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05 Jun 2024
In good shape

For the past four years, Swire has been building up its suite of healthcare investments in Hong Kong, the Chinese Mainland and now Southeast Asia. Here, we explore the significance of this sector to Swire and examine why healthcare represents a long-term investment for the Group. We also look at some of the differences in the markets where we operate, and consider how Swire can contribute to the industry in the future. 

In good shape

When Swire announced its first healthcare investment in 2020, it did so with a long-term strategy in mind: to take a minority position in a new industry that has significant potential and to build up substantial interests for the Group over time.

Since then, Swire has made significant strides in its healthcare investments. To date, the Group has invested in Columbia China Healthcare, which owns and operates private hospitals and senior housing in the Yangtze River Delta area, and in New Frontier GBA Healthcare, which includes Shenzhen New Frontier United Family Hospital, a premium private hospital, and HEAL Medical Group, which runs aesthetic, fertility and oncology clinics and a multi-specialist centre in Hong Kong. In March this year, Swire also stepped up its minority investment to a controlling stake in DeltaHealth China Limited – a Chinese Mainland healthcare provider specialising in cardiovascular care. The Group has also ventured into the Southeast Asian healthcare market via a strategic partnership with the Indonesia Investment Authority (“INA”), the country’s sovereign wealth fund, to invest into state-owned Indonesia Healthcare Corporation (“IHC”), the largest private hospital chain in the country.

Swire’s initial investments in this sector were minority positions in hospitals in the Chinese Mainland. With these two new deals the Group has stepped up to take controlling positions, and has expanded its geographic scope to cover Southeast Asia, a region in which it has made a number of significant investments in the past few years across several businesses.
Dr Jeff Staples, Managing Director, Healthcare has decades of industry experience, and is helping to shape and deliver Swire’s healthcare strategy.

The perfect fit with Swire’s businesses

Healthcare is an industry that serves a critical role within communities. Healthcare businesses are complex and often challenging to operate, particularly hospitals, but Swire sees a good alignment between what they require and what the Group can provide.

Dr Jeff Staples, Managing Director, Healthcare, Swire Pacific, is an accomplished executive with nearly 20 years of healthcare system management and organisational leadership under his belt. 

He explains why Swire has great potential to do well in healthcare: “Diversification has always been important to Swire’s success, and healthcare has a multitude of similarities with our other businesses. For example, it is a highly technical, capital intensive industry, similar in many ways to an aviation business. Healthcare is also consumer-facing, in this case with patients and their families, and so quality, commitment to service and reputation are all vital – and are reflected in the Group’s core strengths."

Chinese Mainland opportunities

The Chinese Mainland has seen significant growth in healthcare spending in recent years. A key reason is its aging population combined with a steep rise in life expectancy. By the end of 2022, the number of people on the Chinese Mainland aged 60 and above had reached 280 million, accounting for 19.8% of the total population, according to government statistics. Naturally, as people get older, they will need more healthcare services. This situation, together with the rise in the middle classes who have an awareness and understanding of the importance of healthcare, as well as discretionary savings or income that they are willing to spend on it, creates a favourable environment for the development of the private healthcare sector over the next 20 to 30 years. Swire’s investments are targeted towards some of these demographic shifts, and include orthopaedic and cardiovascular services.

Currently, on the Chinese Mainland, most people rely on basic medical insurance (“BMI”), which is provided by the government. This system provides universal coverage for over 95% of the population and is the world’s largest basic medical insurance network. Because of the sheer volume of people it covers, BMI accounts for a large proportion of patients at private as well as public hospitals. However, BMI only provides low, fixed reimbursements. Jeff says that for private hospitals to be successful and scalable over the long-term, they will need to focus on achieving scale and profitability within the BMI system, as well as on expanding the self-pay and private insurance parts of their revenue base. Indeed, both DeltaHealth and Columbia China are already linked to BMI. “Having large volume gives us solid growth potential, and enables us to drive good clinical outcomes and offer mature clinical services to our patients,” he explains.

Focus on the Greater Bay Area
The Greater Bay Area (“GBA”), which comprises nine cities in Guangdong Province on the Chinese Mainland plus the special administrative regions of Hong Kong and Macao, is the location for one of Swire’s healthcare investments – New Frontier GBA Healthcare – which includes Shenzhen New Frontier United Family Hospital and HEAL Medical Group in Hong Kong.

The GBA is a fast-growing region, with a population of over 86 million people and gross domestic product (“GDP”) of over RMB 13 trillion in 2022. It also differs from much of the rest of the Chinese Mainland in terms of its young population and sustained birth rate. In 2023, Guangdong Province registered 8.12 births per 1,000 people, outpacing the national average of 6.39 births per 1,000 people. It was the only province where the number of births surpassed one million for four consecutive years. From a healthcare perspective, this represents growth opportunities for private paediatric care in the GBA.

Since the signing of the Framework Agreement on Hygiene and Health Cooperation of the Guangdong-Hong Kong-Macao Bay Area in 2018, there has been strong policy support in place regarding medical services, the use of pharmaceuticals and medical consumables, and talent mobility between Hong Kong and Guangdong Province. The GBA also offers benefits for Hong Kong’s elderly residents, with nine medical institutions, including Shenzhen New Frontier United Family Hospital, listed in the Hong Kong government’s Elderly Health Care Voucher Greater Bay Area Pilot Scheme. This enables elderly residents to select hospitals in the GBA rather than using Hong Kong healthcare providers, giving them greater choice.

Jeff explains further: “There are several ways to look at the potential opportunities in the GBA. One is the availability of healthcare and the other is the cost of healthcare. Take oncology, for example. There are some medications that are available in Hong Kong but not on the Chinese Mainland. Conversely, there are some oncological medications available in both Hong Kong and the Chinese Mainland, but they are much cheaper on the Chinese Mainland. We might see a flow of demand in both directions and we are in a strategic position to benefit from such opportunities.”


imageIn December 2023, Swire announced its first healthcare investment in Southeast Asia, in the Indonesia Healthcare Corporation.

Healthcare investment in Indonesia

In recent years Swire has expanded in Southeast Asia, including in property and beverages. Last year, the Group also announced that it had partnered with the INA to make its first healthcare investment in Southeast Asia, in Indonesia Healthcare Corporation.

“From a healthcare perspective,” says Jeff, “we look to enter markets where there are economies of size and substance, and where the demographics are favourable – and Indonesia fits those requirements very well.” Indonesia has the biggest economy in Southeast Asia, and makes up more than a third of the weight of the region’s GDP. With its economic strength, young population (over half of the population are Millennials and Generation Z, according to Indonesia’s population census in 2020), the country provides good prospects for growth in healthcare over the coming decades.

Indonesia Healthcare Corporation is made up of 37 majority owned hospitals throughout Indonesia, and it also owns and operates 66 clinics.

“This is a very rare opportunity for Swire. For us to become involved with an organisation like IHC, which is at the beginning stages of its maturity and evolution, and yet has an immediate national footprint, is highly significant.

“Of course, there will be challenges along the way, such as building up local relationships and expertise in the sector, but ultimately this investment underscores Swire’s commitment to providing quality healthcare for the people of Indonesia,” says Jeff.

imageSwire recently increased its stake in DeltaHealth China Limited, marking its first time the Group has taken a majority shareholding in a healthcare business.

Future strategy

Healthcare investments, by their very nature, are for the long-term and it takes a patient approach to gradually build up trust with local communities. While Swire’s current involvement in healthcare businesses is a combination of minority and controlling investments, the ultimate aim is to become an owner and operator in much the same way as with its other businesses.

Earlier this year, the Group revealed that it had acquired a controlling stake in Shanghai’s DeltaHealth, in which the Group made a minority investment in 2021. This is an important step because it signals the Group’s desire to have full operational control over its healthcare investments rather than to sit as a minority shareholder.

Aside from investment, the vital lifeforce for any new business is talent. Growing the healthcare leadership pipeline is of paramount importance. A final word from Jeff: “Swire healthcare is expanding aggressively and there are many opportunities for people to learn about the industry and for professional advancement. We are always looking for talent – even if your background isn’t in healthcare. In addition to industry-specific roles, healthcare is like any other business and needs talent in finance, procurement, sales, marketing, logistics, and public and government relations, to name but a few. There’s an immense amount to do and to learn.”

For David Cogman, Development Director of Swire Pacific, the Group’s healthcare investments are a long-term strategy that has added social benefits. “Healthcare is fundamental infrastructure for society: by investing in and developing these assets, we are developing businesses that will not only contribute to the Group financially, but will also improve the communities in which they operate, and create goodwill with the governments that we work with,” he says.

These are still early days for Swire’s healthcare business. However, the groundwork has been laid and the strategy is in place. What is important is that these investments have a long-term trajectory. Looking ahead, the Group is in very good shape to continue making a mutually beneficial impact on healthcare markets – both where it currently operates and where it will expand to in the future.