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20 May, 2014

MENA and GCC Healthcare

MENA

20 May 2014
MENA

At present, the Middle East & North Africa (MENA) region is one of the most sought after markets for healthcare investments with the region's healthcare sector experiencing strong double-digit growth over the last few years. Based on industry estimates, healthcare spending in the region totalled USD69.6bln in 2012. In absolute terms, Saudi Arabia led the region in terms of healthcare expenditure (USD17.5bln in 2012) followed by the UAE (USD9.4bln), Egypt (USD9.3bln), Algeria (USD6.6bln) and Kuwait (USD6.0bln).

In terms of healthcare spending as % of GDP, Jordan leads the pack, followed by Lebanon, Tunisia, Morocco and Bahrain. Key factors driving this sector in the MENA region are the demographic profiles of the countries, the rising awareness on healthcare, strong economic growth, rapid urbanisation, active government investment, and initiatives to form a structured policy and regulatory environment favouring higher participation from the private sector.

Nevertheless, healthcare spending as a % of GDP in the MENA region still remains below the global average. One reason for this could be the fact that the region's healthcare system is largely financed by  the respective governments, i.e. government spending accounts for 64% of total healthcare expenditure in the MENA region while the figure is higher for the GCC region at 72%. In Saudi Arabia, the government finances 62% of total healthcare costs, while in Kuwait (85%), Oman (79%), Qatar (78%), and Jordan (70%).

Though the governments in these countries have been trying to build and improve their healthcare services by allocating more budgetary resources each year; however, we believe this is likely to burden state finances moving forward. As such, the governments must actively encourage more private sector investments in healthcare to share the cost.

Healthcare Demand Drivers

1. Population Growth and Demographic Transition - The population in the MENA region is approximately 223 mln. Over the last decade (2000-2010), there has been an increase of 39mln people in its population base resulting in the population growth averaging 2% per annum, much higher that the global average of 1.3%. Consequently, the International Monetary Fund (IMF) estimates MENA population to reach 240mln by 2016. Key factors for the rise in the region's population are increased life expectancy and low mortality rate due to improvements in healthcare facilities and rising expatriate population, particularly in GCC region.

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2. Drop in infant mortality and the rise in life expectancy rates - According to the World Bank, life expectancy rates in the MENA region has improved to 72 years in 2010 from 59 years in 1980, up 26%. Meanwhile, the infant mortality rate has declined to 25 per 1,000 live births in 2010 vis-à-vis 84 per 1,000 live births in 1980.

3. Rise in Elderly Population - MENA region's population base is relatively young, with the majority under 29 years of age. However, this structure is expected to change as the proportion of population over the age of 65 (elderly) is likely to increase moving forward. The elderly form a big market for healthcare, as they are prone to age-related ailments such as heart diseases, hypertension and diabetes. Data from the United Nations and the IMF suggest that the MENA region's elderly population totalled approximately 10mln in 2010, and is expected to rise to more than 40% to 14.3mln by 2015.

4. The surge in expatriate population - Expatriates constitute a large part of the GCC population, with approximately over 18mln expatriates in the region. While expatriates form 87% of total population in Qatar, their numbers surpass that of the local population in the UAE and Kuwait. The surge of expatriates has led to this increase in GCC's overall population.

5. Rising Income Levels - The demand for healthcare is also driven by higher purchasing power. Income levels in the MENA region have increased at a faster pace than the global average. In 2010, MENA and GCC had a per capita income of USD8,187 and USD26,745, respectively, compared to USD3,727 and USD12,782 in the beginning of the decade. Meanwhile, the global per capita GDP stood at USD9,164 in 2010 versus USD5,280 in 2000.

6. Lifestyle-related diseases - The incidence of lifestyle-related diseases, such as obesity, hypertension and diabetes, has increased in the MENA region due to growing preference for fast-food diet, lack of exercise, sedentary lifestyles and tobacco smoking. The number of people suffering from Type 2 diabetes has increased rapidly.

7. Mandatory Health insurance - Health insurance in developed countries is a must to help pay for high medical care costs. Approximately 85% of all US citizens have health insurance. However, in the MENA region health insurance is relatively new and was introduced only a decade ago. The reason being that healthcare in several MENA countries has been typically funded by the government. However, the trend has been changing with governments in the region introducing health insurance laws. In 2005, Saudi Arabia required companies to seek health insurance for expatriate workers. In 2008, the government extended the rule to include Saudi nationals. Kuwait, Tunisia, Abu Dhabi and Dubai are among the others that have followed suit and introduced health insurance laws.

About KFH Research Limited
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© Press Release 2014