Ha Hoa Tien University, a private university founded in 2007 in the neighbouring province of Hanoi, used to be owned by a steel and construction corporation. In the first four years of its operation, it welcomed and said goodbye to four rectors – the longest-serving being in office for just two years – before the corporation’s chairman directly took charge of the university.
The number of new students enrolled annually remained as low as 200 for years, less than a 10th of the optimistic forecast the corporation had set itself. The corporation finally sold the university to another investor in early 2016.
The commercialisation of education
The story of Ha Hoa Tien University illustrates how higher education has become commercialised in Vietnam. The concept of commercialisation of higher education was legalised in Vietnam for the first time in the Education Law of 2005. This silently omitted an article prohibiting education commercialisation that had been consistently emphasised in previous legal regulations on education.
Also in 2005, through a prime ministerial ruling, private universities were legalised and instructed to organise as corporations whose board of governance could consist solely of shareholders and could exclude faculty and student representatives. From then until recently, corporation-like private universities have been the only legally recognised model for private higher education.
For many corporations, these policy changes, together with the government’s resolution to expand the higher education system and increase the share of the private higher education sector, have acted as an appealing invitation to them to participate in the higher education sector.
In 2006, FPT, a noted Vietnamese IT company, founded a private university, the first corporation-affiliated university in Vietnam. Other corporations like Ha Hoa Tien followed and their universities bear the name of their founding corporations. Vingroup, a conglomerate in real estate and tourism, announced in 2014 that it would soon establish two of its own universities.
Mergers and acquisitions
However, in recent years mergers and acquisitions, or M&A, have provided a stronger incentive for corporations to get involved in Vietnam’s private higher education sector. In 2012, a private university in Ho Chi Minh City – Van Hien University – was ‘rescued’ by a corporation.
Founded in the early years of the non-public higher education sector, Van Hien continuously suffered from under-enrolment due to ineffective management and disputes among its governing board members. These challenges increased when the Ministry of Education and Training gradually tightened the regulations on private universities.
The university was finally banned from recruiting students in 2012 due to its inability to meet the land ownership requirement – all of its campuses were rented. Being acquired by the Hung Hau Corporation was the last resort.
When Vietnam’s private higher education sector hit problems, M&A became an attractive option. Poorly-managed and under-financed universities were good targets.
The University of Economics and Finance, one of the universities that charged the highest tuition fees in Vietnam, was, after years of enrolment difficulties, sold off to an investor which already owned another large and well-run private university in the same city.
Hong Bang University, which once had a very good enrolment record in the private sector but later suffered from a scandalous fall in quality, was finally taken over by a corporation in 2015. The Nguyen Hoang group, its new owner, purchased another university in a neighbouring province – Ba Ria Vung Tau University – not long after the acquisition.
This M&A pattern was also seen in Central Vietnam, a less dynamic economic region. Quang Trung University was acquired by the Hoan Cau Group, an influential real estate and tourism corporation, in 2014.
One underlying reason for the ongoing M&A trend is the increasingly numerous and complex requirements that private universities have to meet. The accreditation process includes 111 criteria as of May 2017 and has been given more importance as a centralised policy tool. Those institutions that fail to meet accreditation standards face a ban on recruiting students.
In addition, the government is now monitoring faculty-student ratios more closely.
Moreover, the requirement that private universities must own at least a five-hectare (roughly 12-acre) campus is far beyond the capacity of many urban private institutions that lack a good source of funding.
With the regulations tightened, private institutions with a poor record on recruitment and management have found themselves unable to keep operating.
Other changes include new regulations brought in in 2005 setting out that those who propose to establish a new private university had to secure a minimum of VND15 billion in charter capital. That level was then raised to VND50 billion in 2010, to VND250 billion in 2013 and to VND1,000 billion (roughly US$44 million) in April 2017. This has obviously dampened the enthusiasm of many corporations for founding a university from scratch.
More significantly, a recent government resolution to limit the establishment of new universities has put off even determined and well-resourced corporations. Hence, acquiring an existing private institution is the preferred choice.
Motives of corporate investors
For many people, profitability is the obvious reason for corporations to invest in the higher education sector. This is particularly the case in Vietnam and many other Asian countries where the seemingly endless need for education has not yet been met.
However, some corporations may be looking to make much more significant profits not from the university itself but from the real estate projects that surround it. Like other public infrastructure, a good education institution is always a plus for its neighbourhood and helps to increase the value of the surrounding real estate. This explains why real estate conglomerates look at private universities with extraordinary enthusiasm.
Moreover, additional profit could also come indirectly from human resource development. Corporation-affiliated universities sometimes act like an in-house human resource training centre for their founding corporations. The Hoan Cau Group promised to open its doors wide to graduates from Quang Trung University, for instance.
Regardless of what drives corporations to invest in private universities, the fact is that Vietnam’s private higher education sector is increasingly likely not to be in the hands of educators. The rise of corporation-affiliated universities is a higher education phenomenon worth the attention of both policy-makers and academics.