Private universities are at the risky centre of realpolitik

Shortly before Vietnam celebrated the traditional New Year in January, it was rumoured that the chairman of a major private university in Ho Chi Minh City had been placed under arrest. The allegation was not about his mismanagement of the university, but rather his off-campus businesses. However, it is unlikely that the university will be able to stay out of legal troubles affecting its chairman.

It is an incident that recalls what happened at Hupan University in China, which was suspended from recruiting students in 2021 after its chief founder, Jack Ma, crossed the line when it came to criticising China’s financial regulations – and it shows the Achilles’ heel of corporation-affiliated universities in countries such as Vietnam.

Corporation-affiliated universities in Vietnam

Many private universities in Vietnam were established by multi-sector corporations, but what has happened to them since has been the subject of significant variation.

The first, and perhaps the most successful corporation-affiliated university, was FPT University owned by the FPT Corporation. But the advantages conferred to this pioneer were not bestowed on those which followed.

Ha Hoa Tien University (founded in 2007) and Tan Tao University (founded in 2011) were faced with challenges in their early years. FLC University secured the prime minister’s approval in principle in 2019, but the arrest of the FLC Group chairman in 2022, which astonished many people, seems to have put an end to plans for the university.

VinUniversity or VinUni, founded in 2020, positioned itself as Vietnam’s first elite university. Although its performance has so far surpassed the initial expectations of its many unfriendly critics, a big question mark still hangs over its future.

Alternatively, corporations can own a university through acquisition deals, normally by buying enough shares to become the majority shareholder. Examples are spread across the country’s regions: North (Phenikaa University and Asia University of Technology), Central (Thai Binh Duong, Phan Chau Trinh and Quang Trung universities) and South (Van Hien, Van Lang and Hung Vuong universities).

The reason corporations set up private universities vary. Some corporation leaders claim a philanthropic vision.

Some regard private higher education as a lucrative business proposition. Many corporations appear to take a more strategic approach: the university is entrusted with the task of developing their workforce and bringing about technological innovations for the corporation.

Some corporations allow their university little autonomy while others grant them a lot of autonomy, but the university is still essentially an entity that is tightly connected – in legal, financial and personnel terms – to the corporation.

The university board is usually dominated by the corporation’s leadership. A corporation’s top leader normally chairs the university board and makes ultimate personnel and financial decisions. In most cases, he or she is also in charge of the institution’s bank account and legally represents the university through their president.

Real estate and private higher education

In Vietnam, many private universities are tied up with real estate businesses. Schools are indispensable to large real estate projects; they are built by the developer mainly to meet residents’ demand for primary and secondary education. In return, high-quality schools can be helpful when it comes to justifying the high price of the real estate.

Once the schools have a substantial number of students, plans for a private university are a natural progression. This is essentially the case for Vingroup, founder of VinUni. Overall, many private universities are now owned by multi-sector corporations that invest substantially in real estate projects.

However, private real estate has always been a politically sensitive business in Vietnam, in a place where land is, in theory, collectively owned by people – a communist ideological hangover.

In addition, this is a business sector with an extraordinarily high profit margin but which also carries tremendous risks: there are many legal loopholes and many ambiguous and contrasting regulations that change frequently.

After years of phenomenal growth, Vietnam’s real estate industry has recently shown signs of stagnation and decline. The leaders of many giants in this industry have been arrested due to their misconduct when it comes to capital mobilisation and other rumours which are widespread on social media.

Given the legal and financial connections they maintain with their founding corporation, private universities are normally implicated in any crisis affecting the corporation.

The arrest of the university chairman mentioned at the beginning of the article, who is assumed to have close business relationships with the chair (also under arrest) of a once ‘untouchable’ real estate empire, is telling.

Another example is Nova Education Group, which was founded in 2021 as a subsidiary of a real estate giant, NovaGroup. Its ambition to develop an education ecosystem that extends from K-12 to university is now being called into question after many of its real estate projects were suspended, supposedly due to financial misconduct.

Many people speculate that current investigations that target real estate giants are part of a well-thought-out policy based on realpolitik. Some assert that real estate is the first, but by no means the only, target of an attempt to enhance the country’s economic transparency and put the private economy under state control.

If there is a grain of truth in such speculation, then the problems faced by corporation-affiliated universities are likely to be just the beginning.

From collective to private ownership

The weak spot of Vietnam’s private universities – especially its corporation-affiliated ones, of which there are many – lies in their increasingly close affiliation with the private economy.

In the early 1990s, non-public universities operated under a collective ownership model: only those who worked for the university could theoretically become its collective owner.

But private universities, legally accepted since the mid-2000s (as people-founded public universities were phased out), are modelled after joint stock enterprises, which means investors are allowed to buy shares, control the university and eventually incorporate the university into their conglomerate.

However, the private economy is politically contentious in Vietnam, and if private businesses come under suspicion, private universities will surely be affected.

Chau-Duong Quang is a lecturer at the University of Education – Vietnam National University in Hanoi, and is a research associate on the Program for Research on Private Higher Education at the State University of New York at Albany in the United States.