Navigating Vietnam’s Healthcare Sector for Chinese Healthcare Companies
Vietnam’s healthcare industry offers promising opportunities for foreign investors and businesses looking to expand their presence in Southeast Asia and Chinese firms are well poised to benefit. Here’s how.
Along with being the 15th most populous country in the world, Vietnam is projected to reach a population of 120 million by 2050, according to the World Bank. Moreover, the elderly population aged 65 and above is expected to triple and account for 21 percent of the population. This demographic shift underscores the escalating demand for healthcare services. As a result, healthcare spending is forecasted to nearly triple from US$15.6 billion in 2018 to US$42.9 billion in 2028, representing an impressive compound annual growth rate (CAGR) of 11 percent.
The growth in Vietnam’s middle class, along with increased healthcare expenditure, is fueling demand for high-quality medical services. These factors collectively contribute to the exponential growth potential of the healthcare services sector in Vietnam.
As such, the country has made significant strides in improving its healthcare infrastructure, with a focus on enhancing the accessibility and affordability of healthcare services. The government has implemented various reforms to modernize the sector and promote private sector participation. This has created a favorable environment for foreign investors.
At the same time, partnerships and investments are playing a crucial role in the development of Vietnam’s healthcare sector. Collaborating with local companies and institutions operating in the field enables foreign investors to leverage their expertise and knowledge of the market, while also facilitating technology transfers and capacity building. This includes Chinese companies, who have been collaborating closely with their Vietnamese counterparts in recent years. Indeed, China’s robust healthcare industry and its expertise in areas, such as pharmaceuticals, medical devices, and traditional medicine, have made it an attractive partner for Vietnamese businesses and investors.
In this article, we delve deeper into the current state of Vietnam’s healthcare market, highlighting the promising opportunities it presents for foreign investors. We also examine the strengths and expertise of Chinese healthcare companies, as well as their expansion strategies with respect to Vietnam.
Vietnam presents a vast market for healthcare, pharmaceuticals, medical equipment, and devices. The country has prioritized the development of its public healthcare sector, leading to increased budget allocations and incentives to attract investment. Notably, Vietnam has emerged as the second-largest spender on healthcare as a percentage of GDP in Southeast Asia, trailing only Cambodia. This reflects the significant focus placed on the healthcare sector and the potential for growth and opportunities in Vietnam’s healthcare industry.
Government health expenditure per capita in Vietnam is forecast to reach US$104.05 by 2027.
However, the rising demand for healthcare in Vietnam poses challenges in terms of financial resources and capacity, particularly in the public sector.
Public hospitals account for the majority of healthcare facilities in Vietnam, with various administrative levels ranging from central to district levels. To qualify for full reimbursement, patients are typically required to follow the referral system from local to central hospitals. However, it is common for patients to bypass this system and directly seek treatment at central hospitals in urban areas, which creates additional strain on the healthcare system.
Emerging trends in Vietnam’s healthcare industry
Emerging trends in Vietnam’s healthcare industry are reshaping the landscape and impacting various aspects of the sector. These trends are driven by an array of factors, including (but not limited to):
- Changing demographics: Demographic changes play a significant role in driving healthcare reforms in Vietnam. As the population evolves, a new paradigm of collaboration between the public and private sectors is emerging. Partnerships with market participants from non-healthcare sectors, such as retail, technology, wellness, and fitness, are transforming healthcare financing and delivery.
- Depleting resources: Lack of resources, such as a shortage of skilled labor, has led to the exploration of technology as a solution in the healthcare industry. Remote monitoring, telemedicine, and mobile devices enable healthcare professionals to save time and improve communication with patients. Advanced analytics and technology-driven solutions enhance decision-making and efficiency in healthcare delivery.
- Increase in consumer awareness: Consumers are becoming more informed and involved in their healthcare journey. They demand greater accountability, integrity, and transparency from healthcare providers and the system overall. Organizations, communities, and social care providers are coordinating their services, while patients actively participate in their healthcare across the continuum of care.
- Chronic diseases: The increasing incidence of chronic diseases, driven by lifestyle changes, is creating a greater demand for chronic care. As such, advancements in the early detection and diagnosis of diseases contribute to minimizing treatment costs, leading to a stronger focus on preventive health solutions.
- Increasing use of mobile technology: The use of mobile technology is making healthcare more accessible, faster, and cost-effective. It allows patients to access healthcare services through virtual channels, reducing travel and waiting times.
Opportunities for foreign investors
Pharmaceuticals in Vietnam are benefiting from favorable market conditions, leading to strategic mergers and acquisitions (M&A) partnerships. Local pharmaceutical manufacturers have joined forces with foreign investors, such as Taisho-DHG, Aska-Hataphar, SK-Imexpharm, and Daewoong-Traphaco.
In general, foreign-invested entities are not allowed to directly distribute pharmaceuticals in Vietnam, as stated in Decree No. 54/2017/ND-CP, but they can distribute locally manufactured products. This regulation has made investing in local manufacturers the most effective way for foreign players to gain a foothold in Vietnam’s pharmaceutical market, which is projected to reach US$16.1 billion by 2026.
(Note: this does not necessarily apply to EU investors per the EVFTA.
Moreover, the country’s pharmaceutical sector is attracting significant interest as a defensive sector amid global economic turbulence. Defensive sectors, in investor parlance, refer to sectors of the economy that frequently demonstrate resilience during an economic downturn as consumers persist in spending on these goods and services, even when facing financial constraints.
The Vietnamese government is thus keen to promote domestic manufacturing, with an aim to increase the share of locally produced pharmaceuticals to 80 percent, thereby challenging the dominance of imports. Local manufacturers are considering M&A partnerships with foreign strategic investors as a viable option to enhance their competitiveness and meet global standards through technology transfers, corporate governance, and management expertise. Meanwhile, investors are eyeing Vietnamese manufacturers to tap into the local market potential and export opportunities through contract manufacturing partnerships.
The COVID-19 pandemic has expedited the need for virtual healthcare services, bringing healthtech to the forefront. The Vietnamese government has placed emphasis on remote medical examinations and the digitalization of medical records. Recently, healthtech startups operating in various sectors, such as telehealth, third-party administration, and e-pharmacy, have successfully secured funding from foreign investors, highlighting the potential of this emerging industry in Vietnam.
However, it is worth noting that healthtech still lags behind sectors like digital payment solutions and e-commerce in terms of investment and developmental progress. This presents an opportunity for investors to actively engage and contribute to the growth and advancement of the healthtech sector in Vietnam.
The diagnostics market in Vietnam remains fragmented, with numerous small-scale labs using outdated technology. Companies that can establish scalable and technologically advanced diagnostic networks have the potential to capture market share and attract investor interest, similar to what has occurred in India and China. Genetic testing has also caught the attention of investors, with companies like Genetica and Gene Solutions successfully completing their early funding rounds and Gentis being acquired by Eurofins.
Most of the medical equipment in Vietnam is imported, indicating a need for local manufacturers to meet international standards. However, investments, such as the US$30 million infusion by Eastbridge Partners into USM Healthcare, a local stent manufacturer, demonstrate the potential of high-quality assets in this sector. The medical consumables segment, including stents and sutures, presents particular interest among local assets.
Areas of collaboration between Vietnamese and Chinese companies
Vietnam and China have witnessed a growing number of partnerships and investments in the healthcare sector, reflecting the shared interests and opportunities for collaboration between the two countries. These initiatives have resulted in mutual benefits, contributing to the advancement of healthcare services and technologies in Vietnam.
Manufacturing and supply of medical equipment
Chinese healthcare companies have recognized the potential of Vietnam as a manufacturing and supply hub for medical equipment. Vietnam’s strategic geographical location and growing market demand make it an attractive destination for establishing manufacturing facilities and exporting medical equipment to other Southeast Asian markets.
This collaboration has the potential to enhance Vietnam’s manufacturing capabilities and contribute to the availability of high-quality medical equipment at competitive prices.
Advancements in telemedicine and digital health solutions
Chinese companies specializing in telemedicine and digital health solutions have formed partnerships with Vietnamese counterparts to establish telehealth platforms and mobile health applications. These collaborations leverage technological advancements to improve healthcare accessibility, particularly in remote and underserved areas of Vietnam.
Through telemedicine, patients can access medical consultations, diagnostics, and monitoring remotely, reducing the burden on healthcare infrastructure and improving healthcare outcomes. These partnerships also foster knowledge sharing and capacity building in the field of digital health, benefiting both patients and healthcare providers in Vietnam.
Research and development
Joint research and development (R&D) initiatives between Vietnamese and Chinese healthcare companies have gained momentum, leading to advancements in pharmaceuticals, medical devices, and treatment protocols. These collaborations capitalize on the scientific and research expertise of both countries to drive innovation in healthcare.
By pooling resources and knowledge, these partnerships have the potential to develop new drugs, medical technologies, and treatment methods that address the specific healthcare needs of the Vietnamese population.
Vinmec Healthcare System and Fosun International partnership
One notable partnership in the Vietnamese healthcare market is between Vinmec, a prominent private healthcare provider in Vietnam, and Fosun International, a renowned Chinese conglomerate. Fosun International’s investment in Vinmec has played a pivotal role in supporting its expansion plans and the development of state-of-the-art healthcare facilities across Vietnam.
This partnership has facilitated the transfer of expertise, advanced medical technologies, and management practices from China to Vietnam. As a result, Vinmec has been able to enhance its service offerings and provide world-class healthcare services to the Vietnamese population.
Mindray Medical International
Mindray, a renowned Chinese medical device manufacturer, has established a manufacturing facility in Vietnam. This strategic investment has contributed to the growth of Vietnam’s medical equipment manufacturing sector. The company’s presence has not only boosted local employment opportunities but has also enhanced the availability of affordable and high-quality medical devices for healthcare providers in Vietnam and the region.
In conclusion, Vietnam’s healthcare industry presents immense opportunities for foreign investors, such as Chinese companies, looking to expand their presence in Southeast Asia.
The country’s projected population growth, rising elderly population, and increasing healthcare spending indicate a thriving market with significant growth potential.
Vietnam’s government has implemented reforms to improve healthcare infrastructure, promote private sector participation, and create an investor-friendly environment. This has paved the way for partnerships and investments, with Chinese healthcare companies recognizing Vietnam as a strategic manufacturing and supply hub.
As the country continues to push for the sector’s growth, foreign companies have a prime opportunity to participate in Vietnam’s healthcare industry and capitalize on the rising demand for high-quality medical services, technological advancements, and market potential. By leveraging their expertise, resources, and strategic partnerships with local companies, foreign investors can contribute to the modernization and expansion of Vietnam’s healthcare infrastructure while reaping the benefits of a rapidly developing market.
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