Saudi government healthcare projects hit by budget cuts

The private sector will continue to push ahead with investments in Saudi Arabian health care, but government projects could face setbacks because of cuts to the sector’s budget this year, say analysts.

The kingdom reduced healthcare spending by 35 per cent to 104 billion Saudi riyals (Dh101.69bn), down from 160bn riyals last year. The spending includes investment in the public healthcare system, financial facilities and incentives to private healthcare groups, and expenditure on medical treatments abroad.

“Though no detailed breakdown of the 2016 budget is provided, expenditure on treatment outside Saudi Arabia will possibly be relegated in favour of upgrading the domestic healthcare system,” said Mohammad Kamal, an analyst with Arqaam Capital.

Ahmed Faiyaz, an analyst at the consultants EY, said the budget cuts could slow down large government infrastructure projects, but opportunity for the private players would continue given the growing demand supply gap with a focus on new models of primary care clinics, specialised centres for disease management and tertiary care, and rehabilitation and long-term care services.

“This presents an opportunity for the private health sector to invest and grow in the Saudi healthcare market, given that the demand for healthcare services is growing in Saudi Arabia [with] an increasing ageing population and utilisation of health services is set to rise given the growing burden of chronic diseases,” he said.

Sweden’s Diaverum, a renal care and dialysis treatment provider, expects to make long-term investments of about 500 million riyals over the next five years to expand its network of clinics.

Diaverum plans to open up to 15 clinics in Saudi Arabia in the next year, according to Ziyad Kabli, the managing director for the Middle East at Diaverum.

“It will be our biggest market globally by 2018,” Mr Kabli said.

Diaverum entered the Saudi market in 2011, and now operates 15 clinics in the country.

In 2013, the government approved 22 public health projects, including funding for the King Abdullah bin Abdulaziz Security Forces Medical Complexes in Riyadh and Jeddah and the 1,500-bed King Abdullah Medical City in Makkah.

There is a possibility that some projects could be delayed, but none has been announced by the government so far.

At the same time, the private healthcare sector has been growing over the past few years because of the government push, allowing foreign ownership of Saudi hospitals.

The total number of private hospital beds in Saudi Arabia grew at about 4.3 per cent annually, more than the 3.7 per cent growth rate of public hospital beds, according to Saudi health ministry statistics from 2010 to 2013.

Outpatient visits in the public sector decreased from 91 million visits in 2009 to 87 million visits in 2013, a decline of 1 per cent a year, according to the health ministry’s annual report in 2013.

Outpatient visits in the private sector during the same period increased from 39 million visits in 2009 to 46 million visits in 2013, a 4 per cent annual rise.

Last October, Dubai’s Aster DM Healthcare invested Dh900 million in the 25-bed Sanad Hospital in Riyadh, lifting its ownership to 97 per cent.

In August, UAE’s Amanat Holdings paid 200m riyals for a 35 per cent stake in Jeddah-based Sukoon International. The healthcare company’s flagship project is a 200-bed facility in Jeddah.


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