Demand drives hospital investment in the Gulf

08 August 2011

The GCC states are expected to experience a sharp increase in healthcare demand by 2025 and governments are spending heavily on new hospitals and medical training facilities

In number

$15.3bn: Value of hospital projects planned or under way in the Middle East

$8.6bn: Value of hospital projects planned or under way in Saudi Arabia

Source: MEED

With the GCC states set to invest heavily in hospitals and medical training facilities, healthcare will form a major part of the region’s projects sector over the next 15 years.

There are currently some $15.3bn-worth of hospital projects in the pipeline as governments look to improve their healthcare services to meet rising demand from a rapidly expanding population.

The investments are intended to meet the expected increased need for treatment, which is forecast to increase by 240 per cent by 2025, according to the US’ Mckinsey & Company. In addition to rising populations, improvements in life expectancy over the past 25 years have resulted in an increasing demand for healthcare.

Changing lifestyles

“As countries get richer, people don’t die of infectious diseases and live longer,’’ says Ioan Cleaton Jones, senior healthcare industry specialist at the International Finance Corporation, which is part of the Washington-headquartered World Bank.

“The decline in infectious diseases results in increasing chronic diseases such as cancer and diabetes. In particular, people over the age of 60 put more strain on health resources.”

Changing lifestyles and diets are also contributing to the strain on healthcare delivery in the GCC. According to Mckinsey, Gulf nationals have an obesity rate of 40 per cent, one of the highest in the world.

Saudi Arabia, the Gulf’s most populous state, has the highest value of healthcare projects planned, with $8.6bn of projects currently in the design or tendering stage.

The kingdom’s population has risen by almost 10 per cent over the past four years and is expected to increase from the current 26.1 million to 29 million by 2015. Its population of people aged over 65 is set to increase sevenfold over the next quarter of a century.

In its 2011 budget, the government pledged to spend SR68.7bn ($18.3bn) on the country’s healthcare and social sectors. Saudi Arabia currently has 120 hospitals under construction and is planning to start building work on 12 new facilities in 2011. Over the next five years, the kingdom has pledged to build 117 new hospitals, 750 primary healthcare centres and 400 emergency centres.

We are also starting to see smaller buildings, such as clinics and health centres

Sandy Macmillan, Langdon Wilson International

The largest medical projects currently being tendered are two medical cities for the security forces and their families. The schemes will be located in Riyadh and Jeddah and have a combined total value of SR25bn. Each will have a total built-up area of 1.3 million square metres and will include three hospitals and related medical and residential facilities. The client is the Interior Ministry and bids for the construction packages were received in early August.

A large hospital project is also planned for Dammam in the Eastern Province. The King Faisal Hospital will cost more than SR1bn to build and bids for the project management contract are due on 4 September.

The kingdom is also investing in expanding and upgrading existing facilities such as the King Faisal Specialist Hospital and Research Centre in Jeddah. It involves the construction of two patient towers, 15 and 18 stories high, and a 24-storey research and academic affairs centre. Contractors expect tenders to be issued before the end of August.

Healthcare overhaul in Kuwait

Kuwait has also embarked on a major overhaul of its healthcare infrastructure. Its population has shown steady growth of 2.5-3 per cent in recent years and is expected to rise from the current level of 3.4 million to 5.4 million over the next two decades.

To meet demand, the government is undertaking an estimated $8bn hospital building programme.

The largest project currently under construction is the $1.1bn Sheikh Jaber al-Ahmed al-Sabah Hospital, which is located in the Surra district in Kuwait City. The 1,050-bed hospital will have a built up area of 479,360 sq m.

Kuwait’s Health Ministry and the Public Works Ministry are both undertaking other large medical projects.

The Health Ministry is expanding and upgrading nine existing hospitals. The ministry has tendered construction packages to expand the Al-Amiri hospital and the Al-Razi hospital and to build a cancer centre. Bids for the three projects are due for submission in August and September.

The Public Works Ministry, meanwhile, has approved plans to build eight new hospitals by 2016. The hospitals will add 5,000 beds to the current capacity of the state’s health facilities.

Kuwait is also moving ahead with plans to build the region’s first public-private partnership (PPP) hospital. Local and international firms have been invited to submit expression of interests by 18 August to design, build, finance and maintain the proposed 500-bed Physical Medicine and Rehabilitation Hospital. The new facility will be located on the site of the existing physical medicine and rehabilitation hospital in the Al-Andalus area of Kuwait City.

Kuwait is also investing in smaller primary health centres. “We are also starting to see smaller buildings to do with social infrastructure, such as clinics and health centres,’’ says Sandy Macmillan, Kuwait country manager for US architecture firm Langdon Wilson International, which is working on the Jaber al-Ahmed hospital.

The challenge for Kuwait will be to push the projects through the country’s lengthy tender process.

UAE health schemes

The UAE’s population is growing at a slower pace than some other GCC states, but a rise in chronic health conditions is putting increased pressure on its healthcare infrastructure. A recent report by the federation’s Health Ministry and the World Health Organisation showed that 25 per cent of UAE nationals suffer from diabetes, markedly higher than the 5-7 per cent global average.

To deal with the problem, the UAE is investing in some large medical projects.

In March 2010, Abu Dhabi awarded an estimated $1.3bn contract to build the Cleveland Clinic on Sowwah Island. The project will involve the construction of a 364-bed hospital, covering a total area of 220,000 sq m.

Abu Dhabi Health Services Company (Seha) is also pushing ahead with some major schemes. In March, Seha awarded the joint venture of local/Australian Al-Habtoor Group and South Africa’s Murray & Roberts Contractors (Middle East) the contract to build the estimated $800m Mafraq hospital. It will have 690 beds and will cover a total area of 245,000 sq m. Seha is also expected to retender the planned 688-bed Al-Ain hospital, which will cover a total built up area of 358,000 sq m.

In Dubai, the local Health Authority has invited contractors to submit bids by the end of August to build the Al-Jalila Children’s Speciality hospital. The project involves building a 200-bed hospital adjacent to the Al-Wasl hospital on Oud Metha road.

In the neighbouring emirate of Sharjah, the UAE military’s General Headquarters is also currently tendering a contract to build an estimated $136m military hospital, which will contain 220 beds and have a total built-up area of about 57,000 sq m.

Qatar’s population has almost doubled in the past five years, from 1 million people in 2006 to a forecasted 1.8 million by the end of 2011. To meet the increased demand for public services, Qatar is investing in a number of major health projects. The world’s biggest exporter of liquefied natural gas (LNG) has allocated QR8.6bn ($2.4bn) of its 2011 budget or 7 per cent of total spending, to be invested in hospital schemes and the provision of smaller health centres and clinics.

In May 2010, South Korea’s Hyundai Engineering & Construction Company was awarded the hospital fit-out contract at the estimated QR3.2bn Hamad Medical City project. The project involves converting buildings that were used as part of the athletes’ village for the 2006 Doha Asian Games into a hospital specialising in the treatment of ear, nose and throat diseases.

The Hamad Medical City project covers an area of 450,000 sq m and includes three hospitals with more than 1,000 beds. The 230-bed Physical Medicine and Rehabilitation Hospital is expected to be completed by 2014.

The $2.4bn Sidra Medical & Research Centre, located in the Education City development on the outskirts of Doha, is one of the largest medical projects currently under construction in the Gulf. The hospital will contain more than 400 beds and is expected to open in 2012. This year will see the opening of the Qatar Heart Centre, providing specialised care in treating cardiovascular diseases.

Oman is also pushing ahead with a healthcare infrastructure building programme. The state will receive $10bn from the GCC over the next 10 years to help it tackle a number of underlying social problems. In the sultanate’s eighth five-year plan, Muscat pledged to spend OR270.7m ($703m) on healthcare. One of the largest projects currently in the pipeline is the 700-bed Sultan Qaboos hospital planned for Salalah. The hospital will cover a total area of 200,000 sq m and will contain paediatric emergency services, a physiotherapy section, as well as general surgery, radiology and accidents and emergency departments.

Construction work is scheduled to start in early 2012, the director-general of health affairs in Dhofar governorate said in early August.

Training nationals in the Gulf

The GCC states currently have the resources to finance ambitious medical schemes. But for sustainable long-term healthcare provision, governments also need to start investing in training. “People are the most important part of any healthcare system,’’ says Cleaton Jones.

The region’s healthcare sector relies heavily on expatriate labour. According to Riyadh-based NCB Capital, Saudi Arabia and the UAE have the highest proportion of expatriate physicians, at about 80 per cent.

The dependence on foreign workers leads to a high turnover of staff and this results in expertise continually being lost and having to be replaced at additional costs.

Progress with recruiting nationals within the GCC healthcare sector has been limited to date, but governments are slowly beginning to invest more in medical training facilities.

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