Impact of Vision 2030 on university funding in KSA

Vision 2030 and the Saudi National Transformation Program 2020 represent a seismic shift in the way all Saudi universities, public and private, will be regulated, funded and governed in the future.

Vision 2030 indicates a clear commitment to privatization, as the government’s role shifts from ‘providing services to … regulating and monitoring them’.[i] In the future, the government will rely on private sector investment to acquire and deliver education services that are currently provided by the public sector. In addition, restrictive regulations and obstacles to foreign and private sector investment are being reformed to achieve this commitment.[ii]

Opportunities for partnering with private sector investors

Through the National Transformation Program 2020, government agencies are determining additional sectors suitable for privatization and identifying opportunities for partnering with the private sector, as well as ‘innovative administrative and funding approaches.’[iii] Plans for privatizing health care are already well advanced and will help to develop models which will be adapted for education provision.

The recent (16 August 2016) MoE drive to make 2,000 government schools ‘independent’ through deploying the National Transformation Program’s Independent Schools Model is an example of a privatization model in education aimed at reducing the financial burden on the government by allowing schools autonomy in administrative and financial matters.[iv] The National Transformation Program has allocated SAR 240, 000, 000 to attract private investments to finance the construction of new schools from 1437/1438 to 1441/1442.[v] Although education will remain free for pupils, the schools will have more power in management and administration, curriculum, educational activities and training for teachers. Small companies will be set up to manage the schools creating opportunities for investment in school buildings and related facilities.

Introducing non-profit companies

The Ministry of Commerce and Investment also seeks to introduce non-profit companies, which would manage education and healthcare provision, and serve as vehicles to structure and channel endowments. [vi] MOCI distinguishes non-profit companies from charitable institutions and associations thus: while charitable entities rely essentially on charitable contributions, non-profit companies would be able to exercise commercial activities and achieve financial gains, subject to these gains being reinvested by the company in the pursuit of its non-profit objectives.

The draft Non-Profit Companies Law includes education and research as charitable objectives that may be pursued by non-profit companies. The draft Non-Profit Companies Law allows non-profit companies to collect and receive donations. The third Endowments Forum organized by the Religious Endowments Committee of the Riyadh Chamber of Commerce and Industry in February 2016, announced the establishment of an Endowments Authority to oversee the endowments sector.[vii]

Saudi companies such as Alkhabeer Capital have capitalized on this trend towards institutionalizing endowments and charitable work by launching an advisory service for structuring and managing awqaf assets. Alkhabeer has stated it will target educational institutions, family offices and wealthy individuals that want to establish awqaf.[viii]

It is likely that the main organizations to take advantage of the new law will be companies set up to manage groups of schools or hospitals, but it is possible that the government may wish all institutions that have sizeable endowments to move to the nonprofit company status to regularize the management of those endowments. The internal structure of the company would be managed by ‘members’, as opposed to ‘shareholders’, which may be either physical persons or corporate entities. The non-profit company would generate profit – in fact, a surplus to be reinvested – with the understanding that no part of such profit would be paid to the non-profit company’s members, directors or employees.

Increasing nongovernmental higher education institutions

One of the National Transformation Program 2020 targets for higher education is to increase the percentage of students in nongovernmental higher education from 6% to 15%. [ix] The government will invest in strategic partnerships with apprenticeship providers, new skills councils from industry and large private companies. The increase will affect private universities and bodies that offer executive education programs as more competitors enter the market, and is likely to attract private foreign companies offering paid-for education qualifications in IT, accounting and technology.

Aligning university graduates with labor market needs

Vision 2030 commits to developing an education system that contributes to the Kingdom’s economic growth and works closely with the private sector to ensure higher education outcomes are in line with the requirements of the job market.[x] This will be achieved in part through information provided by TAQAT (The National Labor Gateway) and sector councils that will determine the skills and knowledge required by each socio-economic sector. A centralized database is being developed that will track students from early childhood through to K-12 and beyond to tertiary education in order to improve ‘education planning, monitoring, evaluation and outcomes.’ [xi]  A database will also collect data on education statistics, alumni and scientific research.[xii] The National Transformation Program has allocated SAR 48,000,000 to establish a practical framework to align university graduates with labor market needs over five years from 1437.[xiii] All of this suggests a much tighter focus on outcomes, which will benefit top-achieving universities including Alfaisal University.

Vision 2030 will also require a focus on innovation in advanced technologies and entrepreneurship. By the year 2030, the government has set an ambitious goal to have at least five Saudi universities among the top 200 universities in international rankings and students achieving above international averages in global education indicators. An additional target is to increase to 800 the number of technology companies emerging from universities.

Changes to the King Abdullah Scholarship Program

The regulations for the King Abdullah Scholarship Program (KASP) have been reformed to better serve national priorities,[xiv] which will have an impact on the number of students able to study abroad. New regulations require that students already enrolled at a university abroad must now be in one of the world’s top 50 academic programs in their field or one of the world’s top 100 universities to qualify for the KASP. The proportion of funding permitted for Saudi Universities through MoHE contributions to scholarships and tuition fees is also likely to change this year.

Focusing on CSR

The final commitment of Vision 2030 that has a direct impact on funding non-profit universities in KSA is the focus on Corporate Social Responsibility (CSR) and the non-profit sector. The National Transformation Project wants more than one-third of non-profit organization’s projects to have a measurable and deep social impact by 2020.[xv] This will be achieved through creating a supportive and cooperative environment in which the sector’s institutions and government agencies can collaborate. The General Presidency of Youth Welfare has responsibility for developing sports programs, hobbies and clubs for Saudi youth. This includes a SAR 120,000,000 budget to design and deliver a strategy for university sport and physical activity, SAR 21,000,000 to establish a charitable model to fund sports facilities investments and an unspecified budget to identify, design and implement CSR opportunities for the private sector.[xvi]

Private education funding strategies

The Sixth Development Plan (1415 – 1420h) aimed to expand the Kingdom’s education provision through the participation of the private sector in opening private non-profit education institutions, including schools, colleges and universities. This led to the establishment of the General Directorate for Private Higher Education by the MoHE to grant licenses for the establishment of private universities, ensure the quality and output of the academic programs provided through the application of the quality standards set by the National Commission for Academic Accreditation and Assessment (NCAAA), and prepare regulatory statutes and executive regulations governing external investment in the field of private higher education.

The second subject of Article 1 of the MOE’s Rules for the Establishment of Educational Charities above Secondary Level states that the institution’s primary purpose must be to provide educational services above secondary level without aiming to achieve a profit, and that the growth of the institution relies on continued self-financing. This latter point, reliance on continued self-financing, will become more and more important in the governance and funding of public sector universities, as well as private ones according to Vision 2030.

Vision 2030 makes it clear that public universities in Saudi Arabia will no longer be able to rely on government funding to cover 100 per cent of their running costs, and they will have to adopt a funding strategy similar to that of the private nonprofit universities in the Kingdom.

Most top international universities rely on large endowments and fundraising campaigns to fund their educational and research activities, such as Harvard University’s endowment of $36.5bn, Yale $22.8bn, Stanford $18bn, Princeton $16bnm, King Abdullah University of Science and Technology (KAUST) $10bn, Cambridge $9bn and Oxford $6bn. As early as 2007, King Fahd University of Petroleum and Minerals (KFUPM) established its own endowment fund office (EFO) to ‘raise, invest, steward and expend funds from an array of non-governmental sources whilst encouraging the spread of a culture of philanthropy for education amongst potential beneficiaries.’ Although KFUPM receives government funding, the endowment fund is used to provide additional funds for research, student enrichment, faculty compensation and new initiatives which require immediate funding.

The KFUPM endowment fund office seeks to be in a position to ‘provide cover of up to 35% of the University’s annual budget should the situation arise where government funding was to weaken due to external factors… that would impact adversely on the quality of teaching or facilities.’

[i] Page 45, Vision 2030 (English Version) http://www.vision2030.gov.sa

[ii] ibid

[iii] Page 83, Vision 2030 (English Version) http://www.vision2030.gov.sa

[iv] Arab News, http://www.arabnews.com./node/970521/saudi-arabia 16 August 2016

[v] Page 101 Appendix: 2016 Initiatives for the National Transformation Program, http://www.vision.2030.gov.sa

[vi] Saudi Arabia: The Draft Saudi Arabian non-profit companies law, 5 May 2016, http://mondaq.com/saudiarabia/x/488884/Corporate+Governance/The+Draft+Saudi+Arabian+non+profit+companies+law

[vii] Http://saudigazette.com.sa/saudi-arabia/minister-endowments-in-total-disarray

[viii] http://www.arabnews.com/economy/news/745531

[ix] http://mondaq.com/saudiarabia/x/501512/Fiscal+monetary+policy/TransformingSaudiArabia

[x] Page 40 – 41, Vision 2030 (English Version) http://www.vision.2030.gov.sa

[xi] ibid

[xii] Page 103 Appendix: 2016 Initiatives for the National Transformation Program, http://www.vision.2030.gov.sa

[xiii] Page 101 Appendix: 2016 Initiatives for the National Transformation Program, http://www.vision.2030.gov.sa

[xiv] http://monitor.icef.com/2016/02/report-saudi-scholarship=programme-to-sharpen-focus-on-top-universities

[xv] Page 77, Vision 2030 (English Version) http://www.vision.2030.gov.sa

[xvi] Page 104 Appendix: 2016 Initiatives for the National Transformation Program, http://www.vision.2030.gov.sa

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