Businessmen: Anticipating new laws, the revolution generated a state of recession
In the wake of the January revolution--and the security chaos that ensued--the investment chart in Egypt is in need of reexamination and regulation of its priorities. One might safely deduce that the healthcare sector in a country whose population exceeds 90 million people would be an attractive investment, especially when taking into account the various investment domains within this sector.
Has the sector been affected by the Egyptian revolution? Or has it been affected by the absence of stability and security in the country, as others maintain? Has the revolution become an inducement for even greater investment in the sector?
Fruitful Healthcare Domains
The former chairman of the holding company for serum and vaccine in Egypt, Dr. Mohammad Rabie, perceives that the revolution did not have a direct impact on healthcare in Egypt; the Egyptian patient is still in need of additional medical care, and the standard of care in Egypt is inferior to that in other Arab countries. He pointed out that the Egyptian citizen suffers from inadequate healthcare services in a range of domains, including lack of medications, care, and medical necessities in hospitals and clinics. At the same time, citizens' awareness about healthcare and their quest for the best alternatives for medical services available have intensified. As Egypt's population soars to approximately 90 million people, this fact consolidates all types of investments in the healthcare domain.
Furthermore, Dr. Rabie stated, despite the bleak economic situation following the revolution, citizens are still seeking the best healthcare available, as evidenced by the soaring rates of medical checkups and the noticeable rush to medical clinics and even to the mediocre health service centers that provide services with prices that are affordable to the lower class.
Regarding the role of the Egyptian government in subsidizing a sound healthcare service for its citizens, Dr. Rabie affirmed that at present the government cannot carry out such a task. As a result, the healthcare domain is in dire need of intervention from the private sector, in order to guarantee the availability of high-quality health services in Egypt. Leaving such a role to the government, said Dr. Rabie, would endanger the quality of Egypt's health services. He added that the security situation does not pose any noticeable danger to healthcare investment, as the domains of healthcare investment are numerous and varied and are not linked to the security factor.
According to Dr. Rabie, pharmaceutical companies are currently considered the best domain for investment in Egyptian healthcare. As the country continues to import more than 80 percent of medical supplies and hospital appliances, domestic factories that are able to produce such products will garner sizable earnings.
The Reality of Investment
A study prepared by the General Authority for Egyptian Investment on the reality of healthcare investment in Egypt points out that government expenditure on healthcare during the last fifteen years has increased at a rate of 200 percent. That investment produced noticeable results, as exemplified by the similarity of the disease profile in Egypt to that of advanced countries, where most deaths are caused by noncommunicable diseases. By implementing comprehensive immunization programs, the government succeeded in eliminating infantile paralysis. In addition, crib death mortality rates decreased to 29 deaths for every 1,000 newborns, which is considered a fundamental development, given that the world average is 49 deaths for every 1,000 newborns.
Healthcare is considered one of the important developed sectors; between 2002 and 2006, the investment scale increased at a rate of 15 percent per year. The high demand for up-to-date and sophisticated healthcare services offers foreign investors and providers of healthcare services a vigorous incentive to enter this market. Joint projects between the government and the private sector are the most important means of investment in the Egyptian healthcare sector, as these projects seek since their implementation in 2006 to improve the standard of healthcare services by encouraging investments in infrastructure projects such as construction, renovation, and refurnishing of healthcare centers.
The General Authority study cited a number of factors that induce the market to invest in this sector, such as the presence of a large and well-trained workforce averaging 8,000 medical graduates each year. The 22.8 million individuals who make up Egypt's healthcare workforce comprise the largest healthcare workforce in the Arab world and the second largest, behind Iran, in the Middle East region and North Africa. Additionally, the Egyptian workforce in the healthcare domain is reputable and characterized by the advanced standard of quality of its service and expertise.
The healthcare sector has attracted considerable attention as a promising investment domain, with the investment scale in 2006 amounting to USD160 million. The government's extensive reform plan for the national healthcare system will revive more than 4,500 healthcare centers and provide additional investment opportunities, specifically through joint programs between the government and the private sector.
The General Authority study also presented a layout for the establishment of a complete medical city in an area of 200 feddans located west of Alexandria. The project calls for the establishment of hospitals, clinics, convalescence centers, five-star hotels, research and laboratory centers, a medical education center, and a number of commercial and administrative structures, at a cost of EGP8 billion.
Additionally, according to a study undertaken by the Egyptian Ministry of Finance, the government called upon investors and businessmen to invest in the healthcare sector, allocating EGP10 billion to healthcare in the budget for the 2011-2012 financial year with an annual increase of 3 to 10 percent over a time period not to exceed three years.
Egypt and the World
A recent study issued by The Economist Intelligence Unit pointed out that expenditure on healthcare in Egypt in 2008 reached 6.1 percent of gross domestic product (compared with 6 percent in Turkey and 4 percent in Saudi Arabia). It is worth noting that these rates are low compared with expenditures in the United States (16.1 percent) or Germany (10.6 percent). According to estimates issued by the World Health Organization, the healthcare expenditures in Egypt reached USD113 per person in 2008.
The study anticipated that the government will allocate larger expenditures to health care in the coming five years despite the financial deficit, which reached 8 percent of gross domestic product in fiscal year 2009-2010.
Nevertheless, the government is making every effort to boost healthcare in Egypt so that every Egyptian citizen is covered by the end of 2011; this is in accordance with the government's 2007 plan, which is currently being implemented.
Moreover, according to The Economist Intelligence study, the government drafted financial plans allocating EGP19.2 billion (USD3.4 billion) to develop healthcare in 2010-2011. It also allocated EGP5.2 billion for renewal, development, and construction of 4,500 healthcare centers, 1,500 of which have been opened; the rest are being implemented.
The Private Sector
Regarding the private sector's role in healthcare projects, the study noted that during the period 1995-2006, there was a tangible boom in healthcare, coinciding with the entry of the private sector into the healthcare domain. In that period, the number of available beds increased from 12,277 to 26,307. Private hospitals and centers provide a better quality service than that offered by government facilities. Employees at private healthcare centers and hospitals earn higher wages than their counterparts in the public sector and these centers typically have more up-to-date equipment. Last but not least, the government reduced custom duties on imported medical equipments and appliances by 5 percent.
Table 1 illustrates the growth of expenditures on healthcare as a percent of gross domestic product in Egypt compared with the United States, Japan, China, and Germany.
According to a study prepared by Masah Capital Limited, Egypt is the second largest market in the Middle East. The Masah Capital study indicated that in 2009 the Egyptian government spent USD9 billion on healthcare, 5 percent of its gross domestic product or USD112 per person. It is worth noting that private sector participation amounted to 58 percent of the healthcare expenditure. This clearly reflects the private sector's growing role in Egyptian healthcare projects.
Figure 2 illustrates Egyptian healthcare expenditures compared with other Middle East countries and private-sector participation in Egyptian healthcare projects compared with that of the government.
Table 3 illustrates expenditures healthcare in Egypt compared with the Middle East as a whole.
Positive Impact
The chairman of the board of directors of the International Forma Queen Company, Dr. Mustapha Awad, believes that the revolution has had a positive impact on healthcare investments in Egypt, as successive flexible governments welcomed investors with open arms, creating various laws that are favorable to the investors. Dr. Awad indicated that investment in the Egyptian medical domain has always been extremely profitable, due to the large population as well as to the sound infrastructure for healthcare projects, which ranges from first-class hospitals to mediocre, lower-class ones.
Dr. Awad added that foreign investment in both the health and medication domains, be it in the private or public sector, has existed for a long time, serving the Egyptian citizen as well as consolidating the economy. Dr. Awad stated that a number of laws have been issued by authorities to regulate such operations; however, these laws need extensive modifications to consolidate a balanced and serious investment operation and attract foreign investors. Dr. Awad stressed the importance of developing lower-level healthcare programs, as such programs are well received by Egyptian citizens.
The chairman of the board of directors of the Egyptian Company for Healthcare in Egypt, Dr. Sarie Mohammad Al-Jabali, observed that the unstable security situation that existed from March first to mid April partially affected healthcare investment and caused numerous companies to lose liquidity. This state of affairs forced some of these companies to sell shares from their companies or from their affiliated healthcare institutions, while others resorted to leasing private hospitals. However, the current security situation is stable, which will make for profitable investment operations due to the depressed prices of medical equipment and real estate resulting from the market recession.
By Mohamed Abdulzaher
mohameda@zawya.com
© Zawya 2011
