RIYADH: Education quality needs to be improved across the Gulf if the region is to truly unlock its economic potential, experts have told Arab News.

Leading figures from the World Bank and regional consultancy firms, together with a range of recent reports and studies, argue that it is not just access to schooling that needs to increase, but the standard of education.

A report from the World Bank in May highlighted that according to its Human Capital Index, a child born today in the Gulf Cooperation Council region is expected to reach only 62 percent of their full potential productivity, mainly held back by low education quality

Speaking to Arab News, Safaa El-Tayeb El-Kogali, World Bank country director for the GCC: “Improving the quality of education is critical for fostering long-term economic growth and prosperity in the GCC.”

GCC countries are currently undergoing a significant transformation, driven by the need to diversify their economies in response to rapid technological advancements and escalating regional and global challenges. 

This dynamic environment necessitates economies that are diversified and resilient, where knowledge and skills play a critical role, and El-Kogali said: “Quality education is critical for GCC countries in reaching their ambitious development goals.”

In recent years, governments across the region have made notable strides in expanding access to schooling and improving student learning outcomes. However, foundational literacy and numeracy skills still elude many students in the region, posing a major obstacle to human capital development and global competitiveness.

El-Kogali highlighted the importance of early investments in quality learning, saying: “Realizing the full potential of human capital in GCC countries requires smart and early investments in the quality of learning that children receive.”

Building solid foundational skills from an early age is crucial as they form the cornerstone of future learning and skills acquisition. Without this, children risk falling behind, becoming disengaged from school, and failing to acquire the advanced skills demanded by today’s labor market.

Effective teaching is pivotal in enhancing learning outcomes at all levels, making it essential to provide educators with the right knowledge and support mechanisms. 

“Education contributes to long-term development and prosperity by improving people’s well-being and labor market prospects, leading to better employment opportunities and higher wages,” added El-Kogali.

Education also boosts individual productivity, propelling economic growth and building resilient economies that can adapt to a constantly changing environment.

The potential of education to spur economic growth is only achieved when it is of good quality and improves relevant skills and knowledge. 

Increasing access to education is vital, but it is ultimately the skills people develop through high-quality education that determine its contribution to economic growth.

In a study conducted by El Mostafa Bentour for the Arab Monetary Fund in 2020, the contribution of human capital to GDP growth in 12 Arab countries was compared to Asian and OECD developed countries. 

It found that Arab countries fell short, especially when compared to OECD economies, where a 1 percentage point increase in human capital leads to a 0.9 percentage point increase in GDP. 

In contrast, the Arab world sees only a 0.5 percentage point increase, while Asian countries see a 0.6 percentage point increase.

A 2008 research paper published in Journal of Economic Literature also found that a 100-point improvement in standardized test scores is associated with a GDP increase of up to 2 percentage points. 

Academics Gabriel Heller-Sahlgren and Henrik Jordahl further extended this analysis to 2016, revealing a 1.3 percentage point increase in GDP per capita for each 100-point improvement in test scores. 

The role of private education

The GCC K-12 private education market is experiencing significant growth, driven by population increases, rising income levels, government initiatives, and a growing expatriate population. 

Increased awareness of the importance of primary education and the need for high-quality options are key drivers of this growth.

Mansoor Ahmed, executive director for healthcare and education at Colliers in the MENA region, told Arab News: “Government initiatives such as Saudi Vision 2030 aim to enhance the quality and accessibility of education.” 

Despite these positive trends, the market faces challenges such as high construction costs and the affordability of tuition fees, which limit accessibility for lower-income families. 

However, opportunities for growth abound through technological advancements, partnerships with international institutions, and the development of specialized education programs in areas such as science, technology, engineering, and mathematics as well as artistic endeavors. 

Mansoor Ahmed, executive director for healthcare and education at Colliers in the MENA region, told Arab News: “The GCC K-12 private education market presents a lucrative opportunity for investors, educators, and stakeholders aiming to capitalize on the region’s growing demand for high-quality education.”

Saudi Arabia’s educational landscape

Among the GCC nations, Saudi Arabia stands out due to its size and demographic trends. The Kingdom, with a population of 32.2 million in 2022, has a higher proportion of nationals compared to expatriates. This demographic reality suggests that K-12 education operators should focus primarily on Saudi nationals to attract sustainable demand, a Colliers report told.

Despite vast resources and investments, Saudi Arabia has the lowest total student penetration rates in the region for private sector K-12 education, with only 15 percent attending such institutions.

Saudi Arabia’s private education sector holds significant potential for growth, particularly by targeting the Kingdom’s nationals. The growing population and young demographics underscore the need for additional schools, with projections indicating that the school-going population will increase from 7.5 million to almost 9.4 million by 2030.

Opportunities are particularly on offer in second-tier cities such as Makkah, Madinah, and Al-Ahsa, as well as Abha, and Taif. 

These cities currently lack high-quality private schools but are undergoing major expansion plans, creating increased demand for K-12 education. 

The rise in white-collar expatriate populations and the opening of international branded schools in main cities are expected to drive the growth for private education.

Affordability remains a crucial factor, with average tuition fees in the GCC region and Saudi Arabia ranging from $10,000 to $30,000 per annum.

According to Ahmed: “The sweet spot for international private schools would range between $15,000 to $20,000 per annum.”

The transformation of education in the GCC is paramount for unlocking the region’s economic potential.

By focusing on quality education, the region can build a skilled workforce capable of driving long-term economic growth and prosperity. 

This strategic investment in human capital is essential for the region to navigate the challenges of a rapidly changing global economy and to achieve its ambitious development goals.

RIYADH: Construction permits led Saudi Arabia’s investment licenses in the second quarter of 2024, with 737 issued, representing 27 percent of the total, according to official data.

Figures from the Kingdom’s Ministry of Investment quarterly report also revealed that this number represents a 32.1 percent increase compared to the same period last year.

Saudi Arabia is aiming to increase foreign direct investment inflows by SR388 billion annually by the end of the decade, contributing 5.7 percent to GDP,  as part of its Vision 2030 economic diversification strategy. 

Additionally, the goal is to achieve overall gross fixed capital formation of SR2 trillion, accounting for a 30 percent contribution to GDP.

Analyzing the latest figures, Albara’a Al-Wazir, economist at the US-Saudi Business Council, told Arab News: “The prominence of construction permits in Saudi Arabia is driven by the Kingdom’s Vision 2030 initiative, which includes mega projects like NEOM and the Red Sea Project.”

He added: “The need for new infrastructure due to population growth, urbanization, and the push to attract foreign investment also contribute. 

“Additionally, regulatory reforms have simplified the permit process, encouraging more construction activity in both residential and commercial sectors. 

“These factors underscore the construction sector’s key role in Saudi Arabia’s economic diversification efforts.”

The manufacturing sector followed with 469 licenses issued, reflecting a 68.1 percent growth.

Permits for professional, scientific, and technical services reached 318, up by 48.6 percent. Information and communication had 232, while accommodation and food services secured 216, and wholesale and retail trade accounted for 214 licenses.

Collectively, these six sectors represented around 80 percent of the total investment licenses for the quarter, according to the ministry.

In terms of distribution by country, Egypt received the highest number of licenses, with 789 issued in the second quarter of 2024. This marked a 71 percent growth rate from the same period last year.

India followed with 264, Yemen with 251, then Pakistan with 168, and Syria with 141 licenses.

Alwazir explained that significant investments from Egypt, India, and Yemen reflect their recognition of Saudi Arabia’s economic potential under Vision 2030.

These nations are drawn to opportunities in construction, tourism, and technology, and see the Kingdom as a strategic gateway to the Middle East and North Africa.

Strong bilateral relations and the Kingdom’s efforts to foster a favorable investment climate through reforms and incentives further encourage these countries to look to Saudi Arabia, viewing the Kingdom as a key hub for regional expansion and high returns.

The two countries with the highest increase in investment licenses during this period were Bangladesh, which saw a 406 percent rise to 91 licenses, and China, where licenses grew by 217 percent to 133.

Alwazir told Arab News that China’s Belt and Road Initiative aligns with Saudi infrastructure goals, boosting Chinese investment across multiple sectors. Bangladesh is also increasing its involvement, particularly in construction, trade, and services, driven by the Kingdom’s demand for labor and goods.

Saudi Arabia aims to diversify its economy and achieve sustainable development by fostering investments in key economic sectors. 

Guided by Vision 2030, the Kingdom has introduced several national strategies, initiatives, and programs to empower and grow these sectors.

These include attracting investors by organizing and participating in international events and investment forums with various countries, and enhancing investment laws and procedures in collaboration with government entities to strengthen the legislative and regulatory framework.

Additionally, the Kingdom launched the Regional Headquarters program for multinational companies, designed to support and accelerate their growth in the region.

This program offers significant financial incentives, including a 30-year exemption from corporate income tax for foreign companies that establish their Gulf bases in Saudi Arabia.

In the second quarter of 2024, the Ministry of Investment made significant strides in supporting the investment ecosystem and enhancing the investor experience.

According to its quarterly report, 57 licenses for regional headquarters were issued in the second quarter of 2024, marking an 84 percent increase compared to the same period in the previous year.

Additionally, the ministry processed 4,709 applications for the business visit visa, also known as the Visiting Investor, which allows foreign businesspeople to explore opportunities in Saudi Arabia.

The e-platform provided over 58,000 services, reflecting a 31 percent growth from the previous year, while more than 61,000 services were delivered through outreach centers.

The ministry also addressed 38 investor challenges, including legislative and procedural issues. The One Stop Service Center saw impressive growth, offering more than 25,000 services — a 146 percent increase from the same period in the previous year.

In August this year, Saudi Arabia introduced a new Investment Law, set to replace the Foreign Investment Law from 2000. 

According to Alwazir, this new law introduces several important provisions to boost investor confidence. It guarantees equal treatment for foreign and domestic investors, eliminating previous barriers and ensuring equal opportunities.

The law also offers stronger protections against expropriation without adequate compensation, addressing a key concern for foreign investors. 

Additionally, it streamlines regulatory processes for obtaining licenses and permits, making it easier and faster to enter and operate in the market.

Enhanced dispute resolution mechanisms provide clearer pathways for resolving conflicts, while incentives for strategic sectors like technology, renewable energy, and tourism make investment more attractive.

“By addressing key concerns such as regulatory clarity, protection of assets, and equal treatment, the new law is expected to attract a broader range of global investors and significantly contribute to achieving the FDI target of SR388 billion annually by 2030,” Alwazir said.