Foreign investors are increasingly seeing Vietnam as an exciting market for education investment, though there remain obstacles to foreign investment in higher education. 

There are a number of factors contributing to education’s rise in popularity, including a burgeoning middle class, which is projected to double in size from 2014 to 2020, the fact that around 24 per cent of the country’s population is under 14 years old with a further 16 per cent under 25, and the commitment by the Vietnamese Government to develop education to meet the demands of its rapidly-growing economy.

Existing FDI in education

Despite the demand for international-quality higher education in Vietnam, at this time investment in the form of establishing foreign-owned or invested universities has still not taken off. At the end of the 2016-2017 academic year, Vietnam had 235 universities. 

The number of foreign-owned or foreign-invested universities was six, including RMIT (the first foreign-owned university in the country). 

There are also three universities established in collaboration with foreign governments as part of the Vietnam New Model University Project: the Vietnamese-German University, the Hanoi University of Science and Technology (with France), and the Vietnam-Japan University.

There has been much more foreign involvement by way of collaboration between international higher education institutes and Vietnamese universities to offer joint programs. 

These include face-to-face training provided under the foreign program or under a joint program developed by both the foreign and Vietnamese parties. 

Existing joint programs also include courses delivered wholly in Vietnam or with part of the course taught in the foreign country. 

A number of universities from the UK, Australia, the US, and Canada have entered into these joint programs with Vietnamese universities. 

The number of such programs at this time is over 400, with many of Vietnam’s top universities offering joint programs, such as the MBA offered by the Vietnam National University and the University of Northampton in the UK.

Another area that has consistently seen growth has been the recruitment of Vietnamese students to study overseas. Vietnam is seen as one of the top four emerging markets for recruiting students to study overseas by foreign higher education establishments. 

The latest figures published online by the UNESCO Institute for Statistics shows that Vietnam has a total of approximately 70,000 students studying overseas. The leading destinations are the US, Australia, Japan, Singapore, and other Asian countries. 

The vast majority of these students are self-funded, with only about 5,400 receiving government scholarships to study abroad in 2016, according to Ministry of Education and Training figures. 

Fields of opportunity

The main areas of opportunity for foreign investment and involvement in Vietnam’s higher education sector continue to be in three main areas: the recruitment of Vietnamese students to study at foreign universities, joint programs with local universities in Vietnam, and setting up wholly-independent foreign-owned universities in the country.

Recruitment of Vietnamese students to study overseas

There has recently been an increase in foreign universities recruiting Vietnamese students by attending or conducting higher education fairs in Vietnam to rouse the interest of Vietnamese students rather than by way of recruitment agents. 

Foreign universities can establish representative offices in Vietnam to oversee this. Representative offices cannot directly engage in commercial activities in Vietnam but can be used to organize consultations, information exchanges, seminars, and exhibitions on education to promote the university among Vietnamese students. 

As noted above, the number of Vietnamese students going overseas to study is increasing and the majority are self-funded. Therefore, it would be advisable for universities seeking to enroll more Vietnamese undergraduate students to consider promoting scholarships and financial aid opportunities. 

Vietnamese students tend to be academically well-prepared but many lack the financial resources to complete their studies overseas.

Joint programs with local universities in Vietnam

Another function a representative office established by a foreign university in Vietnam can perform is conducting market research, including on potential partner Vietnamese universities for establishing joint programs. 

Currently, joint programs and other foreign investment and involvement in higher education is regulated by Decree No. 73 on foreign investment and cooperation in education, issued by the government in 2012. Decree 73 has a specific section on joint programs. 

These must be approved by the Ministry of Education and Training and will be given a term of five years if approved, which can be extended further at the time of expiry. 

The options available for joint programs include face-to-face training provided under the foreign program or under a joint program developed by both the foreign and Vietnamese parties. 

The program can be wholly delivered in Vietnam or with part of the course taught in the foreign country. Decree 73 also allows for either the Vietnamese or the foreign institute to award degrees and diplomas. 

If the foreign institute awards degrees and diplomas then the subjects must be taught in English, with teaching only being allowed in Vietnamese for joint programs that offer Vietnamese degrees and diplomas.

Representative offices of foreign universities in Vietnam can also be maintained to oversee the implementation of any contracts with local partner universities and are an effective way of maintaining links and communication between the Vietnamese institute and the foreign university during the implementation of the joint program.

Establishment of foreign universities in Vietnam

Decree 73 also deals with the establishment of wholly foreign-owned and joint venture higher education institutes in Vietnam. 

It provides certain rules and regulations on registration and the requirements for foreign institutions to gain accreditation or other formal permission from Vietnamese authorities before operations begin. 

The requirements are mainly in terms of providing evidence of the foreign university’s legal status in its own country, the qualifications of its teaching staff, teaching in English (if an English-language foreign university), the foreign university’s investment plan for Vietnam, and evidence of sufficient funds to follow it through successfully. 

In order to establish a higher education institute, a total investment fund of at least VND300 billion ($13.17 million) is required, with an average investment level of at least VND150 million ($6,590) per student. 

Importantly, the subjects to be taught must also be approved and must not go against Vietnamese culture and ethics, with subjects relating to national security, defense, politics, and religion being specifically prohibited. Subject areas that the Vietnamese Government has committed to under its WTO commitments include engineering, natural sciences, technology, and business administration, as well as business science, economics, accounting, international law, and language training. 

However, as with the other areas of the application process, approval will be on a case-by-case basis and can include other subject areas. 

The application process involves obtaining a number of licenses, each having a similar application process, including the submission of the same documents, but each must be applied for separately.

Current limitations

Unlike primary and secondary level foreign education establishments, there is no limitation under Vietnamese law on the number of Vietnamese students that can enroll in foreign joint programs or foreign-owned higher education establishments. This is an advantage for higher education investment over investment in wholly foreign-owned primary and secondary international schools, where only a maximum of 10 per cent of local children can be enrolled at the primary and 20 per cent at the secondary level. 

The most pressing challenges for attracting more foreign investment in establishing higher education institutes is the complicated, time consuming, and costly licensing process and the significant up-front investment required, including the construction of facilities for institutes applying for a license of 20 years or more.

In early 2017, the Ministry of Education and Training released a draft decree to replace Decree 73, with the aim of dealing with some of the challenges under the current law by providing a more straightforward licensing process and removing the requirement for the construction of facilities for institutes applying for a license of 20 years or more. 

The draft decree has not been approved as yet, but if passed should be seen as a welcome step in further opening up and easing foreign investment in Vietnam’s higher education sector. One issue that has been raised about the draft decree is that it would increase the total investment fund to establish a higher education institute from VND350 billion ($15.37 million) to VND1 trillion ($43.9 million). This is a significant increase, but alternatively could be seen as a positive step from the Vietnamese market perspective, as it would ensure that only committed and reputable foreign education institutes look to establish in Vietnam. 

Vietnam is an exciting market for investment in education. It is on its way to becoming a truly middle-income country and there is a desire for quality in everything and specifically in higher education. 

The environment is primed for investment in higher education in terms of demand from Vietnamese people and market, and hopefully this will be met with an inflow of foreign investment if Vietnam continues to move towards easing foreign investment in higher education with the proposed draft decree and other future legislation.

Ross Macleod/Associate at Asia Counsel Vietnam Law Company Limited

VN Economic Times