Posted by: Pradeep | May 27, 2009

Private schools only work on maximizing profits

I have been reading Gulf News ever since I came to Dubai and look at GN reports with positivity and great respect. I appreciate the report “Teachers complain over low salaries” in Gulf News on 25/5/9.  The reporter did her best in highlighting the bleak side of private education providers attitude towards the very basic pillars of institutes which give them millions of dirhams in profits every year.

However as I read through another report “Private schools bemoan resource crunch”, the data presented through graphs was a big shock to me.

While reporter provided certain analysis of cost of operation against tuition fee hike by schools (as per KHDA guidelines), the graphs shown are absolutely misleading for any reader.

The percentage increase indicated (for 2004 to 2009) in

  • Teacher & Admin Staff salary (74%),
  • Repairs and maintenance (135%) and
  • Accommodation cost (202%)

to show that increase in tuition fee by GEMS schools (36%) during same period was insufficient is erroneous.

Please follow the example below to understand the scenario in totality;

with above tuition fee increase the revenue generated increased by 39.2% (this is with the assumption that during same period no. of students didn’t increase – if no. of students increases by 5% during same period then it would generate 6.96% additional revenue to school operator)…

  • Teacher & Admin Staff salary in any of the private Indian schools here doesn’t go beyond 20% of total revenue. Even if I agree with reported figure of 74% increase, it affects revenue by 14.8% only (remember without increasing student nos. schools got 39.2% above),
  • Repairs & maintenance in any of the schools here doesn’t go beyond 4% of total revenue. Even if I agree to reported figure of 135% increase, it affects the revenue by 5.4% only (remember without increasing student nos. schools had 24.4% additional revenue still with them (above),
  • Accommodation costs in any of the establishment won’t be more than 30% of salaries (meaning only 6% of total revenue at most). Even if I agree to reported figure of 202% increase, it affects the revenue by 12.1% only (remember without increasing student nos. schools had 19% additional revenue still with them (above).

When one takes total sum of above, one would observe that actual impact was only 32.3% while school tuition fee was hiked by 39.2%. This leaves additional profit of 6.9% with schools as compared to base year of report (albeit no fair financial accounts are available in public domain here, on conservative side I understand the profit in base year for private Indian schools here would have been close to 30%).

One would be astonished to note that with additional student base, the surplus generated by private schools here multiplies very fast.

 

Cost vs Revenue            

On other note if one co-relates % hike in salaries and teachers statements on actual hike, one would notice private education providers are doing all that they can to only MAXIMISE their own profits and nothing else.

I also agree with the statement made by Mr. Sunny Varkey “How can you achieve quality without investment? If so, I would like someone to show me that.” I am of belief that investment has to be in teachers and students to improve quality and not in buildings.

If private education providers like GEMS claim that they are only making huge losses due to government regulations that limit hikes in tuition fees then I would like to point out a few questions that probably haven’t been posed to such operators as yet…

  1. Why are they starting new schools year after year (MoE and KHDA regulations on fee hike are not new, they are there for long time)? GEMS has announced opening of admissions for one more school from September this year in Dubai.
  2. How come ‘not for profit’ schools like Indian High School operate with much lower fee structure and still are expanding without external funding? Please note that DMHS average present tuition fee is 400% higher than Dubai IHS.
  3. How do GEMS group schools which offer UK/US curriculum are operating at fee levels which are much lower than some of the Indian schools in same group. While Indian schools have typically 30-38 students in class and UK/US curriculum schools have 20 students in class (meaning 50% higher operating costs on lowest side)?
  4. How come similar schools by other education providers are able to generate profits and at the same time offer much lower fee too?

 Last week I read article by Ms Natasha Ridge in The National and it was pointer to me to learn that private education providers have done no good to any society to date and delegation of education is very delicate matter. KHDA is doing great job in regulating the sector an helping Dubai achieve its goals on education, it would be worth that Gulf News supports KHDA in its efforts by representing facts that are researched and analyzed thoroughly.

The newspaper not only surveys news but also ideas, opinion and ideologies.  It is regarded as the fourth pillar of freedom and is made for  the welfare of the country and its people.

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