KPJ Healthcare Berhad - Annual Report 2018

OUR BUSINESS & STRATEGY OUR PERFORMANCE AND OUTLOOK OUR RESULTS OUR GOVERNANCE APPENDICES ABOUT THIS REPORT 33 KPJ HEALTHCARE BERHAD www.kpjhealth.com.my OUR BUSINESS ENVIRONMENT However, the second half of the year was more optimistic. As a new Government took the helm in Malaysia, it unveiled a record budget for 2019, which featured healthcare as one of the main areas of focus. It also kept its manifesto promise of switching back to the Sales and Services Tax (SST) system from the Goods and Services Tax (GST) system. This is noteworthy as in the past, the GST had partially led to a rise in medical costs as the 6% input tax on drugs under the non-National Essential Medicine List was absorbed by private healthcare providers. According to Willis Towers Watson, the country’s healthcare inflation rose from 8% to 9% from 2016 to 2017 as a result. As consultation fees, medications and usage of medical equipment and ambulance services are not subject to tax under the SST regime, this had a net positive impact on private healthcare providers. In 2019, Malaysia was named as the country with the “Best Healthcare in the World Category” of the 2019 International Living Annual Global Retirement Index. THE ASIA PACIFIC HEALTHCARE SECTOR The regional Asia Pacific healthcare landscape has become more complex and increasingly defined by factors such as an ageing population, greater urbanisation and changes in lifestyle trends. These are leading to the growing prevalence of chronic diseases and comorbidities, and is thus redefining the provision of healthcare services in relation to demand. Alongside this, there is a growing middle class population with a preference for private healthcare services over public healthcare, and who are armed with increased patient awareness, knowledge and expectations. There is also a steadily ageing population demographic. Within the aged population, we are witnessing an increase in diseases such as dementia, and a greater need for care for the aged whose extended families are unable to offer care themselves as they struggle with work pressures in the modern age. By and large, the growth prospects for the healthcare sector globally are positive over the long-term, driven by an ageing population, rising affluence and increasing life expectancy. According to The Edge Markets, by 2030, about 14% of the population would be aged 60 and above. By 2030, there will be more senior citizens, creating concerns with health with longer queues at public hospitals, and the government having to bear higher medical costs. All these factors provide private healthcare providers with opportunities to tap into the senior citizen demographics. An upside for Malaysia with regards to aged care services is its attractiveness as a retirement destination for non- Malaysians. According to International Living’s Annual Global Retirement Index for 2018, Malaysia was ranked fifth place as one of the top 24 retirement havens worldwide, based on 12 criteria such as the cost of living, healthcare, entertainment, climate and governance. A worrying trend during the year however was the deficit recorded by the Indonesian National Health Insurance Scheme, Badan Penyelenggara Jaminan Sosial (Social Insurance Administration Organisation or BPJS). According to ASEAN Healthcare published by UBS in