Healthcare spending in the Middle East and North Africa region is on its growth track to reach $144 billion by 2020, following enormous development witnessed over the last 10 years, according to estimates by Al Masah Capital. Crossing $95.8 billion in 2013, government spending in healthcare across the region tripled from just $30.4 billion in 2003. The Dubai-based alternative asset management company also noted that GCC nations, which account for about 52 percent of the healthcare expenditure of the region, kept pace, clocking healthcare spend of $49.8 billion in 2013 versus $15.5 billion in 2003, and economic indicators point towards even brighter prospects for the sector. Healthcare in MENA has emerged as one of the most promising sectors supported by strong demand and supply factors. A robust healthcare sector would help the region's efforts at economic diversification by creating new employment opportunities and will also arrest outbound medical tourism, which is currently a significant burden on the state. Moreover, it would also incentivize investments in higher medical education and research, and help the region take giant strides towards becoming a global hub for medical tourism. Despite this steep rise, healthcare spending in MENA is below par considering the global average. The region spends only 4 percent of its GDP on healthcare compared to 12 percent in high-income nations and a world average of 10 percent. On a per capita basis, the GCC spending on healthcare was $1,022, comparable with the world average of $1,062. However, the MENA region has a much lower per capita spend of $415. "The healthcare sector, accounting for about 10 percent of the world's GDP, has been critical to global economic growth over the years. Global spending on healthcare increased to $7.6 trillion in 2013 from $3.9 trillion in 2003. However, the healthcare spending pattern across the globe has been uneven with high-income countries spending a large share of their GDP on healthcare while developing countries gradually increasing their healthcare spend," Shailesh Dash, founder and CEO of Al Masah Capital, said. This means that while the MENA region is below par in terms of GDP share for healthcare spending, a trend towards increasing budgets for the sector is evident and further growth is forecast in the healthcare sector, especially on the back of steady economic performance witnessed in the region. The MENA economy put up a steady performance in 2014, growing at 2.4 percent compared to 2.3 percent in 2013. Despite the sharp fall in oil prices in H2 2014, most economies performed well, supported by the robust performance of the non-oil sector and large government spending. In 2015, the MENA economy is expected to grow 2.7 percent. While growth in major oil exporting countries is expected to remain steady at 2.4 percent in 2015, the major oil importing nations are expected to receive an economic push due to lower oil prices and may clock an average growth rate of 4 percent in 2015, up from 3 percent in 2014. Over the last decade, multiple factors have contributed to the rapid growth of healthcare sector in the MENA region. The steady increase in elderly population, rise in income levels, improvement in life expectancy, lower infant mortality rates, and the prevalence of lifestyle-related diseases have ensured strong demand for healthcare in the region. On the supply front, the high levels of government spending on healthcare and regulations to improve insurance penetration have incentivized higher investments in healthcare in the region. "The healthcare sector in MENA, despite great prospects for future growth, faces stiff challenges. The healthcare infrastructure in the region is quite inadequate, and the region would have to almost double its current hospital bed capacity by 2020 to be at par with the developed nations. Additionally, the sector faces an acute scarcity of medical healthcare personnel. Moreover, the relatively high cost of treatment, low participation of the private sector, and poor regulatory framework with inconsistent quality standards have weighed on the growth of the sector in the past. Although the regional governments are making efforts to ensure continuous development of infrastructure, nurturing management skills, increasing the share of private sector through public private partnership (PPP) models and utilizing IT skills to spread the reach and range of healthcare services, the overall healthcare services in the region have a long way to go," Dash further commented. Some of the upcoming trends in the MENA healthcare sector include increasing public private partnerships to attract private sector investment, better deployment of IT to streamline processes and reduce costs, development of specialized healthcare centers, and rising demand for cosmetic and wellness centers augur well for the overall growth of the sector. The potential for strong growth of the MENA healthcare sector and its relative stability has attracted immense private equity (PE) interest over the last decade. Across the MENA region, PE firms see significant room for expansion, particularly in services such as long-term care, specialized care and rehabilitation. In the last 10 years, around 91 PE deals worth ~$1.7 billion were struck. However, the deals were largely concentrated in Egypt, the UAE and Saudi Arabia. Among the firms, Al Masah Capital has been one of the most active firms in terms of number of managed deals. Some PE firms have also registered strong returns upon their exit from the sector. — SG
