Five
years ago, foreign investors expected a surge in healthcare demand in Vietnam.
This was because Vietnam has a growing population and rising incomes. However,
this surge didn’t materialize. Part of the problem was that the Vietnamese
weren’t willing to spend a lot of money on healthcare, there was a lack of
awareness about available medical services and a severe shortage in qualified
healthcare workers.
But
Vietnam is a rapidly developing country and conditions have changed. Starting
in 2012, Vietnam’s GDP growth steadily climbed, finally reaching 6.68% in 2015.
As the economy grew so did demand for health services. Spending on private
healthcare grew 241% over the past decade. And healthcare spending now accounts
for 7.2% of Vietnam’s GDP – the highest in the region.
But the
Vietnamese healthcare system cannot keep up with the demand for medical
services. According to the World Health Organization, there are only an average
of 7 to 8 healthcare workers and 25 hospital beds for every 10,000 Vietnamese
citizens. This is much lower than the global average of 15 healthcare workers
and 30 beds per 10,000 people.
The
demand for health services will only grow, however. Vietnam has a growing
population with rising incomes. It is estimated that the middle class (defined
as people making US$10 – $100 per day) and affluent class (those making over
US$100 per day) in Vietnam will double in size from 14 million in 2014 to 30
million in 2020. And per capita
disposable income will rise from $1400 to $3400 per year over the same time
period.
Life
expectancy in Vietnam also reached a record high of 75 years in 2015. Vietnam
currently has a very young population, with 75% of the population being born
after 1975. But as this large demographic, with higher incomes, ages and enjoys
longer lifespans the demand for healthcare services will only increase.
The
government is making it easier for foreign investors to participate in the
growing healthcare industry. In 2014 and 2015, the government issued decrees to
help develop the health care industry and to expedite the cooperation between
public and private providers.
Another
favorable condition for foreign investment is the establishment of the ASEAN
Economic Community (AEC) in 2015. This lowers business boundaries between ASEAN
members and makes it easier for certain professionals to work in other ASEAN
countries. Doctors and dentists are among the 7 professions that are granted
labor movement within ASEAN. This will help with Vietnam’s problem of finding
qualified healthcare workers to staff needed medical centers.
A free
flow of capital and investment in the AEC will also lead to the expansion and
exporting of medical services. Highly-skilled workers moving between ASEAN
markets will also help with research and development and improve the quality of
Vietnam’s medical services.
The TPP
(Trans Pacific Partnership) trade agreement will also make it easier for better
healthcare technology to enter Vietnam. This will help improve the sector’s
overall quality.
A
healthcare company wanting to penetrate the Vietnamese market can partner with
an existing Vietnamese business as a joint venture, or work on a contract basis
with a domestic medical service provider.
A good
example is the joint venture between Canadian Triple Eye Infrastructure and Dai
An JSC Corporation. This venture will result in a new international-standard
hospital being built in the northern province of Hai Duong.
Other
foreign players are interested in the Vietnamese healthcare market as well. Japanese
corporations have been trailblazers in building a strong presence in Vietnam’s
healthcare sector. And the Vietnamese Private Hospital Association has reported
that several institutional investors from Japan, Australia and Thailand have
approached them about using major Vietnamese cities as pharmaceutical and
medical hubs for ASEAN.
Vietnam’s
healthcare sector is still under development. But with a growing population, a
growing economy and growing international interest, it presents investors and foreign
healthcare businesses with an exciting growth opportunity.
Peter
Pham
Peter Pham is managing director of Phoenix
Capital, author of "The Big Trade: Simple Strategies for Maximum Market
Returns" and host of "The Big Trade Series" podcast.
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