North American and European health care organizations looking to expand abroad have increasingly looked at the Middle East as a “land of opportunity” over the last decade. However, making a go of a new venture there – and successfully sustaining it – has proven far more challenging than many expected.
Why? And what lessons should other would-be entrants to that market learn from their predecessors before making the leap?
Applying the standard criteria for evaluating new health care business opportunities, initial enthusiasm often appears fully justified. Population is growing through much of the region. There is money in the economies – at least in the more stable, oil-rich Gulf states and, perhaps when things settle down, Iraq and North African Mediterranean states including Tunisia, Morocco and even Libya. In addition, there is a need for additional hospital beds and other medical resources, at least for now.
However, everything is not always as it seems, and doing business in the Middle East is very different. A market entry business plan based on North American or European operating principals and assumptions made from afar should be considered nothing more than a placeholder pending significant on-the-ground investigation. So, the first order of business should be exploratory trips by the potential Middle East leadership team – and, preferably, an experienced go-between – to meet government and regulatory officials, and potential business partners.
One of the first things they are likely to discover is that the answers to all their questions are “yes”: “Yes, we see a need for your facility and would welcome you here.” “Yes, we can help you site your project.” “Yes, regulatory approval is no problem.” “Yes, your business and partnership plans look fine.” That’s the hospitality culture of the Arab world talking. Skepticism is in order, as is more detailed fact finding.
For example, in Abu Dhabi, the government health regulatory authority (HAAD) is projecting a need for more hospital beds and welcoming proposals, but further investigation will reveal that 63 expatriate and local investor groups already hold preliminary hospital licenses for new facilities. Some of those may never come to fruition, but it is important to discover which projects are truly viable, where they might be located, and what services and target markets they would serve.
Finding the right business partner also is a major issue in many Middle Eastern countries, which, like Abu Dhabi, have laws limiting the expatriate ownership share of new business ventures to less than 50 percent. So, a local “investor” may be necessary. Typically, a private financial arrangement must be reached to secure the investor’s participation. Negotiations can be complex and lengthy.
The right local partner may mean someone with influence –
perhaps a sheikh from a prominent family, whose support will help secure approval for the venture from the government health regulatory agency. (Remember the 63 preliminary hospital licenses still pending in Abu Dhabi?)
Negotiating final regulatory approval for a health care project in the Middle East can be a lengthy process – in some cases many months or even years. It is absolutely critical that terms of the resulting contract be very specific and the language ironclad. Traditionally, contracts can be interpreted very loosely in the Middle East. U.S. and European health care organizations have learned the hard way that responsibilities not defined rigorously enough can open the door for escalating regulatory demands after the fact.
Only after on-the-ground research and meetings, and after business partnership and regulatory parameters are established, can a truly workable business plan be finalized for a new Middle Eastern health care venture.
Undoubtedly, however, the most critical element of that business plan to be addressed is the staffing issue. More on staffing challenges in emerging markets in our next post.