According to a 2012 report by Booz Allen, $628 billion (Dh2.38 trillion) has been invested in PPP (public-private partnerships) infrastructure projects in the GCC (Gulf Cooperation Council) over the last 10 years and the region plans to invest a further $1.5-2 trillion over the next decade. Health care is one of the primary sectors that will benefit from such investment, and the UAE is the leading target for private equity (PE) players.
Good reason then to explore the role of PPPs a bit closer, to see how and where these entities can complement each other best.
In an industry like health care, the overarching objective of all stakeholders, whether public or private, is to improve the quality of health care provision, provide better access to services and operate at maximum efficiency for the benefit of the population. The Middle East offers specific challenges, as well as opportunities, and collaboration between public and private entities is not only beneficial, but vital, in order to develop the health care sector into a world-class system.
Public private partnership covers a broad range of business relationships between public institutions and private ones. In the health arena, typical examples include outsourcing management and lease contracts to private entities on behalf of a facility or a component of the facility, concessions and BOT (build-operate-transfer) projects. PPPs can also generate value in the areas of joint workforce training and buying services from the private sector that face a shortage in the public sector.
The private sector is better placed than the public sector to provide financial support to drive profitable areas of growth in specific sub-sectors. Furthermore, it is able to use innovative financing techniques to invest in capacity building, which the public sector might not have the flexibility to do due to internal regulations or bureaucratic processes.
Private companies also have better access to managerial and clinical experience gathered from across the globe. Bringing in best-in-class, international operators will drive world-class standards in Mena (Middle East and North Africa) health care through the transfer of technology, managerial insight and skilled labour.
However, while we are seeing significant growth in health care PPPs, much more still needs to be done to provide a legal and regulatory framework in order to attract private involvement and both parties should always proceed with caution.
Governments should only pursue PPPs that are likely to be successful and with a private partner who they are confident has the expertise and capital to deliver. Successfully executed PPPs combine resources and expertise, while sharing the risks and responsibilities. More private sector participation will help governments to manage costs and increase health care expenditure, allowing the sector to develop in a sustainable way as it continues to improve its capabilities.
The GCC is a complex region, with each country facing specific challenges. Governments need to evaluate the health care gaps and objectives for their own country and set out opportunities for private sector involvement based on their current and future needs.
From the PE perspective, particular growth areas exist in filling gaps in undersupplied areas and developing highly specialised services, as opposed to more traditional targets such as hospitals and general medical provision. For example, areas such as long-term care and acute care are facing huge demand versus a major shortage of specialist providers and this is placing a physical and financial burden on already over-populated ICUs (intensive care units).
Diagnostic centres and pharma are two other areas that present strong opportunities for private investment. The private sector has a responsibility to identify and seek opportunities by sharing knowledge and expertise with the public sector in their respective fields.
In terms of monitoring and evaluating these relationships going forward, there is no doubt governments must be the regulator in a free economic model. To be able to do that, they should play a major role in gathering valid data and analyse the needs for capacity by comparing beds, doctors to the US and Europe.
The public sector should also spend time and money on developing their own benchmarks and needs for capacity building and remain responsible for ongoing monitoring of standards and operating practices across the sector.
Having a long and short-term strategy in place with detailed descriptions of the main PPP areas would encourage the private sector to participate more. Government led finance initiatives could include long-term low-cost financing for health care projects, and duties could also be minimized for importing medical equipment.
The most vital ingredient for success is that above all, public and private entities must work together in order to improve the health care landscape and enhance the workforce capacity. In such a scenario, they will both reap the benefits, along with the patients.
— The writer is the founding partner at TVM Capital Mena.
