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On April 24, 2013 the Philippines’ Department of Education (DepED) along with Pearson 1(the largest education company in the world) and Ayala Corporation 2(one of the largest business conglomerates in the Philippines) signed a Memorandum of Understanding (MOU) that states:

With the passage of the the ‘Enhanced Basic Education Act of 2013’ mandating the introduction of Grades 11 and 12, there is an urgent need to provide affordable quality education to millions of the Filipino children of secondary school age, whose only option, at present, is to enroll in an overcrowded public school. (DepED & APEC, 2013, p.1)

The MOU further adds that in the Philippines:

The Constitution ‘recognizes the complementary roles of public and private institutions in the educational system’ and the unequivocal declaration by the state of the necessary role which private education plays in society. (DepED & APEC, 2013, p.1)

In 2014, over 7.2 million students were enrolled in public and private secondary schools in the Philippines (5.9 million in public and 1.3 million in private) (Luistro, 2015). However, several hundred thousand Filipino youth still remain out of secondary school. An overburdened and under-resourced system unable to accommodate all students effectively will soon have to provide two more additional years of senior high school (Grade 11 and 12) given the implementation of the Enhanced Basic Education Act or “K-12” system). An educational crisis, therefore, is looming in the Philippines given the “urgent need” to provide quality education to millions of Filipino children of secondary school age. In response, a corporate-led, state-sponsored “solution” involving private, for-profit provision is taking shape in the form of a large-scale chain of low-cost private high schools known as APEC (Affordable Private Education Centers).

Since the government has not upheld its constitutional responsibility to provide free and accessible public education for all, the result has been an overcrowded and inadequately financed system that is unable to accommodate the most marginalized learners. In order to finance the K-12 system, the Philippine government plans to extensively expand the voucher program to leverage private investment and resources to help grow more private schools.

Throughout periods of imperialism and neoliberalization, national education in the Philippines has been structured and restructured in ways that benefit the profit-oriented political and economic interests of foreign and domestic elites. Intensifying privatization in the form of expanded PPPs and vouchers in Philippine education has brought along commercial opportunities for private enterprise to participate in the sector. In the Philippines, the education services industry represents an enormous market opportunity for global edu-businesses. Consequently, Pearson, the world’s largest multinational education corporation, entered the Philippine education market by partnering with Ayala Corporation to establish APEC.

APEC is a for-profit chain of low-cost private high schools (Grades 7 – 12) that currently serves more than 1,500 students in 12 schools in Metro Manila. It plans to double its chain to 24 schools by 2015/16, while serving more than 4,000 clients. Pearson – through its venture capital fund the Pearson Affordable Learning Fund (PALF) – along with Ayala Corporation – through its edu-business arm, LiveIt Global Services Management Institute (LGSMI) – have created APEC, a new corporate entity that will manage and scale the secondary school chain. Pearson and Ayala have agreed to invest up to PHP400 million (US$8.5 million) between 2013 and 2018 in order to scale the chain through a pilot of 50 low-cost private high schools (DepED & APEC, 2013).

APEC as a corporately-owned and operated chain of low-fee private schools (LFPS) aims to offset excess demand for basic education in the Philippines by selling for-profit services to low-income households that are charged nominally “low-fees”.

Pearson and Ayala Corporation. APEC is a joint venture that “combines Pearson’s deep education expertise with Ayala’s operational experience in the Philippines” 3 in order to expand the educational franchise to as many low-income, fee-paying Filipino students and their families as possible. By offering “no frills” education at a price-point deemed “affordable” for the masses, APEC plans to attract students from overcrowded free public schools and more-costly private schools as part of a capital accumulation strategy designed to sell privatized services to low-income consumer/learners. Yet, with a price tag of PHP24,850 (more than US$500) per year, or about PHP70 (about US$1.5) per day, services offered by APEC remain far out of reach for the most “economically disadvantaged” Filipino youth.

While APEC is patterned after other low-cost private school enterprises, it is differentiated by its focus on secondary, rather than primary, schooling. Still, the underlying objective of these large-scale chains of LFPSs remains the same: serve the largest number of fee-paying students at the lowest possible cost in order to increase profit margins. APEC, for example, has deployed a number of cost-cutting techniques, such as hiring underqualified and underpaid teachers and renting unused office space in commercial buildings that function as APEC’s low-cost commercial school sites. Strategies implemented by APEC intended to reduce operational costs and increase profits will be elaborated further on in this report in relation to their effects on teachers and learners.

APEC reflects a capital accumulation strategy in Philippine education that aims to take advantage of K-12 restructuring, current “gaps” in the secondary school market, as well as an expansionary voucher system. Offering low-cost private high schooling aligns with the government’s mandate to support and subsidize neoliberal development, including privatizations in/of education.

Although APEC claims its services will expand the educational franchise to more low-income learners who otherwise might not be able to afford private education, at a price of PHP24,850 (or more than US$500) per year, these commercialized services are still far out of reach for the poorest students in the Philippines. “Fee-paying forms of commercialized learning for the poor involve a distinct and unmissable structural inequity, user fees, which deny access to those already marginalized by poverty” (Riep, 2015, p. 20).

The government is expected to concede its sovereign power over matters of educational governance in order to serve the interests of private enterprise – even though APEC’s edu-business model is in direct violation of a number of regulations concerning basic educational provision in the Philippines.

APEC is patterned after other rapidly growing chains of LFPSs such as Bridge International Academies in Kenya and Omega Schools in Ghana. Similar to these other LFPS companies, APEC is based on long-term rates of return 4 and profitability achieved through economies of scale. APEC plans to benefit from economies of scale by lowering the per-unit cost “to educate” each student/customer, while expanding the size of its operations, in order to increase rates of profitability.

By serving a large volume of fee-paying students, while reducing the costs of production as the company scales-up its for-profit services, APEC plans to increase its market-based returns as it continues to grow. With 250,000 students – each paying more than US$500 per year – APEC is set to become a highly lucrative venture.

Profits accumulated by APEC and its shareholder are “actually the difference between two sets of prices, the price of the goods produced and their cost, i.e., the price of the goods necessary to produce them” (Polanyi, 2001, p. 72). In an effort to minimize production costs while increasing profit margins, APEC has implemented a number of cost-cutting techniques. These include a low-cost rent model that involves short-term leases in unused commercial buildings that lack the adequate space for libraries, gymnasiums, science and/or computer laboratories. For APEC, this low-cost rent scheme is drastically cheaper than purchasing land and constructing proper school facilities. Teachers hired by APEC are also typically unlicensed and, therefore, paid severely low wages. All of these cost reduction techniques are intended to minimize operational costs so that the corporation can remain financially sustainable and profitable. Therefore, in the business of low-cost private schooling “sometimes quality is compromised because of the companies’ concern for making a profit” remarked one APEC school manager. Yet, APEC is still advertised as “world class private education from Ayala and Pearson.” Further problematic is that DepED remains complicit in this arrangement, since it has relaxed a number of regulations that govern the provision of basic education in the Philippines, so that APEC and its shareholders can implement their low-cost, for-profit schooling experiment with limited government restrictions. The proliferation of private, for-profit basic education must be properly regulated by governments to safeguard education as a societal good.

APEC also represents a corporate strategy designed to manufacture cheap and flexible labor required by Ayala and other multinational companies through its provision of privatized basic education that aligns with the labor needs of industry. By “reverse-engineering” its curriculum, APEC intends to produce graduates of a particular disposition with specific skills, values, and knowledge that can be employed in the global labor market. In particular, APEC aims to address the skill shortage in the BPO/call center industry in the Philippines by focusing on English communication skills. In turn, APEC schools involve two forms of privatization: de facto privatization of basic education and privatization that exists because of the “increasing socialization of productive forces and continuing private control in the social relations of production” (Jessop & Sum 2006, p. 343). By extending and intensifying private control and influence in the social relations of production through its provision of basic education, Ayala and Pearson aim to socialize the forces of production by inculcating skills and values that can be employed by multinational companies. As Congressman Antonio Tinio explains:

Big business has moved into the education sector because they are motivated by the view that the quality of education in the Philippines is in decline, we’re lagging behind, and we’re no longer competitive in the global market. Business can’t wait for government to fix the situation so they'll invest and do it themselves. So the key motivation is global competitiveness. The kind of education they are pushing for is one that will develop the skills for the global labor market. So, the impact of the corporatization of education here in the Philippines is supposedly to strengthen ties with the global labor market. Will this lead to genuine development for the majority of Filipinos? We think not. Filipinos will not lift themselves out of poverty by exporting our labor or educating our students so they can become low-paid, low-skilled workers for foreign companies.

By subsidizing the growth of private provision through an expansionary voucher system, DepED is delaying the need to construct more government high schools and hire more government teachers. Instead, a market-based approach involving increased private enterprise and participation has been encouraged in order to leverage private investment and resources that might help alleviate pressures on an overburdened public system. In turn, this has opened-up new commercial opportunities for global edu-businesses. Pearson and Ayala have entered the sector to both fill the “governance gap” and profit from its provision of low-cost education services. APEC intends to reduce production costs to “educate” each student so that it can lower consumer costs and serve the highest number of fee-paying students. The bottom line, however, is that APEC is a for-profit company concerned with business growth and profitability, which can have detrimental effects on the quality of learning.

1 https://www.pearson.com

2 http://www.ayala.com.ph

3 https://www.pearson.com/news/announcements/2014/january/pearson-announcesschoolchainjointventurewithayalacorporationinth.html. Accessed on April 3, 2015.

4 An internal rate of return for its investors in the range of 10-15% is expected over 10-15 years (J. Centenera, personal communication, May 1, 2015).

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*Riep, C.B. (2015). Omega Schools Franchise in Ghana: A case of “low-fee” private education for the poor or for-profiteering? Privatisation in Education Research Initiative, ESP Working Paper Series, No. 63.