Non-profit universities are a model that has proven effective in improving the quality of higher education in advanced countries. In Vietnam, this model is facing legal barriers. Additionally, the transition from private universities to non-profit private universities, as required by law, is causing many disputes, the most significant of which involve the interests of shareholders and the university’s management board.
What is the correct way to view a truly non-profit university? What conditions are necessary for this model to develop in Vietnam and attract social resources as it has successfully done in the U.S. and other advanced countries?
Ambiguity from concept to management policy
Since 2000, the socialization of education has become an inevitable trend due to the practical needs of society, as the governance mechanisms of public universities have shown stagnation and have not met the human resource needs. However, instead of developing according to international standards and becoming high-quality educational institutions, private universities in Vietnam, operating like businesses funded and owned by private individuals, have been driven more by profit than by educational purposes. This type of institution is losing the trust of society, and many believe that now is the appropriate time to develop non-profit private universities.
In advanced countries such as the UK, Germany, France, the U.S., Japan, and South Korea, education mainly relies on public and non-profit private universities, with for-profit universities playing a relatively limited role. This is achieved through strict state control and self-governance mechanisms, which allow these universities to have transparency in management and operations. In the U.S., most of the prestigious universities in terms of education quality are non-profit private universities, such as Harvard, Stanford, Yale…
The criteria for identifying a non-profit university is that all profits must be reinvested into achieving the educational mission and operating the university. Additionally, because there is no owner, no profit distribution, and the school’s assets are ensured not to serve personal or group interests, the quality of education is increasingly improved, and it is easier to attract funding from educational funds, organizations, individuals, and even government grants.

Famous non-profit private universities in the U.S.

At the seminar on Conditions for Non-profit Universities in Vietnam held on May 12 in Ho Chi Minh City, many experts said that there are currently no non-profit universities in Vietnam. Dr. Vũ Thành Tự Anh, Director of the Fulbright Economic Teaching Program, emphasized three factors to distinguish between non-profit private universities and for-profit private universities, expressed through three questions: Who is the investor, who is the owner, and how is the surplus of the university used? With these superior advantages, non-profit private universities are expected to be a model that can address the current shortcomings of public and private universities in Vietnam. However, why is this model still not popular? One of the major challenges is the legal framework. The concept of non-profit private universities in Vietnamese legal regulations is still very far from the global standards.
According to him, if judged by international standards, all three answers should be “no.” In Vietnam, according to legal regulations, non-profit private universities still have a Board of Trustees, ownership, investors, and profit distribution (limited by government bond interest rates). This regulation will create conflicts in the operation of this model and affect society’s trust in endowment activities, which are considered the primary source of income for non-profit private universities worldwide. No individual or organization would want to fund an institution that is disguised as “non-profit” but benefits certain individuals.
Meanwhile, lawyer Lương Văn Lý – advisor and Head of Investment and Trade Department, Viet Long Thang Law Firm, said that Vietnamese law has made progress in paving the way for non-profit private universities. According to Decision 70/2014/QĐ-TTg, section 4, chapter 3 on the organization and management of non-profit private universities, Article 29 affirms that the Board of Trustees, representing the common ownership of the school community, is the highest authority; representatives of capital contributors occupy no more than 20% of the total members of the Board of Trustees. This regulation has diluted the rights of shareholders and created independence for educational activities with a focus on profit.
However, private schools that have operated in a non-profit manner but have not been licensed will face difficulties in transitioning, such as Hoa Sen University or RMIT. According to the regulations at point b, clause 2, Article 34 of the University Charter: to transition to non-profit status, there must be support from at least 75% of the total capital of contributing members.
Currently, the transition from private to non-profit status at Hoa Sen University is sparking disputes between the Board of Trustees and some of the school’s shareholders because this transition will directly affect the rights and benefits of shareholders in profit distribution and governance. In the case of RMIT, many experts believe that although RMIT claims to operate in a non-profit manner, it is difficult to obtain a license because there are no capital-contributing members since the school’s operating budget is funded by the Australian government and endowment activities.
How to alleviate difficulties for non-profit universities?
Each year, Vietnamese parents spend billions of dollars to send their children to study abroad, showing that the social demand for high-quality higher education is very high. According to many experts, it is not necessary to be too strict about the concepts of public universities, private universities, or for-profit private universities, as long as these schools focus on educational quality and have management policies to meet the needs of society. The most important thing is that the government needs to have encouraging policies, along with mechanisms for management and control.
To facilitate the development of non-profit private universities, lawyer Lương Văn Lý said that the law should not stop at the existing regulations but should delve deeper into the reality and actual needs to shape clearer standards. Social organizations will be a solid financial resource if this model proves its effectiveness and gains trust through financial transparency and activities that bring value to education. Currently, examples like Hoa Sen University, RMIT, and Fulbright have demonstrated the effectiveness of non-profit private universities in bringing greater value to education.
Besides policy issues, Professor Gael McDonald, President of RMIT University, said that to develop in a non-profit model, the university must first be profitable. In other words, the university must develop sustainably and create as many revenue streams as possible to maintain operations, pay staff salaries, and provide scholarships for students. Additionally, non-profit universities must carefully review expenditures and focus on educational quality to ensure competitiveness and meet international standards.
Financial issues and attracting social resources are also major barriers to the development of non-profit private universities. If Fulbright has U.S. government funding and RMIT has stable funding from Australia, the Board of Trustees at Hoa Sen University, when transitioning to a non-profit goal, is still facing trouble in disputes with some shareholders who are business people treating education as a business activity. It will be difficult for Hoa Sen because educational activists will not have enough financial resources to buy back shares and control the school according to the non-profit direction. The second possibility is that a sponsor is willing to spend a non-refundable capital to allow Hoa Sen to develop towards educational goals. However, the second scenario is also very unlikely, as the concept of non-profit universities in Vietnam is still ambiguous, and this model still benefits certain individuals.
According to Dr. Vũ Thành Tự Anh, to solve financial issues, Vietnam needs to learn from international experiences in encouraging social participation in non-profit universities. At the same time, true non-profit universities need to be encouraged and treated fairly, like public universities, such as financial support, providing initial investment in equipment… Especially, there should be tax exemption policies for donating organizations and individuals, as well as income tax and land tax exemptions… for universities following this model. However, the most important thing is still transparency in the use of financial resources.
According to Mr. Trần Đức Cảnh, a member of the Board of Trustees of the Association of Universities in the Northeastern United States, non-profits emphasize transparency, openness, and accountability. The state needs to have mechanisms to regulate the accountability of each educational organization, as well as strengthen auditing and monitoring activities for non-profit universities to gain the trust of society. This is the necessary mechanism for sustainable development and the foundation for attracting social resources to this model.
Source: http://vietnamnet.vn/vn/tuanvietnam/nhap-nhang-chuyen-dh-phi-loi-nhuan-o-viet-nam-308320.html