Vietnam’s healthcare sector is on the cusp of remarkable growth, fueled by robust economic development and an expanding middle class. With healthcare expenditure projected to reach almost USD 34 billion by 2030 from around USD 19 billion in 2022 (according to Economist Intelligence Unit (EIU), International Trade Administration of USA, and Vietnam brief’s review), the government’s push to enhance private healthcare infrastructure presents significant opportunities for supply chain optimization and mergers and acquisitions (M&A).
Recent high-profile deals, like Thomson Medical Group’s USD 381 million acquisition of FV Hospital, highlight the sector’s attractiveness (based on Thomson Medical Group’s news in 2024). As Vietnam transitions from heavy reliance on imported pharmaceuticals and medical equipment, the potential for local manufacturing and supply chain enhancements becomes evident.
For western companies eyeing emerging markets, Vietnam offers a lucrative landscape ripe for investment and business expansion. This article explores the promising prospects within Vietnam’s healthcare supply chain and M&A realm, providing strategic insights for capitalizing on this burgeoning market.
Key Catalysts Driving Vietnam’s Healthcare Growth
As Vietnam’s economic prowess continues to soar, a remarkable healthcare transformation is unfolding, catalyzed by a confluence of key drivers. This dynamic landscape presents strategic opportunities for investors and businesses seeking to capitalize on the country’s burgeoning healthcare market.
The Middle-Class Surge
Vietnam ranks fifth among Asian nations projected to witness a substantial influx of middle-class consumers, according to industry reports. This demographic shift is nothing short of staggering – an estimated 4 million individuals are expected to join the middle class by 2024, with a further 23.2 million projected by 2030. With increased spending power, this burgeoning middle class is fueling an unprecedented demand for accessible, high-quality healthcare services within the nation’s borders.
Demographic Dynamics
Vietnam’s evolving population dynamics necessitate increased healthcare investment. The aging population and rising chronic conditions like diabetes and cancer demand urgent development in healthcare infrastructure.
The International Diabetes Federation (IDF) ranks Vietnam among the top 10 countries with the fastest-growing diabetes cases, at 5.5% annually. By 2045, it is estimated that over 6 million people aged 20-79 in Vietnam will have diabetes. Additionally, the Vietnamese Association of Diabetes and Endocrinology (VADE) reports that in recent years, 5 million people of all ages in Vietnam have diabetes, constituting 6% of the population. This figure is projected to rise to 7-8 million by 2025.
The proportion of those aged 65 and older has increased to over 8.5% from 6.4% in 2009, according to Statista and Trading Economics.
In response, the government has invested in upgrading oncology centers. The K Hospital in Hanoi received a USD 110 million upgrade in 2017 (based on Vietnam’s Ministry of Health). Recently, T-Matsuoka Medical Centre and Fujifilm Corporation from Japan introduced AI technology to enhance early disease detection at a reasonable cost for Vietnamese people. This partnership, supported by remote diagnostic experts, ensures efficient health checks, highlighting foreign assistance in improving Vietnam’s healthcare system (according to Vietnam Social Security Office).
Foreign Investment Influx
The aftermath of the COVID-19 pandemic has catalyzed a surge in foreign investment within Vietnam’s private healthcare domain. International investors have taken note of the country’s expanding middle class and heightened health awareness, positioning Vietnam as an attractive destination for healthcare-related ventures. This influx of capital promises to accelerate the sector’s growth and development.
Medical Tourism Potential
While still trailing regional powerhouses like Singapore and Thailand, Vietnam—particularly Ho Chi Minh City—is emerging as a promising hub for medical tourism. With around 300,000 foreign medical tourists annually, the country’s private healthcare providers are targeting this lucrative market, driving growth, and expanding services. According to the Ho Chi Minh City Department of Tourism, visitors seek comprehensive health checkups, health screenings, advanced treatments, and traditional medicine.
Medical tourism surveys highlight that Vietnam offers significantly lower costs compared to major destinations like India and Thailand, thanks to its lower cost of living. For instance, Endodontic treatments in Vietnam range from USD 50 to USD 200, compared to USD 150 to USD 400 in Thailand. This cost advantage positions Vietnam competitively against its neighbors.
Government Impetus
Recognizing the sector’s significance, the Vietnamese government has implemented favorable regulations aimed at bolstering the private sector’s involvement in healthcare. Việt Nam has more than 100 million people, about 1,400 public hospitals, more than 350 private hospitals, and more than 50,000 clinics, according to Vietnam’s Ministry of Health.
Recently, through Decision 201/QĐ-TTg on February 27, 2024, the government approved the Healthcare Master Plan aiming for 35 hospital beds, 19 doctors, and 33 nurses per 10,000 people by 2030, with private hospitals targeting a 15% share. This ambition highlights the government’s commitment to a diverse healthcare landscape
Post-approval, the government actively facilitates new private hospital setups, exemplified by approvals for multiple hospitals in Hanoi. In Ho Chi Minh, key hospitals like Hoc Mon, Cu Chi, and Thu Duc are scheduled for completion by the end of 2024, aligning with the Master Plan’s objectives.
Medical experts note a surge in mergers and acquisitions (M&A), indicating increased competition not only in products and services but also in workforce acquisition. Examples include Thomson Medical Group’s acquisition of FV Hospital and Raffles Medical Group’s takeover of American International Hospital. Additionally, foreign pharmaceutical enterprises like Daiichi Sankyo Vietnam, Novartis, Sanofi, GSK, Pfizer, and MSD are seeking favorable policies to introduce innovative medicines and vaccines to the local market in 2024 and beyond.
Optimizing Vietnam’s Healthcare Supply Chain: A Pathway to Growth
As Vietnam’s healthcare sector undergoes rapid expansion, the nation’s supply chain presents a fertile ground for optimization and strategic investment. Currently, Vietnam’s reliance on imports for medical equipment and pharmaceuticals paints a compelling picture of untapped potential.
Domestic Dominance on the Horizon
The statistics speak volumes: over 90% of medical equipment and more than 50% of pharmaceuticals are sourced from abroad. This heavy import dependence presents a lucrative opportunity for foreign businesses to establish local manufacturing operations, reducing reliance on external sources and fostering a self-sustaining healthcare ecosystem.
Tapping into Domestic Potential
While Vietnam’s domestic medical devices market boasts an impressive annual growth rate exceeding 18%, currently valued at USD 1.5 billion, it primarily caters to basic items, meeting only 10% of the demand. This underscores the immense potential for foreign investment in advanced medical technology production, paving the way for Vietnam to emerge as a regional manufacturing hub.
For instance, Siemens Healthineers, a global leader in medical technology, has significantly expanded its presence in Vietnam in recent years. The company has invested in innovative diagnostic imaging systems, such as MRI and CT scanners, along with laboratory diagnostics solutions. These investments are aimed at bolstering Vietnam’s healthcare infrastructure. Notably, Siemens Healthineers has partnered with 90% of public hospitals in the country.
Similarly, another prominent player in the medical technology industry, GE Healthcare, has made substantial investments in Vietnam. The company has introduced advanced medical equipment and solutions, encompassing ultrasound machines, X-ray systems, and patient monitoring devices. For instance, General Tam Anh Hospital recently signed an MOU with GE Healthcare to deploy an AI-enabled CT scanner with 1975 slices, highlighting the adoption of innovative technology in healthcare
Overcoming Roadblocks
One of the primary obstacles hindering domestic pharmaceutical production is the lack of research and development capabilities to meet stringent international standards, such as the European Union’s Good Manufacturing Practice (EU-GMP) guidelines. This gap presents an opportunity for foreign companies to transfer expertise and facilitate the development of a robust local pharmaceutical industry.
Success Stories
The viability of investing in Vietnam’s healthcare sector is further bolstered by real-world success stories. GIC’s substantial USD 204 million investment in Vinmec, one of Vietnam’s leading private hospital chains, and VinaCapital’s strategic partnership with Thu Cuc International General Hospital, underscore the sector’s profitability and alignment with international quality standards.
Vietnam’s Healthcare M&A Landscape: Unlocking Strategic Growth
Vietnam’s rapidly evolving healthcare sector has become a fertile ground for mergers and acquisitions (M&A), attracting significant interest from global players seeking to capitalize on the market’s immense potential. High-profile deals, such as Thomson Medical Group’s USD 381 million acquisition of FV Hospital, have underscored the sector’s attractiveness and the confidence of industry leaders in Vietnam’s healthcare future.
Key M&A Segments
Hospitals and Clinics
As the demand for quality multi-specialty hospitals and elderly care facilities surges, M&A activities present a strategic pathway for meeting this growing need. Acquiring existing facilities or establishing new ones through partnerships can unlock immediate access to Vietnam’s burgeoning healthcare market.
Pharmaceuticals
With most pharmaceuticals still being imported, opportunities abound for local production and distribution partnerships. M&A can facilitate the establishment of local manufacturing operations, enabling companies to tap into Vietnam’s domestic market while exploring export opportunities within the region.
Medical Technology and Equipment
Companies specializing in advanced medical technologies, such as precision oncology, robotic surgery, and medical AI, can leverage M&A to gain a foothold in Vietnam’s rapidly evolving healthcare landscape. Acquisitions or strategic partnerships can accelerate the introduction of innovative solutions, driving innovation and improving patient outcomes.
Digital Health Solutions
The rise of telemedicine, electronic health records, and AI-driven healthcare solutions presents lucrative opportunities for companies specializing in digital health. Strategic acquisitions can expedite market entry, enabling the seamless integration of these technologies into Vietnam’s healthcare ecosystem.
Navigating the M&A Landscape
While the potential for M&A in Vietnam’s healthcare sector is significant, navigating this landscape requires a strategic approach:
Regulatory Compliance
Understanding Vietnam’s regulatory environment and ensuring strict compliance is crucial for successful M&A activities. Partnering with local experts can mitigate regulatory risks and facilitate smoother transactions.
Cultural and Operational Integration
Merging with or acquiring local companies necessitates careful management of cultural and operational differences. Effective integration strategies, fostering inclusive organizational cultures, and leveraging local expertise can enhance post-merger success.
Competitive Differentiation
As the market becomes increasingly competitive, staying ahead requires a clear value proposition. Emphasizing advanced technologies, superior care standards, and efficient management practices can differentiate offerings and drive sustainable growth.
The Strategic Path Forward
Vietnam’s burgeoning healthcare sector presents a lucrative opportunity for foreign investors and businesses, but navigating this landscape requires a well-crafted strategy. At our firm, we provide a comprehensive blueprint for success through our specialized M&A advisory services.
Firstly, thorough due diligence is crucial. We conduct extensive market research and rigorous due diligence to identify suitable targets and understand the regulatory environment, enabling informed decision-making.
Secondly, building strategic local partnerships is paramount. We facilitate collaborations with healthcare providers, experts, and stakeholders, unlocking access to cultural knowledge, expertise, and networks for smoother market entry and integration.
Thirdly, we emphasize value addition through the introduction of advanced medical technologies, superior care standards, and efficient management practices, differentiating offerings and driving sustainable growth.
Furthermore, we champion a long-term commitment to the market through sustainable investments and capacity-building initiatives, fostering trust and contributing to Vietnam’s healthcare ecosystem development.
Beyond traditional M&A services, we empower clients to navigate the healthcare supply chain and business expansion across Vietnam and Asia. Our comprehensive offerings include market entry strategies, partner searches, manufacturing solutions, and in-depth market research, enabling businesses to unlock their full potential in this dynamic region.
With our industry expertise, local insights, and strategic guidance, we are well-positioned to support foreign investors in capitalizing on Vietnam’s healthcare opportunities. Together, we can contribute to the nation’s progress, drive innovation, and pave the way for accessible, quality healthcare for all.
Read more about our advisory & strategy expertise
References
Unlocking Vietnam’s Healthcare Boom:
- Vietnam Briefing (2023). Medical Tourism in Vietnam.
- U.S. Commercial Service (2023). Vietnam Healthcare.
- Economist Intelligence Unit (EIU, 2023). Vietnam Healthcare Industry.
- FV Hospital (2023). FV Hospital is now a member of Thomson Medical Group.
Key Catalysts Driving Vietnam’s Healthcare Growth:
Demographic Dynamics:
- International Diabetes Federation (IDF, 2023). Data
- Vietnam Association of Diabetes and Endocrinology (VADE, 2023). Data
- Diabetes Atlas (2023). Vietnam Diabetes Data
- Statista (2023). Vietnam’s Aging Population Forecast.
- Trading Economics (2023). Vietnam Population.
- Vietnam Social Security (VSS, 2023). External Information.
- Vietnam Ministry of Health (2023). Hanoi’s K Hospital Cancer Treatment Technology.
Medical Tourism Potential:
- Vietnam National Administration of Tourism (VNAT, 2023). Medical Tourism.
- Medical Tourism Vietnam (2023). Why Vietnam for Medical Tourism?
Government Impetus:
- Vietnam Ministry of Health (MOH, 2023).
- Vietnam Investment Review (VIR, 2023). Private Healthcare Presence.
- Vietnam News (2023). Private Hospitals Healthcare Market.
- Sai Gon Giai Phong (SGGP, 2023). Ho Chi Minh City Gateway Hospitals 2024.
- Vietnam Economic News (VEN, 2023). US Investment in Vietnam Healthcare.
Tapping into Domestic Potential:
- Siemens Healthineers (2023). Strategic Cooperation in Vietnam Healthcare.
- Tam Anh Hospital (2023). Advanced CT Scanner Launch.
Success Stories:
- Vietnam News (2023). Vingroup Sells Stake in Vinmec.
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