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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Julie Bassi - Senior Associate - Corporate / Mergers and Acquisitions / Commercial
December 2016 – January 2017
Healthcare is one of the main focus areas of Vision 2030 and this article considers what is envisaged and what this could entail for the sector and for the foreign investor.
Vision 2030 is a comprehensive plan for reform of the entire economic structure of Saudi Arabia. The main goals are to develop other industries and sectors to ensure that the economy is no longer as dependent on oil as a source of income and to decrease public spending with a greater emphasis and participation from the private sector. In order to ensure that these goals are met and the vision of Vision 2030 becomes a reality the following targets have been set:
The targets are ambitious and require a comprehensive course of action to meet the targets laid down in Vision 2030. To achieve this, the following initiatives have been proposed:
The NTP is the interim action and development plan for Vision 2030 which sets out strategic objectives to be met by a number of government bodies by 2020. It has identified common national priorities and goals to be achieved through the following:
The following strategic objectives have been identified for the Saudi Arabian General Investment Authority (“SAGIA”) to achieve:
These objectives are based on the targets laid down in Vision 2030. The main aim being the creation of an attractive environment for both local and international investors to enhance their confidence in the Saudi economy.
The strategic objectives identified for the Ministry of Health and the Saudi Food & Drug Authority (the regulatory authority for pharmaceuticals and medical devices) are discussed in more detail below.
A target of Vision 2030 is greater participation of the private sector within the economy and this is especially so of healthcare. There is a definite move towards privatisation with a stated objective in the NTP of increasing private healthcare expenditure from the current 25 per cent to 35 per cent of total expenditure by 2020. This represents a projected increase in revenue generated from 3 Billion SAR to 4 Billion SAR. In addition to this, the Ministry of Health plans to spend over 23 Billion SAR on new initiatives over the next 5 years.
The NTP has identified the following strategic objectives for the Ministry of Health and the Saudi Food & Drug Authority (‘SFDA’):
Ministry of Health
These objectives are based on the targets laid down in Vision 2030. The main aims being the improvement of the quality of healthcare services, the expansion of the privatisation of government services and finally the creation of an attractive environment for both local and international investors.
The strategic objectives stated for healthcare in the NTP are extensive and in order to successfully meet them the initiatives will be launched this year at the following ministries and authorities:
Ministry of Health
Vision 2030 offers many opportunities in healthcare for the foreign investor in key areas which can be identified in the NTP as follows:
Foreigners are able to own and manage hospitals in Saudi Arabia but are unable to own or manage other healthcare institutions. It is envisaged that foreign participation and investment in new hospitals will take place through public-private partnerships and joint ventures with Saudi owned entities.
Medical insurance is already compulsory for expatriates and Saudi nationals (and their dependents) working within the private sector. Citizens working within the public sector currently receive free coverage in government health care centres and public hospitals. It is not known at this stage how medical insurance will develop however as more public services are privatised and public-private partnerships are entered into the provision of healthcare will naturally transfer to the private sector. In anticipation of this, we understand that current medical insurance providers are developing products that cater for public sector employees to meet future requirements.
Digital healthcare innovations are key for supporting Vision 2030 as the Ministry of Health is aiming for at least 70 percent of Saudi citizens to have unified digital records by 2020. In addition information technology solutions will improve the performance and productivity of healthcare providers and will enable a better quality of service to be provided. Software that assists with the treatment of medical issues such as the diagnostic process is considered a medical device whereas other software used with the healthcare sector is not. We have assisted a number of healthcare technology providers looking to carry out business in Saudi Arabia either directly or through a distributor and expect this to continue as the opportunities for investment here are recognised more and more. In addition, we are seeing an increasing interest in telemedicine which enables providers to offer services within the country under the supervision of locally registered physicians on a consultancy basis.
The NTP places a great deal of emphasis on healthcare education and training. There is a recognised need for qualified Saudi healthcare practitioners and support staff as healthcare requirements increase and currently the sector is mostly supported by expatriate workers. The increased education and training needs will be catered for domestically and internationally potentially with links to world renowned institutions and public-private partnerships. Furthermore, this increased need could also be catered for through management and operational arrangements with internationally recognised service providers.
Saudi Arabia is mostly dependent on imports for its pharmaceutical requirements and there is a desired need for pharmaceuticals to be manufactured locally to ensure an adequate supply of medicines. Foreign pharmaceutical manufacturers are being actively encouraged to establish plants in Saudi Arabia through public-private partnerships and joint ventures with national entities. Incentives are being offered in the form of preferential treatment in future volume tenders. As an additional incentive, foreign owned manufacturers within Saudi Arabia are able to distribute and sell pharmaceuticals within the country whereas all imported pharmaceuticals can only be distributed through a Saudi distributor.
The SAGIA website lists the manufacture of medical devices and equipment as an investment opportunity for foreign investors. Currently the majority of medical devices and equipment are manufactured abroad and are imported into the country. The Ministry of Health is supporting local manufactures by partnering multinationals with Saudi companies with the incentive of guaranteed volumes for Ministry of Health purchases and preferential treatment in future volume tenders. Furthermore, foreign owned manufacturers within Saudi Arabia have the additional benefit of being able to distribute and sell medical devices within the country without the need of a local distributor.
The potential effect of Vision 2030 is far reaching and if achieved will bring enormous benefit to the economy of Saudi Arabia. There is a huge possibility for foreign investment albeit in limited areas. It is clear that foreign investment is being guided in a carefully controlled direction with activities such as the distribution of imported pharmaceuticals and medical devices being reserved for Saudi entities and citizens. Furthermore, most healthcare institutions will remain within the ownership and control of Saudis. All foreign investors must have something to offer the country and must demonstrate a commitment to assisting Saudi Arabia in reaching the goals laid down in Vision 2030. For the investors willing to do so the possibilities are endless.
Learn how our Corporate / Mergers & Acquisitions practices offer law assistance for matters relating to foreign investment in Saudi Arabia.
Also read: Vision 2030 and the Transformation of Education in Saudi Arabia
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