Why GEMS should keep Westminster School open

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Back in March last year, GEMS director Dino Varkey couldn’t help himself. In an interview with Arabian Business, he boasted about how his education provider was planning to become a company even bigger than Facebook.

This is exactly what Varkey told us then: “The ambition that we work towards is five million students by 2024. If we got to the five million number as a conservative [estimate] we would be a $60bn company; we would be employing 450,000 teachers, 55,000 senior leaders - that’s the size of organisation that we are trying to build. ”

Wow. This week, Varkey has been telling a different story. In a letter to parents at his Westminster School in Dubai, he explained why one of the biggest learning centres in the emirate is being shut down.

 “In recent times our ability to invest the resources required to produce the improvements needed, both educationally and in infrastructure, have been severely restricted because of the current fee structure… We simply cannot offer a high quality education at this level that we see as our duty to provide. Indeed, salary increases during the same period have been at a level higher than any fee awards.”

So there you have it. If you are one the parents of the 4,800 pupils currently at the school, hard luck mate. Next stop Sharjah, Ras Al Khaimah or wherever else Varkey decides to grant your kid a place.

Just six weeks ago, GEMS, which owns schools in ten countries, said it plans to invest  $650m in expanding its operations over the next three to five years, concentrating on emerging markets such as the Middle East, North Africa, and India. Varkey claimed GEMS was aiming to operate in up to 40 countries by 2017. When it comes to expansion plans, Dino Varkey likes to talk big.

Although GEMS doesn’t reveal its profits, I doubt there is a shortage of cash around. As any parent knows, this company charges you $100 purely for the privilege of applying for a place in one of their schools, regardless of whether you get it or not. GEMS has Bill Clinton on the books as the honorary chairman of its Foundation, and according to State Department filings, Clinton is paid for this role. I doubt Bill comes cheap.

Now in fairness to GEMS, I should highlight some of the points they made to me this week: it still operates  a large number of low fee paying schools in the UAE (14). The current fees at The Westminster School are very low, and GEMS should be applauded for this. Not everyone in Dubai is rich. Without such schools, many parents would struggle to give their kids a decent education, and again, GEMS deserves great credit for this. Indeed, over the past five years the school that is closing has had an average fee increase of just AED167 or AED13 per month while costs have risen up to 20% year on year.

This makes the business case for running the school hard to answer. And also the $650m being invested in emerging markets is likely to be borrowed from banks, to finance what are deemed more viable businesses.

But against this backdrop, the net result is that thousands of parents are right now unable to comprehend this decision, and more importantly, fearing for the children’s futures.  I would say this to GEMS:  In any business, there will always be loss making divisions. These are subsidized by more profitable areas of the business, either because they are seen as important to the brand, potentially profitable in the future, or an intrinsic part of the community. Put simply, yeah, you take a hit on one part of your business and make it up elsewhere. Do you think Emirates Airlines makes a profit on every single route it operates? Do you think every one of Rupert Murdoch’s newspapers makes money? Do you think Etisalat makes money on every single offer it launches?

Having gone down the “affordable schools” roads, GEMS was able to justify running its hugely more expensive schools because it showed it catered for both ends of the market – add to that the great work of the Foundation, and you could quickly come to the conclusion that this is a company which wants to make good money, but also cares for the community which gives it that money.

Looking at the many comments on Arabian Business is website this week, this is clearly an emotive issue, one that has stirred the pot. In the cold light of day, I would on balance agree with GEMS that, given its fee structure, the Westminster School is not, as it stands, a viable business.

But I would argue that, considering the incredible financial success the Varkeys have gained from their businesses in the UAE, they should also reconsider their decision. Keep it open, absorb the losses elsewhere, and take one for the team.

It’s not too late.

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Please post responsibly. Commenter Rules

Posted by: MNJ

It really is time for some creative disrupters to change the dynamics of the UAE educational scene. High quality education cannot be made into a privilege that few can enjoy. I am sure a few smart brains can sit down and figure out a unique and creative model and education delivery mechanism that will send this GEMS monster into extinction like the T-Rex! Education is a right not a privilege: you can make money in education,it is a business yes, but don't mess with peoples lives in the name of profit please!

Posted by: SKM

Dear Mr. Anil, Well said.... congratulations and thanks for writing the truth without looking how big they are..

My children also studying in GEMS school, I know their strategy very well for the past 10 years. Its purely a business only; not a charity work. They are collecting money from us for helping the poor children in different countries. But they are not bothered about our children. My salary is only to pay the children school fee, loan and the rent every month. My wife salary is only just to buy food and the other basic things. They have to consider the family like ours also. All humans, birds, animals will end up in final place. All should remember that, nobody can take any single penny which they earn during their life time in this wonderful world. Love each other, Help each other. Give respect to all. You will be blessed.

Posted by: David Jay

GEMS should have set the base Fees higher and I am surprised that a prestigious English School such as Westminster was fooled into agreeing such a low Fee structure. Given the costs of employing Ex-Patriate teachers plus all the on-costs, it surely was never a runner in UAE.

Posted by: Asif Habib

Just for your Information, this school has been here for abt 25years. It was a Pakistani School at first, I got an admission there in the year 1992, yes it is one of the cheapest schools, but Instead of closing the schools that we spent 15years of life in, why donot they discuss their requirements openly.

Posted by: Asif Habib

I had like to make one just more point here, even when we know that GEMS are doing ethically and morally a wrong thing, because the parents donot want them to make huge investments on facilities, we are happy just the way it is, which can be sustained with minor or moderate fees hike.

But still GEMS is going to close down anyhow. And after that we donot have any options, we will have to seek admissions in one of their New schools, where we will be paying 100% more on the fees. Because of the supply and demand factor, as the number of school is already shorter, and with such a huge number looking for admissions now (5000), parents will be lucky to find admissions in any school at any fees.

I feel sorry for all the parents, but their does not seem to be any solution coming forward.

Posted by: Navin

The biggest problem one set of parents face is to compete with another set of parents whose employers reimburse fat school fees and not pay it as a cash allowance. If this was to change the wind would vanish from GEMS sail! This arrogance of operating in a monopolistic environment cannot be ignored by authorities in something as crucial as education which unlike telecom has to be social in its outlook!

Posted by: Telcoguy

@ Navin, I agree with you that allowances are not efficient in an economic sense. And I agree that they distort, to some extent prices.
But that is a different question from your original post or a least my reading of it.
The UAE has a quite extreme income distribution, that is a fact of life here, and there is a small group of high income earners that simply distort the market for housing or education. You see the same thing in London where rental market is driven by a minority of high income professionals.

Given the prices of private education anywhere I doubt that moving from the allowance system to a plain salary one would have a serious impact. I may be wrong, we will probably never now.

But on your dislike of allowances, yes we agree wholeheartedly. I will never understand why they are so popular. I suspect people really believe it is the employer paying, not them.

Posted by: Navin

@telcoguy; paying out a cash allowance instead of reimbursing reduces salaries ! Really! this is not about CTC but about letting the employee decide how he spends his earning and get value for every dollar spent and get GEMS to compete for that dollar instead of using the monopoly they have built up over the years without oversight.

I earn every bit of my income and want total control over how I spend it! And if someone else feels he needs his employers to decide how much he should be spending on his house his food his kids school fees and how much to save then he has my sympathy!

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