NEWS FROM THE UAE
SOURCE : THE NATIONAL
Confused response from banks raises fears
ABU DHABI - SEP 15: Almost a week since a rash of ATM frauds hit the UAE, banks still have no common strategy to deal with customers, while the Central Bank remains silent on how the industry should deal with the fallout.
Conflicting and unclear announcements by banks continue to confuse customers, raising concerns about the opacity of the country’s financial institutions. While the stability of the banking system has never been in question throughout the week, the problems have nonetheless undermined public confidence in bank management.
Senior banking officials, who asked to remain anonymous, said they had not been instructed by the Central Bank on the issue. Several expressed concern over its unusual silence.
The Central Bank, which has issued no statements since the far-reaching effects of the fraud were reported, could not be reached for comment over the past week.
Paul Sherry, the Middle East director of F5 Networks, which specialises in bank security systems, said the situation could hamper the UAE’s ambitions to become a global financial centre.
“If the UAE is to take itself seriously as a world-class financial hub, the ATM security breaches this week should serve as a wake-up call to both the banking community in the region as well as regulatory bodies,” he said. “People seriously doubted the trust they had placed in their banks.
“It is up to officials and lawmakers now to use this breach as [an] impetus to put the UAE where it should be – at the very forefront of network security. They must enforce systemic changes to the way data is handled.”
Confusion continues to reign among customers. Some banks have introduced lower withdrawal limits on ATM cards to stem illicit activity – but have apparently given little forewarning to customers.
Barclays halved withdrawal limits on Premier accounts on Wednesday to Dh25,000 (US$6,800), while those on its Classic current and savings accounts were halved to Dh5,000. Customers are not being formally notified. “We inform them when they call us,” a Barclays employee said, “because this situation is not going to be for long.”
HSBC has also lowered withdrawal limits but apparently issued little, if any, warning about changes to customers.
One bank customer who attempted to withdraw Dh8,000 from HSBC on Thursday discovered that his legal daily limit had been cut in half.
“This was a total surprise and very inconvenient,” the man, who only identified himself as Taher, said. “This is bad communication from the bank – it’s like they don’t really care about the customer.”
Adding to confusion, telephone operators at HSBC told callers yesterday that HSBC ATM cards could not be used at the ATMs of other banks, but HSBC officials said official policy was otherwise.
“HSBC customers continue to have access to the full ATM network in the UAE, although we urge our customers to use HSBC ATMs when they can,” said Jonathan Campbell James, the Middle East head of security at HSBC. “Because our ATMs across our global network are protected to extremely high standards, our customers travelling abroad are also enjoying continued access to their money through the HSBC ATM network.”
Hints of the fraud emerged on Aug 26 after the US Embassy posted warnings on its website. Then on Sept 9, numerous banks began sending text messages to customers imploring them to change their card PINs.
Despite affecting most, if not all, banks in the country, a number waited several days to begin issuing formal warnings to customers about the international fraud.
Some banks also warned of mass cancellations of cards if customers did not change PIN codes, leading to confusion and long queues. Others, including Citibank, began deactivating ATM and debit cards without providing formal warning to customers.
National Bank of Abu Dhabi and Dubai Bank have prohibited the use of their cards outside the country, which could seriously inconvenience travellers.
The fraud is believed to have occurred after a network that banks use to share card information was breached. The culprits were able to use sensitive customer information – including PINs and data from the magnetic strips of cards. Unlawful transactions have reportedly been made in at least 20 countries.
Although most banks have not disclosed the number of customers affected by the fraud, a seemingly large number of UAE residents have had thousands of dirhams charged to their cards, while some have had their accounts wiped out altogether.
Tuition caps ‘threaten’ Asian schools
DUBAI - SEP. 15: One of the largest school networks in the country, Gems, has suggested that it may have to close some of its Asian schools unless the Government lifts caps on tuition fees so it can cover growing expenses.
Faced with substantial increases in rent, salaries and other operating costs, the Global Education Management Systems (Gems), which runs 11 schools teaching the Indian CBSE and CISCE curricula, may close the schools that are losing money, said Dr FA Wasil, director of the network’s Asian schools sector.
The warning is the latest move in an ongoing tug of war between the Ministry of Education and private schools over rising school fees. It offers the other side of a growing argument over the fee increases parents have faced this year.
“There has been a quantum jump in the economy in Dubai,” said Dr Wasil. “If you look at the growth over the past three to four years, there has been an abnormal increase in every sense. But school fees have not corresponded.”
The ministry has capped tuition fee increases at 30 per cent over three years, but Gems and other schools insist that tuition increases are necessary to cover rising costs.
Not-for-profit schools, such as the American Community School in Abu Dhabi, which charges Dh59,650 (US$16,240) for grades 11 and 12, raised tuition by 15 per cent this year.
The school has never increased fees by more than six per cent in a single year. But as The National previously reported, it raised fees due to rising operational costs coupled with school expansion.
The British School-Al Khubairat, another not-for-profit school in Abu Dhabi, also raised tuition fees this year. “We have a real spike in accommodation costs,” said Paul Coakley, the school’s principal. “Because we are effectively paying sterling salaries, we’ve had a real spike in salary costs. The third spike is the very significant rise in capital costs.
“We are a not-for-profit organisation, so we are only interested in fee increases that will enable us to meet our educational missions, but obviously if we are to continue to invest we need to have an active dialogue that reflects these particular spikes that we’re seeing.”
Dr Wasil said schools in his network, which charge as little as Dh2,770 per annum, have been losing money for the past few years due to the cap.
Like all private schools in the Emirates, Gems, a for-profit company, depends on revenue from tuition to cover costs. Gems teacher salaries have risen by 76 per cent since 2004, a spokesman for the company said, while visa and attestation charges have increased 318 per cent. Construction costs have risen 165 per cent, and the cost of medical insurance has gone up by 26 per cent.
“We have recently increased salaries in the Asian schools,” said Dr Wasil. “Staff rentals [for flats] have gone up 400 per cent. If you provide health insurance for your teachers, it’s huge money.”
To keep afloat, Dr Wasil estimates that he would have to raise fees by 150 per cent. He believes that most parents with children in his schools can afford such an increase.
Rashid Salem Lakhrebani al Nuaimi, director general of the Ministry of Education, said the ministry had no plans to reconsider the current fee structure, which was put in place in July and represents a 10 per cent increase from the previous ruling.
But Dr Wasil said the increase was not enough to keep some schools afloat, particularly since the ministry was introducing an accreditation programme for private schools. It would be very difficult for schools operating on low budgets to meet the ministry’s standards, he said.
The accreditation programme will make it more difficult to attract good teachers, Dr Wasil said, because the economies of South-east Asia are improving and teachers are demanding higher salaries to move to the Emirates. “Obviously if you want good teachers, they have to come on a better package. Better salaries can only be paid if your fees are compatible. Education is like any other business where you pay everything.”
The restriction on fee increases, according to Dr Wasil, makes it impossible for Gems to recoup any investments in facilities or equipment at its schools. Despite sinking revenues, Gems recently made an investment of almost Dh45 million in the boys’ campus of Our Own English High School in Sharjah, where the Indian curriculum is taught to more than 9,000 pupils.
“How are we going to realise this investment? When we apply for a fee increase, it’s rejected,” said Dr Wasil. “On one side, there is a compulsory need to provide quality education to children, which has to come with some investment; on the other hand, you are restricted in terms of your returns, so it’s a dichotomy between the image and the reality.”
Abu Dhabi’s branch of Our Own English High School last increased its fees in 1992 to Dh2,400 in KG1 and Dh3,500 in grade 10. The Al Ain branch raised fees in 2006 by 15 per cent to Dh2,770 per annum in KG1 and Dh5,770 per annum in grades 11 and 12. Sharjah raised fees by 20 per cent in 2006 up to Dh3,100 for KG1 and D6,700 in grades 11 and 12; Dubai raised fees in 2007 by 16 per cent to Dh4,000 for KG1 and Dh8,450 for grades 11 and 12.
Revenue from other schools in the Gems network, some of which charge as much as Dh92,000 a year, are supporting the Asian schools. “We are running at a loss,” said Dr Wasil. Referring to Sunny Varkey, the chairman of Gems, he said: “Any other businessman would have closed these schools down.”
Despite heavy demand for school places across the country, Dr Wasil said there was no chance of further expansion. He estimates that there are thousands of children waiting to get into Asian schools.
Were Gems to start closing branches, thousands could be deprived of their education, because public schools are not open to everyone.
The man who built an education empire
DUBAI - SEP 15: Mr Varkey is quick to state, however, that even the budget end of his Gems schools, the largest network of schools in the UAE, offers good value and high standards.
“Although we say we are for-profit, we don’t profiteer,” Mr Varkey said. “If you go to all our schools, budget or premium, you will see that they are all very well resourced. We never compromise on that.”
Global Education Management Systems began with a single Indian primary school founded by Mr Varkey’s parents in Dubai in 1968. It is now the largest network of private schools in the Emirates, with 26 in total. The Dubai-based entrepreneur now wants it to become the largest in the world.
“If the likes of Marriott have four or five thousand hotels, I don’t know why we should not have the same numbers,” Mr Varkey said. “That could take 20 or 30 years.”
This autumn Mr Varkey, 51, a slight and handsome multi-millionaire who made his fortune on schools and hospitals, opened his most palatial school yet, the Gems World Academy in Dubai.
The school, which has a planetarium, music rooms complete with Steinway pianos and a robotics lab, is fit for the children of kings. Costing Dh250 million (US$68.1m) to build, it has a lobby that resembles a high-end hotel, with sparkling lights whose colours shift from blue to yellow and an enormous fountain at its centre.
Its exclusivity is guaranteed by its tuition fees – Dh92,000 (US$25,000) for grade 12.
By contrast, Our Own English High School-Dubai, the very first Gems school, charges only Dh8,450 for grade 12. At a mid-range option, such as the Dubai Modern High School, grade 12 costs Dh20,880.
Mr Varkey is careful to note that he feels Gems has the right balance between commerce and education. While some might blanch at the idea of schools tailored to different price ranges, he is adamant that the quality of instruction does not vary.
He uses the airline metaphor to compare the World Academy and Our Own English High School: you pay more for a better meal with your flight, a more comfortable seat and extra leg room. But everyone gets to the same destination.
“We’re all about quality. Within the educational sphere, teachers play a very important role, so even in a budget school if the teacher is good you will be able to deliver the kind of grades that are necessary to send a child to a good university.”
He points to the success of pupils at the Cambridge International school on International General Certificate of Secondary Education exams, one of his mid-range models, as an example.
The man who describes himself as a “perfectionist” was educated at a British boarding school on the Isle of Wight. He returned to Dubai in 1976 when he was about 20, where his parents, immigrants from southern India, have lived since 1958.
In 1980, he took over the family business, running Our Own English High School, which catered to the children of Indian expatriates. With 27 teachers, the school was home to only 720 pupils. Today it has more than 7,000.
“Being the only son in the family, I had a responsibility,” Mr Varkey said. “But I have an entrepreneurial business thing in my system, in my blood.”
The entrepreneurial streak led him to seize on an opportunity for growth in the education market. “I found that the state schools around the world were not doing a great job, and I thought this is an industry where we can make a difference.”
Three years after refurbishing Our Own English High School, Mr Varkey opened the Cambridge International School in Dubai. Business boomed and in 2003, Gems expanded into the British market, buying Sherborne House School, a private school in Hampshire.
But, like all visionaries, Mr Varkey has his detractors.
In 2005, a group of parents at the Bury Lawn School, in Buckinghamshire, England, publicly complained about Gems’ management, pointing to the dismissal of four head teachers in one year, and claiming that the quality of education had fallen under Mr Varkey’s watch.
At the time, Mr Varkey suggested disgruntled parents should withdraw their children and insisted they cease talking to the press. But today, he says, many have returned their children to the school.
Gems takes advantage of economies of scale, running a huge network of schools that share resources and information and provides training to teachers across the whole system. The company operates schools across several curriculums – in the Emirates it offers British, American, IB, and CBSE.
But, Mr Varkey said it can be difficult to operate in the UAE. “It is definitely becoming challenging to open and operate new schools because the cost of land and the cost of operating schools is very high.”
He noted that it was becoming increasingly difficult to operate schools at the lower end of the spectrum because of the Ministry of Education’s cap on fees.
But he is confident that for-profit schools can be run better than those provided by the Government. For now, Gems is looking both East and West, to Singapore and the United States, in its expansion plans.