Dubai: The GCC governments have embarked on massive investment plans to upgrade health infrastructure but the sharp decline in oil prices could slow down some of these investment plans and could result in greater private sector participation in the sector, according to Alpen Capital.
“The GCC governments’ budgets are increasingly coming under pressure amid falling oil prices, thereby opening up investment arenas for regional and international private sector players to make their entry into the health care market. We see this trend strengthening as governments and private companies work with each other to benefit from the opportunities presented by the GCC health care sector”, said Sanjay Vig, managing director, Alpen Capital (ME) Limited.
The GCC governments’ emphasis on the development of the health care sector has resulted in several investment opportunities for the private sector.
Over the last year the region has witnessed steady flow of private equity funds into the sector and the region has witnessed several successful mergers and acquisition (M&A) transactions in the sector.
A rapidly growing population and a shift in age-group distribution are among the key factors driving the GCC governments to improve the health care infrastructure.
While budget constraints of governments could be partly addressed through increased private sector investments and public-private sector participation (PPP), the sector faces other challenges such as high costs and an acute shortage of local talent.
The cost of medical treatment in the GCC is high compared to the developed, as well as emerging medical destinations, leading several local patients in the GCC to travel abroad to seek treatment. In addition to the cost disadvantage, another factor driving outbound medical tourism is limited super-specialised care in areas such as oncology and cardiology.
The GCC faces a dearth of local talent to meet the requirement at health care centers. Another challenging factor is the high dependence on expatriates, who consider the GCC health care facilities as a stepping-stone to gain experience and then seek careers in the West. The GCC health care sector is likely to experience a dearth of health care professionals in the near term.
In the GCC health care sector, private players face entry barriers such as a high cost of setting up a hospital and high payback period.
Health care providers in the GCC are looking at measures to curtail their operating costs in order to offset the impact of high capital expenditure towards constructing hospitals.
The current investment climate characterised by global economic uncertainty, low oil prices and volatility in financial markets has made investors across the globe more cautious and risk-averse.
This can have a negative impact on the fund-raising ability of companies in the region to finance their health care projects.
