Asia's health care boom is here to stay
Asian health care services look to be a good bet, writes Carl Berrisford
For those who find it nerve-racking trying to time share markets, why not choose a powerful investing theme that is sure to run for decades, and buy and hold? For example, Asian health care. The sector is recession proof and growing strongly.
There are powerful demographic and social trends that make this growth an inevitable, multigenerational trend.
The fact is well supported by the numbers. According to a UBS CIO research report, consumer spending on health care in Asia Pacific will grow to US$1 trillion by 2016 at an annual growth rate of 13 per cent.
Why? Asia is getting older. The number of those aged 65 or above will rise 50 per cent by 2020, according to the report. Asia is also getting richer, and demanding higher quality medical support from its governments. Asian governments have been historically frugal when it comes to health care spending.
Medicalised Middle Kingdom
The best example of this twin trend of an ageing population and rising government health spending lies with the mainland. At present, the mainland spends only 5.1 per cent of its gross domestic product on health care (the global average is 9.4 per cent).
Decades of one-child policy has had its effect. China is producing fewer young people relative to its elderly, who are tending to live longer thanks to rising income and improved treatment. Over the next 20 years, the mainland will see 200 million people reach the age of 60 or above. Government health care funding has grown 18 per cent a year over the past five years - one of the highest growth rates in Asia.
The mainland's plan to recognise the 160 million to 200 million migrant workers who live in cities with no formal residency status will have a big impact on medical spending. That's because these people will suddenly be eligible for state-provided medical support. The scheme is part of a broader plan to promote urbanisation in the mainland, which in itself will drive up medical spending. Rural health services largely revolve around infection fighting, through the use of antiviral or antibiotic medicine.
Urban dwellers, by comparison, are more prone to "rich world" sickness such as hypertension, diabetes and heart disease. This requires a more specialised, involved and costly treatment than, say, a prescription for antibiotics.
The reality is that rising urbanisation across Asia is raising demand for health care. Urbanisation raises demand for medical services as residents come within reach of facilities.
It's also a lot more efficient to offer medical services to a large number of people in the city, compared with the smaller scale facilities in rural areas.
The combination of increased health care spending and industry reforms could allow the Chinese health care sector to grow by a comfortable 20 per cent a year over the next five years.
The tourist dollar
Meanwhile, as the rich world struggles with its own ageing burden, people are searching for cheap treatment in Asia. This leads to part two of our health care boom theory: a sustained rise in medical tourism, especially in Singapore, Thailand, Malaysia and India.
Medical tourism is the practice of travelling overseas for medical treatment. The savings can be considerable. For example, the average US$113,000 price tag for heart bypass surgery in the US costs only US$20,000 in Singapore, and half this price in India.
Even for minor cosmetic procedures such as breast implants, US patients can expect to pay one-third of the cost of treatment in Asia than they would at home.
Singapore and Thailand are Asia's main medical tourism hubs, although India is catching up. Singapore stands out as having one of the world's most advanced health care infrastructures, placing sixth out of 191 countries in the World Health Organisation's ranking of global health systems.
Thailand competes with its combination of quality, affordable services and natural attractions, which allows patients to seek treatment while vacationing. India's main advantage is cost. According to industry research, Asia's medical tourism market could double between 2011 and 2015, with medical tourist arrivals exceeding 10 million by 2015.
Much of the tourism so far has been intra-regional, as patients from Asian countries travel to neighbouring countries with better facilities. For example, many of Singapore's medical tourism receipts (US$765 million in 2011) are the result of Indonesian and Malaysian travellers.
Hong Kong also benefits from medical tourism from neighbours. Tens of thousands of expectant mainland mothers arrived in the territory in 2012, attracted by superior private obstetric care. Mainland patients in private Hong Kong hospitals pay up to 20 times the cost of giving birth in a mainland hospital, a testament to their rising wealth, and their willingness to spend it on premium health care.
Driven by increased health care spending, and more affordable air travel thanks to the rise of low-cost carriers in the region, intra-Asian medical tourism is likely to continue to grow robustly.
Carl Berrisford is an analyst for UBS CIO Wealth Management