Global medical tourism driving capital into emerging markets
LONDON: The rise of global medical tourism is increasingly driving western capital into emerging Asian, Middle East and East European markets.
An Australian-led joint venture broke ground on a 200-bed hospital in West Java yesterday, part of a $1.3 billion agreement leading the way for foreign investment in Indonesia’s health sector.
The hospital in Depok, adjacent to the capital Jakarta, is expected to cost between $US40 million and $US50 million (between $58.4 million and $73 million) to build and will be majority-owned by Australian companies Aspen Medical and Docta through Sanusa Medika Hospitals. Indonesian state-owned enterprise Jasa Sarana has a 10 per cent stake.
The Depok facility is the first of a planned 23 hospitals and 650 community clinics to be rolled out over two decades under a $US1 billion agreement signed in 2020 between Sanusa Medika and the West Javanese government.
“Several private companies have been investing in hospitals, but this will be the first international hospital to operate and it will bring medical practitioners from abroad,” Indonesia’s Coordinating Minister for the Economy, Airlangga Hartarto, said at the groundbreaking ceremony.
In his speech, Mr Airlangga asked Aspen Medical to accelerate construction of the other facilities Sanusa has planned for West Java in the next two decades.
The value of the Depok deal is such that it sparked a lawsuit between the two co-founders of Aspen Medical, Glenn Keys and Andrew Walker, after the latter sold his shares in the company before the agreement was finalised. A dispute over the value of his stake was settled last week.
The push by Aspen Medical and Sydney-based Docta into Indonesia is a direct result of provisions in the 2019 Free Trade Agreement between Jakarta and Canberra allowing Australians to own up to 67 per cent of large hospitals and pathology, paramedic, medical and dental services.
The government of President Joko Widodo has since cleared the way for 100 per cent foreign ownership, although enabling regulations are still being finalised.
Medical tourism is one drawcard for foreign investors. America’s famous Mayo Clinic is among those hoping to lure domestic and international visitors to the tourist island of Bali with a new hospital.
Sanusa Medika has a different focus. The company plans to build in second-tier cities where property prices and bed availability rates are low and potential for profitability and growth is high.
Mr Keys, Aspen Medical co-founder and executive chairman, said the Depok hospital would be financed by a mix of debt and equity, in the same way the Canberra-based multinational has funded hospital construction in Dubai and elsewhere. “There is no shortage of interest,” he said.
“If you look at Indonesia’s predicted growth, at how the government is raising levels of governance, opening up to foreign investment, and seeking international co-operation, it is a fantastic time to be in this region,” Mr Keys said.
When it opens in 2025, the hospital will offer services to Indonesians covered by public and private insurance, and those paying their own way. It is a new model for Indonesia, where public hospitals are scarce and those who can afford it frequently travel to Singapore or Malaysia for medical care.
The Indonesian government estimates these trips cost $US6 billion a year – money that could be spent at home if facilities were better.
Indonesia’s ratio of 1.4 hospital beds per 1000 people is the lowest among the ASEAN countries. The country also has the world’s largest public health insurance scheme, covering most of its 270 million people. Long-term funding of the scheme remains an issue, partly because six in 10 Indonesians are engaged in informal work so do not make any contributions.
This will remain a budget headache for years. It has also focused policy-makers on investing in health solutions that can help reduce treatment costs by focusing on preventive health measures and digital services.
Pent-up demand from those who stayed away from hospitals and doctors during the COVID-19 pandemic was putting pressure on the health budget, said Bhima Yudhistira, executive director of the Centre of Economic and Law Studies/CELIOS in Jakarta.
“In Indonesia, the most common diseases are heart disease, diabetes, kidney disease, and other non-infectious conditions, but there is no prevention education. The public schemes are focused only on treatment,” Dr Bhima said.
Docta’s Dr Andrew Rochford said Sanusa Medika was in talks with provincial and central governments. The joint venture has a mobile clinic that was on the scene the day after the earthquake in Cianjur in West Java last November.
Foreign investors are increasingly welcome in Indonesia, but Dr Rochford said they had to learn how to navigate the market.
“We’ve spent 2 1/2 years building this relationship. You have to be on the ground,” he said.
