Reforms in Myanmar pave way for health care investment
Higher state spending and moves to liberalise investment laws should further boost foreign investment in Myanmar’s health care sector, as the country pushes to implement its first development plan for the industry.
Arguably the biggest external boost to health care in Myanmar in recent months came with the announcement in June that the World Bank would be extending its Country Partnership Framework (CPF) for another two years.
A primary objective of the US$1.2 billion financing package – whose broad goals also touch on a range of sectors besides health care – will be to invest in social services to improve health and nutrition and reduce poverty.
More private sector engagement seen from Japan
Among the foreign companies that have recently shown an interest in Myanmar’s health industry is Japan’s Mitsubishi, which announced in March it would form a hospital management joint venture with domestic firms Yee Shin Holdings and Capital Diamond Star Group (CDSG).
The Tokyo-based company will hold 30 per cent equity in the project while the latter two will share the remaining 70 per cent.
The joint venture represents Mitsubishi’s first foray into hospital management, and the partnership is also planning to build a 300-bed hospital in Yangon in the Capital City complex being developed by Capital Development, a subsidiary of CDSG.
Streamlining investment processes for foreign players
Looking to build on such private sector engagement, the government is rolling out reforms to streamline processes for local and foreign companies to invest in the country’s growing health care sector.
One important step in this regard was the government’s decision to give regional agencies the authority to directly approve foreign investments, rather than having them go through the national Myanmar Investment Commission.
As part of the Myanmar Investment Law (MIL) ratified in October last year, regional and state investment commissions will be established and authorised to approve investments of up to six billion kyat (US$4.4 million) in most segments of the economy, including health care.
An announcement made by the Ministry of Commerce on June 12 could also enhance the sector’s appeal to investors, with the ministry revealing that companies will be able to import and trade hospital equipment, among other industrial goods.
This change should help level the playing field for health equipment suppliers, as foreignowned companies can now trade without any more barriers than local firms have.
However, like local firms, foreign-owned companies must still obtain trade permits from the Directorate of Investment and Company Administration, meet mandatory quality standards, and comply with existing laws, rules and procedures.
Public health spending rises almost 27 per cent this fiscal year
Amid these regulatory changes, state financing for the sector continues to rise.
The budget for the current fiscal year allocated 1.08 trillion kyat (US$790 million) to the sector, up from 850 billion kyat (US$624 million) in FY16 and FY17 – itself a 12.2 per cent increase on the previous year.
As highlighted in Myanmar’s first development blueprint for the sector – the National Health Plan (NHP) 2017 to 2021 – the country’s health spending is still relatively low by global and regional standards, representing just over five per cent of its total budget this year and roughly 1 per cent of GDP.
Nonetheless, some stakeholders suggest that rising spending and growing demand for private health care services will further boost the sector’s appeal to investors in the coming years.
“Over the next decade, we can expect health care spending to reach four to five per cent of GDP,” Dr Gershu Paul, CEO of Pun Hlaing Siloam Hospital (PHSH), told OBG.
“In 10 years the total spend on health care will be in the region of US$145 per capita per annum. Multiply that by a population of 55 million people and you can start to understand the tremendous investment potential of the sector.”
Such investment will be critical to achieving the goals of the NHP, which aims to “extend access to a Basic Essential Package of Health Services (EPHS) to the entire population by 2020”.
To deliver Basic EPHS, townships with the greatest needs will be identified using public and private sector data collated into a Health Input Scoring Index. This should allow funds, such as those allocated by the World Bank in June, to be channelled to areas with the biggest development needs.
Published in December last year, the plan underscores the importance of “inclusive planning at the local level”, an aim supported by recent moves under the MIL to decentralise the approval process for smaller investments.
This Myanmar economic update was produced by Oxford Business Group.