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Analysis: Are healthcare PPPs possible in south east Asia?

Lieven Jacquemyn, PPP international development director at GE Healthcare Singapore, discusses how governments, providers and investors can work together to bring universal health coverage to the region.

Healthcare is a booming business in south east Asia.

With a population of more than 620 million and less than three beds per 1,000 people, south east Asia’s demographics reveal an attractive investment opportunity for private healthcare providers. In fact, some of the largest and most profitable private healthcare providers are based in Singapore, Thailand, and Malaysia, where there are clear pockets of excellence generating impressive medical tourism streams.

To date, it seems public and private healthcare providers are simultaneously serving separate client segments. A true partnership in which public and private partners team up, allocate tasks and risks to the party best able to handle them, and jointly work towards a common goal, is very rare in the region. The new Women and Children's Hospital in Kuala Lumpur is one exception. A public-private partnership (PPP) to build an orthopaedic centre in the Philippines was cancelled in 2015.

Several countries in Southeast Asia are working towards the World Health Organisation’s goal of universal health coverage (UHC). For example, Indonesia created the single payer UHC model in 2014, aiming to provide health insurance for its entire population of 250 million within five years. Thailand and Myanmar ministries of health are also exploring nationwide solutions to increase access to healthcare, even in remote areas.

Although government spending on healthcare has been rising in most of south east Asia, the emerging economies spend frugally on healthcare (3% to 6% of GDP), which is well below developed Asian countries (up to 10%) and their EU/US counterparts (above 10%). The huge population base in south east Asia magnifies the challenge to move up in healthcare spending.

Thailand is the only country whose government accounts for over 75% of total healthcare funding. Government healthcare spending in Malaysia, Indonesia, and the Philippines ranges from 60% to 40%. Private funding clearly has an important role and is likely to increase to reach UHC.

According to a 2014 study by The Economist magazine, south east Asian countries’ readiness to do PPPs varies considerably, reflecting the region’s diversity in demographics, economic development, and other factors. Almost all countries, however, have successfully implemented PPP in economic infrastructure sectors including energy, transportation, and water. Social infrastructure like schools and hospitals have not been perceived as priority investments.

Since 2004, the International Monetary Fund has highlighted the need to invest in health to achieve economic development goals. Today, the links between a healthy working population, reducing healthcare burden, and increasing productivity have been clearly established. Investing in healthcare should not be an ancillary project for a ministry of finance but, rather, a central element of a country’s development plan and competitive strategy.

Public-private partnerships in healthcare are certainly possible in Southeast Asia if all parties can see that such a collaboration will help them reach their respective goals and interests. Our recommendations for each of the partners:

Governments:

•            Increase health spending to at least 8% of GDP.

•            Prioritise health investments as a conduit for economic growth.

•            Organise nationwide healthcare solutions, generating similar benefits as pool funding.

Service and equipment providers:

•            Rethink your services and products from the bottom up to suit the specific needs of developing countries.

•            Assume your role of a responsible corporate citizen by measuring performance beyond traditional shareholder requirements.

Investors:

•            Take a global view on return on investment by uniting different investment requirements – for example, short-term real estate and long-term infrastructure investments. This approach will allow you to capture the wider economic benefits.

•            Co-invest in healthcare projects on a blended capital basis alongside public funds.

Over the last 15 years, GE Healthcare has been involved in more than 100 PPP/MES (managed equipment services) projects and approximately 50 operational projects across the globe, working closely with governments and investors. In south east Asia, we see a clear trend of ministries of health and state-owned hospitals pro-actively engaging with the private sector to find mutually beneficial ways to work together. One factor driving this trend is an increasing willingness and ability to articulate a project’s objectives and framework for realisation. This is a great basis to start a long-term partnership and will go a long way jointly to contribute to universal health coverage.

Posted on: 14/08/2017 UTC+08:00


News

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Malaysian medical glove manufacturer Supermax Group has reported a 42.8% jump in Q1 profits to M$27.9 million (US$6.8 million) on revenues that 16% to M$312 million.
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