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South East Asia

Update 2.1
Table of Contents

1 Introduction 1
2 Southeast Asia 2
2.1 e East Asian Miracle 2
2.2 Tiger Cub Economies 3
2.3 ASEAN 4
2.4 Focus Countries 5
3 Regional Analysis of Focus Countries 7
3.1 Political Stability 7
3.2 Ease of Doing Business 7
3.3 FDI Con dence 8
4 Private Equity Market 11
4.1 General Trends 11
4.2 Private Equity in Education Sector 12
5 Education Market 14
5.1 Kaizen Education (KE) Map 14
5.2 e Education Market in SEA is
Ripe for Investment 14
5.3 Singapore 16
5.3.1 Country Overview 16
5.3.2 Education Sector 16
5.3.3 Market Size 17
5.3.4 Private Sector Activity 18
5.3.5 Regulatory Context 18
5.3.6 Unique Opportunities 19
5.4 Malaysia 20
5.4.1 Country Overview 20
5.4.2 Education Sector 20
5.4.3 Market Size 21
5.4.4 Private Sector Activity 22
5.4.5 Regulatory Context 23
5.4.6 Unique Opportunities 24
5.5 Indonesia 25
5.5.1 Country Overview 25
5.5.2 Education Sector 25
5.5.3 Market Size 26
5.5.4 Private Sector Activity 27
5.5.5 Regulatory Context 27
5.5.6 Unique Opportunities 27
5.6 ailand 29
5.6.1 Country Overview 29
5.6.2 Education Sector 29
5.6.3 Market Size 31
5.6.4 Private Sector Activity 31
5.6.5 Regulatory Context 31
Table of Contents

5.7 Philippines 33
5.7.1 Country Overview 33
5.7.2 Education Sector 33
5.7.3 Market Size 34
5.7.4 Private Sector Activity 35
5.7.5 Regulatory Context 35
5.7.6 Unique Opportunities 36
5.8 Vietnam 37
5.8.1 Country Overview 37
5.8.2 Education Sector 37
5.8.3 Market Size 38
5.8.4 Private Sector Activity 38
5.8.5 Regulatory Context 38
5.8.6 Unique Opportunities 39
6 Southeast Asia e Next Education
Investment Destination 44
6.1 A Burgeoning Middle Class Population 40
6.2 Economies Face a Huge Shortage of Skills 40
6.3 Growing Spend on Education 41
6.4 Rising Student Mobility 41
6.5 An Open Regulatory Environment for Deals
and Foreign Investments 42
List of Figures 44
1 Introduction
is report aims to analyze the Education Sector in Southeast Asia ( SEA
or the region ). It develops on the previous Education Sector reports
written by Kaizen, focused on India. India and SEA are similar in many
ways, particularly in how the two societies view and consume education.
However, there are several clear distinctions, which makes this report
relevant for those with an interest in the Education Sector in SEA.
As the region's economies transform from middle-income to high-
income nations, there is a growing focus on education as a critical driver of
overall human capital development. is report examines the Education
Sector in SEA with a backdrop of the prevalent socioeconomic realities,
regulations, role of the private sector and investment paradigms. It
concludes with an analysis of investment opportunities in the sector.
e US$110 billion SEA annual Education market is substantial
when compared with US$1.43 trillion education and training market in
the USA and the US$133 billion India Education market. As per Kaizen
estimates, the SEA Education Sector grew at a 10% CAGR between 2009
and 2012.
e underlying growth driver is the high consumer spending power,
which manifests itself in a higher incidence of private players in the
education market. As the SEA economies and the consumer spending
power continue to grow, there will be an increase in consumer education
spend and participation in higher education, which is usually correlated
to professional or skilled jobs and associated with higher income. e
need to prepare a skilled labor force is also fueling the growth, along with
increased public and private investment in the Education Sector.
e analysis of the Education Sector in select countries in SEA
including Singapore, Malaysia, Indonesia, ailand, Philippines and
Vietnam suggests that these countries are at di erent stages of human
capital development, and thus have di erent investment opportunities.
Although each country has di erent underlying growth drivers, the
Education Sector o ers attractive investment opportunities primarily in
the higher education and technology subsegments. Technology advances
have resulted in the emergence of innovative models that can be scaled
across the region in areas such as corporate training, outsourced education
services, personalized learning and higher education.

Figure  1: Southeast Asia US$110 billion Education Market

1 Kaizen Education (KE) Report

2 Southeast Asia
Over the last two decades, several countries across the SEA region have
demonstrated high economic growth rates and have also moved towards
closer regional integration. Speci cally, Indonesia, Malaysia, Singapore
and ailand have experienced high economic growth and are recognized
as the more developed countries of the region. Diversity and increasing
market integration lie at the heart of the region's rapid and resilient
economic growth.

2.1 The East Asian Miracle

Asian economies expanded rapidly during the last quarter of the 20th
Century. From 1965 to 1990, the 23 regional economies, combined, grew
faster than those of all other regions globally. A majority of this rapid
growth can be attributed to eight high performing Asian economies
which include Japan, the "Four Tigers" which comprise of Hong Kong,
e Republic of Korea, Singapore, and Taiwan, and the three
industrializing economies of SEA which include Indonesia, Malaysia, and
ailand. ese eight economies grew at an average rate of 7% a year or
more in per capita terms between 1965 and 1990. Contextually, this pace
of expansion implies that an economy doubles in size almost every decade.

Period of GDP per capita GDP per capita

Economy high growth (US$) beginning (US$) 2013
Japan 1950 1983 3,500 38,492
Hong Kong 1960 1997 3,100 38,124
Singapore 1967 2002 2,200 55,182
Taiwan 1965 2002 1,500 21,141
Korea 1960 2001 1,100 25,977
Malaysia 1967 1997 790 10,514
Thailand 1960 1997 330 5,779
Indonesia 1966 1997 200 3,475

Table 1: East Asia's High Growth Performers

Source: World Bank data: Per capita income measure is the GDP per Capita (current US$)

Understanding the sector 2

In particular, Hong Kong, Singapore, Taiwan and South Korea
transformed into advanced developed economies based on their
spectacular economic growth and human capital development and earned
the title e Asian Tigers . ese countries pursued an export-driven
model of economic development and focused on developing goods for
export to highly industrialized nations. High levels of domestic savings,
broad-based human capital, good macroeconomic management, and
limited price control distortions provided the basis for this rapid growth.


Per Capita income (USD)




5,000 2005







Figure 2: The Asian Tigers Spectacular Economic Growth
Source: World Bank, World Development Indicators

2.2 Tiger Cub Economies

Indonesia, Malaysia, the Philippines, and ailand have been dubbed
Tiger Cubs as they aspire to join the ranks of the four "Asian Tigers" that
followed an export-oriented economic growth model. Based on per capita
Gross National Income, e World Bank classi es Malaysia and ailand
as upper middle-income economies, while Indonesia and Philippines are
classi ed as lower middle-income economies.
High income

Upper middle income


Lower middle income

Philippines Indonesia Thailand Malaysia

Figure 3: Tiger Cubs The Followers

Source: World Bank national accounts data, and OECD National Accounts data les, 2010
3 Kaizen Education (KE) Report
e Association of Southeast Asian Nations ( ASEAN ), a geo-political
and economic organization of ten countries located in Southeast Asia, was
formed in 1967 by Indonesia, Malaysia, e Philippines, Singapore and
ailand. Since then, the membership has expanded to include Brunei
Darussalam (Brunei) in 1984, Vietnam (1995), Laos (1997), Burma
(1997), and Cambodia (1999). e 45-year-old regional organization
promotes economic integration and aims to create a single market for
goods, services, investments, and skilled labor by 2015.
As a single geographic entity, ASEAN would rank as the ninth largest
global economy with a combined nominal GDP of US$1.8 trillion
(larger than India) and a consumer market of US$591 million (nearly
twice the market size of the United States) across 10 countries. e
underlying growth potential of ASEAN is substantial today.

GDP, current prices(US$ billions)

1000 2000


















Figure 4: ASEAN Countries Ninth Largest Economy in the World

Source: IMF, World Economic Outlook Database, April 2012

e ASEAN Economic Community ( AEC ) is working towards

regional economic integration by 2015. A more-integrated SEA region
with reduced trade barriers, streamlined customs procedures, integrated
regional nancial markets and easier ows of labor is expected to drive
down the costs of operating business across borders as well as make the
member countries more productive and competitive.

Understanding the sector 4


Trade Regional free-trade zone Established

End double taxation Awaiting

Taxation legislation
across countries
Electrical In
Regional power grid development

Customs Single customs window development

Labor Free flow of labor across Asean legislation

Financial Linked Asean financial In

markets exchange development

Agriculture/ In
Uniform product standards
Forestry development

Intellectual Awaiting
property More regional IP coordination legislation

Figure 5: The Ongoing ASEAN Economic Community Integration

2.4 Focus Countries

is report s examination of the Southeast Asian region as an education
investment destination is based on the macroeconomic environment in
the Southeast Asian countries and the investment potential in the private
Education Sector. We have considered Singapore, Malaysia, Indonesia,
ailand, Philippines and Vietnam as the focus countries. Economies
such as Japan, South Korea and Taiwan are not included as their capital
markets are well developed and investment opportunities may be more
competitive and may not exhibit the growth rates we expect from
companies in developing economies. Singapore, although developed,
often acts as a hub for the SEA region and many companies with pan-SEA
ambitions are often headquartered in Singapore.

5 Kaizen Education (KE) Report

GDP (current HDI Index
Country US$ billions, 2013) (2013)
Singapore 297.9 0.89
Malaysia 312.4 0.76
Thailand 387.3 0.69
Philippines 272.0 0.65
Vietnam 171.4 0.61
Indonesia 868.3 0.62
Laos 9.3 0.54
Cambodia 15.2 0.54
Myanmar 51.9 0.49
Brunei 16.1 0.85

Table 2: Focus Countries

Source: World Bank data, 2013 and UNDP, 2013

e next section rates and ranks the various economies on indicators

including political stability, ease of doing business, FDI con dence and
GDP growth rate to analyze the respective macroeconomic

Understanding the sector 6

3 Regional Analysis of Focus Countries
3.1 Political Stability
Within the focus group countries, Singapore, Malaysia and Vietnam
enjoy higher political stability when compared to Indonesia, ailand
and Philippines. e graph below re ects perceptions of the likelihood
that the government will be destabilized or overthrown by
unconstitutional or violent means, including politically-motivated
violence and terrorism.



Singapore United Malaysia Vietnam
-0.50 States

-1.00 China Indonesia

-1.50 India
Figure 6: Political Stability Index
Source: World Bank, World Governance Indicators 2010. Estimate of governance
ranges from approximately -2.5 (weak) to 2.5 (strong)

3.2 Ease of Doing Business

ree Southeast Asian economies, Singapore, ailand and Malaysia,
rank in the top 20 of the world's easiest places to do business according to
2012 Doing Business Survey by the World Bank and International
Finance Corporation. Singapore was placed 1st out of 183 economies and
ranks 2nd on protecting investors.

Ease of doing Protecting

Country Business Rank Investors
India 132 49
Singapore 1 2
Thailand 18 13
Malaysia 12 4
Vietnam 99 169
Indonesia 128 49
Philippines 138 128

Table 3: Majority of Southeast Asia ahead of

India in World Bank's Survey
Source: World Bank's Ease of Doing Business Index
(Ease of doing business ranks countries from 1 to 183, with rst
place being the best);

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3.3 FDI Con dence
FDI ows to developing and transition economies accounted for more
than half the global FDI ows of US$1,525 billion in 2011, although
FDI ows to developed economies grew at a faster pace than developing
economies. Positive FDI ows into Asia continued to witness a 10%
growth and moderate FDI growth is expected to continue in the near
Developed economies World Total
Developing economies

Transition economies












Figure 7: FDI in ows, Global and by Group Economies, 1995-2011 (US$ billions)
Source: United Nations Conference on Trade and Development

East and South-East Asia have continued to be top destinations for

investors, attracting approximately 22% of global FDI in 2011. SEA
continues to outperform East Asia, with FDI in ows reaching US$117
billion and registering a growth of 26% over 2010. In particular, the
ASEAN economies of Brunei, Indonesia, Malaysia and Singapore
outperformed the other ASEAN members with respect to FDI in ows
during 2011. UNCTAD expects the near term growth of FDI in SEA to
be moderate.
e chart below shows the growth of FDI in ows between 2005 and
2011. FDI in ow to Southeast Asia increased from US$40 billion in
2005 to US$117 billion, which corresponds to a CAGR of 20% over the
same period.

320 South-East Asia

East Asia







2005 2006 2007 2008 2009 2010 2011

16.3 13.4 12.0 13.2 17.2 22.5 22.0

Figure 8: FDI In ows (US$ billion) and Share of World total (%), 2005-11
Source: United Nations Conference on Trade and Development
Understanding the sector 8
Singapore, Indonesia and Malaysia are the top destinations within
Southeast Asia, while Vietnam, ailand and Philippines are emerging
destinations. Although FDI growth has slowed since late 2011 as a result
of the uncertainties in the global economy, the Annual World Investment
Prospect Survey 2012 suggests, that FDI prospects in SEA remains
promising, with approximately 70% of respondents bullish on the growth
prospects of this region.

Range Inflows Outflows

China, Hong Kong (China),
US$50 Hong Kong (China), China

US$10 to Singapore, Republic of Korea,

US$49 Indonesia, Malaysia Malaysia, Taiwan Province of China,
billion Thailand

US$1.0 to Vietnam, Thailand, Mongolia,

US$9.9 Republic of Korea, Macao (China), Indonesia, Vietnam
billion Philippines, Brunei Darussalam
US$0.1 to
Cambodia, Myanmar, Lao People's
Democratic Republic

Below Democratic People's Republic of Mongolia, Macao (China), Cambodia,

US$0.1 Korea, Timor-Leste, Taiwan Province Brunei Darussalam, Philippines, Lao
billion of China People's Democratic Republic

Figure 9: Distribution of FDI Flows Measured by the Magnitude of their FDI ows, 2011
Source: World investment report, 2012

Similarly, the A.T. Kearney 2012 Foreign Direct Investment Con dence
Index, which assesses the impact of political, economic, and regulatory
environment on FDI, is bullish on the region's prospects and ranks ve
SEA economies in the top 20 globally. Singapore, Indonesia, Malaysia,
Vietnam and ailand hold high rankings in the FDI con dence index
while continuing to make progress in regional economic integration. All
of this suggests a more favorable investment climate for intraregional FDI
ows within ASEAN.

9 Kaizen Education (KE) Report

Ranking Value calculated on a 0 to 3 scale
2007 2010 2012 0.00 0.50 1.00 1.50 2.00
1 1 1 China 1.87
2 3 2 India + 1.73
6 4 3 Brazil + 1.60
3 2 4 United States - 1.52
10 5 5 Germany 1.52
11 7 6 Australia + 1.52
7 24 7 Singapore + 1.47
4 10 8 United Kingdom + 1.47
21 19 9 Indonesia + 1.45
16 20 10 Malaysia + 1.41
18 - 11 South Africa 1.40
9 18 12 Russia + 1.39
20 23 13 Turkey + 1.39
12 12 14 Vietnam - 1.38
8 11 15 United Arab Emirates - 1.38
- - 16 Thailand + 1.37
13 13 17 France - 1.37
- - 18 Taiwan + 1.36
24 - 19 South Korea + 1.35
14 9 20 Canada - 1.34
15 - 21 Japan + 1.31
- - 22 Switzerland + 1.30
22 6 23 Poland - 1.30
- - 24 Spain + 1.29
- - 25 The Netherlands + 1.27

Low con?dence High con?dence

Maintained ranking + Moved up - Moved down

Figure 10: Southeast Asia - Favorable Investment Climate

Source: A.T. Kearney Foreign Direct Investment Con dence Index 2012

Understanding the sector 10

4 Private Equity Market
4.1 General Trends
Economic turmoil and limited growth in developed countries led private
equity investors to turn to alternative locations to deploy capital. SEA,
which has witnessed a stable and high GDP growth on the back of a large
underlying middle-class population, o ers a good alternative to investors.
A steady rise in investment activity and an increase in the set up of SEA
o ces for numerous global private equity players are indicative of the
growing interest in the SEA market. However, the recent fall-o in deal
values in 2012 suggests general caution in the global private equity space
and also an increased attention towards US markets.
15 800


0 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SE Asia Global

Figure 11: Deal Value (US$ billions)

Source : Dealogic, AVCJ, Bain & Company Analysis

Growth rates in private equity in SEA are not uniform. Singapore is

the most mature market and witnessed a drop in investment in 2011. On
the other hand, private equity investments in Indonesia, Malaysia and
Vietnam are growing at a faster pace than in Philippines and ailand.
Although private equity investments have increased, the ratio of
investment amount to nominal GDP remains low compared to that of
developed economies, which indicates that the market presents more
opportunities for growth and the risk of market saturation is low.
However, private equity is often viewed as a capital source of last resort in
many developing nations and therefore true saturation may occur at lower
South Korea 0.2
Japan 0.2
Greater China 0.4
Southeast Asia 0.4

India 0.4

Australia/New Zealand 0.5

United Kingdom 1.1

United States 1

0 0.2 0.4 0.6 0.8 1 1.2

Figure 12: PE Penetration Rate (PE investment as a % of GDP), 2011

Source : Global Insight

11 Kaizen Education (KE) Report

Rank Rank
Country (2013) (2011)
United States 1 1
Canada 2 3
United Kingdom 3 2
Japan 4 6
Singapore 5 4
Switzerland 10 5
Malaysia 17 18
India 29 30
Thailand 32 34
Indonesia 47 48
Philippines 56 58
Vietnam 64 51

Table 4: VCPE Index, 2011

Source : Global Insight

SEA economies are increasingly appealing to global investors. Singapore,

Malaysia and ailand are in the top half of the Global Venture Capital
and Private Equity (VCPE) Index, which assesses the country's
attractiveness for private investments. Notably, Singapore is the 5th best
destination for PE and VC investments globally. Singapore o ers the best
investor protection as well as human and social environment in the world
(VCPE Index, 2011). Of the other SEA economies, Malaysia, ailand,
Vietnam, Indonesia and Philippines have maintained their rankings.

4.2 Private Equity in Education Sector

According to data from omson One Banker and Dealogic, over the past
10 years (2002 to 2012), there have been a total of almost 40 investments
in the Education Sector in SEA. A majority of these deals were/are
currently located in Singapore and Malaysia. 16 deals have exited through
the LBO route, strategic acquisition or an initial public o ering (IPO),
which are likely to continue to be the preferred exit routes for private
equity investors. ere have been only ve exits through the IPO route,
primarily because IPO markets are less developed in SEA than those of
developed markets.

11 Acquisition
8 Exited
Active Deals
60% Deals LBO
40% 15.0%
Singapore 12.5%

Figure 13: PE Deal Classi cation by Country, 2010 Figure 14: ASEAN's 40 PE Investments in Education
Figure  : ASEAN's 40 PE Investments in Education Source: Thomson One Banker

Understanding the sector 12

Indonesia Malaysia Philippines Singapore Thailand Vietnam
*High GDP & *Low GDP per *Low GDP per
GDP growth capita, but high Good capita
Economic Good economic Good economic
*High GDP growth economic *High GDP growth
Activity prospects prospects
unemployment *Low prospects *Low
rate unemployment unemployment

Growing market
Presence of Most active
pushed by Bank-oriented Underdeveloped
Increasing market conventional & market in
Depth of increased economy financial market
activity Islamic markets Southeast Asia
market globalization Medium middle Medium middle
Large middle class Small middle Small middle
Medium middle class class
class class
- IPO volume + + + ++ + +
- M&A volume + ++ + ++ + -
- VC activity -- + - ++ - -
- PE activity -- + - ++ - +

Double taxation Lowest rate in

Tax incentive High tax & High tax & High tax &
on income, losses ASEAN region,
Taxation for private administrative administrative administrative
cannot be additional
investments burdens burdens burdens
reported incentives

With ~70 With ~56

With ~55
With ~70 With ~30 countries countries
Double countries
countries countries including including Ireland
Taxation including Hong
including including Cyprus, Cyprus, Singapore
Treaties Kong &
Mauritius Singapore Mauritius & Mauritius &
Hong Kong Hong Kong

Average corporate Low investor *Average corporate

governance, Good corporate protection & Best corporate Uncertain governance
& Corporate
unpredictable governance & corporate governance legal *Some slow progress
Governance government legal system governance worldwide environment in reforming the
policy overall regulatory system

*Good educated *Corruption &
human capital *Good educated security
Human & *Poorly
*High corruption human capital problems High level
Social educated Corruption issues
Enviroment level *Low level *Young of education
human capital
*Inadequate of corruption educated &
& rigid labor
labor market cheap workforce

*Difficulty in Strong
Government Improvement to
Enterpreneurship starting a Government entrepreneurship
culture & Deal
incentives to Limited encourage
business promotes culture curbed by
Opportunities promote innovation entrepreneurship
*Low corporate innovation high cost of doing
entrepreneurship & innovation
R&D business

Table 5: Comparison Across the Focus Countries

Source: IESE Business School & E&Y research, 2011

13 Kaizen Education (KE) Report

5 Education Market
5.1Kaizen Education ( KE ) Map
Kaizen has developed a map which depicts a simple yet comprehensive
view of the Education Sector. roughout this report, references will draw
attention to the diagram below, which lays out the three education market
1. Core Education: is consists of basic and fundamental education
that generally culminates in a degree i.e., K-12 schools &
undergraduate and post-graduate colleges.
2. Parallel Education: is segment consists of services which ll the
gaps in core education including Preschools, vocational training
institutes, coaching classes, tutoring classes, test preparation,
teacher training and related services.
3. Ancillary Education: is segment includes products and services
supplied to companies in the Core and Parallel segments e.g.
Learning Management Solutions (LMS), Information
Communication Technology (ICT) and multimedia at schools,
books & stationery, Enterprise Resource Planning (ERP)
solutions, etc.

LMS, ICT, ERP, Media, Books

Preschool, Tutoring

K-12, College

Figure 15: Kaizen Education Map

Note: Circle area relative market size

5.2 The Education Market in SEA is

Ripe for Investment
Key indicators in SEA continue to improve including the income per
capita, health, and education indicators. SEA has been one of the fastest
growing regions in United Nation's Human Development Index in the
last decade. SEA has witnessed record levels of public funding for
education, which was historically focused on primary education, but
more recently in the higher education segment. For example, Malaysia's
education spending as a percentage of GDP is at par with or more than
top-performing education systems of Japan and South Korea. Similarly,
the Indonesian government's education expenditure today is nearly 20%
of the country's overall budgeted public expenditure.

Understanding the sector 14

A report of 38 countries from UNDP highlights that youth literacy
rates (15-24 years of age) were higher than adult literacy rates in 2010,
re ecting an increased access to primary and secondary education


EN Above 95


Literacy Rate (&)(2009)


Below 80
No Data

Figure 16: Southeast Asia - High Literacy Rates

Sources : UNDP Report, 2009

Governments are now increasingly focusing their e orts on achieving

universal primary education and relying on the private sector to cater to
the growing demand for higher education. With Asia forecasted to
dominate the global demand with approximately 1.8 million students for
major English-speaking destination countries by 2020, higher education
o ers the biggest investment opportunity for private education.
e current emphasis on investment in the Education Sector is to
provide the region's human resource with the requisite skills as the
economy contines to grow and transform. Increased private investment in
the Education Sector would help SEA lay the long-term foundations
required for achieving sustainable and inclusive growth.

15 Kaizen Education (KE) Report

5.3 Singapore
5.3.1 Country Overview

Singapore at a glance

GDP at current prices (2013) US$297.9 billion

Historical GDP CAGR (2000-2012) 9.25%
GDP/Capital (2013, current prices) US$55,182
Population (2012 Census) 5,312,400
Education Sector size (2012) US$15 billion
Public spending as % of GDP (2012) 3.3%
FDI as % of GDP (2012) 20.6%

Table 6: Singapore - Overview

Singapore is one of the world's richest countries measured by GDP per

capita and it is often cited as an economic role model for developing
nations globally. Singapore is predominantly an export-driven economy
and is heavily dependent on banking and nancial services, IT,
manufacturing, biomedical science and consumer electronics sectors to
drive its economic growth. Real GDP growth has averaged 8% between
2004 and 2007, contracted 1% in 2009 as a result of the global nancial
crisis, and is expected to grow by approximately 5% over the next eight
years starting 2011. Singapore's constitutional republic form of
government, low tax rate, pro-business initiatives and strong investor
protection laws ensure that it always ranks as one of the best places in the
world to do business. Singapore has consistently been rated as the least
corrupt country in Asia and was ranked the sixth cleanest in the world by
Transparency International (2012).

5.3.2 Education Sector

e Singapore education system with English as the language of
instruction is recognized as one of the best in the Southeast Asian region.
In 2009, Singapore ranked among the top performers in the OECD's
Program for International Student Assessment ( PISA ). e design of
Singapore's education system owes a lot to the use of benchmarking to
international standards as a tool for improvement and the endeavor to
move up the educational value chain.
e 700 square kilometer island has 698,544 students in 360 schools,
9 professional colleges and 4 publicly funded universities. A critical mass
of diverse education institutes attracts a large volume of international
students and this can potentially increase the contribution from the
Education Sector to the national GDP.

Understanding the sector 16

e subsequent gure indicates Singapore's resident population pro le.
e potential resident student population is ~45% of overall resident
population. Additionally, in 2010, there were 91,500 international
students enrolled in Singapore and the number is expected to increase to
150,000 by 2015.
2.5 million potential students


Below 15 15-24 25-34 35-44 45-54 55-64 65 and over

Figure 17: Population Classi cation, 2011

Sources : World Bank, 2009

5.3.3 Market Size

As of 2012, the US$14.8 billion Singapore Education Sector had an
annual government spend of US$9.1 billion and an annual private spend
of US$5.7 billion.
Singapore's preschool market encompassed more than 2,000 childcare
centers catering to approximately 205,000 children per year. e
preschool market is estimated at around US$600 million. Singapore's
preschool education providers like Modern Montessori International,
Learning Vision, Etonhouse, Kinderland and Pat's Schoolhouse have
gained popularity; su cient to start centers in Malaysia, Indonesia,
China and India.
e corporate training market in Singapore grew in 2010 with more
rms training their employees compared to 2008. Approximately 71% of
private rms provided structured training to at least some of their
employees in 2010, which was a signi cant improvement from the 65%
of rms in 2008. Approximately 85% of the organizations with 100 to
199 employees were likely to provide structured training to their
employees. e market for corporate training is estimated to be nearly
US$1,100 million as of 2012.

2008 2010 2012

Figure 18: Need of Corporate Training

17 Kaizen Education (KE) Report

Singapore has also focused on higher education and has attracted top
foreign institutions such as INSEAD and Technical University of
Munich, creating an education system that is global and o ers high
international mobility. e most recent addition to this list is the arrival of
Yale University in Singapore, creating a Yale-NUS co-branded program.

5.3.4 Private Sector Activity

In 2012, private education services contributed 2% to the Singapore
economy. Private sector education options include business studies,
computers, languages, ne arts, and also include such services as tuitions
and test preparation. Rising demand for upgrading skills and knowledge,
along with lifelong learning is driving the demand for private education
in the country. ere are over 1,200 local and foreign private education
organizations in Singapore, including 30 higher education institutions,
which enroll more than 100,000 students.
Ra es Education Corporation, with a market capitlization of
US$275 million, is publically traded on the Singapore exchange and is the
largest private education group in Asia-Paci c. e Group operates 34
colleges in 31 cities across 12 countries in Asia-Paci c.
Knowledge Universe is a private education rm founded in the United
States that runs more than 3,700 institutions worldwide. e company
moved its global learning HQ from US to Singapore in 2007. In the same
year, it acquired Pat's Schoolhouse Group as well as Learning Vision
Group in Singapore and later acquired Brighton Montessori in 2011. e
company is also currently expanding the childcare business in Asia and
venturing into higher education through Asian International College.

5.3.5 Regulatory Context

Education in Singapore is under the supervision of the Ministry of
Education. e Council for Private Education ( CPE ) established under
the 2009 Private Education Act regulates the private Education Sector in
Since 2009, subsegments like higher education, Test Preparation, K-
12 (foreign and special education) are required to register with CPE. e
Act requires registration of private education institutions ( PEIs ) and
minimum standards to be met for requirements relating to institution
managers, teachers, courses and examination boards. However, the
ministry does not regulate fees and pro t-making is stipulated under the

Understanding the sector 18

5.3.6 Unique Opportunities
Core education in Singapore continues to develop given Singapore's
location in one of the world's fastest growing student markets. According
to the UK Vision 2020 report, Asia is set to account for 70% of the global
demand for international higher education by 2025. Singapore is well
positioned to capitalize on its strategic geographical location, reputation
for educational excellence and presence of a vibrant business hub to
become a global education hub catering to unmet demand for quality
education from the burgeoning Asian middle class.

Rank Country
1 Finland
2 South Korea
3 Hong Kong
4 Japan
5 Singapore
6 United Kingdom
7 Netherlands
8 New Zealand
9 Switzerland
10 Canada

Table 7: Global Education System Ranking, 2012

Opportunities in the Parallel segment stem from the fact that Singapore is
home to 7,000 MNCs (Multinational Corporations) and numerous
SMEs, and has become a coveted destination for companies. With human
capital as a key di erentiator, training has gained signi cance within
MNCs. is has led to an increased demand for corporate training
institutes, which o er executive education and industry focused training
in nance, retail, healthcare, hospitality and tourism. e government
encourages MNCs to anchor their regional training centers in Singapore
and promote reputable institutions to provide high quality, short,
executive training courses.

Education Segment Market Size (US$ million)

Core 12,304
K-12 6,996
Higher Education 5,307
Parallel 2,494
Preschool 588
Tutoring 800
Corporate Training (TVET) 1,107

Table 8: Singapore's Private Education Market

Source: Market estimates and Kaizen research

19 Kaizen Education (KE) Report

5.4 Malaysia
5.4.1 Country Overview

Malaysia at a glance

GDP at current prices (2013) US$312.4 billion

Historical GDP CAGR (2000-2012) 10.4%
GDP/Capital (2013, current prices) US$10,514
Population (2010 Census) 28,334,135
Education Sector size (2012) US$15 billion
Public spending as % of GDP (2012) 5.1%
FDI as % of GDP (2012) 5.1%

Table 9: Malaysia - Overview

Malaysia is a much larger country by land mass and population than

Singapore. It is rich in commodities such as palm oil and rubber and has
an emerging middle class, which is becoming increasingly wealthy, more
mobile and more discerning in terms of their material needs. Malaysia
also holds one of the best growth records in Asia, with the Real GDP
growing at a CAGR of 7% from 1957 to 2005. In addition, increased FDI
and domestic private investment resulted in rapid growth at a CAGR of
8% in the early 1980s and mid-1990s. In line with this steady historical
growth, the economy is expected to grow by approximately 5% over the
next two years according to the World Bank's Malaysia Economic
Monitor. From an economy that was once heavily dependent on
commodities and palm oil in particular, Malaysia has transformed into a
diversi ed and modern middle-income economy, which aims to attain a
high-income and a developed nation status by 2020.

5.4.2 Education Sector

Since independence in 1957, the Education Sector in Malaysia has made
signi cant progress. From 50% enrollment in K-5 in 1957, the country
achieved near-universal enrollment of 94% in K-5 in 2011. With a
student population of approximately 8.08 million enrolled in the
education system as of June 2011, Malaysia is close to achieving universal
basic education with a gross enrollment rate of 77% at pre-primary and
86% at secondary levels.



Pre-Primary Education Primary and Secondary Higher Education


Figure 19: Student Population, 2011 (in millions)

Sources : UNESCO Institute for Statistics
Understanding the sector 20
Figure 20 indicates progress of Malaysia's education sector. ere has
been a steady increase in the overall education attainment levels with a
reduction in the population that has not attended school. Malaysia has
already become the 11th largest education exporting country with
approximately 70,000 international students from more than 100
countries studying at various international schools, colleges and
Tertiary Secondary Primary No Schooling

1 1 2 2 2 2 3 6 8 9
6 7 10 13 15
10 13 19
33 39
35 39
41 51 56
43 59
41 61
56 50 26
44 22
37 18
32 28 15
21 15 13 12 10 9
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Figure 20: Highest Educational Attainment of Population Aged 15 & Above

Sources : Barro and Lee, 2010 (Eurostat, UN)

e Malaysian international education market has grown considerably in

the past decade, primarily driven by Malaysia's competitively priced
quality education and innovative programs. e total annual cost of
university education, including tuition and living costs is approximately
US$9,000 and US$12,000 in public and private universities respectively.
Capitalizing on the cultural a nity with other Islamic nations, Malaysia
has managed to attract students from the Middle East and North Africa
for university education. As of 2009, approximately 70,000 foreign
students were enrolled across educational institutions in Malaysia and
their number is expected to increase to 200,000 students by 2020.

5.4.3 Market Size

e Education Sector contributed approximately US$15.1 billion in
2012 of which approximately US$12.3 billion came from Government-
funded education services. According to the recent Malaysian Education
Plan, the public sector education spending is expected to grow modestly
and the government's focus is on strengthening the private education
services sector by increasing private consumption and investments as well
as expanding education exports. For example, the government's target is
approximately US$20 billion in contribution from education services, of
which the private sector contribution is expected to be approximately

21 Kaizen Education (KE) Report

Despite public spending being the primary contributor, the sector not
only boasts of one of the fastest growth rates over the 2000 to 2009 period,
but is also one of the highest output multipliers in the country. is
impressive growth is well supported by a growing middle class, its thirst
for competitively priced quality education and investor interest in global-
quality education.

The sector has seen robust growth over the past decade and has one of the highest multipliers
in the economy

2000-2009 Historical growth rate Output multipliers of selected activities in Malaysia

Health services and products 8.8 Education 2.34

Business services 7.9
Education (Private) 2.19
Telecommunication 7.8
Financial services 7.1 Building, construction 2.08
Education 6.8 Health - Public 2.06
Tourism 6.3
Wholesale andd retail 6.2 Hotels / restaurants 2.05
Palm oil and related products 6.0 Transport 1.91
Agriculture 4.8
Automotive and assembly 4.5 Health - Private 1.75
Real estate 4.5 Manufacturing 1.63
Livestock and fisheries 4.5
Utilities 4.3 Insurance 1.60
Transport and storage 3.6 Real estate 1.57
Metal products & equipment 3.4
1.9 Electricity and gas 1.52
Rubber and plastic products 1.5 Banks 1.50
OGE and petroleum 1.4
Communication 1.49
Forestry and related products 0.1
Electrical and electronics -0.8 Wholesale & retail 1.48

4.5 Average = 1.80

Figure 21: Educator Sector - Robust Growth and Highest Multiplier

Source: Economic Transformation Programme: A Roadmap for Malaysia, 2011

5.4.4 Private Sector Activity

In Malaysia, the private sector plays an important role with the focus on
Preschool and higher education subsegments. e 10th Malaysian Plan
indicates that no new public universities would be setup from 2011-2015,
but the private sector will be allowed to set up private institutions of
higher learning. us, the government is pushing for the privatization of
higher education institutions while continuing to focus on primary
education. Malaysia had 16,404 private preschools as of June 2011 and
340 private schools as of January 2012. As of February 2013, Malaysia has
37 private universities, 20 private university colleges and more than 414
private colleges that o er diploma and certi cate courses.

Understanding the sector 22

Private international schools have also grown signi cantly, at a rate of
approximately 14% over the past ve years, driven by growth in the
expatriate community and a relaxation in the cap on the number of
Malaysian students enrolled in international schools. In 2010, there were
57 international schools with nearly 20,000 students enrolled and this
increased to 32,000 enrolled students as of June 2012. e demand for
international schools is expected to further increase as evidenced by the
2020 target of 87 international schools and 75,000 students.
In addition, the Malaysian private tuition market is substantial. For
example, a poll of 500 respondents commissioned by the New Straits
Times suggests that the average private tuition cost is US$25 a month
with two in three Malaysians having school-going children paying for
private tuition. Extrapolating this to the national level and adjusting for
the lower incidence of tutoring in the rural market, the Malaysian private
tuition market can be estimated to be approximately US$925 million.
Malaysia allows education companies providing education services
and operating colleges to list publicly on the stock market. Popular
education companies listed on the Malaysian stock exchange include
HELP International Corp Bhd, SEG International Bhd (SEGi), INTI
Universal Holdings Bhd and Stamford College Bhd. Besides this, other
well established institutions providing education across the Core Segment
include Taylors Education Group, Sunway Education Group and Lim
Kok Wing University of Creative Technology.

5.4.5 Regulatory Context

Private education providers in Malaysia are broadly grouped into two
categories that cover the various segments of the education sector from
Preschool to higher education. e Private Educational Institutions
( PEIs ) cover private and foreign schools from preschool to the
secondary school level and the Private Higher Educational Institutions
( PHEI ) cover post-secondary levels including coverage of diplomas,
certi cate and degree quali cations. Private education is governed by the
PHEI Act 1996 that empowers the Education ministry to grant
permission to these institutions to conduct their programs in English. e
Act does not limit foreign equity participation in the country, implying
100% foreign equity may be approved, subject to approval from the
Minister of higher education.
e Malaysia Quali cations Act 2007 regulates the accreditation of all
academic programs at all levels o ered by both Private and Public
Institutes, whilst the National higher education Funding Board Act 1997
establishes a funding council that provides loans for students who have
enrolled for accredited programs.
PHEI Act 1996 also gives Malaysian Corporates the freedom to
nance private universities. For example, Universiti Multimedia is funded
by Telekom Malaysia, the largest domestic telephone company whilst
Universiti Tenaga Nasional is nanced by Tenaga Nasional, the national
power company. Corporates can also enter into partnerships with foreign
universities to open branch campuses - Malaysian conglomerates
including Sunway Berhad partnered with Monash University and Antara
Tentera partnered with the University of Nottingham.
23 Kaizen Education (KE) Report
Although some restrictions still exist for foreigners in the Core education
segment, Malaysia is moving towards a more liberal policy for foreign
investment in education. In the 2012 budget, the Malaysian government
announced the liberalization of nine sectors where three of the announced
sub-sectors were related to education. e liberalization would allow
100% foreign equity participation in Parallel subsegments such as Skills
Training Services, Technical & Vocational Schools and Technical &
Vocational Schools for students with special needs.

5.4.6 Unique Opportunities

In Core Education, the higher education subsegment continues to be the

most attractive investment opportunity in Malaysia. Malaysia has
emerged as a growing destination for international higher education
students and the Government has cemented plans to become a regional
hub by 2020 through the Education Blueprint. e target of 200,000
foreign students is to be achieved by accessing students from the Middle
East and the Gulf region markets, thereby becoming the world's sixth-
biggest education exporting country by 2020.
In Parallel Education, the Preschool subsegment is still largely
untapped by the private sector, with the private sector currently catering
to only 37% of the market. With plans to increase the Preschool
enrollment levels under the Economic Transformation Program (ETP)
from the current 77% to 100% by 2020, the Preschool subsegment,
which is largely dominated by the private sector, represents a huge
opportunity. Parallel education opportunities in the Tutoring
subsegment, primarily in the private tuition market are substantial, but
this segment is largely fragmented with few established players of size.
Malaysia is also working towards developing Iskandar, one of
Malaysia's most developed regions located in the Southern Peninsula,
with high quality education institutions. For example, EduCity at
Iskandar is a fully-integrated 305-acre education hub comprising of
Universities and Institutions of higher education, with agreements in
place to setup campuses for reputable International Universities.

Education Segment Market Size (US$ million)

Core 11,700
K-12 6,471
Higher Education 5,229
Parallel 1,307
Preschool 381
Tutoring 925

Table 10: Malaysia's Private Education Market

Source: Market estimates and Kaizen research

Understanding the sector 24

5.5 Indonesia
5.5.1 Country Overview

Indonesia at a glance

GDP at current prices (2013) US$868.3 billion

Historical GDP CAGR (2000-2012) 15%
GDP/Capital (2013, current prices) US$3,475
Population (2011 Estimate) 237,424,363
Education Sector size (2012) US$35 billion
Public spending as % of GDP (2011) 2.8%
FDI as % of GDP (2012) 2.3%

Table 11: Indonesia - Overview

Indonesia is the fastest growing economy in SEA, with attractive growth

rates that rival India and China, particularly during the global nancial
crisis in 2009, and it has consistently outperformed its peers in SEA in the
last decade. With the fourth largest population globally, the GDP growth
has also resulted in an increase in the disposable income.
e Government's economic policies post the Asian Financial crisis
have also resulted in a lower debt-to-GDP ratio, an improved current
account surplus and a scal de cit below 2%, keeping the economy on a
strong growth trajectory. Fitch and Moody's upgraded Indonesia's credit
rating to investment grade in December 2011. e country is expected
to grow by 7% each year for the next seven years.

5.5.2 Education Sector

Indonesia boasts of the third largest education system in Asia and the
fourth largest in the world (behind China, India and the United States).
According to the World Bank, Indonesia is home to over 50 million
students and 2.6 million teachers in more than 250,000 schools. e
government spent approximately 15% of its 2011 public spending
budget on education. is level of spending, doubling in real terms
between 2000 and 2006, and more than in any other sector, exceeds the
education spend in countries in similar stages of economic growth.

25 Kaizen Education (KE) Report

Indonesia is also close to achieving universal primary education
enrollment, with 118% gross enrollment ratio in 2011 according to
UNESCO, with higher income districts achieving universal primary
education on a net enrollment measure. However, pre-primary and
secondary school gross enrollment rates are signi cantly lower at 46% and
81% respectively. e private sector in Indonesia is predominantly
concentrated in the secondary (upper secondary) and higher education
subsegments. For example, 80% of the 3,000 Universities are private
institutions, compared to 7% of the schools. As of 2011, nearly 4 million
students are enrolled in higher education institutions, of which nearly
50% of the students were enrolled in private institutions.




Pre-primary Education Primary and Secondary Higher Education


Figure 22: Student Population, 2011 (in millions)

Sources : Unesco Institute for Statistics

Given the limited public investment in the tertiary education segment, a

number of universities have close relationships and ties with industries.
ese relationships translate into curricula being e ectively molded to
meet the needs of the growing economy, especially the needs of the private
sector. e private sector has been the primary contributor to the growth
of universities resulting in their numbers growing to over 3,000 in 2011.

5.5.3 Market Size

In 2010, government spending on education was more than any other
sector, reaching an equivalent of approximately US$21 billion (21% of
the total government budget or 3% of GDP according to 2010 UNDP
data). Of this, over 50% of the total education spend was on the primary
segment whilst secondary and higher education subsegment spend was
approximately 10% each. e private sector spend on education is
estimated to be 30% of the total education spend. e US$10.4 billion
private spend puts the total market size at approximately US$34.7 billion.

Understanding the sector 26

According to a recent study by the British Council, Indonesia will
welcome 2.6 million students into higher education over the next decade,
which translates into an estimated growth of approximately 20% per year.
is provides a promising opportunity for private sector investments in
higher education.

5.5.4 Private Sector Activity

e private sector activity in Indonesia is concentrated in the higher
education subsegment. Private sector involvement at the post basic level
has been limited but has recently expanded, bringing about a rapid
expansion of the sector. Whilst only 7% of primary schools are private,
the share of private institutions increases to around 50% at the secondary
level and 80% in higher education subsegment.
e government's strategy is to focus its spending activity on the lower
levels of education which is free and compulsory according to the Free
Basic Education Policy of 2005, whereas relying on the private sector to
cater to demand for segments beyond the lower secondary education
levels. e demand for education clearly outstrips supply, resulting in a
rapid growth of private and public schools in recent decades, primarily in
the secondary and higher education segments.

5.5.5 Regulatory Context

Investments in the education segment in Indonesia have been primarily
focused on the higher education subsegment, with limited focus on K-12
segments given the Government's focus and funding of these two
Investments in the higher education segment have historically taken
the form of partnerships. In May 2010, the Indonesian Government
issued revisions and a list of business activities, which are closed or open
for foreign investment with certain requirements (the Negative List).
Under these revisions, Universities are allowed 100% ownership as non-
pro t institutions, subject to a special operating license. Universities can
also operate as for pro t businesses by establishing a company with a local
partner that provides services to the Education Sector such as teacher
training, research and academic advisory. e Negative Investment List
also permits a 49% foreign shareholding in Parallel and Ancillary

5.5.6 Unique Opportunities

In the core education segment, with Indonesia's rising middle class and
higher education infrastructure constraints, there is an increasing trend of
choosing international options. According to the Global Business Guide,
as of 2010 nearly 40,000 Indonesian students studied abroad with nearly
17,000 students choosing Australia as their education destination.
Regional SEA countries including Malaysia and Singapore could
potentially capitalize on this trend.

27 Kaizen Education (KE) Report

Australia's Monash University and the Melbourne Institute of
Business and Technology have entered Indonesia but obtaining the
necessary license is still a challenge. Similarly, other international
universities have been discouraged to enter the market given the National
Education Law that prohibits for-pro t foreign owned educational
institutions. However, like India, many institutes are established with a
private limited company providing ancillary services like consulting and
advisory, facilities management or library management, and related
services to the institute.
Parallel and Ancillary segments o er better investment opportunities
due to relatively lower restrictions, with a focus on TVE (across multiple
disciplines), language schools (as English and Mandarin gain
prominence) and ICT (for K-12 infrastructure). e Government plans
on increasing access and enrollment levels in TVE, where it matches the
current enrollment level in secondary schools by 2015.

Education Segment Market Size (US$ million)

Core 19,272
K-12 11,679
Higher Education 7,593
Parallel 4,509
Preschool 2,260
Technical & Vocational Training 2,250

Table 12: Indonesia's Private Education Market

Source: DISE Statistics, Kaizen Analysis

Understanding the sector 28

5.6 Thailand
5.6.1 Country Overview

Thailand at a glance

GDP at current prices (2013) US$387.3 billion

Historical GDP CAGR (2000-2012) 9.5%
GDP/Capital (2013, current prices) US$5,779
Population (2011 Estimate) 66,720,153
Education Sector size (2012) US$20.5 billion
Public spending as % of GDP (2011) 5.8%
FDI as % of GDP (2012) 2.4%

Table 13: Thailand Overview

As SEA's second largest economy based on PPP terms in 2012, ailand

is a developing nation with an estimated population of 69 million and is
currently experiencing rapid economic and social growth along with
cultural modernization. Similar to its SEA neighbors, ailand's
economy is export-oriented and dominated by agriculture,
manufacturing, textiles and tourism. ailand's economy su ered a
setback during the 1997-98 Asian nancial crisis, but since then has
enjoyed robust growth averaging approximately 4% from 2000 to 2007.
Exports, which account for approximately 60% of ailand's GDP, are
primarily dominated by machinery, electronics and agricultural
commodities. In 2012, ailand's economy expanded at 6%, its fastest
pace since 1995 and the Bank of ailand expects the economy to grow in
the range of 4% to 5% in the short term.

5.6.2 Education Sector

As of 2012, ailand had a 21 million student population enrolled in K-
12 and higher education institutes. ere have been impressive gains in
enrollments and expansion at all levels of education with pre-primary and
Primary education close to universal. e gross enrollment ratio in lower
secondary education was approximately 88% and in upper secondary
education was approximately 68% in 2012.

29 Kaizen Education (KE) Report




Pre-primary Education Primary and Secondary Higher Education


Figure 23: Student Population, 2011 (in millions)

Source: UNESCO Institute for Statistics

ailand's Education Sector underwent a transformation through the

National Education Reform of 1999, which was put into place to
modernize the education system and to focus on human capital. Even
today, the Government continues to focus on human capital and is
working with the World Bank to nd solutions to enhance the skills of the
K-12 Education in ailand is mainly provided by the ai
government through the Ministry of Education where a free basic
education is guaranteed for twelve years (primary and secondary) by the
constitution, and a minimum of nine years' school attendance is
According to the Directory of the ai Higher Education Institutions
(2013), there are approximately 79 public higher education institutions,
including Limited Admission Universities and Institutions (with the
Rajamangala Institute of Technology that has more than one campus for
each location), Open Admission Universities and Autonomous
Universities. In addition, there were approximately 19 Community
Colleges and 71 Private higher education Institutions across multiple
disciplines. Separately, a 2010 survey by the O ce of the higher
education Commission found that there were 20,155 international
students in 103 di erent institutions of higher education.

Understanding the sector 30

5.6.3 Market Size
ailand spent about 30% of the national budget on education (2011),
which is the highest of all sectors. In the scal year 2012, public spend on
education was US$14 billion, and it is estimated that the total education
market size (public and private) is around 1.2 - 1.5 times the total public
spend. e overall market size for ailand is estimated to be US$20.5

5.6.4 Private Sector Activity

Private sector enrolment in ailand is limited by design given that K-12

education is primarily funded by the Government and the Ministry of
Education. Of this, the proportion of public education institutions
spanning all segments has been approximately 80% historically, with
World Bank data suggesting that the private education institutions are
approximately 18% as of 2009. In Bangkok, the proportion of private
education institutions is higher than the rest of the country.
Recently, there has been a signi cant growth of private international
schools across ailand. e International Schools Association of
ailand ( ISAT ) recognizes all International Schools (95 in total), and
acts as the link to the Ministry of Education. Private international schools
are popular because they teach in English and o er higher quality
education in general.

5.6.5 Regulatory Context

ailand has allowed for-pro t education institutions for K-12 and
higher education due to a supply gap that could not be ful lled by
government institutions. Private institutions like Rattana Bundit
University (RBAC) and Siam University (SIAM) are for-pro t
universities and have contributed signi cantly to higher education in the
country. ese institutes can be established as companies, foundations or
proprietary rms. ese are monitored by the government, speci cally in
the higher education subsegment.
Additionally, the ailand Government promotes projects that
enhance skills, technology and innovation with di erent types of tax
exemption incentives (e.g., two years of corporate tax exemptions).
Moreover, foreign investments in education are allowed up to 100% of a
company's shareholding. Such investments are facilitated by the ailand
Board of Investment.

31 Kaizen Education (KE) Report

5.6.6 Unique Opportunities
In the Parallel segment, Tutoring remains highly popular and student
demand for tutoring has been strong. Bangkok remains a magnet
attracting youth from provinces around the country and has become a
tutoring hub. A recent survey by AsiaOne indicated that the cost of
tutoring per month in Bangkok was US$178 and US$112 per month in
the rest of the country, while the national average was US$145. With even
a small proportion of the 21 million school-going students signing up for
tutoring classes, the market size for this o ering is substantial at about
US$3 billion.
In the Ancillary education segment, the grammar translation method
of teaching is also popular. English communication competence in
ailand remains low, leading to general dissatisfaction with the quality of
English instruction. With the vast majority of ai students educated in
English as the second language of instruction, there is a shortage of
quali ed English language instructors leading to considerable use of
grammar translation method of teaching.

Education Segment Market Size (US$ million)

Core 11,698
K-12 7,870
Higher Education 3,828
Parallel 7,831
Preschool 4,720
Technical & Vocational Training 3,111

Table 14: Thailand's Private Education Market

Source: Market estimates and Kaizen research

Understanding the sector 32

5.7 Philippines
5.7.1 Country Overview
Philippines at a glance

GDP at current prices (2013) US$272 billion

Historical GDP CAGR (2000-2012) 9.9%
GDP/Capital (2013, current prices) US$2,765
Population (2010 Census) 92,337,852
Education Sector size (2012) US$8.2billion
Public spending as % of GDP (2019) 2.7%
FDI as % of GDP (2012) 1.1%

Table 15: Philippines Overview

e Philippines has achieved steady economic growth averaging 5% per

annum in the past decade on the back of a highly skilled English-speaking
workforce and strengthening economic fundamentals. Unlike its SEA
neighbors, Philippines has escaped the recent nancial crisis and is
generally more resilient to global volatility as a result of a lower share of
GDP from exports.
Private consumption is the key driver of the Philippines economy and
represented approximately 74% of GDP in 2012, higher than its regional
peers. In 2011, the GDP grew by 4%, driven primarily by consumer
demand, a rebound in exports and investments, and election-related
spending. e country's growth was largely supported by robust domestic
consumption, strong remittances and a growing business process
outsourcing industry. With strong domestic demand fueling the
economy in the rst half of 2013, the economy is likely to achieve the
targeted average growth rate of 6-7% over the next two years (2013-

5.7.2 Education Sector

e education system in the country has evolved from educational
systems in Spain and the US with English as the medium of instruction.
e Philippines has approximately 26.2 million students enrolled in
education institutions as of 2012 according to the Department of
Education, of which nearly 55% are enrolled in primary levels (K-5),
which boasts of a gross enrollment ratio of over 100%. According to the
UNESCO and Department of Education statistics, the gross enrollment
ratios at Preschool and secondary levels (Grade VI to X) in 2012 were
lower at 91% and 84% respectively.


Pre-primary Education Primary and Secondary Higher Education


Figure 24: Student Population, 2011 (in millions)

33 Kaizen Education (KE) Report Source: UNESCO Institute for Statistics
e Philippines is the only country in Asia that has a 10-year basic
education program and this short basic education program puts millions
of overseas Filipino professional workers and students who intend to
study abroad at a relative disadvantage. For example, e Washington
Accord prescribes 12-years basic education for entry into degree programs
for engineering professionals and the Bologna Accord requires 12 years of
education for university admission and practice of profession in European
countries. However, the government, realizing this, started the migration
from a 10-year schooling system to a 12-year schooling system in
School Years
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024
GRADE 11 First senior
GRADE 10 Implementation of high school
Grade 7K to 12 graduates First batch of
GRADE 9 Curriculum Year 5 K to 12 graduates
GRADE 8 implementation


Implementation of
Grade 1K to 12
KINDER Curriculum

PHASE 1: Laying the PHASE 2: Modeling and PHASE 3: Complete PHASE 4: Completion of
Foundation Migration Migration Reform

- Universal Kindergarten - Enactment of basic - Grades 11 & 12 (HS Years 5 - Complete implementation
- Development of the education low & 6) implementation of K to 12 basic education
K12 Program - Phased implementation of - Complete migration to K to curriculum
new curriculum (Grades 12 curriculum
1-4, 7-10)
- SHS Modeling

Figure 25: K-12 Transition Plan

Source: Department of Education, Philippines

e Department of Education ( DepEd ) started to implement the K-12

Basic Education Program which seeks to provide 12 years of basic
education through an enhanced curriculum to bring the education
program at par with other countries. As outlined above diagrammatically,
the program involves a phased implementation starting with the rolling
out of Universal kindergarten in 2011-2012 and moving through the core
education segments systematically.

5.7.3 Market Size

Although historically the Philippines Government has been allocating the
largest share of the national budget to education, it is still the lowest in
terms of allocation for public expenditure on education as a percentage of
GDP amongst regional peers. In 2009 for example, Philippines
Government allocated approximately 15% of the national budget or 3%
of GDP to education. e US$8.2 billion (2012) Philippines Education
Sector has an annual government spend of approximately US$5.7 billion,
equating to approximately 2% of GDP as of 2012.

Understanding the sector 34

5.7.4 Private Sector Activity
Overall, the private sector involvement has played an important role with
a steady increase in the proportion of student enrollment in private sector
institutions across the Core segments including K-12 schools. e private
sector accounts for about 20% of pre-primary, 8% of primary and 20% of
secondary enrollment in the Philippines and it is substantial for the higher
education subsegment as well. e share of private higher education
subsegment and vocational training institutions is proportionally larger
than most regional peers.

Higher Vocation
K-12 Education Training
Public providers 45,619 607 452
Private providers 13,925 1,573 4,045
Total 59,544 2,180 4,497
% of private providers 23% 72% 90%

Table 16: Private Sector Activity Across All Segments

Source: Philippines Regulatory Fact Sheet, October 2012 ( gures as of 2011)

ere are large clusters of private higher education institutions

concentrated in cities such as Metro Manila, Central Luzon, Southern
Tagalog and Western Visayas. On the private sector front, a growing
number of corporations are venturing into for-pro t higher education.

5.7.5 Regulatory Context

e Philippine Constitution recognizes and explicitly outlines the roles of
public and private educational institutions and empowers the State to
regulate and to exercise supervision over all educational institutions.
e K-12 subsegment is regulated by the Department of Education
and the higher education subsegment is regulated by the Commission on
higher education ( CHED ). While Government accreditation for all
education institutions is mandatory, private accreditation is voluntary
and the regulators provide incentives and greater autonomy to
schools/HEIs with private accreditation. e higher education
subsegment is dominated by private institutions, and increasingly, these
institutions are focused on improving their bottom line. For example,
universities including the University of the East and the Mapua Institute
of Technology have been taken over by private investor groups with a
focus on pro tability.
e Foreign Investment Act 1991 de nes the foreign investment
limits in the Philippines and two Negative Lists restrict foreign
investments in some segments. e Seventh Negative List, e ective
January 2007, limits foreign companies to invest in activities regarding
the ownership, administration and establishment of educational
institutions to 40% of total shareholding. However, given the past deals,
this restriction does not apply to education companies in the Parallel and
Ancillary segments.

35 Kaizen Education (KE) Report

5.7.6 Unique Opportunities

e rollout of the Enhanced K-12 Basic Education Program has opened

up new opportunities for investment in the Education Sector in the
In 2011, Philippines had 26,000 international students studying in
the various educational institutions in the country. Although, this is
relatively moderate in size when compared to the numbers enrolled in
higher education institutions in Singapore and Malaysia, it is an emerging
opportunity as it follows the American education system.
In the Parallel segment, the government's Investment Priorities Plan
(2012) proposes technical vocational education as one of the priority areas
for public investment with additional government funding provided to
the Technical Education and Skills Development Authority ( TESDA ).
Teacher training is another emerging subsegment as a result of this
transition, with the Department of Education suggesting a need to hire
approximately 61,000 new teachers in 2012. e department is in
discussions with the private sector to address this shortage of teachers and
In the Ancillary segment, services to K-12 such as textbooks and
classroom infrastructure, will also be an emerging investment
opportunity due to the momentum generated through the
transformation of the K-12 subsegment.

Education Segment Market Size (US$ million)

Core 9,524
K-12 2,156
Higher Education 7,368
Parallel 290
Preschool 161
Technical & Vocational Training 116
Teacher training 12
Launguage Training (English) 0.1

Table 17: Philippines Private Education Market

Source: Market estimates and Kaizen research

Understanding the sector 36

5.8 Vietnam
5.8.1 Country Overview
Philippines at a glance

GDP at current prices (2013) US$171.4 billion

Historical GDP CAGR (2000-2012) 13.5%
GDP/Capital (2013, current prices) US$1,911
Population (2012 Estimate) 90,388,000
Education Sector size (2012) US$15.9 billion
Public spending as % of GDP (2010) 6.6%
FDI as % of GDP (2011) 6%

Table 18: Vietnam Overview

Vietnam's growth story in the last decade has been remarkable; it has been
one of the fastest growing countries in the world since 2000 and in 2011,
was recognized by HSBC as on one of the top 10 growth economies until
2050. In addition, the ASEAN Business Council 2011-12 Survey rated
Vietnam as the second most attractive investment destination after
Indonesia in 2012.
e country's middle class has been rapidly evolving with a population
of approximately seven million households in 2012 and a burgeoning
class of consumers, where nearly 53% of the population is under the age of
30 and is concentrated in urban areas. Another sign of progress
highlighted in a recent World Bank report suggests that the poverty
headcount has fallen from nearly 60% in the early 1990s to 21% in 2010.

5.8.2 Education Sector

With a population of approximately 88 million in 2011 and
approximately 53% of the population under the age of 30, Vietnam's
education needs for its young population are huge. Vietnam has
approximately 31 million students as of 2011, with nearly 10 million in
the Secondary school subsegment and 9 million in the higher education
subsegment. Education expenditure as a share of Gross Development
Product was approximately 6.5% in 2012, a rate that is comparable to
several developed countries and shows Vietnam's commitment to
improve both access to education and quality of education.




Pre-primary Education Primary and Secondary Higher Education


Figure 26: Student Population, 2011 (in millions)

Source: UNESCO Institute for Statistics
37 Kaizen Education (KE) Report
Access to K-12 education has remained steady given the high
proportion of public funding for education. e gross enrollment rate at
primary level for example, has consistently been above 100% since the
year 2000 and was most recently at 106% in 2011. e enrollment rate at
higher education, however, remains low due to infrastructure constraints.
ere are approximately 500 universities and colleges as of 2012, and
this gure is set to rise to approximately 576 universities and 4.5 million
students by 2020. According to the Department of higher education,
Vietnam has approximately 1.2 million students graduating from schools,
but only around 300,000 enrolling in higher education institutions.

5.8.3 Market Size

In 2012, the total spend on education represented US$12 billion of which
US$7 billion is government funded, while the private sector participation
is nearly 42% of the total education market.

5.8.4 Private Sector Activity

Vietnam has a long history of free education and the public sector funds a
majority of the education spend. Private intitutions have traditionally
played only a small role in the sector but the participation has increased in
recent years, primarily in higher education. According to the Ministry of
Education and Training ( MOET ) there were more than 40 non-public
universities in Vietnam, which accounted for approximately 25% of all
universities with nearly 189,000 enrolled students.
As part of the sector s restructuring in 1989, the government of
Vietnam implemented several reforms, including policy changes to allow
establishment of private educational institutions. In addition, the
Resolution on Comprehensive and Fundamental Reform of higher
education (2006-2020) has focused on growing the number of higher
education institutions. Notably, given Vietnam has only recently moved
from a central economy to a free market economy, private participation in
the sector is still relatively low.

5.8.5 Regulatory Context

e Vietnam government has taken numerous steps to set quality
standards and stipulations for education institutions by enacting several
plans and reforms. In 2009, Vietnam removed the 30% foreign investor
shareholding cap and allowed unrestricted investment by foreign
investors in Vietnamese educational entities, which includes 100% FDI
in private education institutions, covering the Core (Preschool, K-12 and
higher education) and Parallel (short-term training and vocational
institutions) education segments. e Education ministry also stipulates
some requirements for investment capital for educational institutions t
for investors including minimum level of investment per student across
segments, facilities and teacher quali cations required.

Understanding the sector 38

e future of the education system in Vietnam was clearly outlined in the
Socio-Economic Development Plan of 2006-2010 and the higher
education Reform (2006-2020). e goals were to increase enrollments,
the quality of teaching sta , student to teacher ratio and to establish high
quality, 100% foreign invested private education institutions, across a
broad range of disciplines.

5.8.6 Unique Opportunities

With growing levels of privatization across the education segments in
Vietnam, the total education spend is expected to steadily increase, given
the increased public expenditure as a percentage of total government
spend and higher market penetration of private educational services.
In the Core segment, the current mismatch between demand and
supply in the higher education subsegment has created a huge market for
international education with Australia, China, Singapore, US and UK
emerging as the most popular higher education destinations. e statistics
from the Ministry of Education and Training in Vietnam estimate that
nearly 106,104 Vietnamese students were studying overseas in 2012
(US$1 billion to US$1.6 billion market according to the Vietnam
Ministry of Finance) and an additional 60,000 students are at overseas
training establishments.
In the Parallel education segment, the foreign language teaching
program, which is a part of the Ministry of Education's ten year plan, is
also a large opportunity for education players to enter the Vietnamese
markets. A total of 80,000 existing teachers would need to be retrained by
2020, in addition to new teachers entering the profession.
In the Ancillary segment, it is estimated that Vietnam has 55
publishing houses and 6,200 state and private printing enterprises,
generating sales of approximately US$1 billion as of 2012. As the
education industry continues to grow, the demand for paper to print
books is expected to be 2 million tons per year, of which approximately
60% comes from foreign sources.

Education Segment Market Size (US$ million)

Core 9,312
K-12 5,712
Higher Education 3,599
Parallel 944
Preschool 500
Teacher training - English Language 92
Technical & Vocational Training 352

Table 19: Vietnam's Private Education Market

Source: Market estimates and Kaizen research

39 Kaizen Education (KE) Report

6 Southeast Asia The Next Education
Investment Destination
e Southeast Asia education market is attractive for investments in
private companies. With a growing middle class population, shortage of
skilled labor, increase in number of students studying aboard and
favorable regulatory environment, these countries have the right enablers
to attract private investments.

6.1 A Burgeoning Middle Class

Increasing economic liberalization, regionalization and intra-regional
trade in ASEAN has resulted in the formation of a common single market
which allows for a free ow of labor and reduced tari s, which is
e ectively driving consumerism in the region.
e consumer class in SEA is growing at the same pace as the region's
GDP. According to a Boston Consulting Group study, approximately 102
million households in the region are projected to achieve middle-class
status (equivalent to an annual income of more than US$3,000) by 2015,
up from about 75 million in 2012. Consumer expenditures are expected
to grow in line with the rise in per capita income, creating signi cant
investment opportunities in industries such as organized retail, consumer
products, health care, education, transportation and

6.2 Economies Face a Huge Shortage

of Skills
SEA, with the exception of Singapore and Malaysia, is currently
undergoing economic transformation with resources shifting from
agriculture to manufacturing and services. For example, the GDP
contribution from commodity exports is decreasing whilst the
contribution from services is increasing. New jobs creation activity across
sectors serves as a key indicator of this trend, wherein a concentration of
new jobs creation activity in labor-intensive, low technology products and
in skill-intensive, high technology manufacturing and services has been
ese structural changes require a higher level of education and skills,
and a shortage in institutions that provide these skills can threaten to
undermine the growth of the region as a whole. Higher education is the
primary mechanism to attain these skills.
From a long-term perspective, the key to sustained economic growth
in SEA would encompass developing and deploying the right skill sets
through investments in human capital development across the ranks.
Investments in education help close the skill gap, increase productivity
and ensure that the economic system maintains its competitive

Understanding the sector 40

6.3 Growing Spend on Education
Education spend is correlated to and in uenced by headline
macroeconomic issues such as GDP growth, population growth and
growth in per capita income. SEA's expanding economies and their rising
middle class populations are likely to continue to increase their spend on
education, and this latent demand for quality education is the main driver
for rising private sector participation in education. Data from e World
Bank and Kaizen research indicate that from 2000 to 2012, public spend
on education per capita in ASEAN countries increased from an average of
US$200 to US$300 at a CAGR of 4%. Private institutions can expect to
capitalize on this trend, which has played out well in Singapore, where
private sector institutions have stepped in to provide quality education.
Most SEA countries including Singapore, Malaysia, ailand and
Indonesia have achieved near universal primary education enrollment.
e focus is now shifting towards increasing the quality of education in
primary education institutions and enrollments in secondary and tertiary
education institutions. Private institutions are in high demand by the
growing middle class Southeast Asian population as they are percieved to
o er better education than public instituions.




80 105 88
34 76 20 19

Singapore Malaysia Philippines Vietnam Thailand Indonesia

2000 2012

Figure 27: Public Education Spend per Capita (US$)

Source: World Bank Data and Kaizen research

6.4 Rising Student Mobility

With a signi cant increase in the number of years a students spends
syudying abroad-Student mobility has become the most important part
of a student s education experience. Data from UNESCO Institute of
Statistics indicates that the number of globally mobile students was at 3.4
million in 2009, up from 2.1 million students in 2002, a 7% CAGR in
student mobiliy.

41 Kaizen Education (KE) Report

With a growing demand for higher education and one of the largest pools
of international students, the number of Asian students looking for
opportunities to study abroad is expected to increase signi cantly in the
coming years. For example, Vietnam is emerging as the new source for
students seeking higher education, with Singapore and Malaysia
competing to be host education hubs for these students.

Global competition to attract the best and the brightest students is driven
by the desire of institutions to enroll full-fee paying international
students, which adds to the gross national income for the host nation. In
this regard, SEA is strategically positioned to become a regional
educational hub catering to internationally mobile students looking for
quality education and value for money. Success as an international
education destination depends on economic competitiveness and
international reputation for quality education.

6.5 An Open Regulatory Environment

for Deals and Foreign Investments
Southeast Asian economies are moving towards adopting policies that
encourage investment in private education. Governments have recently
enacted laws for regulating private education companies and ensuring
quality control. For example, regulations have been revised to allow
foreign institutions in the region and encourage foreign universities to set
up campuses in the region. A summary of each country's policies on
foreign investments is summarized below:
Allowing foreign investment for non-formal education up to a
shareholding of 49%
Universities can also operate as for-pro t businesses by establishing
a company with a local partner that provides services to Higher
Education institutes
Universities are allowed 100% ownership as non-pro t institutions
100% foreign equity (subject to approval from the Minister of
higher education) allowed in higher education
100% foreign equity participation in Parallel subsegments such as
Skills Training Services, Technical & Vocational Schools and
Technical & Vocational Schools for students with special needs.
Malaysian Corporates can nance private universities

Understanding the sector 42

Allowing for-pro t education institutions where foreign
investments are limited to 40% in Core education
No restriction in foreign investments in the Parallel and Ancillary
education segments
Allowing for-pro t education and promotion of foreign
investments &partnerships
Only quality of delivery is regulated, while fees are unregulated
Promotion of foreign investment in education(projects that
enhance skills, technology and innovation) with additional
Allowing for-pro t education institutions
Foreign investments in the Education Sector are allowed up to
100% of a company's shareholding
Encouraging private education by allowing unrestricted FDI and
foreign investment in private education companies
No shareholding cap in education institutions in all segments of
Education Sector

Kaizen would like to acknowledge the contribution of the following
Ms. Shehzia Valiulla Graduate, Schulich School of Business, Class of
Mr. Aman Rangrass Candidate, Wharton Business School, Class of
Ms. Sakshi Saigal Candidate, IESE Business School, Class of 2015

43 Kaizen Education (KE) Report

List of Figures
Figure 1: Southeast Asia US$110 billion Education Market ........................................................5
Figure 2: e Asian Tigers Spectacular Economic Growth...........................................................7
Figure 3: Tiger Cubs - e Followers ..............................................................................................7
Figure 4: ASEAN Countries Ninth Largest Economy in the World.............................................8
Figure 5: e Ongoing ASEAN Economic Community Integration ..............................................9
Figure 6: Political Stability Index..................................................................................................10
Figure 7: FDI in ows, Global and by Group Economies, 1995-2011 (US$ billions)....................11
Figure 8: FDI In ows (US$ billion) and Share of World total (%), 2005-11................................11
Figure 9: Distribution of FDI Flows Measured by the Magnitude of their FDI ows, 2011 .........12
Figure 10: Southeast Asia - Favorable Investment Climate............................................................13
Figure 11: Deal Value (US$ billions) ............................................................................................14
Figure 12: PE Penetration Rate (PE investment as a % of GDP), 2011........................................14
Figure 13: PE Deal Classi cation by Country, 2010.....................................................................15
Figure 14: ASEAN s 40 PE Investments in Education ..................................................................15
Figure 15: Kaizen Education Map ................................................................................................17
Figure 16: Southeast Asia - High Literacy Rates ...........................................................................18
Figure 17: Population Classi cation, 2011 ...................................................................................20
Figure 18: Need of Corporate Training.........................................................................................20
Figure 19: Student Population, 2011 (in millions)........................................................................23
Figure 20: Figure 20: Highest Educational Attainment of Population Aged 15 & Above..............24
Figure 21: Educator Sector - Robust Growth and Highest Multiplier ...........................................25
Figure 22: Student Population, 2011 (in millions)........................................................................29
Figure 23: Student Population, 2011 (in millions)........................................................................32
Figure 24: Student Population, 2011 (in millions)........................................................................35
Figure 25: K-12 Transition Plan ...................................................................................................36
Figure 26: Student Population, 2011 (in millions)........................................................................39
Figure 27: Public Education Spend per Capita (US $)..................................................................43

List of Tables
Table 1: East Asias High Growth Performers..................................................................................6
Table 2: Focus Countries................................................................................................................9
Table 3: Majority of Southeast Asia ahead of India in World Bank s Survey ..................................10
Table 4: VCPE Index 2011 ..........................................................................................................15
Table 5: Comparison Across the Focus Countries .........................................................................16
Table 6: Singapore - Overview......................................................................................................19
Table 7: Global Education System Ranking, 2012........................................................................22
Table 8: Singapore s Private Education Market .............................................................................22

Understanding the sector 44

Table 9: Malaysia - Overview .......................................................................................................23
Table 10: Malaysias Private Education Market .............................................................................27
Table 11: Indonesia - Overview ....................................................................................................28
Table 12: Indonesias Private Education Market............................................................................31
Table 13: ailand Overview.....................................................................................................31
Table 14: ailand s Private Education Market.............................................................................34
Table 15: Philippines Overview .................................................................................................35
Table 16: Private Sector Activity Across All Segments ...................................................................37
Table 17: Philippines Private Education Market ...........................................................................38
Table 18: Vietnam Overview .....................................................................................................39
Table 19: Vietnams Private Education Market .............................................................................41

45 Kaizen Education (KE) Report


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47 Kaizen Education (KE) Report


Understanding the sector 48


49 Kaizen Education (KE) Report

Kaizen Management Advisors Private Limited

202 Suraj Prakash CHS, Shankar Ghanekar Marg,

Prabhadevi, Mumbai 400 025, India.
Telephone: +91(22) 6767 5757
Fax: +91(22) 6767 5758