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Healthcare and the economy are closely linked. In contrast to other products, health services have a dual character: on the one hand, they constitute an essential component of social development and wellbeing; on the other, they represent a growing sector of the economy, especially with populations in transition – either with a very young base, like GCC States, or in aging countries, like Western Europe.

Throughout the Middle East in general and the Arabian Gulf in particular, Health systems are at a crossroad. They have reached a critical point in their development where they must make the decisions that will shape their future. They arrive to this juncture with a rich legacy of accomplishments, but also with the backlog of unsolved problems and the pressure from emerging challenges. Health systems must be renewed if they are to keep up with the wave of innovation that has swept through economics, politics, culture, and technology.

In Kuwait, as well as in most GCC States, governments have arrived to a solid realization of healthcare reform strategies. Scaling down public delivery of services and introduction of private sector competition in the provision of healthcare with retention of public regulatory and quasi-financing roles is usually seen as the way to address public sector inefficiencies while retaining a tool for ensuring equity.

Today, the MOH is the owner, operator, regulator, and financer of the vast majority of healthcare services rendered, pharmaceuticals purchased, and medical equipment acquired in the Country. Its operating budget for 2008 was reported at KD 589 Million. As for the 2007 budget of (KD 526million) was responsible for purchasing almost KD 81 MM worth of pharmaceuticals, operating 5,217 inpatient beds out of 6,150 available (85%), admitted 193,207 patients out of 204,082 total hospital admissions (95%), and employed 24,633 clinicians out of 30,258 of medical staff working in the country (81%).

Extracted from MOH annual reports, the following table provides historical MOH budgets and per capita share:

Year

MOH Health Expenditure

Per capita MOH health Expenditure

Pharmaceuticals Expenditure

Per capita Pharmaceuticals Expenditure

2003

323,918,958

130

48,655,681

20

2004

346,284,986

131

49,658,333

19

2005

368,533,442

129

58,619,259

20

2007

526,376,896

158

80,877,033

24

 

 

Healthcare Investment Sector Outlook

Kuwaiti Healthcare industry is characterized by a large public infrastructure and a growing private sector. The industry is fast evolving. With the recent economy characteristics, there have been several changes including a shift towards increased incidence of lifestyle diseases, aging population and a greater demand for advanced treatment services with the rise of the informed/educated consumer who now have unprecedented access to knowledge. Hence, the overall structure of the healthcare industry is experiencing a lot of changes.

According to WHO’s World Health Statistics report 2008, the country has 19 beds per 10,000 population. Though WHO does not earmark any target standards on these indices, it gives a clear picture of the healthcare infrastructure status of the countries. Kuwait’s healthcare indicators i.e. Infant Mortality Rate, Maternal Mortality Rate and Life Expectancy are quite comparable with the best except for the healthcare infrastructure, viz. a viz. beds which is 19 per 10,000. The country should be aspiring for anywhere between 40 – 50 beds per 10,000 to cater to the growing demands of the population.

Al Razzi Management believes that since the country is in an urgent need to the changing needs and priorities of its growing ageing population, the private sector will be having a great role in its developing infrastructure. Therefore, healthcare industry within Al Razzi geographical mandate offers exceptional investment opportunities due to its current size, intrinsic non-cyclical nature, fragmentation, relative complexity, and compelling growth prospects. Al Razzi management believe that the unique segmentation of the healthcare industry, coupled with its current comparatively small size and eventual growth characteristics, can provide for a consistent flow of investment opportunities for specialized investors like Al Razzi.

According to a recent healthcare market release, “The overall healthcare sector will expand by a local currency compound annual growth rate (CAGR) of 8.47% over 2009-2014 on the back of the healthcare development plan. By 2014, we forecast a growth in spending to KWD1.37bn (US$4.88bn), with public sector expenditure continuing to provide the majority of funds at 74.7%. Kuwait's drugs expenditure stood at around KWD106mn (US$365mn) in 2009. Over the forecast period to 2014, BMI expects the market to grow at a CAGR of just under 6.06.19% to reach KWD143mn (US$510mn)”

Business Monitor International: "Kuwait Pharmaceuticals & Healthcare Report Q4 2010

Addressing the size of the healthcare industry, healthcare in general is one of the largest and fastest growing segments of the global economy. While healthcare expenditures in the developed world range between 9% and 15% GDP, developing countries’ expenditures on health range between 3% to 6% only. Noting that in developing countries the consumption of healthcare generally tracks increases in income and standards of living, healthcare economists believe that the expected growth rate in healthcare expenditures will be much faster than industrialized countries.

The fragmented nature of current private healthcare “entrepreneurial-ships”, and just like most other economic sectors, will undoubtedly be affected by WTO related compliance initiatives and current trade related barriers. Mergers, acquisitions, and group alliances appear to be the only way forward. The highly fragmented industry allows experienced healthcare investors to build companies in numerous healthcare sub sectors with a middle market investment strategy.

Addressing the current and prospective complexity of the sector, Al Razzi management believes that the current lack of sector specific professional expertise reduces competition from other investment groups and provides significant, medium and long term, advantages to knowledgeable investors like Al Razzi. This is particularly true when we note the current and prospective transformation of the role of respective Ministries of Health in the region from owners, operators, financers, and regulators to more of a regulatory role, while leaving the private providers and insurers to gradually take over the delivery and financing of care functions.

Finally, the demographic transition in region, coupled with technological advancements, as well as increasing consumerism and favorable political economy climates, represent compelling forces driving the future growth of the healthcare industry. Your Company, Al Razzi Holding is making and will make every effort to capitalize on all noted factors in an effort to become one of the leading blue chips of the healthcare industry.

 

 


 
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