Thesis Chapter 1 - An Investigation Into The Privatization Process Of Public Hospital In KSA And Its Long-Term Effects

Chapter 1

PROBLEM AND ITS BACKGROUND

 

Introduction

According to Hodge, (2004) privatization is defined as the process of transferring the ownership or management of public establishments, projects, and services from the government sector to the private sector, relying on market mechanisms and competition, through a number of methods including contracts for managing, operating, financing, or selling all or part of the government's assets to the private sector. There are many reasons why government attempts to privatize certain establishments and there are many procedures to be considered to privatize public organization like public hospitals. It has been noted that the process of privatization include various objectives.

The first objective is the improvement of the capability of the national economy and enhancing its competitive capacities to meet the challenges of both national and international competition. The capability of the economy can be enhanced by subjective projects to market forces. The enhancement of the competitive is closely connected to the general approach of developing private sector (KSA Supreme Economic Council, 2008). Another objective is to encourage private sector investment and efficient participation in the national economy of any nation and increasing the share of domestic production to attain stability and growth in terms of national economy. In addition, privatization also aims on ownership expansion of productive assets. Through the use of public subscription as part of privatization process, can expand the participation of population in the ownership of the productive assets. Further, they also want to encourage large number of people to participate in various types of process transferred to the private sector by utilizing the privatization approach of public subscription and encourage local investment of national and international capital. Privatization reflects the commitment of the government to economic reform as well as projective a positive image on attracting more foreign investor (KSA Supreme Economic Council, 2008).

With many investors, this leads to the increase of employment opportunities among citizens and optimizes the utilization of national labor forces and it also provides services to people and investors in a cost-efficient and timely approach. The monopoly concession rights of privatization projects may result on the increase prices and reduction of the quality of services since some of the industries receive government subsidies prior to being privatized. Privatization can also help in rationalization of public expenditure and reduction of the burden of the government in terms of financial budget by providing private sector opportunities to operate, finance and maintain certain organizations. Lastly, privatization are also said to increase government revenues from returns on participation in procedures to be transferred to the private sectors and moneys obtained. These are few of the obvious effects of privatization process of public services and since the Kingdom of Saudi Arabia are trying to gain benefits from privatization, the aim of this dissertation is to analyze and investigate the privatization of public hospitals in KSA and to determine the long term effects of this to the entire nation.

 The study shall be divided into five chapters in order to provide clarity and coherence on the discussion of the topic. The first part of the study will be discussing the problem uncovered by the researcher and provide ample background on the topic. The chapter shall constitute an introduction to the whole study, the hypothesis, and the statement of the problem in order to present the basis of the study. Moreover, the chapter shall also have a discussion on the scope of its study as well as the significance of the study to society in general and specific effects on individuals.

The second chapter shall be discussing the relevance of the study in the existing literature. It shall provide studies on marketing strategies or practices and customer satisfaction and others. After the presentation of the existing related literature, the researcher shall provide a synthesis of the whole chapter in relation to the study.

The third part of the study shall be discussing the methods and procedures used in the study. The chapter shall comprise of the presentation of the utilised techniques for data collection and research methodology. Similarly, it shall also contain a discussion on the used techniques in data analysis as well as the tools used to acquire the said data.

The fourth chapter shall be an analysis on the tabulated data. After the said tabulation, the data are statistically treated in order to uncover the relationship of the variable involved in the study. With the said data, the chapter seeks to address the statement of the problem noted in the first chapter.

The last chapter shall comprise of three sections, the summary of the findings, the conclusions of the study, and the recommendations. With the three portions, the chapter shall be able to address the verification of the hypothesis stated in the initial chapters of the study.

Background of the Study

According to Schaefer (2000), Saudi Arabia’s health system performs effectively in terms of maximising the health status of the population, continuing to assure the population financial protection against illness, providing equitable access to high quality, state-of-the-art services with high levels of consumer satisfaction. He adds that the health system performs efficiently from both macroeconomic and microeconomic perspectives and being financially sustainable in the light of expected economic growth and demographic trends. The ability of the Saudi Arabia to support the population’s increased health needs for the individual will depend on the country’s socio-economic situation as well as the efficiency and effectiveness of the Saudi health system programs in providing necessary services. Basically, he would assert the relationship of socio-economic situation of the individual with the existing health system policies. However, due to some economic reasons, Saudi Arabia has been able to present a vision for privatisation in the Kingdom. 

The privatisation of the hospitals in Saud Arabia is part of its Seventh Development plan for 2020 (Speakman, 2002). Such vision is supported by an elaboration of the main goal of privatisation. Privatisation is mainly referred to include not only the selling of Government assets to a private entity, but also transfers all the management (contracts and concessions) and the opening up of new sectors so far reserved to the public sector for investment by the private entity. Accordingly, KSAs Ministry found that privatisation is the best way to solve the issue of hospitals shortcomings and problems. The government has concluded that the Australian experience fits KSA best because of the commonness of their health system.  Some mentioned that one of the advantages of privatisation is to avoid public hospitals from bankruptcy and the capital of the private entity can be used to developed the hospitals and attract highly trained and qualified health professionals. Even if the government has their own reasons for privatisation of the Hospitals in the nation, problems still occurs in line with the perspectives of some economist and the residents of the Kingdom. This study is then conducted to determine the long terms effects of privatisation of hospitals in KSA.  

Research Questions

The study will investigate the privatisation of hospitals in Saudi Arabia.  Specifically, the researcher will answer the following queries:

1.                    How would the residents describe or assess the privatisation of hospitals in terms of:

        Benefits Equity

        Access and Service Delivery System

        Quality and Consumer Satisfaction

2.    How would the Saudi Arabians assess the effects of privatisation of the hospitals in Saudi Arabia?

3.    What are the advantages of public hospitals privatisation in Saudi Arabia?

4.    What are the disadvantages of public hospitals privatisation in Saudi Arabia?

5.    What are the major factors holding the privatization process?

6.    If the government wants to proceed with the privatization plan, what could be the most effective ways to do so?

Thesis Statement #1

The privatisation of hospital will only lead to private hospital monopoly and increased competition.

Statement of the Problem

The privatisation will benefit private hospitals in various ways including the scope as a resultant factor of the transfer from public to private, improved efficiency and effectiveness of healthcare services, improved overall corporate governance because of the addition of professionals and the creation of new opportunities within the healthcare industry. Provided that private hospitals have the financial, administrative and technical capabilities to control and influence the healthcare business, the economic balance between private and public hospitals will become blurry. Within the competitive environment, the healthcare industry structure, this is also subjected to market forces, must conform to commercial objectives and private sector principles at the expense of the

public hospitals and the end-users.

Thesis Statement #2

Hospital privatisation will negatively impact the Saudi Arabian nationals employment.

Statement of the Problem

The impact of privatisation on labor is evident on the negative trend in employment. Labor retrenchment will be viable resulting to employee turnover. Saudi Arabian workers make up only a small portion of the private sector. As such, there may be the fear of laying off of workers and be replaced by foreign workforce who tend to be much cheaper and productive. Further, the terms of employment and necessary employee arrangement could be restructured in light of the privatisation. When workers are made redundant, the compensation structure could be altered. Another issue to ponder on will be the skill development and retraining required once hospital privatisation materialises. The extent to which the Saudi Arabian government could extend to help Arabian nations due to the switched in demographics will be a matter of debate.

Thesis Statement #3

Due to hospitals privatisation, the economic control of the Saudi Arabian government over the healthcare industry will be limited.

Statement of the Problem

In the presence of foreign investors, the extent of ownership of these privatised hospitals will be tended on external forces and not the Saudi Arabian government. Since infrastructure, natural resources and social assets such as health and education resources are managed by the Saudi Arabian government, the degree of ownership and management will be lessened. Moreover, the government revenue could likewise be limited because there are no corporate taxes to which the government could benefit from. The non-existence of taxes could not necessarily mean better prices for hospital services end-users. If the government will lose control and authority in privatised hospitals, revenue sharing arrangements, fee charging regimes and sale proceeds will eventually be inadequate.  

OBJECTIVES OF THE STUDY:

�  To examine in depth the privatization process and practices in Saudi Arabia.

�   To identify the determination of privatization the public hospital in Saudi Arabia. 

�  To investigate and revel the long-term effects of the privatization and for privatizing of the public hospital.

�  To propose the privatisation process and procedure for the government hospital in Saudi Arabia which can be used as the prototype of such privatisation process in the Middle East.

Significance of the Study

This study would provide an in-depth base empirical data on the implications of Hospital privatisation in KSA. This study would be of great help to the government of KSA to determine whether privatisation is necessary for the nation or not. Lastly, this study serves as an academic tool in informing its reader about the current situation of Hospitals in Saudi Arabia.  In this regard, the objectives of the study, if achieved, can provide significant contribution in the country.

First, knowing the effects of privatisation of public hospitals in terms of benefits of equity, access and service delivery system and quality consumer satisfaction can lead to the development of a more enhanced privatisation approach that meet the needs of the KSA residents. In addition, knowing the advantages and disadvantages of privatisation can help the government to find a new way to improve privatisation approaches and strategies.

The study shall contribute to the limited literature review in the area of  privatization and thus enhance knowledge of readers in the area, in ِparticular for the privatization of public hospital.

• Knowledge of the long term effect of privatization of public hospital is ِbeneficial for: ِ
  1. Government to evaluate and make decision on privatizing the hospital.
  2. Citizens to understand the options and choices they have.
  3. Others to have better understanding on the potential effects.
• The prototype can be used as the guide by other governments and bodies to implement the privatisation of government hospital in their countries in particular at Middle East which have similarity in culture.

Scope and Limitation

The study intends to investigate the perception of the respondents regarding the long-term effects of privatisation of public hospitals in Saudi Arabia.  For this study, primary research and secondary research will be used. Primary research will be conducted using self-administered questionnaires that will be sent to chosen respondents from Saudi Arabia. The questionnaires will be used to collect quantitative data.  The data will be analysed and compiled for the correlation of the hypothesis. The data will then be presented by means of graphical representations and illustration and the difference would be highlighted. Through the use of different statistics, the researcher will determine the effects of public hospital’s privatisation in Saudi Arabia.   

Reference

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Hartoqa, F. (2005).  Privatization of Hospitals in KSA. Available at http://strategis.ic.gc.ca/epic/site/imr-ri.nsf/en/gr123734e.html. Accessed September 3, 2009

KSA Supreme Economic Council (2008). Privatisation Objective and Policies . Online available at  http://www.sec.gov.sa/Privatisation_Strategy/Privatisation_Objectives_and_Policies.aspx?lang=en-US. Retrieve September 3, 2009.

Mallard, T. and Cullen, M. (2001). Report of the Advisory Group on the

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Mufti, M. (2000). Healthcare Development Strategies in the Kingdom of Saudi Arabia, Kluwer Academic/Plenum Publishers, New York

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Schieber, G. (2000). Health System in Saudi Arabia, Health and Social Protection Sector

Speakman, L. (2002). Privatization and PPI in Saudi Arabia. Available at http://www.planning.gov.sa/home/Home/Arabic/ALL%20PAPERS/DAY3/Privatization,%20Pricing%20and%20Regulation/6.%20%20Privatisation%20and%20Private%20Provision%20of%20Infrastructure%20in%20Sau/Speakman%20updated%20paper%20on%20privatisation.doc (September 3, 2009).

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