BMI View: Kuwait remains regarded as one of the strongest long-term prospects for foreign companies within the Middle East and Africa (MEA) region. Its high per capita spending on drugs, as compared to the regional average, coupled with the import-dependent market, will continue to provide solid commercial opportunities for drug manufacturers. The transformation of its healthcare system from a state-run scheme into a public-private partnership (PPPs) programme should continue to boost this potential, despite the increased government focus on generic drug usage and the negative impact of ongoing patent expirations that will reduce value sales of a number of regionally best-selling medicines.

Kuwait Pharmaceuticals and Healthcare Market Report Q1 2012

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Headline Expenditure Projections

.. Pharmaceuticals: KWD182mn (US$637mn) in 2010 to KWD197mn (US$704mn) in 2011; +8.2% in local currency terms and +10.5% in US dollar terms. Forecast slightly down from Q411 due to macroeconomic factors.

.. Healthcare: KWD1.02bn (US$3.57bn) in 2010 to KWD1.17bn (US$4.17bn) in 2011; +14.7% in local currency terms and +17.0% in US dollar terms. Forecast up slightly from Q411 due to new historic data.

.. Medical devices: KWD71mn (US$249mn) in 2010 to KWD76mn (US$273mn) in 2011; +7.2% in local currency terms and +9.4% in US dollar terms. Forecast slightly down from Q411 due to macroeconomic factors.

Business Environment Rating: Kuwait again ranks second out of the now 30 key markets surveyed by our proprietary Business Environment Rating (BER) matrix for the Middle East and Africa (MEA). Its score is, however, 4.6% quarter-on-quarter (q-o-q) lower than in Q411, on account of the small market size, despite the use of new population data that boosted the Country Rewards component of its overall score. Nevertheless, Kuwait’s stable and high value market will continue to provide a major draw for multinationals, especially as patented medicines represent over two-thirds of the market’s value.

Key Trends & Developments

.. India is shortly expected to conclude free trade agreement (FTA) talks with all the member states of the Gulf Cooperation Council (GCC). These talks began officially in 2006, following the 2004 signing of the Framework Agreement on Economic Cooperation, which paved the way for the current negotiations. The FTA should help Indian drugmakers to take a greater market share of the regional generic drug segment, primarily at the expense of Middle Eastern drugmakers.

.. In November 2011, Trade Arabia reported that US-based Marwood Group, a healthcare advisory and financial services firm, inaugurated its operations in Kuwait. The Marwood is operating its local unit in cooperation with Kuwait Life Sciences Company, which is itself a subsidiary of the National Technology Enterprises Company (NTEC). As mandated by the Kuwait Council of Ministers, NTEC’s aim is to enhance private equity and investment inflows into technology projects in the country and wider.

BMI Economic View: We remain optimistic about the prospects for economic growth in Kuwait heading into 2012. We have revised up our forecast for 2011 from 5.3% to 6.1% on the back of higher-thanexpected levels of oil production, while we are sticking to our forecast for real GDP growth of 5.5% in 2012. Moreover, we continue to expect that the Kuwaiti government’s KWD31.0bn Development Plan (DP) will have a positive impact on the Kuwait’s economy. The five-year plan, initiated in February 2010, is an attempt to strengthen the country’s non-hydrocarbon private sector through large investments in infrastructure, health and education. The DP adds to a number of other government policies designed to encourage private sector participation by Kuwaiti citizens, including financial incentives offered to businesses employing Kuwaiti labour and minimum sectoral quotas for the employment of Kuwaiti citizens. However, we now highlight a number of serious downside risks to this forecast, given that global economic woes persist and Kuwait’s political situation looks increasingly unstable.

BMI Political View: Although political unrest in Kuwait has not been on a scale comparable to other countries in the Gulf region, We see a growing possibility that anti-government discontent in Kuwait could translate into increased political instability. Recent actions by the government demonstrate the extent of its concern over underlying political tensions. If controversy over a corruption scandal escalates further over the coming weeks, there is an increasing chance that the emir may accede to opposition demands for dissolution of parliament. This scenario of escalated risk would also hamper the transition of the healthcare system from a welfare state to a system of public-private partnerships (PPPs). Still, given the persistence of small-scale political discontent in the country – coupled with the government’s healthy fiscal position – we are not anticipating any scaling back of public spending over the medium term