It is perhaps a curious line in the sand to draw, but the new hospital in Dunedin, the second-largest city in the South Island of New Zealand, is gearing up to be a significant battle in the use of private-public partnership funding in the APAC region.

At the weekend, prime minister Bill English unveiled plans for a new up to NZ$1.4 billion dollar (US$1 billion) hospital in Dunedin, in what will be the largest build of its type in the country’s history. It is also one of the most controversial. This has nothing to do with electioneering, though this charge has been made (traditionally government announcements like this are not made within three months of an election) rather it is because of the way that the hospital will be funded.

“We have been assessing the options around refurbishing the existing site and building a new hospital. The decision has been made to rebuild. This would maximise the opportunity of having a purpose-built, state-of-the-art facility, while also minimising disruption to patients and staff,” said health minister Jonathan Coleman. “The ministry of health is working to secure an appropriate site for the new hospital, with a strong preference for a central city location. Depending on the location the new hospital will be opened in seven to ten years,” he added.

But what set the cat among the pigeons was his comments on how the government planned to fund the rebuild. “Given the size of the project the government will consider all funding options including a private public partnership model,” Coleman said.

It drew an instant and angry response from Association of Salaried Medical Specialists (ASMS), the trade union that represents the professional and industrial interests of just over 4,000 senior salaried doctors and dentists, mostly employed in New Zealand District Health Boards.

“A new public hospital for Dunedin is long overdue and very welcome but it needs to be fully funded by the government instead of allowing private investors to profit at the expense of patient care,” said Ian Powell, ASMS executive director.

“If the government does go down this track in Dunedin, then it would essentially be handing over the keys for one of the country’s biggest public hospitals to private investors to maximise extracting profits for themselves. Much of these profits would come from repayments Southern DHB would be forced to pay out of its increased annual operating expenses,” he added, pointing out that PPP funding models had been tried in the UK and proved “financially disastrous”.

This is not the first time that the ASMS has lobbed against a public private model. Earlier this year it raised concerns about the funding model for a new integrated family medical centre which is planned in Westport to replace the existing Buller Hospital.

“The government is trying to force a public private partnership on the West Coast District Health Board that would take money away from patient care and hand it to third party investors,” said Powell in May. “West Coast senior doctors are distressed and angry about the financial foolishness of this shoddy deal and that money that should be spent on West Coast patients will be siphoned off to pay a third party investor.”

Westport remains controversial. On Friday more than 1,000 people demonstrated against the new medical centre and a protest march is planned for Saturday.

The new NZ$10 million centre will be completed in the first half of 2019.

But with a general election next month, healthcare is emerging as a major topic – between those who believe that healthcare is a core part of government spending, and those who believe that private sector assistance is needed. The outcome will be closely watched.