The Changing Landscape Of The Saudi Healthcare Sector

Saudi Healthcare Sector

The Saudi Healthcare sector features prominently in the country’s 2030 vision (the Vision). It’s significance in achieving a better quality of life for Saudis being particularly emphasized.  Along with other ministries and government agencies, the Ministry of Health has been set targets to achieve by 2020 under the National Transformation Program (NTP).

These targets focus primarily on improving access to Saudi Arabia’s healthcare, adhering quality of services to international standards and taking preventative measures. A key part of this strategy is to increase the private sector’s expenditure into the healthcare sector from 25% to 35%.

100% foreign ownership of healthcare companies

As part of this initiative the Saudi Arabian General Investment Authority announced it would allow foreign investors 100% ownership of healthcare companies in August 2017. This move seeks to modify the Ministry of Health’s long-standing role as both a provider and regulator. The Ministry is currently studying the sale of all its hospitals and pharmacies, and has already begun the process in respect of the King Faisal Specialist Hospital and Research Centre in Riyadh. If fully implemented, this move should free up a significant portion of government spending. Currently an average of 7% of the government’s yearly budget is directly spent on healthcare. This currently translates to approximately SAR 60 billion (USD 16 billion). Additionally, the sale of its assets could raise a significant amount of revenue to help bridge the deficit gap and increase investment in other sectors.

The structural shift of Saudi’s healthcare sector, combined with its growing and aging population, creates a great opportunity for the private sector. Growing demand is adding pressure on existing healthcare facilities nationally, but particularly in major cities. Saudi currently has a healthy rate of 2.2 beds per 1,000 persons. To maintain this number, or even improve it to reach the global average of 3.13 beds per 1,000 persons, further investment in healthcare infrastructure is required.

Growing demand for healthcare facilities is also being driven by moves towards mandatory health insurance (MHI) for all nationals employed in the private sector and their dependents. According to the Council of Cooperative Health Insurance, around 12.2 million people are currently covered by private health insurance in Saudi and the government is considering plans to expand this coverage further.

Investment opportunities are not limited to the development of hospitals and clinics. The Saudi Arabian General Investment Authority has outlined clear investment opportunities for private investors including the construction of new medical / nursing schools, the expansion of existing schools, provision of services, local production of pharmaceuticals and hospital equipment, and the development of the Advanced Nursing Program.

Growth in the labour force

Opening investment opportunities to medical education is in line with the NTP’s target of increasing the number of Saudi physicians enrolled in training programs from 2,200 to 4,000, and the number of nurses and support staff from 70 per 100,000 people to 150 by 2020. The result of which should see labour force grow in tandem with Saudi healthcare infrastructure. Particularly as another recently introduced revenue generator for the government, a levy on expatriate dependents, will likely make employing and retaining expatriate labour, who make up a large portion of hospitals’ labour force, more challenging.

Opening investment to the pharmaceutical and equipment sectors is also a strategic move in addressing another constraint currently facing the sector. Most equipment and medications are currently imported into Saudi. Producing them locally will aid in developing the healthcare sector in Saudi, in addition to further diversifying its economic base in line with the Vision.

2017 has been a pivotal year for the Saudi healthcare sector. The implementation of the announced plans to privatise the sector will further change the healthcare landscape to provide better quality hospitals, equipment and services to meet the growing demand.

For more information on the real estate opportunities within the Saudi healthcare sector, read more about Saudi Vision 2030 or download the latest JLL healthcare report ‘Healthy Returns – Why real estate players are paying more attention to the healthcare sector’.