Private Ties
The demand for health services is set to escalate considerably as Oman’s population grows larger. Aware of this the government of Oman is welcoming private participation in the healthcare industry, offering various incentives such as soft loans and, in some cases, free land to medical entrepreneurs

By Oliver Cornock

It’s a bear market for swine flu, but Oman is nevertheless prepared to deal with the threat. US traders at the Iowa Electronic Health Markets, an unconventional futures market that ‘trades’ everything from syphilis to avian flu based on their perceived threat level, opened H1N1 futures at the end of April. Traders were cautious, with most of the 300 participants banking on mortality levels in the US at less than one per cent.

The risk in the Gulf is perhaps even more remote but Oman has been careful to call upon its considerable resources in case the H1N1 virus sneaks into the Sultanate. Its response was prompt and efficient – the Ministry of Health (MoH) immediately set up a committee devoted to preventing and controlling the potential spread of swine flu. But emergency preparedness aside, the country’s healthcare system has some capacity issues to iron out as it will soon face difficulties handling the more quotidian health problems of the population.

Indeed the healthcare industry, which is dominated by the government, is of a high calibre but expansions are required. Several factors are pointing to a need for greater involvement of the private sector in order to address upcoming challenges. For one, demand for health services is set to escalate considerably as Oman’s population grows larger and, unfortunately, sicker. The population is expanding at 3.2 per cent a year and the incidence of non-communicable diseases (NCDs) such as diabetes, cancer and obesity is rising at an alarming rate throughout the Gulf. The Ministry of Health estimates that by the year 2020, NCDs will account for seven out of every 10 deaths in Oman and the World Health Organisation (WHO) recently announced that it expects a 25 per cent increase over the next ten years in deaths from these ailments in the Eastern Mediterranean region, which includes the GCC.

The government is hoping to stem the rise of NCDs with public education programmes about healthy lifestyles, but for the foreseeable future high rates of disease incidence will put an increasing strain on the capacity of state facilities as more Omanis seek regular physician visits.

Raising the bar
Besides increasing capacity, the presence of the private sector also serves to boost competition and, subsequently, quality of care within the sector. Public healthcare has a good reputation within Oman and now private hospitals are beginning to step up their capabilities. In March, for example, Muscat Private Hospital, the Sultanate’s first privately owned and operated hospital, successfully completed and open heart surgery – the first such operation in Oman.

Across the GCC, too, the standard of medical services and technologies has been considerably raised in recent years, which could help to create a culture of convivial competition and innovation in the Gulf. A focus on health and education has emerged as a common characteristic among the economic diversification plans of GCC countries. With centres of research and constantly improving medical facilities popping up around the region, private investment is more likely to gravitate toward the area, further accelerating its momentum toward a world-class healthcare standard.

Moreover investment in Oman and the wider GCC has also put a focus on increasing medical training facilities, helping to address one of the most serious problems facing the healthcare sector – a shortage of skilled professionals. The Omani government hopes that new training facilities within the country as well as neighbouring states will help to solve the issue. With demand on health services increasing all the time and a lack of doctors, specialists and nurses a recurring issue throughout the globe, private investment is perhaps most sorely needed in medical education facilities.

A skilled workforce is also in line with Oman’s general transition to a more knowledge-based economy and a lessened dependence on foreign workers, or “Omanisation” of the workforce. Currently, only 29 per cent of physicians in the Sultanate are Omani and in 2007 the overall level of Omanisation in the healthcare sector was 68 per cent. The government’s seventh five-year plan aims to raise this proportion to 81 per cent by the time it expires in 2010. This is an ambitious goal and increased privatisation makes financial sense in the Sultanate, especially during times of tight budgetary conditions. The public sector is the source of 81 per cent of total health expenditure in the country and the government provides healthcare to Omani nationals at a symbolic rate of RO1 per year.

Enhanced budgetary spending
In 2009 Oman is maintaining and in fact increasing its financial commitments to the health sector, despite the fact that it is posting a deficit for the first time since 2001. In this year’s budget the healthcare sector will receive RO271mn ($705mn), a 19 per cent increase over the previous year’s allocation. The increase in healthcare spending outpaced that of overall budgetary spending, which rose by 11 per cent year-on-year.

Low oil and gas prices are putting stress on the budgets of nearly every GCC state this year and while the Omani government has not eased up on its commitment to improving the standards of healthcare in the country, as evidenced by the budget, tight overall financial conditions may increase officials’ eagerness to privatise the sector. In short, the premature sell-off may not see a worthwhile return to the government. Mohammed Hassan, the undersecretary of planning at the MoH, recently told Oxford Business Group, “In 10 years time we will have to spend double what we spend right now and, consequently, we will have to resort to alternative financing.”

There are valid concerns that the global financial crisis will shrink inward investment levels across the economy, but the healthcare industry is nevertheless likely to remain attractive to foreign and local private sector players. Foreign companies are already eyeing the market.

Oman registered as the fastest growing destination for inward foreign direct investment (FDI) in 2008, according to a recent report by fDi Intelligence, the dedicated FDI research unit of Financial Times. The same report, which does not take merger and acquisition activity into account, predicts that levels of real investment in developing countries, including Oman, will remain roughly the same as that of 2008. Moreover, the report noted that healthcare is among the few sectors that are expected to remain attractive to foreign investment in 2009.

The government of Oman has already welcomed the private sector into the healthcare industry, offering various incentives such as soft loans and, in some cases, free land to private medical entrepreneurs. Its openness has not gone unnoticed by investors, with major international players like the UK-based UME Group present in the Sultanate for close to a decade. As pressure on the system increases and the demand fundamentals remain strong, private participation in the health care sector looks set to increase considerably over the coming months and years. Public health providers can then begin to release a salubrious sigh of relief.
 

The author is Regional Editor, Oxford Business Group

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