The Kuwaiti healthcare sector offers tremendous opportunities, given the rising population and an under-explored healthcare sector that's largely driven by the public sector. The government is keen for private sector involvement and has initiated a number of reforms and incentives to attract the private sector.
Despite crippling political deadlock, Kuwaiti is looking to march ahead with many of its infrastructure projects. Given that healthcare has an immediate and direct impact on the Kuwaiti populations, the sector has been identified as crucial, even if many of the projects may not immediately be fast-tracked.
Plus, the economy appears to have staged a smart recovery from the global financial crisis and there is an acute awareness to create revenue streams away from the energy sector and stimulate private sector growth.
National Bank of Kuwait estimates that the country's gross domestic product (GDP) recovered impressively in 2010, rising by 16.9% to KD35.6 billion. Oil GDP increased by 22.5% on the back of strong oil prices last year, while the non-oil sector recorded a less significant but still strong gain of 9.8%.
"This year, we expect GDP to grow by around 27%, supported still by high oil prices and by the government's development plan. In real terms, we expect GDP to grow by an average of 4.5% this year and the next."
The International Monetary Fund (IMF) has identified healthcare as a key area for the government to invest in, with the objective of transforming Kuwait into a regional trade and financial center, while expanding the role of the private sector in the economy.
But the fund notes in a recent report that the country's investment in healthcare, apart from education and infrastructure, lags behind international standards, despite its high standard of living and GDP per capita.
"The primary health care system is relatively good but the system has not kept up with the demand for specialized care, leading to an expensive program to send citizens abroad for healthcare services," notes the IMF. "The health care infrastructure, such as hospital beds per capita, is significantly below countries with a comparable income level and the share of spending in GDP is low.
Accordingly, there is significant scope to increase the provision of healthcare services domestically, which will require capital spending and adequate resources to hire well-trained service providers."
Major plans
The Kuwaiti Government is conscious of the healthcare needs and is expected to tender US$3-billion worth of healthcare projects over the next year, according to a report by Kuwait-based Kleos Healthcare Corporation.
"The 2011-12 Kuwait Government budget will be the first time the Ministry of Health spends over 1-billion Kuwaiti dinar ($3.3bn USD) on the operational expenditure (OPEX) of the public healthcare system.
These projects include:
1. Establishment of New Companies
The Kuwait Health Assurance Company (KHAC), a 1600 to 1800-bed health maintenance organization, and the yet to be established Private Health Insurance Company for Kuwaiti Nationals (PHICKN) .
Kleos expects the establishment of KHAC and PHICKN to be strong contributors to the diversification of health system finance in Kuwait.
Nine consortia have bid for the project, and the government is expected to announce the winner by November 17.
"The government of Kuwait will provide 140,000 square metres of land (at a minimal lease price) divided in three equal parcels in the growing governates of Ahmadi, Jahra and Farwaniya," noted Dr Mussaad Al-Razouki, Chief Executive Office at Kleos Healthcare Corporation, in the report.
"It will be the responsibility of the winning consortium to deliver at least three hospitals (1600 to 1800 beds) and 10 to 15 primary care clinics (at least one clinic in each of the six governorates of Kuwait) in 36 months."
The primary market for the project is the expatriate population, estimated to be around 1.7 million.
The government is also looking to corporatise healthcare for Kuwaiti nationals, and create a local company half-owned by the public and the other half by a private sector consortium.
Kleos expects the PHICKN project to be tendered by late 2013.
2. Strategic Public Private Partnerships
A 500-bed New Rehabilitation and Physical Medicine Hospital (NPMRH) through a design, build, finance and maintain (DBFM) contract.
The project has also received 15 solicitations from consortiums and is expected to provide tertiary rehabilitation, geriatric rehabilitation, extended care for persons with physical disabilities, apart from facilities management services.
3. Expanding Existing Projects
Tenders for the 540, 400 and 240 bed expansion of the Husain Maki Jumaa Specialty Surgery and Oncology, Amiri General and Razzi Orthopedic Hospitals respectively.
Originally planned to include nine existing hospitals, the expansion of the three hospitals mentioned above has seen interests from no less than 12 consortium; it is unclear when the remaining six expansions will take place, notes Kleos.
Major growth area
Al Masah Capital estimates that the Kuwaiti healthcare market stands at $4.3-billion and set to grow as greater income levels, education and awareness among Kuwaitis and expatriates leads to a greater demand for more advanced medical care.
Alarmingly, Kuwait also has the highest obesity rates in the region, and the government is looking to address rising medical care costs and the impending demand for high-end healthcare.
A McKinsey study conducted in 2007 indicated the demand for healthcare in the GCC would surge 240% over the next 20 years, mainly due to significant increase in cardiovascular diseases and diabetes-related ailments.
According to the World Health Organization, the diabetes-affected population in the region is expected to increase 2.5 times by 2030 from 2000 levels, with Kuwait registering the highest CAGR of 3.8%.
Kuwait also has the highest life expectancy among MENA countries. It improved to 78.1 years in 2009 from 75.0 in 1990, while the rate of infant mortality slid to 8.2 per 1,000 live births from 13.9 over the same period.
"In contrast, Kuwait lacks the required number of hospital beds and physicians; it had 18.0 hospital beds and 17.9 physicians per 10,000 people in 2009," notes Al Masah. "We estimate current shortage at 4,500 hospital beds and 3,000 physicians in Kuwait."
Currently, the Kuwaiti government spends 76% of the total spend of healthcare in the country, and it is looking to involve the private sector to shoulder some of the responsibility and bring in technological advances and international expertise to the country's healthcare sector.
At the regulatory level, Kuwait's government has made health insurance a mandatory requirement for expatriates earlier this year. According to media reports, the new health insurance policy for expatriate personnel costs a maximum of KWD130 annually.
"There is strong momentum within the government of Kuwait to create an independent healthcare regulatory, which this report will refer to as the Kuwait Health Authority which will lead the policy development, licensing, quality assurance and the overseas healthcare functions in Kuwait," notes Kleos.
Phara potential
There is great potential for private sector to get involved in all aspects of the country's healthcare sector, including pharmaceuticals.
Kuwait is the third-largest pharmaceutical market in the GCC. The sector size is expected to be US$ 374 million in 2010.
"High expatriate population and dominating presence of patented drugs, along with a favourable regulatory structure and stable political and economic conditions, drive pharmaceuticals sector's growth in Kuwait," notes Al Masah.
"Only 20% of pharmaceutical products in terms of volume were manufactured domestically in Kuwait in 2009. Kuwait- Saudi Pharmaceutical Industries (KSP) is the only prime generics producer in the country. Pharmaceuticals multinational firms do not have manufacturing facilities in the country, and operate through representative offices in neighbouring countries of Saudi Arabia or the UAE.
Currently, the market is dominated by imported and expensively priced patented drugs as generic drugs are not widely available.
Conclusion
Much like the rest of the Gulf, Kuwait's healthcare and related industries (including healthcare insurance, pharmaceuticals) remains a largely under-explored as a sector.
Not one to miss an opportunity, private equity players have invested $882 million regionally in the sector, including $23.9 million in Kuwait's Elaj Medical Services by Global Opportunistic Fund, and NBK Capital's stake in Taiba Hospital.
Most analysts believe this is only scratching the surface as demand for healthcare in Kuwait and the wider Gulf region is expected to rise from $65-billion today to nearly $125-billion by 2015.
© alifarabia.com 2011
