There's potential in Vietnam's healthcare market for foreign investors but the obstacles are manifold.
When Ms. Vu Hong Linh was diagnosed with cancer six months ago her family immediately sent her to Singapore for treatment. They had heard about the greater success rate of cancer treatment in the city state and also feared that such treatment in Vietnam would be fraught with difficulty, with local hospitals having too few doctors and too many patients. Ms. Linh has undergone several radiation sessions in Singapore and her cancer, doctors believe, has been brought under control.
Ms. Linh, 31, is just one of about 40,000 Vietnamese who head overseas to receive medical care, many of them reluctantly. Spending on healthcare services in Vietnam has continued to rise steadily over the years despite the economic difficulties, making the sector attractive to investors. Although there are no reliable official figures, of the $12 billion spent in 2013 about half came from people’s pockets, with $1 billion spent by wealthy local people on treatment overseas. In a country where demand for medical care has risen in line with prosperity, some foreign investors are indeed reportedly seeking to tap into the market.
For many years healthcare in Vietnam was closely regulated by the government. Since the country opened up to privatization, however, the healthcare sector has become an area of interest for foreign investors. Vietnam represents a potentially large healthcare market and there are many challenges facing its healthcare sector that foreign investors hope to address through investment.
It’s true that Vietnam is desperate to draw foreign investment into its healthcare sector in general and hospitals in particular. The government has expressed support for foreign investors because it wants to alleviate the pressure on the public hospital system and improve overall healthcare quality. Under the country’s WTO commitments, foreign investors can establish 100 per cent foreign-invested hospitals or set up business cooperation contracts with Vietnamese partners. As confirmed by officials from the Ministry of Health, there are no restrictions on qualified foreign doctors practicing in the country.
Unlike many other lucrative investment fields in Vietnam such as real estate, finance or tourism, the healthcare sector has been largely ignored by foreign investors in the past. But this has gradually changed. One of the largest foreign investment projects in the country this year is the $225-million Dai An Vietnam - Canadian International Hospital Corporation project. The Canadian investor Triple Eye Infrastructure Corp. received a license to set up the joint venture with Vietnam’s Dai An JSC Co. this year, to build an international-standard hospital with 200 beds at the Dai An Industrial Park in the northern province of Hai Duong. Once open in 2016, the hospital is expected to serve around 20,000 workers at the park as well as local residents.
International-standard hospitals developed by agreement between a local company like Dai An and Triple Eye could be of significant benefit to Vietnam, according to Mr. Marc Kealey, Principal of the Triple Eye Corporation. “It behooves us as Canadians to try and find alternatives within our own system to help Vietnam realize her potential in a global world where health dollars should stay close to home,” he said, adding that options for healthcare are being considered in Vietnam by investors in other countries like Malaysia, China, France and the US and they are being closely examined to see how they can work.
The benefit of the Canadian proposal, Mr. Kealey went on, is that the policy framework for private sector hospital projects, or PPPs, has worked in Canada and may be adopted in Vietnam. “Private sector investment in healthcare is the way to go in countries like Vietnam as it matures,” he said. “State-run systems without adequate capitalization are never good. And as economies grow, so too does the choice for those with the means.”
Among the foreign investors involved in Vietnam’s healthcare sector, analysts believe that those from neighboring countries are the most interested. In 2013 the Singapore-based international business group the Chandler Corporation spent $99 million on acquiring 80 per cent of the Hoan My Medical Corporation, the largest hospital chain in Vietnam. In the coming year foreign hospitals from Thailand, Indonesia and Malaysia may make similar moves. Local media have reported that the Indonesian conglomerate the Lippo Group wants to build 15 hospitals in Vietnam, while Thailand’s Bumrungrad Hospital is also seeking investment opportunities in the country.
In particular, Malaysia’s IHH Healthcare Bhd is actively on the lookout to acquire hospitals in the ASEAN region and, hence, Vietnam. “If 10 per cent of the population can afford private healthcare, that represents 9 million people,” a company representative was quoted as saying, and the company also wishes to provide consultancy and management services in the country. Although it is not in any rush, the company has found opportunities and is now scouting sites in Hanoi.
Over the years some foreign investors have operated effectively in Vietnam’s healthcare sector and expanded their scale of operations, for example the Vien Dong Co. Ltd, which invested in the France-Vietnam Hospital in Ho Chi Minh City, and the Thomson Medical Centre with its Happy Hospital. However, the small number of these successful foreign hospitals also highlights the reality that getting deals done in Vietnam remains a challenge for foreign investors. Some investors who have been working in the sector for several years express their disappointment in how challenging it is to navigate the country’s maze of regulators and approval agencies. These investors are restricted by a local mindset that foreign hospitals will bring products, technologies, care plans and service standards that will easily capture a meaningful market share that previously belonged to public and privately-owned hospitals.
Some investors say it is a struggle to identify potentially profitable businesses in an industry like healthcare, as it’s not known for colossal profits. It requires large upfront investment and takes a long time to generate returns. For instance, existing regulations require an investor put up at least $20 million to open a new hospital and $2 million to open a new clinic, which are no small amounts given the current economic difficulties.
Because of the huge capital demand, most foreign investors in the healthcare sector are geared towards the high-end market, such as foreigners working in Vietnam and their families as well as wealthy Vietnamese, who often go abroad for treatment. But high-end patients account for a small minority of the total market.
One of the greatest challenges facing Triple Eye comes from funding sources that inquire as to how to mitigate risk in Vietnam. This fear, the company believes, comes largely from of lack of practical knowledge about Vietnam. “I personally believe that Canadians have to visit Vietnam if they are interested in the market and see for themselves the potential that exists there,” said Mr. Kealey. “Once Canadian businesspeople and those available to deploy finance for large projects like our hospital corporation see how the economy is shifting, they will also see the enormous opportunities on offer.”
Mr. Lai Voon Hon, General Director of Hoa Lam - Shangri-la Healthcare LLC, tells VET’s Linh San he considers Vietnam’s healthcare sector to hold great promise for investors.
Do you think private hospitals have potential for development in Vietnam?
Overcrowding at public hospitals in Vietnam has been a long-standing issue and has led to many Vietnamese going to Singapore and Thailand for medical treatment, which has resulted in billions of dollars in foreign exchange being lost. With such issues and a limited budget, the Vietnamese Government has been encouraging more private investment in the healthcare sector to help resolve the problems and provide people with more options.
Vietnam’s healthcare sector is under-served and this presents a golden opportunity for healthcare operators and investors who are able to appropriately address the demand. The government’s recognition of this and their concerted efforts to attract investors by adopting friendly policies bodes well for industry’s outlook.
The concept of private healthcare is still new in Vietnam. As a result, investors face many challenges with regulatory approvals, funding, and human resources. One of the greatest challenges is the recruitment of qualified clinical staff that are familiar with internationally-recognized standards. This is not specific to Vietnam, and is faced by all hospital operators in developing countries.
Some foreign investors have acquired stakes in local hospitals to enter the market. Do you think this will become common over the years ahead?
Acquisition is definitely the quickest way to enter Vietnam’s healthcare sector but success cannot be guaranteed. The facilities at a hospital are only one part of the success equation. The staff is another, and taking time to understand and adapt to patient needs and culture through organic growth may prove advantageous over the longer term.
What is the difference between Hoa Lam Shangri La Healthcare’s Hi Tech Healthcare Park and other private hospitals in Vietnam?
Firstly, the Hoa Lam - Shangri-La International Healthcare Park is not a hospital but an integrated medical park that will comprise of six hospitals with supporting facilities such as medical laboratories and research centers, a nursing training school, a retail mall, an international school, a kindergarten, and apartments and serviced apartments. This is to offer people in Vietnam and neighboring countries international-standard clinical services as well as provide patients with an alternative to seeking medical treatment overseas.
City International Hospital (CIH) is the first hospital to be completed at the International Healthcare Park and what differentiates it from other private healthcare providers in Vietnam is that we are not a solo hospital but part of a larger network of Parkway and Pantai hospitals in the region. By association, we are a sister hospital to prestigious brand names such as the Mount Elizabeth and Gleneagles Hospitals in Singapore, which allows us to learn and share best practice and give our patients unprecedented access to their clinical expertise.
What should Vietnam do to improve its healthcare sector?
In our view, the government should facilitate more PPP initiatives between private hospitals and public hospitals, improve health coverage, and enhance the regulatory framework to support the development of private healthcare facilities.