Earlier this year Saudi Arabia outlined an ambitious plan to diversify its economy amid crude collapse and significant development in shale gas sector.
In the words of Commerce and Industry Minister Taufik Al-Rabiah, the Kingdom now wants to get out of the Dutch Disease syndrome, of total dependence on oil in the economy, at any cost.
And very rightly, the Saudi government is seeking more investments in the Kingdom’s sunshine sectors of health care, tourism and IT through radical liberalization. Accordingly, government officials, representatives of international businesses, policymakers along with global experts huddled together in Jeddah to review the state of Saudi economy and examine the role of public-private partnership (PPP) in an altered economic scenario apart from gauging the possible socioeconomic impact of privatization on Saudi society.
At the recently held Jeddah Economic Forum (JEF) conference, leading analysts unanimously advocated privatization of Saudi Arabia’s health-care system to cushion a stressed national treasury from rising disease burden and the resultant medical inflation, even as the Saudi government continues its effort to harness the power of PPP model in this crucial sector. Indeed, a steadily expanding population coupled with burgeoning disposable income, upsurge in life expectancy and a sharp rise in lifestyle diseases contribute to a significantly heightened fiscal pressure on the exchequer. In fact, compared to developing countries, public spending in health care — in terms of percentage of government expenditure in national health — is quite high in Saudi Arabia.
And expanding the scope of private participation in Saudi health care system up to at least 35 percent can work wonder because, experts say, it will translate into an investment opportunity of SR50 billion over the next three to five years. Moreover, privatizing health care means introducing best medical practices and expertise apart from remodeling the delivery mechanism to improve patient outcome significantly. Being host to one of the largest and fastest growing populations within the Gulf Cooperation Council (GCC), Saudi Arabia has made some significant progress in improving primary healthcare indicators like life expectancy and infant mortality rate. However, a rising demand in health-care services can become a national burden in the not so distant future — in the backdrop of an official estimate of Saudi population reaching 31.6 million by 2016.
Saudi Arabia’s three tier health-care system composed of government-owned, semi-public and private medical facilities is already overstretched and therefore paving the way for entry of new private players in the market will have a beneficial effect on national health as well as the economy.
Besides, one of the main challenges in the Kingdom’s health-care system is the demand and supply gap compared to the population’s need and authorities have rightly emphasized on spending a major portion of the budgetary allocations to bolster infrastructure and building modern health cities. Initiatives have also been put in place to encourage the private sector to participate wholeheartedly in the expansion efforts in health-care sector. Though PPP in KSA is already an established model so far as health care is concerned, more needs to be done to attract foreign players with huge experience in health-care delivery. As very aptly pointed out by a leading analyst, who moderated the JEF panel discussion on PPP in Saudi health care, “there is an interesting space and a very good opportunity for foreign providers. The key question would be how to give them assurance and confidence to enter the market, especially a market that they are unfamiliar with. So it is important to give them assurance on the overall business environment in order for it to be successful.”
Now that the Saudi government has identified health care as one of the main sectors of focus in the country’s plan to further expand and diversify its economy, local capabilities needs to be developed simultaneously to facilitate the intended transformation. The Kingdom, with its comparative low-cost advantage, quality infrastructure in medical care, high-end research and development in various fields of medicine and being the fastest growing market globally, is a potential leader in medical tourism.
And by boosting health infrastructure through private participation, the Kingdom can surely position itself as a major healthcare tourism destination in MENA region. Since the volume of medical tourists globally has reached the 11 million mark presently and will only grow in the coming days, this job-generating sector has all the potential to shape Saudi economy in the near future as it switch to a model of qualitative growth, distributed evenly across the board.
So far Saudi Arabia has been a major source of global outbound visitors, combining treatments with vacation plans. But now, this trend needs to be arrested before the downside manifests itself.
