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.
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.
