Seven Reasons Why 25 UAE Colleges will Close by 2025

In April 2014, Michael McDonald of Bloomberg wrote an article called “Small U.S. Colleges Battle Death Spiral as Enrollment Drops” in which he describes the decline of small US colleges and universities. He pointed out some very disturbing facts:

• In the United States, the number of private four-year colleges that have closed or were acquired doubled from about five a year before 2008 to about 10 in the four years through 2011. The statement was based on a study in 2013 by researchers at Vanderbilt University in Nashville, Tennessee, citing federal data.
• Among all colleges, 37 merged in the three years through 2013, more than triple the number that merged from 2006 to 2009, according to Higher Education Publications Inc., a Reston, Virginia-based directory publisher.

All of the schools in the Vanderbilt study that closed in recent years were small, with fewer than 1,000 students and average assets of less than $50 million. Most had endowments of about $1 million and many were private institutions that depended on tuition as its primary revenue.

I see the potential of up to 25 higher education institutions in the UAE closing or merging in the next ten years unless they begin to take action now.

Here are my seven reasons why as many as 25 UAE colleges and universities will close.

1. Too Many Schools with Small Enrolments – There are at least 113 registered higher education schools in the UAE today with at least another 4-7 coming into operation within the next year. The vast majority are privately held, do not receive funding from the UAE government, and 60 institutions have enrollment under 1,000 and 47 under 500.
2. Accreditation – There is only one accreditation agency in the UAE, the Commission for Academic Accreditation (CAA), which has approved 79 of the 113 UAE higher education institutions. The other schools not approved are registered in free zones in Dubai, Ras Al Khaimah and other cities. The institutions located in free zones are considered branch campuses and the degree is given by the home campus. However the UAE government only recognizes schools that have been approved by the CAA. If a student graduates from a free zone school and it is not CAA approved then the degree is only recognized in the home emirate. This limits the mobility of their graduates especially expats who may look for work outside of that one Emirate.
3. Pricing – The higher education market in the UAE is highly cost competitive. In some cases such as the federal or semi government institutions it is free tuition for UAE Nationals. For the other 100 private and branch campus schools the average tuition for a bachelor degree program ranges in the AED 150,000 – 200,000. Other additional costs include, housing, food, books, etc. It is not unusual to find tuition fees for some UAE universities in the AED 250,000 and above.
4. Student Recruitment and Retention – Universities in the UAE are competing for students with over 110 UAE institutions and have expanded their recruitment coverage to the Middle East, Asia and Africa. This has been a successful strategy and over 50,000 students in the UAE are citizens of other countries. However, recruitment is very expensive and only a small percentage of students, who indicate interest in a certain school, begin their first year at that school. The average expat student makes application to 6-10 schools. Once a university has the student enrolled they want them to succeed and graduate, yet many drop out or transfer. There are no reliable figures in the UAE concerning retention, but in the US only 44% graduate within 6 years with a Bachelors degree from the school they first enrolled.
5. Maintaining Quality Faculty – In the 2012 UAE CHEDS report there were 5,969 full time equivalent faculty who were teaching in the 53 CAA and 3 federal institutions. Assuming there are currently 135,000 students, the full time equivalent faculty is 7,417. While some institutions offer very good compensation packages and maintain quality faculty, many have a constant turnover. This is caused by lack of pay raises or the lack of promotion. This issue is prevalent in the universities with small enrolments.
6. Overhead Costs too High – The costs associated with maintaining a university campus facility are very high. Everything from utilities, IT infrastructure, insurance, phone systems, security, maintenance and repair are all ongoing expenses. Some of the less visible expenses involve financing new construction, campus projects, and revenue inconsistencies. The cost of loans to build campuses is significant and must be added to the overall operating costs.
7. Rating Systems and Reputation – In recent years numerous organizations such as Times Higher Education World University Rankings, QS World University Rankings, Shanghai Academic Ranking of World Universities, and US News & World Report Best Global Universities Rankings have produced top 400 – 500 rankings and various sub sections such as top Arab universities. These have become increasingly popular with parents and counselors. Students are influenced by what they read on the Internet and what their siblings or friends say about a certain school. Many of the smaller institutions do not make these lists and therefore from a branding point of view are less recognized.

The most vulnerable are the institutions with under 1,000 students. Many need support to have a better understanding of their strengths and weakness especially in the areas of recruitment, retention, and market competitiveness.