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Growing Foreign Investment: Vietnam’s Private Healthcare Sector

(SGI) – Vietnam’s private healthcare sector is experiencing a significant increase in foreign investment, driven by rapid growth of the middle class and increased demand for better healthcare services in the wake of the pandemic.

Growing Foreign Investment: Vietnam's Private Healthcare Sector

A surge in M&A activity in the healthcare sector

In 2023, healthcare has emerged as one of the industries with the highest levels of mergers and acquisitions (M&A) activity, both in terms of transaction volume and value. According to data from Kirin Capital, a private equity investment firm, there were 11 M&A transactions in the healthcare sector in 2023 with a total disclosed value of $508 million. This represents a doubling of investment compared to 2022 and places healthcare in third place in terms of the value of M&A transactions, second only to finance and real estate. Importantly, most of the recipients involved in these transactions were foreign entities.

In 2023, Singapore-based Thomson Medical Group made headlines by acquiring FV Hospital for a staggering USD 381.4 million, making it the largest acquisition in Vietnam’s healthcare sector and the largest in the region as of 2020, Thomson Medical Group, a listed company on the Singapore Stock Exchange, operates mainly in Singapore and Malaysia. Before finalizing the acquisition of FV, the group extensively evaluated approximately 20 hospitals, ultimately concluding that FV outperformed the competition in many respects.

Additionally, the healthcare sector has seen a surge in other investment activities. A notable example is Warburg Pincus, a leading global growth investor based in the United States, which recently announced an investment in Xuyên Á Hospital on April 15. Although the exact investment amount was not disclosed, Xuyên Á Hospital said the injection of new capital will be used to improve patient care services, expand investment initiatives and upskill medical staff.

Warburg Pincus is known for its expertise in healthcare investment and has set itself the goal of transforming the Xuyên Á Hospital System into one of the top private hospital networks in Vietnam.

In a separate significant transaction, Raffles Medical Group (RMG), led by Singaporean tycoon Loo Choon Yong, made headlines in October 2023 by acquiring a majority stake in Ho Chi Minh City-based American International Hospital (AIH). Although RMG did not disclose the specific number of shares or the value of the transaction, it emphasized its intention to acquire a controlling stake in AIH. With AIH’s valuation of approximately $45.6 million, RMG’s investment represents a significant commitment to Vietnam’s healthcare sector.

Meanwhile, in the pharmaceutical arena, what attracted attention was the acquisition of a 51% stake in Trung Sơn Pharma by the Korean pharmaceutical giant Dongwha Pharm. Dongwha Pharm stated that the purpose of this transaction is to diversify its operating portfolio and has received significant investment interest. The transaction value is estimated at approximately 39 billion won (approximately USD 30 million), equivalent to over VND 710 billion.

Deciphering the Appeal

During January’s unveiling ceremony at Thomson Medical, Deputy Health Minister Tran Van Thuan emphasized the Ministry of Health’s position, saying there should be no distinction between the public and private healthcare sectors. As such, Vietnam actively promotes private healthcare, especially through investment by multinational corporations. Thuan emphasized that the government’s interest in developing private healthcare has increased. Recently, the Ministry of Health proposed the enactment of Research and Treatment Law No. 15/2023/QH15 and Decree 96/2023/NĐ-CP, accompanied by guidance circulars containing numerous policies aimed at driving the development of private healthcare.

According to data, private healthcare currently accounts for only about 5.5% of Vietnam’s healthcare system, a relatively modest share compared to the Asia-Pacific region. Under resolution 20 on improving health care and well-being, the number of beds in private hospitals is expected to reach 10% by 2025, rising to 15% by 2030, thus complementing the public hospital network.

In addition to regulatory measures, foreign investors are driven by growing demand for healthcare from a growing middle class.

World Data Lab, a renowned global data analytics organization based in Vienna, Austria, reported that Vietnam ranks fifth on a list of nine Asian countries expected to see the largest influx of people into the middle class in 2024, with approximately 4 million people. The organization predicts that by 2030, an additional 23.2 million people will join the middle class. By definition, middle class includes people who spend at least $12 a day, based on purchasing power parity in 2017.

It is worth noting that in the past, Vietnamese people often sought treatment abroad, but this trend has waned in recent years due to the continuous expansion of private healthcare. Particularly in the wake of the pandemic, there has been a significant increase in people’s willingness to devote more resources to improving their health.

Private healthcare providers not only meet the needs of the domestic population, but also focus on a previously overlooked niche: medical tourism. While Vietnam may lag behind countries like Singapore, Thailand and Malaysia in medical tourism, recent statistics show a promising trend. Each year, an average of about 300,000 foreign visitors seek medical care in Vietnam, 40% of which are concentrated in Ho Chi Minh City.

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