For years in the recent past, the local healthcare sector attracted very few foreign investors who saw it as requiring a long time to recoup investment. The tide has turned now when a new wave of foreign entrepreneurs are coming in, seeking to tap a market seen as highly potential given the rising demand and the inadequate supply of services.

Several foreign investors have shown keen interest in the healthcare sector in Vietnam, at least for now. This will likely help remedy the current hospital overload.

New investment pledges

After developing two drug plants in HCMC and Binh Duong, the Filipino pharmaceutical firm United Lab has just decided to boost investment in Vietnam through medical service supply.

Last week, United Lab signed a deal with High Precision Diagnostics (HPD) of the Philippines to open a clinic specializing in diagnosis and medical tests in HCMC. The two companies plan to form a joint venture in the city for developing this clinic, set for completion next year.

Meanwhile, Trip EYE of Canada has recently pledged to build an international-standard hospital at Dai An Industrial Park in Hai Duong Province. Under the plan, a 200-room hospital worth US$160 million will get off the ground in the first quarter of 2013.

It is expected that the project will start service in 2015 to serve over 20,000 workers at Dai An Industrial Park, as well as residents of Hai Duong and neighboring localities.

In a recent trip to Vietnam, a representative of Mercatus Capital Pte Ltd. informed the Singaporean company would establish a healthcare investment fund. The purpose of Mercatus’s business trip to Vietnam is to seek competent investors for medical projects in Vietnam, which the group has done successfully in some regional countries.

Even Fortis Healthcare, an Indian operator of hospitals, intends to deepen its investment in Vietnam, after the group acquired a 65% stake worth some US$64 million in Hoan My Medical Corp. last year.

Vishal Bali, CEO of Fortis Healthcare, said his firm would join hands with Hoan My to expand the healthcare network in Vietnam, after the local private investor had developed five hospitals in HCMC, Danang, Can Tho, Dalat and Ca Mau, along with four clinics.

According to experts, investment in Vietnam’s healthcare sector has not met the actual demand. The country’s healthcare system is now underdeveloped in terms of quantity and quality.

The central budget spending on the healthcare sector only accounts for 7-8% of GDP, and private hospitals only makes up 12% of the total number of facilities nationwide.

According to the Foreign Investment Agency under the Ministry of Industry and Trade, as of July 2012, there were only 78 foreign direct investment (FDI) projects in the medical sector, with a total capital of US$1.16 billion, including ten hospitals, 66 clinics and two drug factories. These figures are quite trivial compared to hundreds of billions of dollars of FDI pledged in other sectors in Vietnam.

Targeting the high-grade segment

Although the number of healthcare projects is on the rise, investment in this industry is still poor.

Compared to other fields, investors in the healthcare sector enjoy more incentives, such a minimum corporate income tax rate of 10%, tax exemption in four years and a 50% tax cut in the following years.

However, so far, there have only been 137 private-invested hospitals, versus a total of 1,063 hospitals across the nation. Most of the private hospitals are located in big cities like Hanoi, HCMC and Danang.

Investors frankly pinpoint the reasons why the medical sector is not attractive to investors, one of which is slow capital recovery. With the same amount of money, investment in banking, finance or real estate would be recovered faster than in healthcare, said several investors.

Because of the huge capital demand, most of the foreign investors in the healthcare sector aim at the high-grade segment, serving foreigners working in Vietnam, overseas Vietnam coming back home for treatment, and local citizens with above-average incomes.

In addition, investors also target Vietnamese high-income people with demand to go abroad for medical treatment. Customers in this segment would afford high service charges. Therefore, investors tend to set up hospitals in big cities, such as FV Hospital in HCMC.

As Vietnam’s population is reaching 90 million, and the local economy is developing, experts forecast the demand for high-grade medical services would surge further in the future. Therefore, now is the time for investors to eye high-grade healthcare projects.

SGT