GCC Hea

Growing investmen
for private sector pl
Driven by new government strategy
and regulatory reforms, more
investments are expected in the
GCC healthcare industry, aimed at
enhancing and developing healthcare
infrastructure and value chain. This
increase in investment will lead to a
significant expansion in the healthcare
sector and will create attractive
opportunities for private sector
participation in the industry.

26 | Spring 2012 | A Middle East Point of View

Healthcare

althcare:

nt opportunities
layers
20

21

22

23

24

25

26

27

KSA
bn USD

1000

1500

2000

2500

3000

3500

4000

4500

Kuwait
new beds

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

Qatar
bn USD

A Middle East Point of View | Spring 2012 | 27

Key market drivers

Demand for health services are affected by several key
drivers, including demographic and macroeconomic
factors. According to the Economic Intelligence Unit
(EIU), the Gulf Cooperation Council (GCC) population
reached 45 million in 2010 and is forecast to reach close
to 57 million by 2015, posting a cumulative annual
growth rate of 5%. The GCC population is relatively
young with the vast majority of people under the age of
29. But this structure is expected to change in the next
10 years, with the over-65 age segment experiencing
the fastest growth rate. This segment has a
proportionally higher healthcare cost per capita
associated with the treatment of diseases such as heart
ailment, hypertension and diabetes.
The healthcare industry is also driven by positive growth
prospects and increased purchasing power, such as
those witnessed in the region. The overall income
levels in the GCC region have risen substantially due to
the increase in oil prices over the past few years. Income
growth has outpaced population growth, resulting in
faster increases of per capita income. According to the
International Monetary Fund (IMF), per capita GDP in
the GCC is expected to grow 5.4% over the period
2010-15, which is likely to further drive healthcare
spending in the region.
Increased urbanization and rising per capita income
have also led to a more sedentary lifestyle in the GCC.
This has substantially increased the prevalence of
lifestyle-related diseases such as diabetes, cardiovascular

The higher incidence of lifestyle

diseases is projected to lead to an
increase in per capita healthcare costs
and more demand for specialized
tertiary medical facilities

ailments and cancer. According to the World Health

Organization, the GCC has the highest ranking in the
world in incidences of diabetes and obesity. The higher
incidence of lifestyle diseases is projected to lead to an
increase in per capita healthcare costs and more
demand for specialized tertiary medical facilities.
Additional investment and private sector participation
are required to reduce the demand/supply gap.
Key market drivers and challenges for the GCC
healthcare industry

Rising income
levels and
population
growth
Mandatory
health insurance
and growing
penetration

Developing
healthcare
infrastructure

Key market
drivers

Outflow of
patients seeking
treatments
outside the
GCC

Inconsistencies
in quality and
standardization
of services

increased
focus on policy
making and
intervention

Growing demand for

advanced medical
equipment and
technologies

Complexity and
lack of standardization
in regulations

Source: Deloitte

28 | Spring 2012 | A Middle East Point of View

Growing lifestyle
diseases and aging
populations

Key market
challenges

Heavy reliance on
government
finance

Spiraling
healthcare
costs and overconsumption

Shortage of
healthcare professionals
and limited medical
education
institutions

Healthcare

Developing the healthcare infrastructure

GCC governments have devised strategies to boost their
healthcare infrastructures. However, they continue to
lag behind the developed markets in terms of standards
and key indicators. Expenditure on healthcare in the
GCC grew by around 14% to reach over $34 billion in
2009, of which the public sector contributed 70%. But
despite a relatively high level of public spending,
expenditure as a percentage of GDP stood at 3.5% only,
far below that of developed economies and the world
average of 10%. In addition, GCC states lag behind
developed countries in bed count. The bed density in
the GCC is currently at 1.8 beds per thousand, as
compared with 3.1 in the U.S., 8.2 in Germany
and a staggering 13.7 in Japan.
Aided by large budgetary surpluses, the GCC
governments are set to make unprecedented
investments to support healthcare provision and bring
the industry up to par with international standards in
terms of bed capacity and the quality of healthcare
services. Such investments will require strong private
sector partnerships as well as a strong private sector
presence to both, sustain and capitalize, on expected
demand. Promoting the industry to private players is a
priority for all GCC governments, as it is clearly stated in
their strategic and development plans.
Saudi Arabia
Saudi Arabia, which is the largest and one of the most
developed markets for healthcare services in the region,
allocated a $23 billion healthcare budget in 2012,
representing the largest in the history of the Kingdom.
They have also allocated a robust SAR 274 billion (USD
73 billion) for various health initiatives in their ninth Five
Year Plan (2010-2014), including the construction of
121 hospitals, 700 primary healthcare centers and 400
emergency centers. The plan is to improve the bed
density from the current 2.2 to 3.5 and the ratio
of physicians to beds to 0.75. The Saudi government is
undertaking policy reviews to create an effective
regulatory framework aimed at providing the
appropriate environment for increased private sector
investment and expansion in medical facilities and
production and distribution of medical equipment,

Aided by large budgetary surpluses,

the GCC governments are set to make
unprecedented investments to support
healthcare provision and bring the
industry up to par with international
standards in terms of bed capacity and
the quality of healthcare services
supplies and services. Such initiatives include the
promoting of mergers and acquisitions to spread private
healthcare expansion, offering incentives to attract
highly qualified medical professionals, addressing the
shortage in qualified medical staff through education
and the expansion of medical colleges and residency
programs, creating partnerships with leading
educational institutions to build the Kingdoms medical
education capacities, designing a sophisticated
healthcare system to regulate and track the increasingly
complex healthcare sector and establishing a national
electronic records system and business intelligence
solutions to support the Kingdoms healthcare
expansion. The aim of the privatization initiatives is to
reduce public spending and re-focus government efforts
on market regulation.
Kuwait
Kuwait is another example with plans to increase bed
density from the existing 2 to 2.2 by building nine
new hospitals by 2016, which will add 4,000 new beds
to the market. The government is also planning major
policy and regulatory reforms to increase the private
sector investment in the industry. The government is
also identifying specializations that the private sector
can invest in to align service offering with the public
sector and control competition to ensure quality services
are being offered.

A Middle East Point of View | Spring 2012 | 29

Promoting the industry to private

players is a priority for all GCC
governments, as it is clearly stated in
their strategic and development plans
Qatar
Qatars 201112 budget allocated QAR 8.8 billion (USD
2.4 billion) for health projects and services and the
government continuously encourages the private sector
to play a greater role in upgrading healthcare
infrastructure. In fact, private sector participation, which
stands at around 60% of total hospitals, has been
steadily rising over the years and the government has
recently taken a number of additional steps to further
widen participation. For example, Qatars Supreme
Council of Health (SCH) plans to introduce a national
health insurance scheme within the next three years
under the National Health Strategy (NHS) 201116 to
reduce dependence on public funds for healthcare.
Qatar also intends to implement a pioneering e-health
program across its hospitals and clinics nationwide,
including the introduction of an electronic health
records system. The imminent need for a comprehensive
information management system will provide extensive
opportunities for the private sector to contribute to its
development and benefit from the flow of information it
generates. Furthermore, in January 2011, the SCH
approved a decree to remove all price controls on
medicine in an attempt to liberalize the market and
increase competition. Currently, the SCH is
implementing the free pricing policy, but routine
inspections on the prices are conducted to prevent any
misuse of the policy. The SCH also has a new direction
to promote pharmaceutical manufacturing in the
country for private sector investors.

30 | Spring 2012 | A Middle East Point of View

UAE
Meanwhile, leaders in the United Arab Emirates (UAE)
have emphasized in their vision that all Emiratis should
have access to comprehensive world-class facilities with
the best quality services in early diagnosis and
preventative medicine. With this core focus, mandatory
insurance will be introduced to all Emiratis and nonEmiratis across the UAE (beyond Abu Dhabi), which in
turn will increase consumption of healthcare services
(perhaps as much as three-fold) and will help regulators
identify the gaps in current services at hospitals and
clinics across the emirates. The private sector will have
access to better information on the market landscape,
thus providing an additional platform for investment in
the industry. Furthermore, the President of the UAE,
Khalifa bin Zayed al Nahyan, recently issued a decree to
establish a Federal Health Authority (abolishing an earlier
decree). The new decision was driven by the Presidents
interest in utilizing the allocated budget on improving
and expanding the existing healthcare services and
infrastructure in the country.
Specifically, the Emirate of Abu Dhabi has been working
to strengthen their cooperation with internationally
recognized healthcare providers with an aim to transfer
knowledge and know-how to the local market. The
Public-Private Partnership (PPP) model between
Mubadala and Cleveland Clinic is an example of the
strategic direction and importance the government
of Abu Dhabi has placed on providing world-class
healthcare services to its citizens. Dubai, on the other
hand, has created a specialized healthcare free zone
(Dubai Healthcare City) aimed at attracting
internationally recognized medical service providers
to set up in a 100% ownership structure.
The leadership of Dubai strongly believes that increased
private sector participation is a promoter of competition
that results in best in class quality service offerings. The
Dubai Health Authority (DHA) has also set new initiatives
aimed at positioning the industry as an international hub
for medical tourism. Similarly, in April 2012, the ruler of

Healthcare

Sharjah, Sultan bin Mohamed Al-Qasimi, announced

the establishment of the Sharjah HealthCare City
(SHCC), which is also aimed at attracting international
healthcare companies and private players to the
emirate. It is estimated that Sharjah will require an
additional 630 beds in the next five years to meet
growing demand. As such, healthcare has been
designated as a key focus sector for the attraction
of Foreign Direct Investment into the emirate.
Good reasons to invest
The GCC healthcare market stands on the brink of major
developments and double digit growth. The combined
forces of regulatory and funding reforms (i.e. structural
changes in service provision and recent moves towards
a compulsory insurance system) and increasing demand
for services through population and income growth
and high incidence of disease categories make this
inevitable. As the GCC governments plan for additional
investments and expansions, the private sector is
becoming increasingly aware of the gaps in healthcare
services, not only in terms of infrastructure availability
but also as quality of services. Indeed, any additional
investment in the industry will require a strong private
sector presence. This creates attractive opportunities
for the private players to supplement the efforts of
the government and devise effective strategies focused
on highly differentiated services and products to cater
to the unmet demand across the entire healthcare
value chain.

As the GCC governments plan for

additional investments and
expansions, the private sector is
becoming increasingly aware of the
gaps in healthcare services, not only
in terms of infrastructure availability
but also as quality of services

by Parham Gohari, senior manager, Strategy

Consulting, Deloitte Middle East and Sari
Alabdulrazzak, manager, Strategy Consulting,
Deloitte in the Middle East

A Middle East Point of View | Spring 2012 | 31