This podcast audio has been transcribed by an automatic transcriber.
Fred Rocafort 0:07
Global law and global business go hand in hand, but never seemed to keep pace with each other, developing and developed nations wax and wane and their importance in the global stage. While consumption and interconnectedness both increase, laws and regulations change incessantly, requiring businesses to stay nimble. How do we make sense of it all? Welcome to global lawn business, hosted by Harris Bricken International Business attorneys. I’m Fred Rocafort
Jonathan Bench 0:34
and I’m Jonathan Bench. Every Thursday, we take a bite sized look at legal and economic developments in locales around the world as we try to decipher global trends in law and business with the help of our international guests. We cover continents, countries, regimes, governance, finance, legal developments, and whatever is trending on Twitter. We cover the important the seemingly unimportant, the relatively simple and the complex.
Fred Rocafort 0:59
We hope you enjoy today’s. podcast. Please connect with us via email and social media to comment and suggest future topics and guests.
Today we are talking to our Arlo Kipfer for about international schools and the law. Arlo is originally from Indiana and it’s a Purdue University graduate go Boilermakers. In 2002. He moved his young family to China to work on an agribusiness project in western China and studied Mandarin. After five years of doing that, he moved to Shenzhen where he worked with companies sourcing products from China. His wife is an international school principal. And through that connection, he started developing a niche practice handling licensing, compliance and financial restructuring for international schools in China and later throughout Asia and the Americas, first based out of Shenzhen and then later Hong Kong. He has been working for Harris Bricken since 2014, first as a china business specialist, and now as an attorney. After 16 years in Asia, he is looking forward to a move to Bogota, Colombia later this month. Welcome, Arlo.
Arlo Kipfer 2:15
Thank you, Fred. Good to be here.
Jonathan Bench 2:17
Although we’re very excited to have you with us, as a former teacher, myself in China, I’m very interested in learning more from you. So can we start with a basic question? What is an international school?
Arlo Kipfer 2:30
An international school in a sector is a school that delivers curriculum in English when the country’s main language is not English. Or it could be Also included is a school that delivers a curriculum that’s different than the national curriculum, but the country has English as one of its languages in the school is very, has kind of an international focus about it. And there is about 10,000 schools like that, on the world in the world today.
Fred Rocafort 2:59
Arlo just a follow up question to that your definition focused quite a bit on on the use of English Where do other so for example, I’m thinking of a place like Hong Kong or you have the I forget what the what the exact name is but you have the French school you have the Swiss German school. Where did those schools fit in into how do those schools fit into this picture?
Arlo Kipfer 3:26
They are also would be international schools. numerically, they are quite small. Typically because the big driver for international schools is not just expats. We used to be that these internationals were 80% expats nonprofit type of international schools, and they would certainly fit in that realm. But the driver is to go to send off the kids to the US, US or UK or Australia for undergrad studies. And so the big part when we talk about internet School market. The the massive part of it is the English focus schools.
Fred Rocafort 4:05
So Arlo with that definition, can you please give us an overview of the global market for international schools?
Arlo Kipfer 4:14
Sure. As I said the market has changed a lot over the last 30 years going from primarily focused on expats and be nonprofit to a for profit type of school that is focused on the local population. And according to some data out of the UK for an ISC research, the number of schools has gone over the last 20 years for about 2500 schools to almost 10,000. This students number of students has gone from less than 3 million to almost 5 million. staffing worldwide was only about 90,000 people and now we’re about a half a million staff teachers for international schools. And then the big thing that’s drawing investors to the sector is the fee income and 20 years ago it was less than 5 billion, and now it’s approaching $50 billion a year. So this is getting a lot of tension from private equity firms and investors. The International School is market is dominated by Asia, about 60% of all international schools are in Asia. And if you throw in Europe, you’re at about 75% of all the schools. And the big thing that is fueling some of this growth is what I mentioned earlier, the drive to put undergrads in UK, US or Australian schools. There was about 2 million undergrad students that were studying outside of their country’s citizenship in 2000, and they’re projecting that it’s going to be close to 25 are in 2025 8 million students. So it’s quadrupling and if you’re a wealthy local, you don’t want your kid to go to local university. You need to have IV or an AP diploma or A Levels. And so they want to get their kids into the best students or the best colleges and universities. And so this is feeling a lot of growth. We have seen a little bit since 2016. We’ve seen something I would call like the Trump effect. The enrollments for undergrad students from say, Saudi Arabia, Pakistan, India are down a bit, and maybe China now maybe a little bit because of some of the political situations but overall, there seems to be a lot of growth and about I think, according to some data from the USDA department did a study with college board, about one third of all students coming to the US from outside the country are from China. So it’s it’s a, that’s the big part that’s fueling this kind of growth in this industry.
Jonathan Bench 6:51
So if we can focus on China since it has the lion’s share of students, can you talk a little bit about the legal and regulatory environment for the internet National schools in China.
Arlo Kipfer 7:02
Sure, Jonathan, as you know, certain types of foreign investment are restricted in China. And education sector is definitely one of those. And the reasons why it’s restricted is that in China, especially with the communist government, the Communist Party government, the social services sectors, in general are considered the responsibility of the government to provide education to provide elder care, other social services and the government takes this quite seriously. And because their citizens will hold the government accountable whenever there’s a failure in one of these sectors. So education is very sensitive, and it’s restricted for foreigners to involve be involved in. at it, as with many things in China, the government first was sort of hands off about this, but now there’s a lot more supervision coming from the government. They’ve even done things like create their own school accreditation system for international schools partnering with us accreditation organizations, and these regulations are quite sophisticated now where they used to be quite general. Really in China, there’s four types of international schools there’s four types of legal entities they can fall under. The first one is called a school for children, foreign workers, and this is a Wàiguó gōngrén zǐnǚ xuéxiào. This type of school is only allowed by law to take people who are not citizens of China. Although there are some exceptions. I heard Chairman Mao’s grandson went to one in one major Chinese city, but they are they were set up a lot of times for diplomats. They have a majority or almost all their students are are non Chinese. And they are nonprofits and this type of school was for a while the only type of international school in China and then recently because of the increased regulations and click In other entity forms, this is actually there’s not much growth. There’s hardly any new school for children foreign worker type international schools being created today.
There’s also a sino foreign cooperative school. And this type of school is typically there are some internet schools organized into this, but very few and it’s primarily a means for a Chinese University in a US university or foreign university to set up kind of a joint operation. When you hear of Duke or NYU setting up a school in Shanghai, then you this is this type of arrangement. There’s also in international streams in public schools. So a public school will come along and say we want to do International School, and they will hire some foreign teachers, maybe create a name. Really, this is part of the that Chinese public schools operating environment and these are now heavily discouraged because the idea of using government funds to, you know, to have teach kids foreign ways and foreign languages is not considered something that the government wants to be seen doing. So that leaves us the fourth type, which is a private school, Chinese private school. And these are called mean band shisha. These type of schools are typically owned by and operated by Chinese investors. This requirement of foreigners ownership is not allowed. And these these cater to Chinese students almost exclusively, although foreign students can go to these schools. And this is kind of where there has been a series of regulatory clarification. And it’s certainly the type of school that the Chinese government wants to see Grow. If anything, they they’re not too keen on some of these other types, but they want they’ve all those recent legislation has been about about clarifying while Chinese private school and essentially China’s private school law has evolved since basically since 1949. When the when the communist won, my understanding is that every private school in China changed to a public school. And it took about a decade or so. But eventually they realized there’s some demand for private schools to be allowed. So they started to pass laws that allowed people to sit at private schools. And I think the government recognized that these private schools were important to help the country achieve socio economic and development goals. So in they started passing law saying if you want to start a private school, you can that’s almost all the law said, if you go back and read what the law said. It didn’t really say how someone who spent the money to start a private school could get any kind of return from it. But these these lot times are ex professors or residential developers or business people that started these Schools, of course, they did want to receive some income from it. I mean, they had noble probably noble goals as well, but they definitely went to some return on investment. And I there was a survey done about 20 years. I think it was done around the 70s. That said, 95% of all of these private school operators wanted to get a return out of it. And so, but there was no real clear way how to do it. So like many things, China, people came up with ways they set up maintaining companies to maintain quote, unquote, maintain the school, that they could skim some of the profits off, they would set up, they’d own the building and get them charged whatever rent they need to do to make to get their money back. Even though the school is technically a nonprofit, there’s people able to profit through kind of gray income. Later in the 2000s when the new private school law passed, they the government allowed people a recognizes people they wanted to profit From a bid or get some reasonable rate of return is how the law was worded it is long, but didn’t really define how you could get this reasonable rate of return.
But it said that it made it so that it wasn’t illegal to do so. So in other sectors that were involved in helping clients and it’s there, it’s off, it’s not uncommon for people to go into China, invest, do some business, in an area that isn’t completely clear. But say you’re manufacturing widgets for five to 10 years, you’re making a killing. And now the government says that you can’t make widgets, foreigners can’t be involved in it. So you just kind of closed on operations, you made your money and you leave. Schools are a little bit different in that they’re, you know, the school established, set up to run for 30 years, 50 years, maybe 100 years. And when you operate in this gray area, it’s it’s really difficult to just say, oh, we’re not going to school anymore. And so as this law evolved over time, We created a lot of challenges which are still there today. And it isn’t the easiest, even though it’s a growing sector, for people to be involved in, it’s not the easiest at times to to be involved in. I just give you a quick if I can a quick overview of the where the laws at today. So in 2002, the private, the private school law passed. And then there was a series of amendments after that that attempted to clarify it. And the big ones that kind of made the headlines were in 2017. The government kind of said for the first time, they started clarifying an international school in China for Chinese citizens what that would look like so investors could actually make more clear decision on how to go in there. And one of the things they did in 2017, is they said, If you start a International School for Chinese citizens organized as a Chinese private school, you can set the tuition whatever you want. This is a big change because in the past, you would Have to go to the price Bureau and get approval. And, you know, maybe there’s disfavor on having really high school fees. But now an investor could know hey, if I go in, and we went to a premium top of the market school, we can set the fees without government interference. The second thing they did, which was interesting is they said, it’s not compulsory, yours education has to be nonprofit. We can’t have people making money from that. But a kindergarten, your kindergarten and your secondary week, if you cleave those off and make those into separate entities, you can make them for profit entities organized under the company law in China. And they have all the same rights and responsibilities as any regular for profit company in China. They can pay dividends to investors, they can, you know, tap into equity markets, both foreign in some cases and in China domestic equity markets. And this was actually welcome news because a school that before had been operating sort of in the in the gray and trying to get their investors money or maybe had operated with through a V tap into foreign equity markets no longer needed to do so, because and so you basically split the school up into for profit nonprofit entities.
This definitely helped turn some interest because as they said, I think they’re looking at it’s projected that there’ll be about 400 new schools of this type established in China in the next four to five years. So investors could feel more confident about how they were going to get their rate of return back. However, there’s been since 2017, there’s been a series of other provisions and draft opinions that have muddied the water a bit. One of the things that they came out and said if you’re going to so if you’re going to say create a UK school, UK school is going to establish a sister school in China. When teaching those grades one through nine, the compulsory years, you cannot use any international textbooks. And you your curriculum needs to be the Chinese national curriculum. So it’s sort of unclear how do you have parents paying high tuition fees for the compulsory years? And they’re not getting there half, it’s required that the Chinese citizen students be taught Chinese national curriculum and no foreign textbooks. So it’s just having the kids at that age pay play rugby, and you know, and having that kind of pastoral field, the school and dressing up in like Harry Potter type uniforms. Is that enough? Or is there some more that you can do? So this is this is a little unclear how schools are going to grapple with this because previously, people thought, Oh, we can just teach the national curriculum, but alongside it, we’re also going to teach the subject straight out of the UK or the US, that it’s clear that the government is quite serious that they don’t want that to happen. At the end of the compulsory age years, another big challenge is the local officials decided to take away the testing as a criteria, like assessment testing as a criteria for student admission. They previously had said the elite local schools couldn’t do this. And now they said the private schools are the same, which means you can’t test so if your applicants for seats, Africans exceed the number of seats there, you have to do a lottery. And I think what the government was trying to do is they didn’t want the elite schools, they wanted to focus them to focus on high quality learning, instead of being highly selective. And so in this case, the the if only the private schools were allowed to do testing stuff, it would make them look like they’re the best and these elite, local state schools would suffer. So this is probably going to be a transitionary period and as you know, in many things China, the local environment have these kind of rules will be gradual and spotty. And a couple other notes on that is just that. Vi E’s were out, like explicitly said vi E’s cannot be allowed for school for education. That’s a little different than 2017, when they said that you didn’t need to use one, they kind of firm that up. And they specifically said, if you’re a kindergarten, don’t even try to get foreign. That could have been foreign equity marks, equity resources, or foreign ownership, you need to be completely Chinese domestic ownership of kindergarten. So secondary options, schools, sections of schools are still it’s still possible to be involved with foreign equity markets, but as of this point, but some of these are just draft provisions. But so far, there’s been a steady move towards making these actual law. And I don’t see any reason why it seems to be very consistent with the government’s doing overall, the whole
Fred Rocafort 19:59
thanks, Arlo. You raised a very interesting point regarding what exactly is it that parents are paying for right? Is the rugby and the Harry Potter esque campus going to be enough? I think we’re, we’re struggling with some of those issues ourselves here in the US at the moment with with the possible large scale shift to online learning, right where I think some private universities are, have the intention of continuing to charge the tuition that they normally charge for online instruction when in reality, a lot of the students, a lot of the foreign students in particular might really want that much of that physical experience, right? They might want to be in a In a campus like like Harvard’s, they they might want you know, to, to be in that sort of environment and you know, be able to send photos back to their friends showing them you know, and in these these settings. You also alluded briefly to joint projects like NYU and Duke, the ones that they have in China. So following up on that, what are the important issues that a school planning to bring their brand or establish a sister school in China should consider?
Arlo Kipfer 21:40
Sure. Well, the first one is pick the correct legal form. And I mentioned those four forms earlier. And surprisingly, a lot of times people think they must start a school for children or foreign workers. And they fully intend to enroll Chinese students. So you need you need to understand the different type entities and what their what is possible. So as I mentioned, or The growth is if you’re if you’re going to educate Chinese citizens, you’re going to need to do that under the the Chinese private school form, legal form. So picking the right legal forms huge. This one is should be no surprise to anybody who’s experienced in China. But picking the right local partner is critical to reducing your risk. There’s a lot of reasons factors that you should have, that you need, make sure they tick all these boxes that mean you need to select for quality. It’s amazing to me how many schools in China international schools in China were started big on some very informal connection. Like the they met somebody while on vacation in China. And then that connection invites them to start a school or you know, parents send their kids to UK school, or a parent on the board of a school wants to start a International School in their hometown in China. That doesn’t really mean they’re a great partner for you. It just it just means that you know them.
And so really focusing on making sure the partner is, is competent. There as you as I mentioned, when I kind of did an overview of this, the private school law, most Chinese don’t know anything about these what I just spoke of the restrictions and they have all kinds of ideas, but you need to pick a partner that can help you run the school. I mean, you pick someone who can help you to figure out how much can we or can we not merge this foreign curriculum or trying to bring in in the sister school with the National Curriculum? How do we that understands the legal structures that understands how to get the teaching staff the local teaching staff, usually the foreign partner understands how to get the foreign teachers but in these type of bilingual Chinese private schools, about 65% of staff you need is going to be local and In China. For example, in the next 10 years, it’s estimated they’re going to need for only 494,000 teachers. To be in these new 400 schools, and where do they come from. So you can’t just go, your local partner just can’t say, oh, we’re just gonna hire, we’re gonna offer higher salaries to all the local schools around us and pull their teachers. The government frowns on this. This is compromising equity and social harmony. So you have to figure out how you’re going to bring up teachers that are capable of teaching Chinese source for their people teaching in western pedagogy. And so this is a huge challenge and picking a partner that knows how to do that, or at least has some sense of that. That’s what’s needed. If you are in the UK, or the US or somewhere and you’re wanting to establish a school, that partner being competent will help your head of school not spend all their time in China. You don’t want your UK or us Head of School, always in China sucking resources. They need to have a good partner they’re another big thing with your partners. As you guys know this is true in many sectors is to conduct due diligence on not just the quality and not just their legitimacy as far as a legally legitimate, but things like are they a government? Are they are they part of a state owned administrative enterprise is you know if the US has been very clear when things like the fcpa and UK with UK Bribery Act, if you are giving a gift to someone who’s part of a state owned enterprise, this is like bribing a government official. It’s considered a bribe. And these things you need to know who you’re with and in in when establishing an international school, it is extremely common that your local partner has connections or maybe even works for the local department of education. So know who you’re actually working with, and doing deals with. I also think, due diligence on the proposed land side of the school is very key. I probably spent almost a third of my time when I was working with schools and school clients work trying to figure out if the land that we were being offered to start a school for the local partner was proposing was actually even legal for us to put a school on it. In China, it’s very strange. It’s the only place a school is supposed to be is education zone land. But the education zone land can only be used for a nonprofit school. And it’s really for Chinese citizens specifically. So in a way, when the government allocates land to a developer and says you need to put a school here, that developer has to kind of it kind of gives back that rights for that land. Back to the people of China. It’s an it’s considered education zoned. And if you put something on that land that’s not allowed to be there, or you try to make money off of that school zoned land, it becomes quickly apparent that that’s illegal. And it causes all kinds of problems. It’s sort of like if you wanted to build a log cabin on a national park land and live there are rented out this would not be allowed. And so the education zone land is actually tremely rare, and it’s nearly impossible for international school to obtain some. So zoning of land is big. I’ve had all kinds of land offered to me from provincial level officials. they’ve offered me industrial and residential land, education land that I can’t actually build an international school on. they’ve offered me military land even I got offered military land, which is really strange. But it’s it’s really key to figure out what land you’re on and it usually requires a bit of flexibility. That is uncomfortable. One in one situation I was the education bureau itself was saying I should build a school on it was research industrial land for research and development. And I said before we sign off this, my client needs to know is it okay for us to build a school there for sure. Like you guys are going to write a letter and chop it It’s okay. And they hedged and they hedged and they hedged and they hedged. And then one day they called me up and said, Oh, you’re going to build a research and development office on this land, right?
So of course, it’s okay for you to build a research and development office in this land. And of course, we were planning on building a school, and they they send a letter saying we could build a research and development office. And it just creates when doing this, it’s though the amount of government flexibility and that you have to deal with is very uncomfortable. And so, the good news is, with the clarity of the Chinese private school law, I think these type of schools can be built on education land where previously they were being built all over on residential land, you know, a commercial land, industrial, and so doing due diligence on the land that your partner plans on using is a big deal. And it is even a big deal because in things in China, things like the fire safety certificate that you need to open the school is a special kind for schools and The fire safety bureau can only issue this fire safety certificate for schools if you’re on education zoned land. And you may ask how I know that because I’ve been there before, with a school is supposed to open in a week on, everyone said it was fine to open on residential land, and they cannot get the school certificate or safety certificate issued. Now, of course, as in many things, China, you work it out, because the law is not clear on how we were supposed to build it anywhere. So you just But due diligence is very key. And it also makes sure your partner understands compliance. This is anybody who’s done business China knows Chinese many times the understanding of what compliance is is different than what we expect. But if you’re going to invest, you need to know how the school is actually doing so you can get your money out and get paid your share. One of the things I do I recommend schools do to try to deal with this is to use one of the big four accounting firms, local Chinese office are in country office to perform audits. And this is not foolproof by any means. But what it does is because I had a client that used one of the big four accounting firms office from Europe coming to China to audit this, this international school. And what happened is, is they were there on a day that I happened to be there.
So I took him out to lunch and I said, hey, you’re doing an audit. They’re like, yeah, I go, do you read Chinese? No. And I said, How are you doing an audit? So they were just doing an audit of the schools produced English Records, which is not a real audit, as you know. And so, by using a local office of one of the big four accounting firms, I always felt the report that first of all, they knew Chinese, they knew Chinese accounting law, which the foreign counterparts wouldn’t know. And it just gave it was it’s much more expensive to do this because usually what happens is the local staff at the school recommend a local accountant office that does books, the way it’s often done in China, which is usually not very compliant. And usually a big four firm being hired by a foreigner, at least with somebody who can understand Chinese it produces a little better results. So make sure your partner understands compliance. I found this to be a good idea. And then the last part about of your partners use good contracts with your partner. And this is true, as you guys know, in China in general, but I’ve had seen so many contracts that were they were downloaded off LegalZoom and English, executed in China that terms they weren’t enforceable. They’re ineffective given Chinese contract law. Maybe they are bilingual with the Chinese part not reflecting that what the English part says. And even if it states as you guys know, even if it states the this, the English language version of this will prevail. That’s not what Chinese contract law says. It says the opposite. And the jurisdiction over the defendant, some jurisdictions in the US or the UK. And usually these are written by some lawyer that’s not familiar with China or they’re even worse. They’re written by the Chinese lawyer for the opposing your partner. And you don’t know what it says, and you sign it. I’ve actually sat down people on and there was a dispute and talked to the foreign party and said, Hey, so who’s this who’s party a, they had no idea. And so it was a it was fictitious company it didn’t have it wasn’t a registered Chinese company is just a name. So getting good contracts with your, your local partners good. Um, another thing that’s really interesting is that China, there’s worldwide if you’re going to set up an international school, there’s really four ways you can structure your deal. You can, you can do direct investment, you can do a franchise, you can structure it as a cooperation agreement. Or you can say the deals about management fees. China doesn’t Allow foreign direct investment in this sector. It doesn’t allow franchises of schools of international schools and it doesn’t allow cooperation agreements, although they are allowed a little bit but most at the university level. So the deal has to be structured as a management fees deal. And if you do it correctly, and you have your portfolio of contracts that say, Good contracts that say, we’re providing the use of our intellectual property, our marks, we’re hiring the foreign teachers. So we have a headhunter service contract fee. You can have a portfolio of contracts that allows you to get your money legitimately sent from the school out of the country. So make sure the deal is structured well is a key issue. And then related to that is as I just mentioned, intellectual property you got to protect your reputation and your brand. So it’s not stolen from you and also when you go to send when the school goes to send out where your royalty fees. The having that brand registered in China is is part Have a good contract that allows the gatekeepers at the bank or the state administration of foreign exchange to allow your payments to go out and reach your bank account in the UK or the US. So those are kind of the big key issues that I work with, with clients on setting up a school.
Jonathan Bench 34:17
Arlo, you raised some really interesting concepts with the way that international schools can be run and profit can be received from, from the business. For those who are familiar, that’s the way that cannabis businesses are generally done in the United States as well, depending on the state where the licensed entity is the key. And then there are a portfolio of contracts around with companies that provide services to that that licensee so it’s very interesting parallels there. Who Can we switch gears for a second and talk a little bit about the current environment of COVID-19. I know that China is certainly ahead of the curve and where the US is now. But a lot of teachers come from the US or have in the past. come from In the US to teach in China at the international schools. So can you talk a little bit about what’s happening in China and maybe other countries in the region as well, with respect to the K to 12 international schools?
Arlo Kipfer 35:11
Sure, Jonathan. The there’s a loss of enrollment that’s being reported. And part of this is expats who aren’t able to get back or just choosing to stay in their home country. And some of it is local, the local population who’s decided, if it’s going to be online, we don’t want it we want part of that or we don’t we don’t really think it’s a good value at this point. There is concerned that maybe some of this expat loss of expat students is going to be permanent. It’s really hard to tell. I do know that schools who primarily have international schools that primarily have a local population environment are going to do better. They’re definitely in better shape financially, and to weather this crisis, if they’re reliant on ex-pats I’ve heard one school that has lost about 40% of its enrollment from what I had last year to what it says and this is a school of well established school in a major tiny city. It was the biggest International School in the city and it’s it’s it but it’s primarily it’s one of the schools that can we take foreign students so of course, they’re gonna have a problem with that. Teacher employment, as you mentioned, is definitely impacted. There’s teachers that want to get out of a contract and don’t want to come their teachers that can’t come because the country they are going to doesn’t allow people from America to arrive. And when they threw the switch in China specifically last spring and said, all schools must now open. I heard of one internet school that that was well over 1000 students enrolled that had 10 teachers only in country 10 foreign teachers, but they had to open and so of course they had like all hands on deck every available Chinese paraprofessional and teacher and staff For had to be thrown into it while most of the teachers were still outside the country. So it’s definitely impacted that the amount of teachers being able to available and then it’s it’s really difficult to navigate being a private school in a country where the government in the health department is focusing all their policies on the public schools as not everything’s quite the same and you don’t know if you’re supposed to follow the guidance if it’s only for like they say you have to open is that just the public schools? Can the private school stay closed? and navigating that in for environment is pretty challenging tuition rates being the same even though the school is online? And this I mean, this would be true probably in any country. I’m sure it’s true in private schools here in the US. But you know, now that the everything’s virtual do we should we pay the same some schools, internationals, I’ve heard of giving refunds, or discounting the rates, others, most have not. And this will be something they have to work through, and especially challenging because an international school is going to have vendors like a school lunch providers and bus, a third party bus providers and these local providers don’t want to get out of the contract and require the school to still pay. And yet they cannot refund the parents and the parents, of course, what refunds because buses aren’t going and school lunches aren’t being eaten. So there’s it’s been a big challenge of all those issues. And then they have the same challenge that you have in most countries, which is how do you get high quality, personal protective equipment in this imported in the LA Times what’s available locally might not be of the best quality and they and they kind of expect being international school it’s expected that they have, you know, good quality, ppe. So getting those in is another big challenge I’ve seen
Fred Rocafort 38:51
Arlo, taking a different look at the issue of international schools. What advice do you have for people who I actually want to teach at an international school in China or perhaps somewhere else in the world.
Arlo Kipfer 39:06
It’s a good question. A lot of people ask me about that. I think that really important is to get your years of experience in your own country, get a few years down because work visas in many countries require years of experience. When I first came to China, in 2002, you could get a job at an international school with little or no college education. Certainly no degree or teacher certification. That’s changed a lot. The it’s very clear now. And almost every International School situation I’ve heard of that the cities and the provinces have said, you need to have a minimum of two years but most recently, it’s been five years teaching experience you need to have teacher certification in your home country. And, of course, a bachelor’s degree in actual Education. And it’s there are exceptions to this like, of course, they are in China but in general, you just want to get your, your experience down and then in be certified before you try to get a job. And this leads into the second part, the most flexible schools and situations might not be the best kinds of do do your research when you pick a school that you’re going to teach it, or apply for a job because not every International School is the same. There is everything from what’s so called tier one and, you know, embassy schools to maybe a local school that has some type of nominal international stream that they call an international school or maybe even a training set English training center or something like that. Not that those experiences are necessarily always bad ones. Some of them are quite legitimate and good. And not every big. legit seeming school is great, but it did generally there’s a trend towards the better the school is, the longer they’ve been in operation. There’s all you can get reviews on. There’s all the kinds of review sites for international teachers online, just do your homework and pick a pick the best school you can because if you do get a bad one, it can make it for a very, very bad experience. And I think we’ve all heard stories like this, but I know personally when I was teaching outside Shanghai, and his passport was locked in a safe at the village 20 kilometers away from the school. And he would get it back at Chinese New Year to go somewhere. And at the end of the school year, and he was frightened. He was he was wanting to leave the school, but he couldn’t because his passport was in some safe and in the police, he went to the police, they were of course no help. Because the owner of the school is quite well connected. And so you want to have in you know, in their situations where teachers go to leave and they for some reason they’re told your flights in and out for can take out of your pay because you didn’t complete all your contractual duties. Maybe the teachers aren’t told At some of these schools about upfront about the personal income tax that needs to be deducted. So I’ve heard a lot of horror stories from people who have gotten into some, what I would call bad quality schools. But on the other hand, the plus side, there’s people who make a career out of international teaching because of all the positives. I mean, for a lot of American teachers compared to US public school, for example, there’s less discipline issues, more resources, better pay, you know, more supportive and involved parents, you get to experience and learn new cultures, a lot of international school teachers will teach two to five years in one location and go to another continent, and do all the travel that’s available in that continent. And so there’s all these amazing opportunities and during normal times, of course, and there’s no for Americans who want to do an actual teaching. They don’t really pay us federal income tax because of the large income tax exemption pretty much means they don’t pay federal income tax in the US and a lot of them their schools will cover their local taxes. In the country they’re in. So they kind of get a net pay. And it’s quite, it allows for a very good quality of life. So there’s a lot of positives, two reasons why people should think about it. I do want to point one important thing. That discussion I’ve had often with my international school teacher, and administrative friends is you need to make sure if you do this, that you save for retirement yourself, because you’re making a great salary. you’re traveling around, but there’s no like teacher union supported pension waiting for you. You literally will have to create your own retirement fund. And this is for many people who are used to a career of teaching. It’s an unusual concept, especially for Americans. So you don’t want to lend yourself find yourself broke at 60.
Jonathan Bench 43:42
Arlo. You’ve been a china hand for quite a while. Do you have any thoughts on Hong Kong on the US China decoupling just kind of general environmental factors that are flying around in the wind right now?
Arlo Kipfer 43:55
Well, Hong Kong I definitely have some sadness and some nostalgia over Hong Kong changing. I have friends that live there today and they tell me the streetscapes have changed some of the signs, the signs and the even the protests that you would see I mean, I lived in Causeway Bay, which is like ground zero for all the protests and even just the chanting stuff that happened every Sunday when I walked my way over to the grocery store. We my wife and I would walk through lines of the Falun people in the the anti Fela of Falun Gong people and you would be you just smile and you think all these people express themselves you see mainland tourists staring at the site because they hadn’t seen anything like that before and in I just makes me a little sad that this is this is changed. I mean, there was such a difference. When you came over I lived eight years in Shenzhen and then three years in Hong Kong and when I get off the ferry in Hong Kong, you just felt different. And my friends are telling me that feelings Not as much the same. I mean, it’s not uniform yet, but I’m afraid of what that can happen. But that’s really nothing compared to the sadness I have for the Hong Kong people and their loss of freedoms. I just it’s hard for me to imagine to live a lifetime with freedoms and then having taken away. So I mean, I definitely stand with on people and hope that through protests and diplomacy, that the right to speak freely can be returned to them. I know many will leave many hongkongers will leave Hong Kong that can, but many will not be able to, most will not be able to. And my heart aches for those people. So I was never really that pro China and overly optimistic about the Chinese Communist Party becoming democratic, but I did. I definitely was one of those who thought that China would keep their hands off of Hong Kong until because the government needed their kind of financial expertise and the unrestricted financial outlet that Hong Kong provided that it seemed like mainland cities like Shenzhen and Shanghai could not do this. And I thought It would be maybe not just financially but in a diplomatic sense too costly to do what they’re doing right now. So I just hope I think like many people that over that 50 year period after the takeover that the China would maybe move the mainland would move a little bit towards where Hong Kong was. But it seems like that my hopes have been dashed a bit in this in this department about the decoupling. There is a lot of anecdotal evidence that companies are moving operations out of China. I saw a survey of some multinational buyers recently, and I think something like 95% of them said they were trying to reduce their reliance on sourcing from China. And I know we’re seeing this from our clients too. They will they want our help to move operations from Vietnam or move operations from China to Vietnam, Thailand, Malaysia, basically anywhere that shows promise to handle it. They companies like Apple, Samsung or Shifting production and even saw that the Japanese government has set aside something like $2 billion to help reassure manufacturing back to Japan. So that and that Chinese direct investment has almost completely stopped. Chinese direct investment into the US has almost stopped. It’s gone from something like $50 billion a year in 2016 to something less than $5 billion last year. So I think that all those factors, and maybe if Chinese companies do get delisted, it seems to be there’s definitely seems to be some decoupling. But having said that, I’m a big fan of globalization and international cooperation. And I like commercial peace. You know, we’re traitors cross borders, soldiers don’t so I hope that no nations ever completely decouple. And I do think it’s extremely likely that US and China will continue to have a very intertwined economies. And I just, I guess I pray that there’ll be better political and diplomatic times ahead. But having said that, is still very wise to strategically plan for what seems to be trending now things seem to be trending to separate a little bit, a little pulling back a little hesitation. And then given the the Chinese government’s undemocratic moves in Hong Kong and kind of its moral actions with the Uyghurs in Xinjiang which is close to my heart because I live there for I lived in Xinjiang for five years and, you know, worked with weaker people. And I think this pulling back is probably for good reasons right now, but at some point Enough is enough.
Fred Rocafort 48:34
Well, thank you. Thank you, Arlo. For those personal perspectives, I think we’re going to have to talk a little bit more about Xinjiang. And I think we will have the perfect opportunity for that before before too long. Maybe you can. You can join us again, with others to delve into that a little bit more. before we say goodbye. I’d like to ask you for your recommendations. Whether it’s a book books, magazines, YouTube videos, TV series, whatever it is that you have been enjoying and recommending recently, if you could share that with us, we’d really appreciate it.
Arlo Kipfer 49:12
Sure I am. I typically am a reader. So I typically read a couple books at a time, usually one a little more lighthearted. And one more, more serious. So it’s probably a good time to talk about a lighthearted one right now. The one book I’ve read recently, I think, is really interesting. It’s certainly not for everybody, but it’s a it’s called Redshirts by an author named john scalzi. And it’s basically a Star Trek parody. We’re told from the perspective of a redshirt officer, the guys who are usually killed when the away team goes away. And it’s very, it’s humorous and very light hearted after reading the news or what’s going on the world. I read something like that. And it makes me chuckle. And I’m kind of nerdy, I suppose. And the other one is, in anticipation of my move to Bogota There’s a book called short walks from Bogota by guy named Tom Feiling And basically, he is a guy. He’s a documentary maker who lived in Bogota, when it was dangerous to live there. And he, there were parts of the country you just could not go into because you’d be kidnapped by one of the guerrilla forces or one of the cartel or killed. And so he lived there. And then he moved back. I think he’s from the UK. And he would just hear a lot of people talk about Colombia negatively. And when it opened up, he said, I want to go back and take trips out of Bogota, into these areas of the country that you couldn’t go to before and he wrote a book. And the book is just each chapter is a different story of a different person that he met on one of these trips through these previously inaccessible places in Colombia. And it’s it’s fascinating because he focus instead of focusing on like expats and different things like he focuses on the local people, the different minority groups tribes that, you know, had never seen, they thought they were the only people on the planet and now they sell photographs of themselves for like $10. So just really amazing. So it’s really helped me become acclimated to what is Colombia today. So that when I get there, maybe not so caught off guard.
Fred Rocafort 51:17
Thank you, Jonathan, what about you?
Jonathan Bench 51:18
I recently read a very interesting article in the Nikkei Asian review called Death of the coffee King power and money in corporate India. And it tells the story of Vg sidhartha, who is the cafe coffee day entrepreneur. He was also in the tech parks, hospitality businesses. And he died by apparent suicide a year ago this month. And so it’s really interesting look into the business and politics in India and how dangerous it was in the past to mix those or how really how unavoidable it was to mix those as well. And also, you know what happens when you you build an in business empire you’re chasing growth ahead of revenue, you’ve got pressure from your lenders, and then you know, and then the government regime changes that was formerly friendly to you. So very interesting look, I read it because it was recommended to me as a really Indian look at Indian business environment. And so that was it was it was certainly not light hearted at all, but it was kind of an interesting gritty look into into this. You know, this cafe coffee day was the alternative to Starbucks, just kind of like luck and coffee has been in China. And so the parallels between India and China are always interesting for me to delve into. So that’s, that’s what I recommend. Fred, what about you?
Fred Rocafort 52:41
Well, I also like to like to read but I do spend a lot of time listening to podcasts, which you know, should have shouldn’t come as a surprise given, given what we’re doing at the moment. One podcaster that well, I I think was probably the first podcaster that I started listening to on a regular basis on a regular basis is Dan Carlin and I actually recommended one of his podcasts before one of the episodes. Today, I would like to once again, recommend something by Dan Carlin, he actually has two different podcasts. One of them focuses on current affairs. And that’s been pretty dormant over the past couple of years. Oddly enough, however, his other podcast is is called hardcore history. And at the moment, he’s taking a very detailed look at the the war in the Pacific, the Pacific France during World War Two. And if you’re at all interested in that, if if or if you Whether you’ve already read about that or and want to take a deeper dive into it, or whether you really haven’t read much about it, it’s it would be a great introduction to it. I’m at the point now where where he’s describing the Battle of Midway and it’s just it’s just great. I mean, he’s just he just has a great style really brings these kinds of events to to to life. So definitely would recommend anything by by Dan Carlin, but but certainly this last series, it’s called supernova in the east. So at the moment, it’s still available for free after a while he moves his content into the paid section. So you know, there’s there’s still time to, to listen to this for for free. And with that, our load I’d like to thank you once again for for being our guest. We look forward to having you on again. And once you’ve you’ve put in some some time in Bogota. So thank you again.
Arlo Kipfer 55:15
My pleasure. Thank you, Jonathan and Fred.
Jonathan Bench 55:19
We hope you enjoyed this week’s episode. We look forward to connecting with you on social media to continue to discuss developments in global law and business. and tune in next week for another episode. We’ll see you then.
Transcribed by https://otter.ai