The World Data Lab‘s 2021 report on Asia’s middle class indicated that Vietnam’s middle class will expand by 60% by 2030. This expansion will make Vietnam home to the world’s 18th-largest middle-income class. With very significant gains in the middle-class population (a projected 21 million), Vietnam is also among Asia’s thriving countries in this segment.
Overview of Vietnam’s Education Sector
Domestic and multinational companies are using Vietnam’s rapidly expanding middle class as a major indicator for business prospects. Among them, education has become one of the most promising sectors, with the ability to enrich society and the generations to come.
With that in mind, Vietnam is home to a dynamic startup landscape that includes school and university startups. One successful example is Montessori Internation School (MIS), a kindergarten and elementary school based in Ho Chi Minh City. The school aims to care for and educate young children (aged 18 months to twelve years) throughout their formative years.
Apart from the growing middle class, there is also growing demand for private and/or international schools as the population grows and public schools struggle to accommodate students. On top of that, education quality is becoming an increasingly important criterion for parents, especially in K-12 education (for children between 6 and 18 years old).
However, higher education is also seeing strong potential for investment, as Vietnamese people spend nearly USD 2 billion on studying abroad every year.
If you’re looking to do business in Vietnam, opportunities in the education industry are abundant. However, there are several key factors you should be aware of before opening a school or university in the country.
Four Key Factors to Keep in Mind when Starting a School in Vietnam
1. Licensing, Accreditation, and Curriculum
As a foreign investor, starting a school in Vietnam is just like starting a business, which means setting up a legal entity. Generally, depending on the type of school and business model(s) that you choose, there are a few licenses to be acquired at relevant agencies, as listed below.
Investment Registration Certificate (IRC)
An Investment Registration Certificate is a requirement for any foreign investor looking to do business in Vietnam and is granted by the Department of Planning and Investment (DPI). To start a school, however, the process of IRC application is different from common businesses.
If you’re starting a school that doesn’t offer higher education, you will need consultation and official approval from the Department of Education and Training when applying.
Universities will need additional consultation from the ministries that govern their respective fields, as well as approval from the Prime Minister.
Enterprise Registration Certificate (ERC)
The ERC is an official acknowledgment of the establishment of your legal entity, also granted by the Department of Planning and Investment.
School Establishment Permit
The issuance of a school establishment permit also involves different authorities depending on whether your school provides higher education. A permit granted to a university requires consultation from the Ministry of Education and Training (MoET) and approval from the PM. Meanwhile, other schools have to be consulted by the Department of Education and Training and approved by the local People’s Committee Chairman.
Education Operation Permit
For schools without higher education, the education operation permit will be signed by the Director of the Department of Education and Training. For universities, you have to obtain this permit from the Minister of the Ministry of Education and Training.
If you’re starting a school as part of an international franchise, you also need approval from the Ministry of Industry and Trade (MoIT).
It is also worth noting that a school with foreign investment has a different set of regulations from a school with only local investments.
2. Legal Entity Options and Capital Investment
For foreigners setting up a school or education business in Vietnam, you must choose a legal business structure for your company registration. You can register your education business as a public school or a non-public school.
Additionally, there are different legal structures that can provide different benefits based on your needs.
- Sole ownership: Foreign investors who have both strong capital and education expertise are the only ones who can safely handle this type of incorporation. This is a high-risk, high-reward option to invest in education in Vietnam.
- Partnership: The most common form of partnership in this area is when a foreign education professional cooperates with a local real estate developer to form a venture. This way, the foreign partner can focus on any aspect of education operation, qualification, manpower, branding, etc. while the local partner assists with infrastructure development and licensing.
- Franchising: International education brands can expand their presence in Vietnam and maximize revenue via cross-border franchising.
During your business registration process, you’ll also have to register your charter capital. Here are some recommendations for capital investment for each school type.
- University/higher education: VND 1 trillion
- Secondary: VND 50 billion
- English center: VND 20 million per student (e.g. VND 20 billion of capital for a 1000-student center)
3. Regulations on infrastructure
Depending on your chosen type of school, there are specific regulations for operating an education business. Infrastructure is one of the primary subjects of regulation. Here are some of the facilities generally required for K-12 schools.
- Appropriate teaching facilities and equipment
- Accessible location and sufficient area for activity (the minimum average area is 6 sqm per student in urban areas, 10 sqm per student in rural areas, and the minimum teaching area should be 2.5 sqm per student)
- Assigned offices for the board of directors and teachers, along with appropriate meeting rooms
- Subject-specific classrooms (for secondary and high schools), a library, teaching and learning equipment, and materials that satisfy the MoET’s standards
- Multi-functional gyms, art rooms, computer labs, rooms with support for disabled students, clinics, canteens, and break rooms (for boarding schools)
- Hygienic facilities that meet the conditional standards of the Ministry of Education and Training: clean water supply, proper drainage systems, and bathrooms adequate for the scale of the school
- Playgrounds, training grounds, and parking lots that make up at least 30% of the school’s total area, along with a gate and surrounding walls
Your school’s infrastructure and facilities reflect greatly your school’s curriculum nature, vision, and mission. Furthermore, they are designed in a way to meet local needs and requirements.
Therefore, before you start constructing and designing your school infrastructure and facilities, you must first understand the school curriculum, local teaching, and learning priorities.
With that information, only then you will be able to consider the class sizes, capacity, and other future needs.
Of course, the construction standards, processes, and costs are important factors to deal with and you need to engage with specialists to fulfill these parts.
4. Strategic Planning
You need long-term strategic planning to achieve your goal of opening a school in Vietnam.
A good school management team often comes up with strategic planning between five and ten years in advance.
It’s also vital to look into the details of the plan as it’s not uncommon for most new schools in Vietnam to only generate significant profit in the 4th year since its operation.
Regardless of whether you set up a profit or non-profit school in Vietnam, it’s highly recommended to have a detailed business strategy laying out a short-term and long-term financial plan. These plans often span the first five to ten years from the establishment of the school.
Investors also need to keep in mind that a school usually does not achieve its financial goal until the 3rd or 5th year of operation. You must also take into account all associated factors that may affect your financial performance.
InCorp Vietnam (formerly Cekindo) is a leading provider of global market entry services. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 8 countries in Asia-Pacific, headquartered in Singapore. With over 1,100 legal experts serving over 15,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business perfectly fit into the market with healthy growth.
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