By Peter Feuilherade
Healthcare is a major growth area in the Middle East, with public and private investment in the sector forecast to exceed $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. 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 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. 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 $79.2 billion by the end of next year, while the GCC’s combined pharmaceutical and healthcare market is set to exceed $133 billion in 2018, according to the Frost & Sullivan business consultancy.
Although GCC healthcare spending is set to increase, 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. 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 $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 $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. “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,” observed 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 $15 billion a year travelling abroad for medical care, “governments and private companies will both benefit from providing more focused, high quality care locally”.