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Business

Emerging markets key to hospital operator's expansion, CEO says

SINGAPORE -- In its quest for growth, IHH Healthcare is looking beyond its core markets of Singapore, Malaysia and Turkey. CEO Tan See Leng shared with the Nikkei Asian Review his thoughts on the company's competitive edge and its strategy for becoming a global player in the medical field. 

Q: What is your growth strategy?

A: We are a Pan-Asian health care player, and the focus of our strategy in terms of market penetration is emerging markets. These are high-growth markets with young workforces, particularly in Southeast Asia, North and South Asia, and the Middle East. They give us an opportunity to grow because as they move from developing to a more developed economy, we will have a rising affluent middle class, which is the segment that we want for our business. As we offer a premium brand of health care, we go for the top 1% to 2% of this market segment. That means we don't go after the mass market. How do we do that? We make sure our hospitals are in the price-inelastic segment, where we offer complex open-heart surgery, cancer treatment, organ transplants and so on. In these fields, not many players can come in and compete with us on price. 

Q: What are your plans for expansion?

A: We manage 37 hospitals [some fully owned], and we are opening a further 19 in the next 24 months. We have about 6,000 beds, and by 2017, we will have close to 10,000. In the next three to five years, we will be using Malaysia and Singapore as hubs to launch platforms into China, India and Indonesia. For our China strategy, we will go in using the hub-and-spoke model, making Beijing the hub to cover northeast regions, Shanghai for regions along the Yangtze River delta, one in the south to cover Shenzhen and Macau, and Chengdu to make inroads into the central part. Mitsui & Co., which is one of our major shareholders, helps us by opening doors for us in China through their network there.

     In India, likewise, we believe Gujarat, which is the home state of Prime Minister Narendra Modi, 

     Indonesia is another big market that we are contemplating going into, but due to its proximity with Singapore, our strategy there will be to build pre- and post-treatment facilities. For complex surgeries, we can send Indonesian patients to Singapore. We won't go in there to set up huge hospitals, unlike in China and India.is undergoing rapid industrialization. A huge middle-income class will arise, and along with it, cardiovascular and other chronic diseases will rise and fuel demand for health care.

     In Turkey, where we own 60% of Acibadem, the country's largest private health care provider, we will deploy the same strategy to expand into Eastern Europe, the Middle East and Central Asia. By doing so, we can cover the whole of Asia.

Q: What are IHH's competitive advantages?

A: Health care is a global kind of industry, but at the same time, the operation is actually quite local. So even though we have some sort of global aspiration, operationally, we allow individual operators to run [their hospitals] with local staff, because these entities need to work with the regulatory authorities, suppliers, etc. In Turkey, for instance, we still have the founder of Acibadem, Mehmet Ali Aydinlar, running the operation.

     We also have the language advantage, as both Malaysia and Singapore are multiethnic countries. The Chinese, Indians and Malays are highly accepting of each other's cultures, like a melting pot. This is a uniqueness that we have in our part of the world that gives us some understanding when we expand deeper into the region.

Q: Do you see medical tourism as a boost to your revenue?

A: In Singapore, our sales are derived from a 60:40 local versus foreigner ratio. The foreign patients are from Indonesia, Indochina, South Asia, China and the Middle East. In Malaysia, they make up about 10% only. We have marketing offices in around Asia and as far as Russia.

Interviewed by Nikkei staff writers Wataru Yoshida and CK Tan.

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