These are busy days for Dr Faisal Al-Mousawi. The chairman of the Royal College of Surgeons in Ireland Medical University of Bahrain is about to take over management of the government-built King Hamad hospital. The medical school was set up in 2004 and in two years' time its first physicians are due to qualify.

Next year Dr Mousawi will start financing for a $600m healthcare city next to the hospital, where he hopes the great and good of the international medical community will set up branches.

"We want to make Bahrain a medical hub," he says. "The government is more friendly now. They want private sector experience."

Bahrain's move is mirrored across Gulf states. Average life expectancies in the region have risen to 73 years in 2004 from 60.5 in 1978, and infant mortality has plummeted. But residents grumble about the service at state-run hospitals. Many head for Europe or the US for treatment.

"If you are really sick, you should go abroad," says an Emirati in Abu Dhabi. "Our hospitals are not very good."

Gulf Co-operation Council countries spend about 4 per cent of gross domestic product on healthcare compared with 9 to 16 per cent in the European Union, says Richard Di Benedetto, head of GE Healthcare for the region. "A lot of spending is needed to bridge this gap."

According to a patient survey by McKinsey, the consultancy, public hospitals have "limited appointment hours, long waiting times, and unattractive and uncomfortable facilities".

In part this is because the Gulf does not train enough medics. There are 1.4 doctors per 1,000 inhabitants. The average in the Organisation for Economic Co-operation and Development is three.

Stresses on health services are set to increase. The Gulf population is expected to double by 2025, and become older and less healthy. Because of unusually high rates of obesity and diabetes, cardiovascular disease is expected to soar. The rapidly emerging middle classes expect medical services to match their living standards.

By 2025 the need for hospital beds will more than double to about 165,000, and "treatment demand" will rise 240 per cent, says McKinsey. Healthcare costs will rise fivefold to $60bn.

Governments shoulder more than three-quarters of the cost, but "even those with the deepest pockets may not have enough in 20 years to pay for the cost of healthcare", McKinsey says.

GCC states have identified private sector involvement as the way to plug this gap. Most are introducing healthcare insurance legislation for expatriate workers; Abu Dhabi and Saudi Arabia have done so already. All want to improve their health services significantly.

Governments are evolving from suppliers of medical services to regulators. The Dubai health authority levies a mandatory payment from all companies, to fund at least basic medical services from private or public providers for all residents.

"We encourage the private sector to take part," says Qadhi Saeed Al-Murooshid, the authority's director-general. "As long as you have a regulator, it doesn't matter who delivers the services."

The result has been the arrival of world-class private hospitals. The Cleveland Clinic, Imperial College, Johns Hopkins and Moorfields eye hospital have signed contracts to manage branches in the region. Many states are building "healthcare cities", which offer cheap land to attract private care providers.

Private equity players are eyeing opportunities. Ithmar Capital in Dubai plans to invest up to Dh3bn ($817m) in the sector, and Abraaj, the Middle East's biggest buy-out firm, has made several investments.

"Core healthcare provision, such as hospitals, could be very lucrative, but the whole ecosystem of healthcare is very attractive," says Achmed al-Shahrabani of Abraaj. "It's no longer a well-kept secret that it is an interesting market."