7. Private International schools growth forecast in Taiwan: investors recommendations
7.2. Reasons for investing in the education sector & K-12 International schools
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Schools offerings based on analytical and emotional skills. Students and graduates are better integrated in the global environment.
Asia has seen the largest increase in the number of international school opening, and in 2016 accounted for more than half of all international schools and 60% of all students. By 2100, more than half the world’s population will live in India, China, or Africa. It is forecasted that Global policy leadership and sales of education goods and services will be shaped less by issues and needs in the U.S., and more by the issues and needs of Africa, South Asia, and China.
7.2. Reasons for investing in the education sector & K-12 International schools
Renowned Internationals schools can operate as non-profit independent schools for-profit schools in the K–12 sector. The schools operate as businesses, receiving fees from each student they enrol. For-profit school, compete in the educational market and serving students and families that public and private non-profit institutions could have ignored by proposing different services.
The return of investment for profit school can be related to the revenues perceived via tuitions fees, given a percentage margin of return for investors. The advantage of investing in school relies on the following factors.
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Low Risk
Education is viewed as a top priority as it is largely “recession proof’’
Parents rarely change schools mid-stream.
Fee increases rise faster than local inflation figures, improving returns for investors over and above other sectors.
Visible income streams and long-term customers.
Positive cash flow and high margin
Collect fees in advance.
Typically profitable within three years of operation. Profit margins of between 20 to 40% for big sized campus (1,800 students).
Branding
Established brand allows new school to fill more easily and offers a far quicker return.
Social Responsibility
Improve country’s educational infrastructure
Responsible investment into the country’s long-term global competitive position.
Investment in K-12 school can also be made indirectly through real estate investments and can target a larger numbers of school operators. Developers can expect competitive commercial yields and the attractive proposition of a single long-term tenant.
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7.3. Potential growth forecast model considering implementation of NDC and New Southbound Policy
The following model is based on the previous sections analysis, taking in account Taiwan SWOT which reflect an openness’s from the government regarding private investment in education, a society with a strong emphasis in children's education and in favour of English-Medium western education. The country competiveness shows a freedom of doing business combined with the environment quality that could help the deployment of the New South Bound policy and attract new white collars immigrants from South East-Asian countries.
The industry outlook in China and East Asian countries, shows that Taiwan have a larger disposable income, and GDP per Capita, but have a lower number of international schools, due to its history and past government restrictions on international schools enrolment.
To develop the growth forecast model we based on the following facts that could have the larger impact on the K-12 education sector:
Working population is decreasing by an approximate 180,000 annually from 2016 as estimated by National Development Council (NDC)
NDC proposition to counter the demographic issues by facilitating immigration and recruiting more overseas talent
Renowed International School (TES, TAS) have waiting lists for enrolment
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The following assumptions are integrated to finalize the model:
Based on 2016 numbers, we assume that 75% of ARC under 15 years old join international schools, and the distribution local / foreigner students with ratio of 70/30
A growth of 7% of local students if more places are offered. We have taken in account that 53% of applicants do not receive school places, at TES, significantly a 21%
growth if all were accepted. We can consider that if 60% get a place somewhere else, the growth would be 7% and we kept that conservative number.
A multiplication factor of 1.5 or 2 of foreign white collar immigrants’ workers is anticipated.
K-12 International schools in Taiwan, Potential growth forecast model Scenarios Foreign
Table 13: K-12 International schools in Taiwan, Potential growth forecast model
The table above shows the results of the model and forecast a growth of between 20% to 40%,.
The growth would rise to 96% if the number of white collar immigrants workers were multiplies by four.
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Legislators and government agency should be aware of the potential market and consequently adjust the policies that could favor investment in this sector, having a long term benefit aspect on the country future development. Investors should be aware of the risk of the investment but of the high return that can be expected in this sector, if public policies are correctly and clearly directed.
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8. Conclusion and recommendation
Taiwan is a favourable place for investor regarding the international school market; however the outcome will largely depend from the government New Southbound Policy. By attracting more immigration to Taiwan the country could develop a potential market for international schools. The Southbound policy currently design to attract student for higher education could also be extended to the K-12 education by creating boarding schools for low GDP countries as Myanmar or Cambodia.
In Taiwan low cost private school will certainly faced the competition due to low birth rate and force to close for the less worthy. We can also note a distinction between low cost private school and Private international school, with high tuition fees, as a way to segment the market.
Investor can implement adequate marketing plan and achieve market penetration for this last more profitable segment.
The potential growth model of international schools in Taiwan shows that the country can be an attractive market for investor. The government bodies and lawmaker should support the industry by making the conditions more favourable for this expending sector in Asia; as it will have positive consequence on Taiwan country competiveness.
Taiwan yet should not be the first place of choice in Asia as China and Indonesia offer more opportunities in term of market growth. Indonesia, a country with a young median age, has new growth regions like Medan, Makassar and Manado where international schools can be developed. In addition a recent revision of education law for investment makes room for private-sector actors to engage in education even more attractive.
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