Tax break on setting up hospitals: Fiscal relief inadequate to attract investors
Entrepreneurs might not be interested in setting up large hospitals outside of Dhaka, Chattogram, Narayanganj, and Gazipur despite a 10-year tax break.
A shortage of qualified doctors and healthcare workers, their unwillingness to stay away from the major cities because of a lack of amenities, and uncertainty about the return on investment may prevent the government from making quality health services accessible to citizens.
Finance Minister AHM Mustafa Kamal offered the tax break in his budget speech on June 3 to ensure better healthcare facilities and decentralise medical services by reducing pressure on the four cities.
A huge amount of investment would be required to set up a 250-bed general hospital and a 200-bed specialised hospital to avail the tax benefit offered by the National Board of Revenue, according to entrepreneurs and analysts.
Besides, the number of patients who could potentially visit such a healthcare provider is insufficient to make such an investment justifiable, they said, adding that a lack of amenities in most districts encourages doctors to live in major towns or cities.
It costs at least Tk 300 crore to set up a 200-bed specialised hospital. Building a standard 250-bed general hospital would require Tk 200-250 crore.
"There are not enough patients, doctors, or other healthcare workers outside the four districts. So, you cannot make any profit by setting up a hospital with such high investment," said AM Shamim, managing director of Labaid Group, one of the biggest private sector healthcare providers in Bangladesh.
"I don't think there will be enough interest in the tax exemption," he said.
Hospitals that will begin commercial operations from July 1 this year to June 30, 2030 will enjoy the tax exemption. The hospitals will have to have the stated number of beds to qualify.
Shamim believes if the government wants to encourage the setting up of hospitals outside the four zones, it will have to reduce the number of beds to 100.
Currently, Dhaka is home to most big public and private hospitals and hundreds of clinics and diagnostic centres. The number of private hospitals and clinics in the country stands at 5,320.
Private hospitals account for 91,537 of the 146,200 beds available, thanks to the growing demand for healthcare aided by rising income and the expanding middle-class amid a steady economic growth.
About $2 billion of Bangladesh's healthcare market has remained untapped. The demand for healthcare is growing by 21 per cent annually, according to Bangladesh Investment Development Authority.
Tapan Chowdhury, managing director of Square Group, which owns Square Hospitals, said the group was not thinking of setting up any new hospital.
"The main reason is that no doctor is willing to go outside of Dhaka. They say they do not get all the amenities they need to live there," he added.
However, United Hospital, another private healthcare provider, plans to open a multispecialty 200-bed hospital in Jamalpur on October 1.
In Chattogram, it has a 500-bed hospital coming up under a public-private partnership with Bangladesh Railway. In Sylhet, the company has acquired land to construct a 150-bed hospital, said Shagufa Anwar, director for communication and business development at United Hospital.
ABM Haroon, managing director of Samorita Hospital, one of the oldest private hospitals in the country, expressed interest to build a cancer hospital if the government provided loans at a low interest rate in addition to the tax exemption.
"We will set up the hospital in a district where there is a good communication system so that people from other districts can go and receive medical services," he said.
"This will reduce the pressure on the hospitals in Dhaka."
Prof Maniruzzaman Bhuiyan, president of the Bangladesh Private Clinic and Diagnostic Owners' Association, said the tax holiday might inspire many entrepreneurs.
"But it is not clear yet how many of them would be interested," he said.
Prof Rashid E Mahbub, pro-vice-chancellor of Bangabandhu Sheikh Mujib Medical University, said no sensible investor would be interested in investing just because of the tax break offer.
"The investors have to be confident about getting the money back. Otherwise, they will not be keen," he said.
Syed Abdul Hamid, chairman of the health economics department at the University of Dhaka, said there was a crisis of qualified doctors in Bangladesh.
Labaid's Shamim went on to say that the government should reduce the import duty on spare parts for medical equipment and remove tariffs on the equipment for diagnostic and treatment.
At present, hospitals count 35 per cent in import duties and taxes to buy spare parts from the international market.
"We will be able to open branches if the government cuts the import tariffs," Shamim added.