Saudi Arabia offers great growth as government steps back
NMC's success shows the promise of healthcare
As the governments of the Arabian Gulf look to overhaul their economies, healthcare, together with education, is expected to be one of the key areas of growth across the region in the coming years.
As the state steps back from its former role as primary healthcare provider for its citizens, opportunities abound for private companies. A report issued last week by Alpen Capital found that healthcare projects worth Dh200 billion are underway across the Middle East, with around half that figure accounting for by hospital mega projects that are expected to add 22,500 additional hospital beds.
Needless to say, healthy patients offer the promise of healthy profits for a handful of healthcare providers in the region. Abu Dhabi-based NMC Healthcare last week announced a 39 per cent rise in profits for the first half of the year, sending its London-listed shares to their highest ever level.
The positive impact has been felt in related industries as well. After several challenging years, the UAE’s insurers posted a healthy rise in first half profits, due in no small part to the final stage of the implementation of compulsory medical care in Dubai.
Unsurprisingly, the sector’s growth prospects in the region have spurred a buying frenzy. As our interview with NMC’s chief executive Prasanth Manghat confirms, nowhere is the prize for healthcare providers greater than Saudi Arabia.
The kingdom’s large and rapidly growing population, combined with a widescale privatisation of government healthcare facilities, make it the key market for the likes of NMC. Consultants Aon Hewitt forecast the kindgom’s healthcare sector will grow at a compound annual growth rate of 12.3 per cent up to 2020, thanks to a combination of mega projects like Mecca’s King Abdullah Medical City and a proliferation of smaller but no less vital secondary care facilities.
Competition for assets in Saudi Arabia and across the region is intensifying, to the extent that NMC may find itself a target; Al Noor Hospitals, a key UAE rival, was bought out by South Africa’s Mediclinic in 2015 for $2.2bn.
The price of oil may rise and fall, but people will still need to go to the doctor. And with the state looking to step back, the opportunities for the private sector aren’t likely to diminish anytime soon.