(Updates shares in seventh paragraph.)
Feb. 19 (Bloomberg) -- Demand for weight-loss surgery is expanding along with waistlines in the Persian Gulf, after oil wealth transformed Arab towns and villages into sprawling cities where people walk less and eat more.
Al Noor Hospitals Group Plc performed more than 500 of the bariatric operations in the United Arab Emirates last year, twice as many as five years earlier, Chief Strategy Officer Sami Alom said in an interview. He sees more demand because “obesity and diabetes are two tsunamis hitting us.” Dubai’s government is so concerned it offered weight-losers a gram of gold for each kilogram shed.
Alom’s boss and father, Kassem Alom, recalls that Abu Dhabi had one hospital when he got there in 1978, one year before the first U.S. fast-food outlet opened. Since then, he’s witnessed Emiratis move “from an active life to a sedentary life. Suddenly wealth is there. They use cars, eat junk food.”
Less than four decades after his arrival, every 100,000 people in the U.A.E. are served by 19 fast-food outlets, the most among 34 countries in a 2012 Bloomberg ranking. The data underscores how consumer habits that evolved over longer periods in the West have changed faster in the Gulf. One result is a looming health crisis, another is an investment boom in hospitals.
Obesity-related diseases may cost the six-nation Gulf Cooperation Council $68 billion a year by 2022 in lost output and treatment costs, almost double the 2013 figure, Booz & Co says in a study in December. That’s equivalent to about 4.5 percent of current gross domestic product. Five of those countries are among the world’s top 10 for diabetes rates, according to consultants Frost & Sullivan.
Al Noor is among the health-care companies that are tapping equity markets to meet the growing demand. It raised 221 million pounds ($369 million) in an initial public offering in London in June. The shares have jumped about 50 percent since then.
Shares in Saudi Arabia’s National Medical Care Co. have more than doubled since its IPO in March 2012, gaining four times as much as the country’s benchmark index. The Prince Sultan Cultural Centre Co., another Saudi company, is developing a health-care park in Jeddah that will include a center for diabetes, hypertension and obesity. The center will be run by the global arm of Houston Methodist Hospital in Texas.
It’s the shift in Gulf lifestyles that is helping to create investment opportunities, Sobhi Batterjee, chief executive officer of Jeddah-based Saudi German Hospital Group, said at an investment conference in Dubai.
The building next door illustrated the changes he was referring to. The Dubai Mall, one of the world’s largest shopping centers, is home to dozens of candy and fast-food outlets such as Hershey’s Chocolate World, Cold Stone Creamery and Johnny Rockets.
Earlier this month, customers stood in a queue outside the Cheesecake Factory waiting for tables. About 15 kilometers away, another mall hosts the world’s biggest Cheesecake Factory branch, with capacity to seat 526 people.
“In the Middle East, we’re fascinated by anything and everything western,” said Nael Mustafa, chief executive officer of Dubai-based Magnolia Restaurant Management. When a new food outlet arrives in the Gulf, he said, it has an allure that goes beyond “the attraction of new concepts in Europe or the U.S. People there are more used to brands.” Mustafa said his company focuses on bringing healthier fast-food brands.
A survey by YouGov released in November found that 56 percent of GCC respondents said they eat at a restaurant or fast-food outlet at least once a week, compared with 43 percent in North Africa and 38 percent in the Levant. Another poll by Gallup found that in all GCC countries bar Oman, less than half of adults say they exercise frequently.
The result is an obesity rate for adults that’s among the world’s highest: 43 percent in Kuwait, 34 percent in the U.A.E. and 35 percent in Saudi Arabia, according to UN data. By comparison, the developed-nation average is 22 percent and the highest rate among such countries is 32 percent in the U.S.
“We are seeing diseases related to obesity such as diabetes in children,” said Lama AlKhuja, a Dubai-based clinical dietitian. “This is something that wasn’t common before.”
The discovery of oil gradually transformed the GCC from nomadic and semi-settled tribal communities relying on pearl- diving, fishing and agriculture into what the UN describes as one of the world’s most urbanized regions.
The oil-driven wealth also triggered a surge in population, which jumped from about 7.8 million in 1970 to 33 million in 2005, according to a report by Baqer Al-Najjar of the University of Bahrain.
Governments are trying to encourage healthier lifestyles to reduce the rising costs of treatment. In Qatar, thousands took part in outdoor sports activities such as soccer, wall climbing and martial arts on Feb. 11, which was declared a national sports holiday for a second year in a row.
Dubai in July offered contestants a gram of gold for each kilogram lost in a month, provided that they lose at least two kilos. As part of the program, called “Your Weight in Gold,” authorities set up outdoor fitness camps for participants, where they could seek medical advice and exercise.
“The impact was huge,” said Alkhuja. “I saw that in my own clinical practice. More clients were coming in because they wanted to lose weight and win gold.”
Mustafa, Magnolia’s CEO and a former investment banker, said his company focuses on healthier brands of fast food, for which he sees rising demand. He cites Flippin’ Pizza, a San Diego-based eatery, as an example, saying it doesn’t use fructose or corn syrup in its products. Mustafa’s company plans to invest more than $100 million by 2016.
Authorities in the U.A.E. have also started screening programs to diagnose diseases such as diabetes. Al Noor is part of that program, said Sami Alom.
“Preventive care, we’re very interested in it,” said Alom. “Will it reverse the trends we’re talking about in the short term, meaning in the next five years? Absolutely not.”
He says Gulf diabetics typically get diagnosed in their 40s, a decade earlier than in most regions. That leaves at least 30 years when they’re consumers of health-care services. Al Noor shares rose 0.6 percent as of 12:30 p.m. in London.
“It takes a lot of time for health education, and the good habits that come with it, to catch up with wealth,” Alom said.
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--With assistance from Robert Tuttle in Doha. Editors: Ben Holland, Amy Teibel