KUCHING: Demand in the healthcare sector has continued to be robust in analysts’ view in tandem with rising health awareness and increased affluence.
The research arm of Affin Hwang Investment Bank Bhd (AffinHwang Research) believed that global demand for private healthcare remains resilient as healthcare awareness worldwide continues to rise.
AffinHwang Research noted that the healthcare industry in Malaysia is no exception and this is supported by factors such as changing demographics leading to an ageing population in Malaysia, insufficient public healthcare systems and better insurance and employee medical benefits.
It further noted that according to the Malaysian Economic Transformation Programme (ETP) 2014 Annual Report, healthcare investments are expected to rise to RM17.2 billion by 2020 from an estimated RM12.2 billion in 2014.
AffinHwang Research was also convinced that the private healthcare system is essential to complement the current public healthcare system.
“We believe that the public hospital system is not sophisticated enough to support the Malaysian population in terms of beds and medical staff,” the research arm said.
It noted that a survey conducted by World Health Organization (WHO) showed that the average ratio of hospital beds in Malaysia (public and private) is 1.9 beds per 1,000 people, which is below average considering that the global average is 2.6 beds per 1,000.
“If we were to only take into account public hospitals, the average ratio of hospital beds will drop to a further 1.1 beds per 1,000 people,” it said.
In addition, AffinHwang Research believed that demand for private healthcare services are inelastic due to increasing employee medical benefits and higher medical claims stemming from the increase in insurance policies sold over the years.
The research arm noted that despite the yearly price increases for medical services, demand has continued to remain strong as patient volumes has continued to grow steadily.
Moving forward, it expected more patients using medical insurance to pay for medical services and it believed that this trend will continue as medical insurance purchases increase.
Meanwhile, AffinHwang Research noted that Malaysia is also expected to reach aged population status by 2030 given its rapidly growing elderly population.
“According to the United Nation (UN)’s projections, Malaysia may reach this stage as 15 per cent of the population consists of those who are aged 60 years and above.
“We believe that healthcare services will play an important role as the ageing population usually has higher expenditures on healthcare services, which is evident in countries such as Japan and South Korea,” the research arm said.
Therefore, it believed that the healthcare industry in Malaysia will continue to be supported by the ageing population.
Moreover, AffinHwang Research believed that demand for private healthcare services will also be fuelled by the rapidly growing medical tourism in Malaysia.
The research arm noted that according to the Malaysia Healthcare Travel Council (MHTC), healthcare travelers to Malaysia have been increasing steadily at a compound annual growth rate (CAGR) of 12 per cent from 2007- 2013.
It believed the increase in tourist arrivals to Malaysia will continue as private healthcare operators continue to improve on their service and product offerings with continued support from the government.
“Furthermore, the influx of medical travelers should increase due to the weakening of RM against US$ and under penetration of the regional customer base, compared to other countries with more matured medical tourism industries such as Thailand and Singapore,” it said.
AffinHwang Research noted that in view of the robust demand for healthcare services, especially in emerging markets, private healthcare operators have been ramping up their bed capacities and expanding through brown-field and green-field projects.
The research arm further noted that brownfield projects refer to the expansion of existing hospitals while green-field projects are new construction projects.
It added that both KPJ Healthcare Bhd (KPJ) and IHH Healthcare Bhd (IHH) have been aggressively expanding into strategic markets locally as well as overseas especially in countries with high populations and limited private healthcare.
“As of now, KPJ has plans to add another six new hospitals by 2018 while IHH currently has up to 15 ongoing expansion projects,” it said.