™@ Increased government focus on education. In many countries, per student public spending on

™@ Increased government focus on education. In many countries, per student public spending on education represents a larger portion of per capita GDP than in the U.S. For example, in Australia and the United Kingdom, the government has subsidized a large portion of ECE. Now, countries such as Saudi Arabia are developing similar programs. The opportunity for increased government spending on pre-K-12 education is particularly apparent in growing economies such as China and South Korea as those countries increase their share of world GDP. @ Potential opportunities in countries with declining populations. \|n countries that have had low fertility rates for several generations, such as Japan and Italy, there often exists a large family structure supporting a single child. KUE believes that this leads to several family members (e.g., both parents and grandparents) contributing to a single child’s schooling, resulting in higher education expenditures per child. In addition, the high cost and limited availability of quality ECE in countries such as Japan has been identified as a contributing factor to declining birth rates in the country. The following paragraphs provide a brief overview of some of the key markets around the world, which KUE views as attractive. These include China, Saudi Arabia and the United Kingdom. 8.5.1 China: Market Overview With a population of 274 million children under age 15, and a fertility rate of 1.73, China represents an attractive market for early education providers.” In China, mandatory education starts with primary schools, at which most children enroll by age six. Currently, 24 million Chinese children are attending kindergarten as a growing middle class and the one-child policy are driving multiple incomes to one child and increasing the amount of capital that can be dedicated to education. These socioeconomic factors are reflected in the increasing numbers of private kindergartens, which have grown at a rate of 13% over the past eight years.*" Public versus Private Pre-School Education 13.7% 17.7% 20.1% 19.7% 8.7% 14.7% 2! 0.7% 0.5% 181 182 479 1 1 180 187 3 181 181 476 50 150 142138 a a Ps Fl e | 112 2. 116 1 37 44 45 48 56 1995 1996 1997 1998 1999 2000 2001 2002 2003 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 gamma Private Schools === Total Schools “l= Private Growth mAllicindergantons is Pavate Kindergartens Note: Private kindergarten enrollment data unavailable before 1998. Source: Ministry of Education, China Education Industry Development Statistics Report, China Education and Research Network. Schools tend to be concentrated in larger cities with Beijing, Shanghai, Nanjing, Qingdao and Guangzhou being the largest pre-school markets. Kindergartens are divided into three categories: Bilingual, Foreign language and Mandarin. Bilingual kindergartens are typically joint ventures between Chinese and foreign entities or owned wholly by Chinese private or public entities. Tuitions for bilingual programs can reach $15,000 per year. Foreign language kindergartens are wholly owned foreign schools that recruit only foreign students and are typically backed by their embassies. These schools adhere to foreign educational standards with Mandarin being taught as a second language. The tuitions of foreign language schools range from $10,000 to $22,000 per year. Mandarin kindergartens are typically owned by Chinese public entities. * Source: Central Intelligence Agency, World Factbook 2006. * Source: Ministry of Education, China Education Industry Development Statistics Report, China Education and Research Network. 70 HOUSE_OVERSIGHT_024503