The Learning Conundrum in Vietnam
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I spend some of my off-time interviewing and screening children for post primary educational grants. I’ve noticed a disconnect between the value of education as a culture and the application of it within social strata. Vietnam has achieved a great deal in terms of pervasive literacy (94%) and primary education, with a median 10 years of schooling per child.
The problem is the internal struggle between the reverence for education and class immobility. Repeatedly in my interviews I would see parents dampen the expectations of their child, explicitly telling them that they should not dream of a career in something as common as finance. In essence, the American Dream, which oddly enough is disappearing in America, does not exist in the minds of many Vietnamese parents which they communicate to their kids.
This generational and cultural tension hangs over the labor market here.
It’s not the Money.
A lot of the criticism of the Vietnamese education system from outside of Vietnam focuses on lack of equal access and the under-investment in public education which ends after primary school (5 years). While that may be true it also misses the point. Vietnam spends a higher proportion of GDP on education (5%) than most of its peers. The investment cycle in anything, including education, benefits early adopters first and everyone else at the margin over time.
Parents are willing to spend for their children. Tuition rates prove that demand for quality education than exists. With a population as large as Vietnam's and a goal as lofty as primary education for everyone, something has to give, namely prices paid for instructor labor who have to tutor their students outside of class to make ends meet.
Preparing them for a global marketplace is imperative. More than $110 billion was spent in 2011 on English language teaching services by more than 2 billion people. While Americans are paid well to be brought overseas to teach English in Vietnam and Japan, the wages are not compelling enough to bring them over in numbers that can fill demand. 34 million Americans work from home and will rise to 63 million by 2016, 43% of the workforce. Technology enables this and facilitates the opportunity to fill this demand for almost no cost.
The Changing Landscape
Private and people-owned schools have been filling a larger role every year. Up to 25% of primary and secondary students are enrolled privately in Ho Chi Minh City and while their quality is variable they are creating new opportunities for children to get the education they require.
This is an industry in its infancy and it will take time for new types of schools to emerge. Laying aside the potential and reality for corruption which is endemic to all education providers public and private, the path to success lies with a more multilateral approach to education as opposed to more governmental control and spending as preferred by intellectuals in the West.
The highly regimented public schools with their focus on language, math and science are not an environment designed to question authority or challenge societal strata. So, though it is capable of producing astounding academic achievement for the most talented students, it is not going to solve the generational disconnect I described earlier. The private schools can take a more boutique approach by offering a “well rounded” education giving the students greater access to the arts and social sciences, broadening their dreams of what is possible for them.
Re-inventing the Dream
As I said earlier many young Vietnamese lack the spark to dream. If they had it when they were young it was whittled away through parental pressure and their schooling environment. This lack of imagination, lack of the dream, is anathema to entrepreneurship. It permeates all levels of business here creating a structural or cultural drag on the economy as young workers are not pushing the envelope to achieve more; rather they are content to have modest ambitions.
For the foreign investor who looks at the global macro story of Vietnam, says, "Aha!" and looks towards the Market Vectors Vietnam Index ETF (NYSEMKT: VNM) to invest in, the reality is that while the labor is cheap it is not well-trained to function in a dynamic environment or if not require complete retraining. This ETF is invested 70% in Vietnam directly. It does not track the VN Index directly but is more heavily weighted towards energy than the VN Index, including foreign companies who have operations in Vietnam. The ETF is up more than 40% year to date and has seen a 20% expansion in invested funds since the beginning of March.
In the education sector, the Apollo Group (NASDAQ: APOL) has had a subsidiary in Vietnam since 1994. They have six campuses in 4 major cities to train both students and new teachers of English. Their curriculum spans all levels of education through adults, sponsor overseas study programs and produce children’s programming as well. Their work in Vietnam has been regularly recognized for its excellence in education by both the Vietnamese government and the industry.
That's the bad news. The good news is that the demand for quality, dynamic education is so high here that education itself may just be the opportunity investors dream of.
Peter Pham has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
