Middle East healthcare spending surges as demand soars

Healthcare is a major growth area in the Middle East, with public and private investment in the sector forecast to exceed US $150 billion in 2016. In the GCC in particular, governments are allocating ever‑increasing budget shares to healthcare, to meet soaring demand fuelled by high population growth rates, longer life expectancy and the extension of compulsory health insurance, as well as the spread of lifestyle diseases and chronic illness. 

Private hospital in Jiddah, Saudi Arabia

 

By Peter Feuilherade

This article was first published in The Middle East magazine, London, April 2014 issue

Former British health minister Lord Darzi, a keynote speaker at the January 2014 Arab Health Exhibition in Dubai, noted that the Middle East has some of the highest per capita levels of obesity and associated chronic illness like diabetes and cardiovascular disease. “It has a rapidly changing demography, both in terms of population growth and an increasing life expectancy. These are necessitating an increased level of spending on healthcare and the rapid expansion of provision. There is also a heavy reliance on imported human and material healthcare resources; and a significant level of overseas spending on healthcare due to a lack of local specialist healthcare provision,” he added.

International healthcare technology providers like General Electric Healthcare and Philips, whose US and European sales have dipped because of budget constraints, are hopeful of double-digit percentage growth in the Middle East, not just in the established markets of the GCC but also in emerging or post‑conflict markets like Iraq.

Across the Middle East and North Africa (MENA) region, non-communicable diseases like obesity, diabetes and cardiovascular diseases are widespread, while smoking‑related respiratory diseases are on the increase. The scale of the health challenges is vast. Cardiovascular disease is responsible for 45% of deaths in the Middle East; four GCC countries are in the global top 20 for obesity; and there is a high and rising incidence of major depressive disorders and anxiety.

A September 2013 survey by the World Bank and the Seattle-based Institute for Health Metrics and Evaluation found that “potentially preventable risk factors such as poor diets, high blood pressure, high body mass index (an indicator of obesity and overweight), and smoking are contributing to the growing burden of non-communicable diseases in the region.” Another factor is lack of exercise, particularly among women.

At the same time, poorer Middle East countries, including Iraq, Yemen and Djibouti, continue to struggle with a high level of communicable diseases, while the outbreak of polio in Syria has prompted a massive immunization campaign across the Middle East.

Saudi “bonanza” for foreign firms

GCC governments are making significant investments to meet growing demand for healthcare and bring the sector up to international standards. Saudi Arabia, whose economy and population make up approximately half that of the GCC states collectively, is seen as leading the way.

Total healthcare expenditure in the six GCC states is expected to rise to US $79.2 billion by 2015, while the GCC’s combined pharmaceutical and healthcare market is set to exceed US $133 billion in 2018, according to the Frost & Sullivan business consultancy.

Although GCC healthcare spending is expected to increase at a compound annual growth rate (CAGR) of 11.4% until 2015, a shortage of medical graduates and other skilled staff is making countries heavily dependent on expatriates to fill healthcare jobs and poses a big challenge to be tackled, global consultants Ernst & Young note.

Recruitment ad for Saudi private hospital

 

A growing number of GCC governments are also enforcing mandatory medical insurance.

In response to discontent about overcrowded hospitals and shortages of medicine, healthcare infrastructure in Saudi Arabia is accelerating at a rapid rate, funded by an annual healthcare budget of US $27 billion. Stock market listings planned by two of the Kingdom’s biggest private hospital operators reflect the boom in its healthcare industry. Several new healthcare cities are under construction, and the number of hospitals is expected to increase by more than 100 within the next three to five years.

According to Reuters, “this could make Saudi Arabia the world’s fastest-growing major healthcare market over the next few years, helping to diversify the economy beyond oil and providing a bonanza to foreign companies selling medicines, equipment and services.”

In the UAE, Dubai’s recent move to make health insurance mandatory for all workers would be a catalyst for private investment in the emirate’s healthcare sector, in the same way that a similar law in Abu Dhabi was in 2005, said Michael Bitzer, CEO of Daman, the UAE’s largest health insurer with over 2.4 million subscribers.

The law will make employers responsible for providing at least an “essential benefits package” for every worker and will come into effect in several phases by 2016, said the Dubai Health Authority. The government will remain responsible for the coverage of local citizens, who are estimated to make up less than a fifth of the population.

The UAE’s healthcare budget is around US $12bn, and spending on healthcare as a percentage of GDP is the third highest in the Gulf at around 3.3%, after Bahrain and Saudi Arabia. About 36% of UAE hospitals are owned and operated by the Ministry of Health, while the private sector catered to 64% of the whole population in 2011.

According to the Oxford Business Group, medical tourism in Dubai looks set to grow beyond the US $1.69 billion in revenue earned in 2012, and a number of health and pharmaceutical groups are eyeing Dubai as a regional centre, owing to its well-developed transport and communication links and continuing advances in technology and research.

Qatar is set to launch the second phase of its compulsory health insurance scheme in April 2014, when all Qatari citizens will be brought under the new system. And Oman, which built its last major hospital 20 years ago, plans to open the first phase of a US $1 billion International Medical City in Salalah in 2016. A population expanding at 4% a year is putting increasing strain on healthcare in the Sultanate, despite a 32% increase in the sector’s budget from 2012 to 2013.

“Strong returns” for private equity

The growing number of mandatory health insurance programmes in the GCC is increasing reliance on the private healthcare sector. Across the wider MENA market, private equity firms see significant room for expansion, particularly in services such as long-term care, specialized care and rehabilitation.

“Experienced private equity investors know that the MENA healthcare sector presents significant opportunities and strong returns for those who can get the balance right, by bringing international experience and global insight to the local market,” argues Dr Helmut M. Schuehsler, chairman of TVM Capital Group, a European private equity fund. He points out that because individuals from the MENA region spend US $15 billion a year travelling abroad for medical care, “governments and private companies will both benefit from providing more focused, high quality care locally”.

To meet rising expectations across the Middle East for expanded and better quality health services that are on a par with international standards, expenditure on healthcare as a percentage of GDP will need to be raised further. Training local doctors and medical staff and establishing research and clinical trial centres in the region should also become a top priority.

 

GCC plans shared water network

Across the Middle East and North Africa, ensuring a reliable supply of water is a top priority, as demand soars from both rapidly growing populations and water-intensive industries in the world’s most water‑scarce region.

Desalination plant

By Peter Feuilherade

This article was first published in The Middle East magazine, London, December 2013 issue

 

 

Across the Middle East and North Africa, ensuring a reliable supply of water is a top priority, as demand soars from both rapidly growing populations and water-intensive industries in the world’s most water‑scarce region.

Figures from the World Bank in 2012 showed a decline in per capita renewable water resources from over 3,000 cubic metres/year in the 1950s to around 715 in 2011, which is below the World Health Organization's water poverty threshold of 1,000 cubic metres/year per capita.

The projected impacts of climate change on future water availability in the MENA region are not favourable, with some countries expected to experience up to 40% decreases in precipitation and runoff by the end of the 21st century. "Ever-increasing water demand - coupled with rapid population and economic growth - will likely add to the region’s water stress and pose serious challenges to the region’s future development prospects," the World Bank argues.

The rate of water extraction is also far greater than natural replenishment. The Abu Dhabi‑based Arab Water Academy estimates the collective water shortage of 17 Arab countries at over 30 billion cubic metres, a deficit which is expected to triple by 2030 and increase to over 150 billion cubic metres by 2050.

The Gulf Cooperation Council (GCC) intends to complete a common regional water network by 2020, as part of efforts to address rising population growth in the Gulf region over the next three decades,

Four of the six GCC states - Bahrain, Qatar, Kuwait and Saudi Arabia - are ranked as the most heavily affected by water scarcity in the world. According to the global management consulting firm Booz & Company, Saudi Arabia and the UAE respectively consume 91% and 83% more water per capita than the global average, while Qatar and Oman also use more than the global average.

However, the GCC countries, in the words of a recent report by the Oxford Business Group (OBG), "are in the unique position of being able to leverage their considerable wealth to invest in developing technologies and innovations with the aim of gaining a competitive advantage in the global water sector".

Most of the GCC's water supplies come from desalination. As the OBG report notes, the GCC already accounts for 57% of the world's desalination capacity, and GCC countries plan to invest more than 100 billion dollars between 2011 and 2016 to develop more efficient desalination technologies, wastewater recycling and building water treatment facilities.

Regional water network

The GCC is conducting technical studies in the Saudi capital Riyadh, eastern Saudi Arabia and northern Oman as part of plans to build a regional water network.

The total cost of building the network is estimated at 10.5 billion dollars - 3 billion to build desalination plants and 7.5 billion for pipelines, pumping stations and reservoirs.

In Oman, environmental impact assessments will also be carried out to identify the best places to build desalination plants in Sohar, the sultanate's industrial hub 200 km north of Muscat, and Al Ashkharah, on the Arabian Sea. Oman also plans to build strategic water storage reservoirs in Muscat to avert a crisis if desalination plants are disrupted.

Other GCC water projects in the next few years will see Saudi Arabia complete the world’s largest desalination plant in Ras al-Khair on the Persian Gulf. Abu Dhabi will add more than 30 million gallons per day of desalination capacity to its water network following a green light for a power and water plant extension at Mirfa. And Kuwait is constructing two reverse osmosis desalination plants that will produce nearly 50 million gallons of water per day.

High price of desalination

Desalination, however, carries enormous economic and environmental costs. Despite efficiency improving more than fivefold since 1979, to desalinate a cubic metre of seawater costs one dollar, making it a relatively expensive way of producing potable water.

The desalination process also discharges salt back into the Arabian Gulf and other oceanic sources, jeopardizing their marine life and introducing new environmental risks, the Booz & Company study said.

Seawater desalination is an energy-intensive process, consuming eight times more energy than groundwater projects, and accounting for between 10% and 25% of energy consumption in the GCC.

The current almost total reliance on fossil fuels for water desalination is not sustainable - Saudi Arabia alone uses 1.5 million barrels of oil per day in its plants. This adds to the problems of energy intensity already plaguing the region.

Many of the problems related to desalination could be reduced by replacing fossil fuels with renewable energy sources. This would cut the cost of energy consumption, which accounts for 30‑50% of total water desalination costs. A gigawatt of energy produced by oil and gas generates 700 and 460 tonnes of carbon dioxide respectively. The same amount of energy produced by solar energy (concentrated solar power – CSP) releases just 17 tonnes of carbon dioxide, according to Dr Asma El Kasmi, director of the Arab Water Academy.

Her views mesh with those of the World Bank, whose report "Renewable Energy Desalination: An Emerging Solution to Close MENA’s Water Gap" recommended greater investments in renewable energy and suggested that CSP was the most suitable source of renewable energy, owing to its scalability and ability to provide energy 24 hours a day. The World Bank report noted, however, that CSP may only be an option in the long term because of its current high cost.

Dr Nasser Saidi, founder and president of Nasser Saidi & Associates, an economic advisory and consulting company based in Dubai, notes that although the MENA region is home to 6.3% of the world’s population, it has access to only 1.4% of the world’s renewable fresh water. "To make matters worse, the region currently exploits over 75% of its available renewable water resources due to its burgeoning population, increased urbanization, mispricing of water and rapid economic growth," he warned in an article on the Gulf Business website in October 2013.

"Saudi Arabia in an ill-fated drive to increase food production has - over a 15-year period - largely depleted its water aquifer that had taken millions of years to accumulate. It will be forced to stop its wheat production by 2016. Yemen is already a hydrological basket case and Gaza is an ecological disaster," Saidi commented. In the GCC, a major policy issue is that "the bulk of the region’s water is misdirected into agriculture, a sector that provides less than five per cent of GDP".

Overcoming water scarcity, Saidi argues, requires a combination of ecosystem and water management systems, improved efficiency and pricing of water use, and investment in water infrastructure.

To close the "water gap" in this region, the World Bank estimates that approximately 104 billion dollars per year will be needed, equivalent to about 6% of the MENA region's GDP. However, the Bank warns that the costs of failing to take action could be even higher, reaching up to 300-400 billion dollars per year.

Eight Kings to Form Club of Arab Monarchs

Jordan and Morocco will join the six-member Gulf Cooperation Council in an extended union comprising all eight Arab monarchies.

The Saudi capital Riyadh


Article first published as Eight Kings To Form Club of Arab Monarchs on Technorati.

Leaders of the six Arab Gulf states have welcomed bids by Jordan and Morocco to join the Gulf Cooperation Council (GCC).

The GCC comprises Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the United Arab Emirates, which between them supply about 20% of the world’s oil. It was formed in 1981 to coordinate political and economic policies. More recently, this has extended to defence and security too. In April 2011 the GCC sent troops into Bahrain, where the monarchy faced protests calling for democratic reform.

The GCC leaders' decision will result in an extended alliance including Jordan and Morocco. Both these kingdoms have seen limited protests and calls for political reform and constitutional monarchy during the "Arab Spring". In the GCC itself, as well as the Bahrain unrest, there have been small-scale protests in Oman and Saudi Arabia.

Regional unrest

Expanding the GCC is aimed not only at countering unrest across the Arab world but also strengthening the oil-rich Arabian kingdoms against what they perceive as the regional threat from Iran, their powerful neighbour across the Persian Gulf. They have accused Iran of fomenting the insurrection in Bahrain and of seeking to destabilize Arab regimes.

Iran denies involvement in the protests, saying it only gives Bahrain protesters "moral support".

In the impoverished Republic of Yemen, the GCC has been mediating, to no avail so far, to persuade rival factions to sign a transition deal aimed at ending months of anti-government unrest.

Yemen, which stands in stark contrast to its wealthy neighbours in the Arabian Peninsula, has limited observer status in the GCC.

Arab kings must "stick together"

Although Jordan and Saudi Arabia share close ties through common tribal and family links, the links are less evident between the Gulf states and Morocco, at the other end of the Arab world.

But they do have at least two factors in common - the Arabic language, and the system of monarchy.

The Dubai-based Gulf News cited Shaikh Jaber Al Khalifa, a political analyst, as saying that putting the eight monarchies in the Arab world under a single umbrella would be a positive step. "When political systems with common visions and ideas work together, you should expect good results because they are not held back by divergent political ideologies."

In a separate commentary in Gulf News on 11 May, Sultan Sooud Al Qassemi, a non-resident fellow at the Dubai School of Government, said that after Tunisia and Egypt, the survival of the 12 remaining Arab republican regimes was not guaranteed. The Arab League was "floundering", and the remaining eight Arab monarchies recognized the need to enhance mutual collaboration.

"They have identified the GCC as the ideal body for them to make an immediate and exponential leap in political, military and economic relations," he said.

The London-based independent newspaper Al-Quds al-Arabi on 11 May quoted "observers of Gulf affairs", whom the paper did not name, as saying that "the spread of Arab revolutions in the region, which have reached some Gulf countries, has prompted the GCC members to search for new allies following the collapse of the old alliance of so-called 'moderate countries' after the revolution in the country which was the Gulf countries' strongest ally, Egypt…"

Comments on Gulf websites ranged between those welcomed expanding the GCC and those who opposed it, Al-Quds al-Arabi noted: "Some said the military expertise of Jordan and Morocco would benefit the GCC countries, while others complained of the economic conditions in these two countries which might affect 'Gulf prosperity'."

The expansion plan is the strongest assertion of the GCC's foreign policy role in its 30-year history.

"They are leading the counter-revolution and it makes more sense for them to join with other Arab autocracies," Shadi Hamid, director of the Brookings Doha Centre, told Reuters news agency on 10 May.

Some analysts caution that an expanded union could have economic disadvantages for the Gulf.

John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, in remarks cited by Reuters, said: "Greater economic harmonisation and collaboration is needed on the economic front among the current GCC states before further expansion."

Middle East Receives One-Sixth of Global Arms Transfers - SIPRI

In the last five years Middle Eastern states accounted for 17 per cent of international arms transfers, say researchers at Sweden's SIPRI.

Saudi Arabian missile corvette Tabuk  (IMAGE – US Department of Defense)

The Middle East received more than one-sixth of arms transfers worldwide in 2006-10, according to new data published on 14 March 2011 by the Stockholm International Peace Research Institute (SIPRI).

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