Leverage of funding models imperative for health sector

Private investment in Vietnam’s healthcare sector is expected to further flourish with the trend focusing on hospitals and social business healthcare. However, some barriers to the development of public-private partnerships in health remain that need to be solved soon to leverage potential capital flows.

PPP, PPP projects, health sector, private investment, PPP, PPP projects, health sector, Private investment
Hospitals have gained in recent years thanks to improved facilities and more strategic partnerships

Nipro Pharma Corporation – Japan’s biggest prescription drug contract manufacturer – has nearly completed procedures to increase investment capital by about $270 million to enlarge its facility at Saigon High-tech Park (SHTP) in Ho Chi Minh City so as to increase production volume.

“The procedure completion is expected in the next few weeks, thus increasing Nipro Pharma’s total investment there to $570 million,” a SHTP representative told VIR. “Nipro has performed well since it began investment in the park in 2016.”

Nipro Pharma is among the Japanese investors which have strong interest in Vietnam’s healthcare sector. Many more are expanding to and in Vietnam, according to the Japan External Trade Organization.

Together with Japan, South Korea and the EU also have more sights set on the lucrative local market.

Positive signals

The healthcare sector has welcomed new investment inflows in recent times, especially in 2020 when a number of new projects were announced despite pandemic restrictions. Late last year, a consortium led by Singaporean sovereign fund GIC acquired a minority stake in Vietnam-based private hospital operator Vinmec, part of Vingroup, for $203.1 million.

The year also witnessed VinaCapital using $26.7 million to acquire 30 per cent stake in Thu Cuc International General Hospital; and British Real Capital London’s launch of the $156 million Hong Anh Medical Campus project in Ho Chi Minh City.

In addition to foreign investment, new domestic private capital flows into the sector were also reported during the year. Last January the southern province of Tra Vinh licensed the high-tech pharma project from TV Pharma with initial investment of VND650 billion ($28.26 million). A few months later, the Van Phuc-Saigon Hospital and Hoan My General Hospital projects were also kicked off. Elsewhere, the Long An Obstetrics and Pediatrics Hospital, a public-private partnership (PPP) with Technical World Group being the investors, was put into operation.

The hospital segment is among the most attractive to international financiers and domestic ventures. Since 2015 when the government issued a policy on encouraging private investment in the health sector, over 200 private-run hospitals and more than 35,000 private-owned clinics were built nationwide.

Together with newly-built facilities, existing hospitals are advancing digitalisation projects to cash in on the unmet demands for high-quality services among Vietnamese who were spending an estimated $2 billion on overseas treatment every year before the pandemic.

In addition to infrastructure advances, the trend of focusing on social business programmes has been reinforced by recent moves among multinational corporations like Novartis, Roche, Sanofi, GSK, and AstraZeneca. The moves are in anticipation of a sharp rise in non-communicable diseases thanks to an ageing population.

For example, AstraZeneca Vietnam in collaboration with the Ministry of Health (MoH) and three specialised associations has launched a communications campaign to improve community awareness in asthma management.

Similarly, late last year the Vietnam Medical Association and Roche Vietnam signed a strategic partnership to implement a scheme on improving access to innovative therapies for high-risk breast cancer patients until 2025.

Also last year, GSK Pte., Ltd. in Vietnam signed an MoU with the MoH to fight against antimicrobial resistance in Vietnam, with the deal lasting until 2023.

Despite the growing interest, the quality of such initiatives has yet to satisfy the demand. According to the Vietnam 2035 Report by the World Bank and the Ministry of Planning and Investment, total spending on healthcare in the local market makes up about 5.8 per cent of the country’s GDP, among the highest rates in the region.

New motivations

Like other sectors in Vietnam, the healthcare sector faces a mismatch between the demand for investment and the fiscal space available to meet such demand. In 2016, it was estimated that the public healthcare network would need infrastructure investment of VND176 trillion ($8 billion) for the 2016–2020 period. Since 2010, the government has only allocated and met around two-thirds of capital demand for that period.

Therefore, the government sees private resources as critical to filling that gap, with government master plans for facility investment explicitly directing the MoH and hospitals to mobilise funding from the private sector.

Despite the sector’s importance, private investment in healthcare remains low due to shortcomings including a lack of a legal framework for PPP investment. However, the Law on Public-Private Partnership Investment, which took effect from January, will open the room for private investment in healthcare.

According to a VIR source, the government is gathering ideas from ministries and central agencies for the draft decree guiding the implementation of the law so that it is expected to be issued in the next few days, becoming the key piece of legislation governing PPP transactions in the country.

Under the law, health remains one of the priority sectors for PPP investment. Moreover, some legal concerns among investors are being solved. Specifically, Vietnam will, for the first time, apply revenue risk allocation for related initiatives.

Investors of such projects will be also ensured the right to access and use land and other public assets. Additionally, PPP businesses will enjoy incentives in tax, land use fee, land lease fee, and will be more in line with the prevailing rules on tax, land, and investment.

In addition to the Law on Public-Private Partnership Investment, the new Law on Investment and the new Law on Enterprises are expected to further facilitate capital flows into healthcare.

Moreover, it is projected that the EU-Vietnam Free Trade Agreement will bring more investment opportunities to EU-based pharma businesses in Vietnam and stiffening market competition. The landmark agreement will open the Vietnamese market in fields that businesses have been seeking particular solutions to for years, such as intellectual property rights, direct pharmaceuticals imports, and tenders, among others.

A representative of the MoH said, “Vietnam’s health sector is working on a number of tasks to achieve its goals. The sector always encourages private investment to join.”

Barriers remain

According to the World Bank’s “PPP for Health in Vietnam – Issues and Options” publication, the application of such partnerships in the health sector is still limited despite several facilitators such as the promotion of private investment into healthcare activities, deepening of hospital autonomy, the expansion of universal health insurance coverage, and the development of healthcare credits.

Thus far, a long wish list of 63 projects remains in the health PPP project pipeline. This high number is indicative of ineffective PPP project screening criteria rather than high potential, and only a small percentage of these projects are expected to reach implementation.

Most health PPP projects are proposed and developed at the sub-national level, especially in Ho Chi Minh City, and focus on hospital infrastructure and services rather than on preventive and primary healthcare. They are oriented towards higher-income groups in urban areas rather than disadvantaged groups in rural areas. The proposed health PPP pipeline, therefore, raises serious questions about equity and efficiency in public sector health service delivery.

Furthermore, PPPs have not been embedded in health policies and related regulations, hampering the use of PPPs to expand infrastructure and improve services in the sector. Stakeholders have far greater motivation and incentives to engage in healthcare projects using the joint venture models that were made possible through private investment attraction policy rather than the more complicated and prolonged PPP route.

In the current context, the World Bank experts said that health PPP models and contracts should be adopted with caution. The “asset-heavy, service-light” PPP models, such as equipment and facility PPPs, seem to be the most feasible options. Meanwhile small-scale “asset-light, service-heavy” models such as specialised services and integrated PPPs at the primary healthcare level may be suitable for selected projects for which the private sector has a competitive advantage.

Vietnam, however, does not yet seem to be ready for a fully integrated hospital PPP model because of various barriers in the existing regulatory framework as well as the capacity mismatch between the public and private sectors.

Experts recommend that the MoH should develop a circular guiding the screening, preparation, implementation, monitoring, and evaluation of health PPP projects.

By Minh Nguyet

News Related

OTHER NEWS

Online community takes on map mishap

UNIQLO has been focusing on sustainability in order to lure in new customers Immediately after calling for a fervent wave of boycott on social networks of Swedish fashion giant H&M, the Vietnamese online… Read more »

Expectations for Vietnam’s new path

Newly-elected Vietnamese leaders. Photo: VNA Ivo Sieber – Swiss Ambassador to Vietnam   Vietnam’s remarkable progress combined with Switzerland’s long-term engagement has resulted in a partnership that makes me proud to look back… Read more »

Mixed bag for first phase of CPTPP deal

After a slow start, the CPTPP is now hoped to benefit Vietnam more After two years of implementation, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has created some positive initial impacts,… Read more »

VinFast rumoured to be planning IPO in US

VinFast is working with advisers on the potential IPO in the US Newswire Bloomberg stated that local carmaker VinFast is working with advisers to carry out a potential offering that could take place… Read more »

Semiconductor crisis forces top-level action

Semiconductor crisis forces top-level action. Source: freepik.com The world’s semiconductor industry sales hit $40 billion for the month of January – a rise of 13.2 per cent on-year, revealed the Semiconductor Industry Association.… Read more »

Cross-border railway hopes remain stuck on the tracks

Cross-border railway hopes remain stuck on the tracks. Photo: freepik.com The blockage of the Suez Canal last month, the shortest shipping route between Europe and Asia, has once again urged Vietnamese agencies to… Read more »

E-motorbike startup Dat Bike wraps up $2.6 million funding led by Jungle Ventures

Dat Bike aims to conquer the 2-wheeler market of Southeast Asia The fresh funds will bankroll Dat Bike’s plans to scale its team, research and development, and customer-facing operations. These expansion plans come after… Read more »

MM Mega Market maintains position as two-way trade bridge between Vietnam and Thailand

Opening ceremony for the Songkran Festival, one of the activities to celebrate 45 years of Vietnam-Thailand diplomatic relations held recently by MM Mega Market Vietnam in Ho Chi Minh City Vietnam and Thailand… Read more »

FNF Lighthouse project connects four Vietnamese exporters with Europe

Enterprises are supported at the Lighthouse project “The Lighthouse project will strive to bring over 10 exporters of agricultural products from Vietnam to Poland within a year if nothing changes,” said Piotr Harasimowicz,… Read more »

Stocks of aviation industry have gone through the boom?

In addition to banking, securities and real estate stocks, the aviation industry group was also assessed to “sublimate” in the second quarter thanks to the controlled epidemic, Vietnam also began to study the… Read more »

Coming to IPO with valuation of $ 34 billion, Grab kicked off the ‘feast’ of Southeast Asian tech startups

Grab and Traveloka are preparing to go public in the coming months, kicking off the “reveal party” of Asian Internet companies. Bloomberg quoted a close source as saying that this week Grab will… Read more »

Finnish Fund increased its investment in HDBank

HDB is the bank share with the largest proportion in the portfolio In March, PYN Elite Fund made many major changes in its portfolio, including banking stock restructuring activities. Shares of VietinBank (HoSE:… Read more »

Securities judgment April 13: Testing benchmark of 1,250 points

Interlaced vibrations (Neutral) The VN-Index is forecasted to continue to rise and aim to challenge the resistance zone of 1,275-1,300 points in the short term. Market movements will have a strong differentiation between… Read more »

Dragon Capital buys 1.2 million more shares of steel giant Hoà Phát

HPG shares are being traded at VNĐ49,550 per share on the stock market, up 10 per cent since the end of March but almost flat in recent sessions. Photo Hoà Phát Group HÀ NỘI — Hanoi… Read more »

Touchstone Partners announces first close of inaugural fund for Vietnamese startups

Touchstone founders possess in-depth knowledge about startup and investment Touchstone is founded by Khanh Tran, former founding partner of VinaCapital Ventures – one of Vietnam’s leading investment management firms – and successful serial entrepreneur Tu… Read more »

H&M fighting to save fanbase after social media backlash

Fashion retailers like H&M have suffered from negative comments, photo Le Toan As a consequence of integrating the “nine-dash line” map into online shopping websites in the Chinese market, a great number of… Read more »

Wood exporters face array of obstructions

Wood exporters face array of obstructions, photo Le Toan Data from associations like VIFOREST, FPA Binh Dinh, HAWA, BIFA, and Forest Trends shows that Vietnam’s import value of timber and its products reached… Read more »

Many large stocks increased strongly, VN-Index increased nearly 10 points

11h07 The uptrend of VN-Index continued to widen, in which, VIC increased by 4.1% to 48,950 dong / share and was the key factor helping the trading on the market to be more… Read more »

Singapore's Draper Startup acquires Hatch Ventures Vietnam

Singapore’s Draper Startup has acquired Hatch Ventures Vietnam HATCH!, which offered training, business incubation, and investor matching, was founded in 2012 by US entrepreneur Aaron Everhart. HATCH! organised the HATCH! FAIR from 2012-2017,… Read more »

Foreign investors continuously hunted for STB shares

At the end of the session on April 9, the total volume of STB of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank, HoSE) reached 25 million shares, of which foreign investors net… Read more »

Schedule for closing dividend rights, bonus shares for the week of April 12 – April 16

11 companies closed dividend rights and bonus shares in the coming week. FPT Online pays the highest dividend at the rate of 200%. According to statistics, 11 companies announced the closing of dividend… Read more »

Recommended stocks April 12: PVS, ACV and DGW

VCSC: Recommended market relevance for PVS Viet Capital Securities Company (VCSC) said that Petrovietnam Technical Services Joint Stock Corporation (HNX: PVS) has just announced the AGM document with the goal of 2021 revenue… Read more »

Removing logistics barriers to unlock potential of Mekong Detla's agricultural exports

The workshop drew valuable feedback and ideas to remove the logistics challenges facing the Mekong Delta’s agricultural sector At the “Logistics leverage for the Mekong Delta agri-products” workshop held last week in the Mekong… Read more »

LG Electronics looking for buyer for smartphone plants

LG Electronics is looking to sell its smartphone plants. Source: Glassdoor After announcing to withdraw from the smartphone business, LG Electronics is closing down production plants in Haiphong (Vietnam), Taubate (Brazil), and Qingdao (China)… Read more »

Masan High-Tech Materials reports year full of advances

Masan High-Tech Materials reports year full of advances(source: masanresources.com) In his opening speech, Craig Richard Bradshaw, general director of Masan High-Tech Materials, shared: “In 2020, Masan High-Tech Materials completed the acquisition of H.C.… Read more »

Work on Quang Tri airport to begin in early September

Work will kick off on Quang Tri Airport in the central province of Quang Tri in September, according to local authorities. The construction is designed to have an investment of over VND8 trillion… Read more »

Huawei says HSBC agrees document access in Hong Kong court

Huawei says HSBC agrees document access in Hong Kong court (source: baodautu.vn) Chief financial officer Meng — whose father is the company’s founder and CEO Ren Zhengfei — has been in a two-year… Read more »

Dynamic duo team up in comprehensive collaboration

C.T Group and RSM Vietnam have signed an agreement to combine their internal strength and core values C.T Group, known as a youthful and dynamic company operating in various industries such as tourism,… Read more »

Brewing up change with modern strategy

During the most difficult period of 2020 that was plagued by COVID-19 and tough new local drink-driving rules, Neo Gim Siong Bennett, who is the general director of SABECO, kept the faith in… Read more »

Securities judgment April 12: There could be another derivative maturity week

April derivative maturity week (Neutral) Next week, the market is expected to continue moving in the direction of struggling with strong differentiation according to business results of each specific enterprise. VN-Index will continue… Read more »

Stock market from April 12-16: It is possible to regain a positive position

According to securities companies, cash flow has not shown signs of withdrawing from the market, is circulating among stock groups and helping to balance the market under short-term profit-taking pressure. (Source: kinhtechungkhoan.vn) The… Read more »

Foreign investors net buying of VND 2,400 billion in week of 5-9 / 4 due to sudden change in put-through transactions

Foreign investors on HoSE net sold 235 billion dong by matching method. VHM was bought the most by foreign investors with 2,320 billion dong, of which over 2,170 billion dong came from put-through… Read more »

Dragon Capital bought 1.2 million HPG shares

Dragon Capital group owns nearly 200 million HPG shares, equivalent to 9,900 billion dong. HPG shares closed on April 9 at the price of 49,550 dong / share, up 10% from the end… Read more »

Approving the policy of investment in infrastructure of Hoa Lu Industrial zone

Hoa Lu border-gate industrial park covers an area of ​​348.32 hectares in two communes Loc Tan, Loc Thanh (Loc Ninh district), with an investment of 1,119.29 billion dong, of which the investor’s capital… Read more »

Gender Lens Investing a treasure trove of economic momentum

If women’s economic empowerment is improved, Vietnam’s GDP gain $40 billion a year by 2025 At the event titled Gender Lens Investing in Practice – Driving Value for Investors in Vietnam, Australian Consul General… Read more »

First-quarter growth fairly impressive

  Pham The Anh- chief economist Institute for Economic and Policy Research Economic growth was below the expectations of Resolution 01, and it was not much higher than in the same period of… Read more »

Vietnam's beer production fell 14 per cent in 2020 

The VBA Congress discussed objectives for the next five years The Vietnam Beer Alcohol Beverage Association (VBA) on April 8 held the 2021-2025 Congress to review the 2020 performance and discuss new tasks… Read more »

PetroVietnam outperforms business targets in first quarter

PetroVietnam’s first-quarter online meeting connected different locations On April 7, 2021 PetroVietnam hosted a periodical online meeting with leaders of its member units to review production and business activities in March and the… Read more »

YSVN – Banking group can lead VN-Index towards region of 1,283 – 1,300 points in April

YSVN estimates that GDP in the second quarter will increase by 6.4% and for the whole year to increase by 6.57%. The VN-Index might continue its mid-term uptrend and move towards the zone… Read more »

Apple to pay $3.4-m over iPhone obsolescence in Chile

Apple to pay $3.4-m over iPhone obsolescence in Chile (Source: freepik.com) Apple is accused of having programmed a limited lifespan into some products to force users to replace their phones sooner than necessary,… Read more »

Long road ahead for buyout offer, Toshiba board chair warns

The logo of Japanese industrial group Toshiba is seen at the company’s headquarters in Tokyo on April 7, 2021.(Kazuhiro NOGI / AFP) CVC Capital Partners is reportedly considering a 30 percent premium over… Read more »

Robust growth trends projected for investment in healthcare

Robust growth trends projected for investment in healthcare. Source: freepik.com Kim Dental, Vietnam’s largest private dental care platform, has recently raised $24 million in a series B round. The investment was led by… Read more »

Data protection receives draft fillip

Minh Nguyen, senior associate of ACSV Legal The entry into force of the European Union’s General Data Protection Regulation (GDPR) in May 2018 was a wake-up call for companies in Vietnam which have… Read more »

Local mergers and acquisitions portray businesses’ confidence

Local mergers and acquisitions portray businesses’ confidence In January, seafood processing company Vinh Hoan Corporation scooped up 51.29 per cent stake in Sa Giang Import Export Corporation. The company spent nearly $15.2 million… Read more »

Growth indicators to ensure an optimistic scenario

Processing has been a key driver for strong recovery. Photo: Le Toan Deputy Minister of Planning and Investment Tran Quoc Phuong said, “The growth rate of the first quarter at 4.48 per cent… Read more »

Warrant market April 9, 2021: Continued adjustment?

The warrant market ended on April 8, 2021 with 49 stocks down, 11 stocks unchanged and 29 stocks increasing. Foreign investors turned to be net buyers again with a total net buying of… Read more »

25 occupations foreign investors do not have access to investment

Decree 31/2021 detailing and guiding a number of articles of the Investment Law has just been issued. In which, specifying a list of 25 occupations that foreign investors have not yet had access… Read more »

Market commentary on April 9: Cash flow remains in the market

Securities company Positive Neutral Negative AseanSC X BSC X BVSC  X MBS  X VDSC  X Shake can take place at high price zones (Asean Securities Company – AseanSC) The phenomenon of order congestion… Read more »

Many large-cap codes reversed, VN-Index dropped slightly

9:40 At the opening, VN-Index once increased by more than 4 points but then fell back. After 45 minutes of trading, the index officially reversed to decrease. Banking stocks were quite differentiated when… Read more »

Works on Hanoi-based Ecopark floating trade center to kick off in 2022

Work on a mega trade center on water is expected to begin in early next year in Ecopark, a housing development in the northern province of Hung Yen’s Van Giang district, with an… Read more »