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Indonesia's Lippo Group spreads its hospital network to China

Company inks agreement with China Merchants Group to manage 100 facilities

Lippo first ventured into overseas hospital operations with Pun Hlaing Siloam Hospital in Yangon.

JAKARTA/YANGON Indonesian conglomerate Lippo Group is expanding its sprawling hospital network to China, where it aims to apply a chain-building model that has proved successful in the retail and banking sectors at home.

The group, anchored by real estate operations, has grown to become the largest hospital operator in Indonesia and now plans to manage roughly 100 facilities in major Chinese cities. Lippo and state-owned China Merchants Group, which owns the hospitals, signed a strategic partnership agreement recently and will set up a joint venture in Hong Kong.

Mochtar Riady, founder and chairman of Lippo, revealed these plans in a recent interview with The Nikkei.

Many Chinese state-owned enterprises "have hospitals, but they don't have the knowledge to manage them, and they are losing money," Riady said. Lippo will have those facilities "change to a private business" mindset, he added.

TRIED AND TRUE The China Merchants hospitals "are in very central locations," Riady noted. He envisions old and deteriorating hospitals eventually being rebuilt into high-rise structures that also host other commercial facilities, boosting profitability. Lippo is also looking to venture into urban development, of which hospitals are a pillar, and will likely invest about $1 billion into such projects.

Riady's successes at home are driving his confidence in the Chinese push. He is known for turning Indonesian lender Bank Central Asia into the country's biggest private-sector bank, among other accomplishments. Under his management, BCA saw rapid growth as it cut costs through such means as standardizing branch interiors so it could place money-saving bulk orders on decor.

Lippo envisions similar strategies for hospitals.

Siloam International Hospitals, a subsidiary of core group member Lippo Karawaci, operates 25 hospitals in Indonesia. The company, already the industry leader, plans to increase its port-folio to 50 facilities by 2019.

Lippo began expanding its hospital operations overseas in 2015, opening Pun Hlaing Siloam Hospital in Myanmar in partnership with local conglomerate First Myanmar Investment. The Yangon hospital is able to provide advanced medical services such as MRI and CT scans.

Lippo aims to open 20 hospitals in Myanmar and is looking to enter such markets as Vietnam and Cambodia.

The group intends to speed its expansion through acquisitions. In February, Lippo invested in Healthway Medical, a Singapore-headquartered corporation that builds chains of clinics and other facilities. It is also continuing to grow at home by purchasing regional hospitals.

IN NEED OF CARE Economic growth in emerging Asia has highlighted the shortage of hospitals and doctors in the region. While the Organization for Economic Cooperation and Development says its member nations have an average of 3.3 doctors for every 1,000 people, the figure for China is roughly half that. In Indonesia, the count comes to just 0.3.

Many public hospitals in these countries are unable to deliver the higher-quality care that patients are increas-ingly demanding.

Lippo is not alone in seeking to meet the growing demand for medical care accompanying this rapid economic growth. Malaysia's IHH Healthcare, which serves a wealthier demographic, plans to add hospitals in China and India. The Columbia Asia group, meanwhile, operates hospitals geared toward middle-class patients in three Southeast Asian countries.

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