Investment in private education may help to create jobs for the millions of jobless youth in the region and help avert a fresh round of civil unrest.
Private sector to aid job creation
Private-equity funds are aiming to increase investments in education as the Arab world seeks to stem the estimated US$50 billion (Dh183.65bn) cost of joblessness every year.
Such investments have been given renewed urgency after the unrest of the Arab Spring exposed a need for high-quality education to create jobs for the region's young people.
New Silk Route Capital Growth, a private-equity fund focused on Asia and the Middle East, is scouting for opportunities in countries including Saudi Arabia and Egypt. It is already one of the world's largest investors in primary and secondary schools, with its cash helping to teach 500,000 students in 850 schools globally.
"We can observe a significant gap between what education is providing and what education should be providing," said Jens Yahya Zimmermann, a partner and the managing director of the Dubai office of New Silk Route. "What is attractive from an investment point of view is excess demand for education at the right price point.
"The Arab Spring has increased the need to responsibly rebuild these countries, and education is the key to that process."
Through its stake in Beaconhouse School System, a Pakistan education provider, the US-headquartered firm is already managing 1,500 students in public schools in Abu Dhabi and also has investments in private schools in Dubai, Sharjah and Oman.
FM Investment Management, a private-equity investor based in London, hopes to start talks soon with the sovereign wealth fund of a North African country about setting up an investment pool to fund the building of universities and business schools.
"The opportunities are endless … if you have a growing young population that needs jobs," said Nicola Padovani, the head of risk management and education at FM.
A growing youth population together with a skills mismatch between school and university leavers and the labour market has helped to stoke soaring unemployment across the region.
As many as 25 per cent of youths in the region are out of work, one of the highest jobless rates in the world.
Unemployment is costing the region between US$40bn and $50bn every year, said Dimitris Tsitsiragos, a vice president at the World Bank's International Finance Corporation (IFC).
"The private sector has needs, and we need to develop with the private sector a joint training programme to provide employment opportunities," he said on the sidelines of the IFC's Private Education Conference in Dubai last week.
However, education experts argue that investment in education cannot just mean building more schools and universities simply to graduate more students.
Tunisia illustrates the problem. An estimated 80,000 university graduates entered the country's labour market last year, far more than the economy can absorb.
"You cannot just provide degrees, you need to focus on the training and the relevance," said Jamil Salmi, an independent economist.