

Conclusion

Vietnam’s education sector presents a dynamic investment landscape, with robust government support for private sector growth and rising demand driven by demographic trends. The recent regulatory changes through Decrees 124 and 125 reflect the government’s commitment to improving education standards and attracting foreign investment. Foreign investors should thoroughly understand the updated regulations and investment requirements to capitalize on the growing opportunities in Vietnam’s school education sector.