Saudi Arabia recognises the need to evolve its education system to support its youth, drive a new innovative economy and sufficiently meet new demands.
Ivor McGettiganPartner, Head of Education,Employment & Incentives
Farha LeadbetterSenior Associate,Employment & Incentives
Saudi Arabia recognises the need to evolve and enhance its education system to support its young population, drive a new innovative economy and sufficiently meet new demands. Therefore, education forms a significant part of the Saudi Arabian Vision 2030.
One of the many programmes in place to assist in implementing Vision 2030 is the Human Capital Development Programme which is likely to have the greatest impact on education in the future. This programme aims to improve education at all stages and to reach international standards through an education and training system which reflects modern requirements and fulfils the developmental needs of the local and global labour market.
Pre-primary education is not compulsory and there is generally a lack of early childhood development institutions available.
Reforms to improve education both in terms of outcomes and structure include improvements to the training, development and recruitment of teachers, development of curricula to stimulate creativity and innovation and to increase pre-primary education enrolment rates.
Other reforms which have helped with certain challenges include enabling foreign investors to hold majority ownership in pre-schools and schools i.e. 100% foreign ownership, the public -rivate partnership initiative as well as access to a wide range of financing methods.
An investor centre was established in 2019 by State backed property company Tatweer for Buildings, to match-make operators and investors with Tatweer planning to offer land and buildings including ‘built to suit’ to international school operators on long leases (20-25 years) for reasonable rents.
The Ministry of Investment Authority (MISA) and MOE provide similar initiatives, the latter under the Istifmar investment programme.
Additionally the Royal Commission for Riyadh city (RCRC) provides a number of incentives to operators including assistance with Saudisation requirements and visas and immigration requirements. It also can provide help with funding.
At Higher Education level, the government plans to expand the technical and vocational education sector, including by encouraging a significant percentage of students towards the technical and vocational institutions. Future international universities may be licensed independently of the MOE.
The education system is currently regulated primarily by the Education Evaluation Committee and the MOE. Other authorities, MISA and Tatweer, are also involved at various stages.
ChildcareAs social norms change and female participation in the labour force increases significantly, so has the demand for good quality and affordable pre-primary institutions (see our article in this edition of Law Update on ‘Women in Saudi Arabia developments and reforms’).
Although many Saudi working women have already benefited from extra nurseries and day care centres via the Qurrah Programme, there remains a significant lacuna and noteworthy opportunities for preschool groups, kindergartens and early childhood development institutions.
Although there is a growing demand for international education amongst Saudi nationals many of whom recognise its benefits, affordability remains a challenge particularly for the middle income segment of the population. The current sweet spot for tuition fees appears to be in the SAR 40,000 – 60,000 range.
Although there are purported caps on fees for pre-school and K12, effective dialogue around such issues with the MOE and other stakeholders is the key to overcoming such challenges.
TaxValue added tax is levied on international school’s tuition fees at the rate of 15%.
Corporation tax, which the school operator would be subject to, is levied 20% (assuming non-GCC owned entity).
There is a 15% withholding tax which applies on payments made from Saudi Arabia to non-residents for intellectual property; otherwise it is 5%.
SaudisationPotential foreign operators and investors have seen the Saudisation requirement as being a recruitment and staffing challenge although in reality international schools are exempt from Saudisation requirements for the first 3 years (with no time limitation for the school principal role). The exemption applies even to those teaching national identity subjects like Arabic, Islamic and social studies.
ConclusionThere has never been a better time nor a more compelling reason to invest in KSA’s education sector given the potential for growth and demand as the country continues to write its new chapter. Our education team, having cultivated close relationships with the relevant government authorities and ministries in KSA as well as having acquired valuable local knowledge and significant expertise in advising foreign operators on financing options, licensing requirements and other relevant educational regulatory and compliance, are leading advisors in the KSA education space and ready to assist.
For further information, please contact Ivor McGettigan or Farha Leadbetter.
Published in August 2022
Illustration of Muhammad al-Idrisi
