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ONTARIO MINISTRY OF ECONOMIC DEVELOPMENT & INNOVATION INTERNATIONAL TRADE BRANCH

ONTARIO MINISTRY OF ECONOMIC DEVELOPMENT & INNOVATION INTERNATIONAL TRADE BRANCH. Capital Projects in Emerging Markets Targeting Infrastructure Middle East and North Africa, and South America PANEL # 3 Middle East & North Africa Opportunities and Challenges Jarvis Hoult

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ONTARIO MINISTRY OF ECONOMIC DEVELOPMENT & INNOVATION INTERNATIONAL TRADE BRANCH

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  1. ONTARIO MINISTRY OF ECONOMIC DEVELOPMENT & INNOVATIONINTERNATIONAL TRADE BRANCH Capital Projects in Emerging Markets Targeting Infrastructure Middle East and North Africa, and South America PANEL # 3 Middle East & North Africa Opportunities and Challenges Jarvis Hoult CEO Consultant, King Fahad Specialist Hospital, Dammam Project Executive Director, King Khalid Medical City Innovative Concepts and Practices for Setting Best Organization-wide Direction

  2. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)Presentation Objectives • Address capital project opportunities and challenges in the Middle East (focus on Kingdom of Saudi Arabia) • Focus will be on capital infrastructure in the public sector – specifically as it relates to the Healthcare sector • Share current experiences and information • Provide some practical tips and advice • Convey a sense and perspective of the MENA client Innovative Concepts and Practices for Setting Best Organization-wide Direction

  3. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)Presentation • Saudi Arabia – Background Facts • Demographics • Investment 2. Opportunities – Key Sector Areas 1. Healthcare 2. Social Services 3. Education 4. Transportation 5. Aramco 3. Challenges – Canada/Ontario 1. “Deep Pockets” 2. GCC Government Policy & Regulations 3. The Competition 4. ‘Mega’ Projects 5. Canadians – “eh” 6. Foreign Policy Innovative Concepts and Practices for Setting Best Organization-wide Direction

  4. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)Saudi Arabia - Demographics • Population growth averaged an annual rate of 3.2% between 2004 and 2010 placing a significant burden on all health, social services, and education infrastructure (Birth rate – 24.5/1000 population) • The population of Saudi Arabia will hit 30,000,000 by 2016, up from the current population of 27.1 million • In 2008, the over-65 age group only made up 2.8% of the population. By 2020, it will increase by 1.5 million and will comprise 8.8% of the population • Between 40% -50% of the population are under the age of 18 years • 26% of Adult males and 44% of Adult females are obese • 1 in 3 Saudis suffer from diabetes today. It was 1 in 5 in 1995. The global average is 1 in 20 Innovative Concepts and Practices for Setting Best Organization-wide Direction

  5. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)Saudi Arabia - Investment • Health expenditure in the Kingdom has doubled over the past decade • 2010 – SR 64 B (USD 16.3 B) spent on health and social services. Up 17 % compared to 2009. • Ninth Five Year Development Plan – the planned Healthcare spending in this five year period is SR 1.4 Trn (USD 384 B). • Education spending in 2010 was SR 137 B (USD 36.7B) up 13% from 2009. This allocation represents 25.7% of government spending • An estimated 1,200 additional new schools will be constructed and 2,000 existing schools will be upgraded and modernized • USD 70 B for construction of 500,000 low income housing units. • Forecasted need by 2015 – 1.65 M new units Innovative Concepts and Practices for Setting Best Organization-wide Direction

  6. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Key Sector Areas • Healthcare • Medical Cities • Hospitals • Clinics • Pharmaceuticals • Healthcare Education & Training • Social Services • Education • Public • Secondary • University • Trades • Transportation • Aramco Innovative Concepts and Practices for Setting Best Organization-wide Direction

  7. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Healthcare • Ninth Five Year Development Plan (2010 – 2015) – the planned Healthcare spending in this five year period is SR 1.4 Trn (USD 384 B) • Medical Cities (SR 16.4 B): Locations: • King Fahad Medical City (Riyadh) – expanding from 1100 beds to 2000 beds • King Khalid Medical City (Dammam) – 1500 bed • King Faisal Medical City (Abha) – 1350 beds • Prince Mohammad Medical City (Al Jouf) – Phase I – 500 beds • King Abdullah Medical City (Mecca) – 1500 beds Innovative Concepts and Practices for Setting Best Organization-wide Direction

  8. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Healthcare – Medical Cities Prince Mohammad Medical City King Khalid Medical City King Fahad Medical City King Abdullah Medical City King Faisal Medical City

  9. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Healthcare 4. Hospitals 1. 56 New hospitals (ranging in size from 50 beds to 250 beds) 2. 51 Replacement hospitals (ranging in size from 50 beds to 500 beds) 3. Hospitals will be primary/secondary care facilities designed to shift basic patient care services away from the Tertiary care hospitals 5. Clinics 1. 750 new primary healthcare clinics 2. Major push to shift patients away from hospitals as their primary health care contact and to provide a referral network back to the community Innovative Concepts and Practices for Setting Best Organization-wide Direction

  10. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Healthcare 6.Pharmaceuticals 1. Saudi Arabia’s pharmaceutical industry is the largest in the GCC with a value of USD 1.9 Billion 2. Given the projected growth of the healthcare industry in Saudi Arabia and the MENA region, this market will likely increase 3. Local production is already behind known demand .. Especially in the generics market 4. Health insurance reforms will drive demand even higher. 5. Generic pharmaceuticals accounts for 20% of the market in Saudi Arabia compared to 40% in the West. Health and medical insurance will encourage the purchase of generic products or branded products. 6. There are currently three pharmaceutical companies in Saudi Arabia. Room for growth and expansion in KSA as well as the GCC and MENA regions. Innovative Concepts and Practices for Setting Best Organization-wide Direction

  11. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Healthcare 8. Healthcare Education & Training 1. Expansion in healthcare spending and capacity will make keeping up with staffing a major challenge for all GCC and MENA countries 2. The shortage of healthcare human resources is particularly acute in Saudi Arabia 3. Relatively few nationals are entering the medical, nursing, and allied health professions. (KSA 2009 – 77% of physicians and 70% of nurses were expats) 4. Government is pushing to shift healthcare education and training to the private sector 5. KSA/Canada Agreement (1984) – 27 year relationship. Opportunities for significant growth and improvement in this relationship 6. Recent study (McKinsey & Co) forecast a shortfall of 5,000 physicians and 50,000 nurses in Saudi Arabia Innovative Concepts and Practices for Setting Best Organization-wide Direction

  12. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Education • An estimated 1,200 additional new schools will be constructed and 2,000 existing schools will be upgraded and modernized (SR 20 B) • 23,000 additional teachers to be hired for the 2011 year • The KSA government and other GCC countries are transitioning to encourage private institutions. Twelve percent of elementary schools are private. The Ministry wants this to increase to 25% • Job training and vocational schools are to get a boost in priority and training (ie: not everyone can go to college/university) • Scholarships help students to attend local universities. A growing number of Saudis are going abroad for education • KSA – MOH Medical Cities given SR 30 M each to send students and staff abroad for training and education (annually) • Bahrain – construction of 250 bed tertiary referral center to be attached to Arabia Gulf University (currently in the Feasibility Study stage) Innovative Concepts and Practices for Setting Best Organization-wide Direction

  13. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Aramco • In 2009 Aramco finished the largest capital program in its history. More than USD 120 B was invested across the company’s portfolio with the goal of preparing it for the future • At the present time (2010), Aramco is holding 900 B barrels of oil in reserve • Diversification is high on Aramco’s agenda .. Of particular note are two key strategies: • Petrochemical production • Reduced dependency on hydrocarbon consumption and shift to non-carbon-based energy sources • Electricity generation has been identified as an area for privatization. SEC is working to hand over the construction and management of key power stations over to private firms. Aramco is considering both PPP and build-to-own contracts for both power and sewage treatment facilities on all its complexes in the Kingdom • Housing – Armaco will be replacing the majority of all its housing compounds and staff amenities over the next five years (see KKMC) Innovative Concepts and Practices for Setting Best Organization-wide Direction

  14. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)OPPORTUNITIES – Canada/Ontario • Medical Equipment • Furniture, Fixtures, Equipment • Medical & Surgical Supplies • Healthcare/Hospital Consultancy • Education & Training (College/University) • Research • Ambulance/vehicle • Architect/Engineering • Project & Construction Management • Healthcare Recruitment • Power • Water/Waste Water Treatment • Alternate Power (Non-Carbon) Resources • Information Technology • Construction/Constructors Innovative Concepts and Practices for Setting Best Organization-wide Direction

  15. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – Canada/Ontario • Time + Patience – “deep pockets” • GCC Government Policies & Regulations • “The Competition” • ‘Mega’ Projects • Canadians “eh” • Federal Government – “Foreign Policy?” Innovative Concepts and Practices for Setting Best Organization-wide Direction

  16. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – Time + Patience (“Deep Pockets”) • Establishing a business in any new market requires a solid business strategy • Establishing a business in a foreign country requires time and patience • Establishing a business in a GCC/MENA country requires time, patience and capital • Establishing a business in Saudi Arabia requires “deep pockets” • For all the GCC markets, it is strongly recommended that businesses establish a presence in the market country • For Saudi Arabia, it is a must that you establish a presence in the Kingdom • Apply for and secure all the necessary licenses and permits to get your business established • Forge a formal business partnership and relationship with a national company and/or entrepreneur within the country Innovative Concepts and Practices for Setting Best Organization-wide Direction

  17. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – GCC Government Policies & Regulations • GCC/MENA country regulations extremely complex – for both private and government issued tenders/work • KSA commercial licensing is particularly complicated and subject to interpretation • Goods • Services • Consultancy • Consultancy licenses – special requirements + generally require a Saudi partner • Bid Bonds – some times quite onerous (financially) .. 1% with Tender Bid … up to 5% with contract award • Government Contracts – General Terms & Conditions – will conflict with other government regulations and reporting requirements Innovative Concepts and Practices for Setting Best Organization-wide Direction

  18. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – “The Competition” • USA – well established .. If not entrenched within the GCC/MENA region. Both a political and military presence strengthens financial networks and relationships • UK – similar to USA .. however .. noted a reduced presence and success rate over the past few years • The “new” competition .. That continues to increase its market share in the region: • China • India • Korea • Investment versus ‘doing business’ Innovative Concepts and Practices for Setting Best Organization-wide Direction

  19. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – ‘ Mega’ Projects • GCC/MENA projects/opportunities for the most part are classed under the heading of ‘mega’ • This is particularly true for the GCC .. and especially Saudi Arabia • Most companies do not have the [individual] resources to bid on such big projects • Establish partnerships within your industry and market scope … and start now .. Don’t wait until you get a tender .. Be proactive • Partnerships coming together for the first time who do not have a history will lose points in the evaluation process Innovative Concepts and Practices for Setting Best Organization-wide Direction

  20. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – Canadians – “eh” • General impression that we Canadians are “too nice” … especially when it comes to the mega projects • Nice has its advantages … but it also had its disadvantages • Competition in the GCC/MENA is ranked on a global level .. and you all know how your competition operates Innovative Concepts and Practices for Setting Best Organization-wide Direction

  21. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA)CHALLENGES – Federal Government – Foreign Policy • Noticed a shift in Federal Government foreign policy over the past 15-20 years .. And more so within the past 3-5 years • Growing sense that the our country’s foreign policy priorities have moved away from the Middle East • Recent examples of UAE visa requirements for Canadians and the KSA imposing a minimum 45 day turn-around for visa applications reflect a concern amongst Canadian companies doing business in the Middle East • Today’s conference is an excellent example of government infrastructure support for Canadian businesses … but Government policy can create hurdles that can have a negative impact on our businesses Innovative Concepts and Practices for Setting Best Organization-wide Direction

  22. Capital Projects in Emerging MarketsTargeting Infrastructure Middle East & North Africa (MENA) Innovative Concepts and Practices for Setting Best Organization-wide Direction

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