Over the course of the next several weeks, we will be meeting with officials from the WHO, UNICEF and other NGOs in Myanmar who will be offering their thoughts on how the existing healthcare system in Myanmar is currently structured, and where they see the most likely and necessary changes (and, the extent to which these two are the same, given what is likely may not be what is most necessary). Understanding how the current healthcare system in Myanmar is structured, specifically the current role of government versus private spending is important. We noted in an earlier column that Myanmar’s current healthcare budget is a pittance.
Two weeks ago I had the pleasure of speaking with Tom Vallely, the head of Harvard Kennedy School’s Myanmar program. I was curious to get Tom’s feedback on the current state of the country’s healthcare system. His essential response was “they don’t have one.” Tom’s point of view is influenced largely by the work the Kennedy School is doing in rural Myanmar, where it can be hard to over-state how difficult healthcare issues remain. The situation in Myanmar’s largest cities such as Yangon, Mandalay and Naypyidaw is better, but only marginally so. To give readers a sense of how little Myanmar currently spends on healthcare it is helpful to provide both regional comparisons as well as comparisons to other impoverished nations. The below data is taken from the last global survey on public and private healthcare spending completed in 2010 by the WHO.
First, let’s compare Myanmar’s total – both public and private – spending on healthcare as a percentage of GDP in relation to other countries in its region. You will note that Myanmar spends roughly 2% of its GDP on healthcare (again, this is total, both public and private spending combined); even impoverished Laos spends 4.5%, while Cambodia is a little better 5.6%. The closest regional country whose spending approaches that of Myanmar’s is Indonesia, who spends 2.6% of its GDP on healthcare. It is important to point out that Indonesia is in the midst of a massive increase in spending on its healthcare sector, with all signs pointing towards the successful implementation of universal care by 2014. The obvious implication to this is that Myanmar’s healthcare spending is a regional outlier, which suggests both the opportunity and the ground Myanmar must cover in order to create a meaningful healthcare sector.
To even more directly frame Myanmar’s relative spending on healthcare, what if we zoom out of the region and evaluate its spending relative to other Third World countries? If we eliminate regional countries that fit this description such as Cambodia and Laos, how does Myanmar compare? Congo is one of the closest comparisons, but even this country’s spending is slightly greater (when measured as a percentage of GDP), than Myanmar’s. Truly impoverished Malawi spends 6.6%; Afghanistan, 7.6% (admittedly, Afghanistan’s spending is likely skewed by the enormous amount of NGO and US-government led spending going into the country).
These comparisons beg the obvious question: should healthcare companies (pharmaceuticals, medical devices, diagnostics, hospital investor/operators) be bullish in Myanmar? The most basic trigger for bullishness has already happened: the country’s embrace of political reforms. The central role around FDI making its way into the economy and the resulting economic growth will be one of – if not the most – important factors. What else is key to determine for healthcare companies entering Myanmar?
Obviously, the amount of money the government is interested in dedicating to healthcare spending is critical. On this point, we already know the December 2012 letter of intent between the IMF and the Myanmar government stipulated a 5x increase from the 2011-2012 budget for healthcare. This is precisely the sort of second signal healthcare companies needed to see from the government, and should be interpreted as a very bullish signal.
Given how healthcare is currently paid for in Myanmar, what does a 5x increase in healthcare spending mean?
Well, here is where things get a little tricky: the government in Myanmar currently does not play a huge role in healthcare funding. Again, regional comparisons are helpful. In Myanmar, government accounts for slightly more than 12% of all healthcare spending. Compare that to a country like Thailand (75%), or even Vietnam (37.8%) and you can see that Myanmar’s current emphasis is on out of pocket spending (OOPS).
We might, for the purposes of a regional comparison, think about a country like China where OOPS approached 70% in the late 90s. The keys to healthcare becoming a lucrative sector in China (GDP growth, relaxation in sector-specific FDI constraints, increasing government budgets for healthcare) have all been set in motion within Myanmar as well. I won’t include a graph comparing government spending on healthcare between Myanmar and other non-regional third world countries, but the data shows only Afghanistan’s government spends less (11.7% to Myanmar’s 12.2%). The obvious implication to this is that in Myanmar, OOPS has played the dominant role.
In 2010, Myanmar’s Ministry of Health published a large data set that attempted to capture the country’s current healthcare system. Our final research report will feature an evaluation of this data; however, for now, we are going to reference one part of the data.
Several notes of caution on using this. Most obviously, in countries slowly emerging from periods of political repression, data of any sort is difficult to find and even more difficult to trust. Data has implications, and because of this, especially when it comes to sensitive topics such as healthcare, using government provided data has to be done with a grain of salt. In addition, the methodologies behind how the data was gathered can be equally problematic simply because the limited capabilities of those gathering the data. With those caveats in mind, Myanmar’s MOH did publish a study based on a 2010 audit of three areas (Yangon, Mandalay and Mon). What the data shows is that healthcare spending is predominantly private-pay, and that most of the spending comes from current income and savings. We will have more information on this in our final report, but suffice it to say that the average family in Myanmar is eager to see their access to improved healthcare improve, and they are willing to pay for it if for no other reason than they have historically born the bulk of the burden themselves. They will welcome the government’s expanded spending, but they are also going to be aggressive spenders on healthcare as individuals and families.
Over the course of the next several weeks, we will be reporting back to readers with more anecdotal evidence of what we see as the reasons to be bullish on Myanmar’s healthcare economy. Formed by interviews with NGOs, government officials and local citizens, we may occasionally point back to data in this column as support for this bullishness; however, as evidence of our conviction that Myanmar represents a great growth opportunity, we will also begin to expand on the actual companies in Myanmar who have taken the step to build meaningful capacity in-country with the ability today to deliver world-class pharmaceutical and device capabilities.