Regulatory changes in Bahrain improve investment conditions for foreign health care providers

In July 2016, Bahrain approved a new law allowing 100% foreign business ownership when it comes to various sectors of the economy, including health care. The new law is meant to spur growth and attract investment to various economic sectors, including food, administrative services, entertainment and leisure, information and communications, manufacturing, and mining and quarrying, and allows foreign firms to independently own businesses without a minority local partner.

OPPORTUNITIES: The new foreign direct investment FDI law aims at making the country more attractive to inward investment. According to the UN Conference on Trade and Development, FDI in Bahrain dropped from inflows of $3.73bn in 2013 and $1.52bn in 2014, to an outflow of $1.46bn in 2015 due to the impact of subdued oil prices around the world. However, despite this, in late 2015 FDI Intelligence placed Bahrain first among Middle East and African countries in terms of FDI attraction strategy. In the health care sector, there are clear opportunities for foreign investors, with a population growing both in size and affluence, as well as a new national health insurance scheme beginning in 2019. The move to allow foreign health care providers to fully own their operations in Bahrain will further stimulate the development of the private sector.

INTERNATIONAL INTEREST: Even before the change in law, FDI to the sector was rising. In December 2015 the CEO of Bahrain’s National Health Regulatory Authority (NHRA), Dr Mariam Adhbi Al Jalahma, announced that 46 applications had been submitted to invest in the health sector in Bahrain. While the breakdown of international and domestic interest was not revealed, it is expected that some of those applications came from international health care providers.

Meanwhile international players already operating in the market have announced plans to expand their operations. For example, Aster DM Healthcare, a provider headquartered in Dubai, announced plans to invest BD10m ($26.5m) over the next five years.

CHALLENGES: While opportunities are there, challenges exist. “The opening up of the health care sector to private ownership is a government directive to lessen the burden of health care provision by the government,” Dr George Cheriyan, CEO and chief medical officer at American Mission Hospital, told OBG. “The competition for a low volume of patients make it hard for small players to sustain operations. Another drawback is that the private sector would provide profitable services, meaning demand for management of chronic diseases and care of the elderly could be left behind.”

WIN-WIN: Private health care providers are already involved in the sector, but the new regulatory environment is expected to spur new developments.

“In the past, foreigners didn’t have the ability to open fully owned health services in Bahrain,” Waleed Khalifa Al Manea, assistant undersecretary for hospitals at the Ministry of Health, told OBG. “Now they will invest in Bahrain and have private insurance to cover them.”

However, Al Manea believes the main benefit will be to the Bahraini health sector. “In the short term we need to have more investment in Bahrain. To reach 30 beds per 10,000 people we need about 500 beds in the private sector,” he said. “I think growth in the next five years will be slow from the Bahrain side, so in the short term this law will really help us when it comes to getting investors in to offer such services. It is great for the next 10 years, and maybe after 10 years, if we have enough hospitals, the law could be changed.”

REGIONAL RIVALS: Bahrain is not the only Gulf country loosening foreign ownership restrictions. In 2015 the UAE announced that plans for a law to allow full foreign ownership of firms outside free zones in strategic sectors. Saudi Arabia also announced in June 2016 that it would allow foreign entities to own 100% of retail and wholesale businesses, up from 75%. However, these changes are likely to make more international health care providers look at Bahrain, and get other companies to examine the options.