Investing in Healthcare in Vietnam. KPMG Vietnam Webinar 30 November 2017

Transcription

1 Investing in Healthcare in Vietnam KPMG Vietnam Webinar 30 November 2017

2 Investing in Healthcare in Vietnam Agenda 14:00-14:05 Introduction 14:05-14:15 Vietnam healthcare system at a glance 14:15-14:25 Legal forms of operation for healthcare sector in Vietnam 14:20-14:40 Market trends and investment opportunities 14:40-15:00 Question & Answer Investing in Vietnam Webinar Series, KPMG Vietnam, 30 November

3 Question and Answer Session Please submit questions in chat window (bottom right corner of screen) any time. Don t forget to hit SEND. I will compile the questions and submit them to the speakers in the last 20 minutes of the webinar, as time permits 2 3

4 Key Presenter Michal Jacob is an Israeli lawyer and a certified foreign lawyer by the Ministry of Justice in Vietnam. She has been living and working in Vietnam since 2006 and has over 22 years of professional legal and business management experience both in Israel and Vietnam focusing on the Healthcare and Life Sciences sector. Michal has worked with public and private healthcare providers, regulators and insurers both in Israel and in Vietnam and was the lead advisor to the second largest Health Maintenance Organization (HMO) in the world. Michal Jacob Director & Head of Healthcare and Life Sciences KPMG Vietnam michaljacob@kpmg.com.vn Michal s vast experience in healthcare has provided her with indepth understanding of private and public healthcare systems, including insurance and reimbursement plans, with a pragmatic approach to support clients in achieving the objective of improving efficiency and quality of healthcare services. 4

5 Introduction 5

6 Vietnam demographics Age structure 5.50% 24.60% 0 14 years 24.6% years 69.8% 65 and over 5.5% 69.80% and over 6

7 Young consumer base A young population and rapid adoption of modern technology create an exciting window of opportunity for change 62.3% Together with rising disposable incomes, a golden demographic structure and higher living standards have set Vietnam apart as one of the most attractive investment destinations in Asia 7

8 Consumption growth A young population and rapid adoption of modern technology create an exciting window of opportunity for change Vietnam personal disposable income in Projected Vietnam healthcare expenditure % 6.2% 7.0% 7.2% 7.1% 7.2% 7.4% 7.3% 7.3% 7.3% 7.3% 8% USD Billion USD billion Stable growth at 7.3% of total GDP % 4% 2% % GDP % Healthcare spending Healthcare spending (% of GDP) 8

9 Facebook Users Vietnam Number of users in millions 9

10 Vietnam healthcare system at a Glance

11 Key macroeconomic indicators National-level demographic and socioeconomic indicators (1 /3) GDP INDICATORS ( F) CAGR of GDP per capita 11-16: 7.2% 16-21F: 9.4% 1,504 1,718 1,862 2,007 2,044 2, ,767 4,346 3,964 3,618 3,012 3,301 2,747 2,511 2, GDP per capita (USD) Source: Business Monitor International 5, Real GDP Growth (% y-o-y) Real GDP growth fluctuated over the last five years and is expected to increased slightly to y-o-y growth rate of 6.6% by Real GDP growth of Vietnam in 2016 is higher than some ASEAN countries such as Thailand (3.2%), Malaysia (4.2%), Indonesia (5.0%), Myanmar (5.4%), Singapore (2.0%), etc. - The growth in real GDP in the next ten years is driven by the increasing FDI inflows, higher income, continuing trade in goods and services, foreign trade agreements and government s objective to industrialize the country by Subsequently, GDP per capita is anticipated to increase at CAGR of 9.4% to reach USD5,231 by 2026, thanks to a fast growing economy. 11

12 Key macroeconomic indicators National-level demographic and socioeconomic indicators (2/3) DISPOSABLE INCOME PER HOUSEHOLD FROM 2011 TO 2021F (USD) 3,412 3,386 3,424 3,498 3,687 3,820 3,942 4, F 2018F 2019F Source: Business Monitor International 4,256 4, F SOCIAL CLASS DISTRIBUTION IN 2016 (AGED 15+) (a)(b) Average gross income per year: USD2,358 (c) Source: A B C D E Euromonitor 9% of 72.6 millionpeople 6% of 72.6 million people 13% of 72.6 millionpeople 31% of 72.6 millionpeople 41% of 72.6 millionpeople 4, F Disposable income per household in Vietnam in 2016 is expected to grow inline with the growth in economic trends - There will be an upward trend in Vietnam disposable income per household by 2021 to reach USD4,604 at CAGR of 3.8% ( F) which is in alignment with the economy s growth. Increasing income indicates higher living standards, better awareness on health and wellbeing and potentially expenditures on healthcare and related services In 2016, middle- and high-income classes (Class A, B and C) accounted for 28% of Vietnam s population - The number of people classified into the middle and high income social classes is rising and is expected to reach 33 million by 2030, providing positive indications and opportunities for private healthcare services Note: (a)only includes population between the age group of years old (b)social Class data refer to the number of individuals whose incomes fall within a specified range of the average gross income of all individuals aged 15+ in that country or region. Social Class A: +200%; Social Class B: between 150% and 200%; Social Class C: between 100% and 150%; Social Class D: between 50% and 100% and Social Class E: less than 50% of the average gross income. (c)based on exchange rate of VND/USD 22,

13 Key macroeconomic indicators National-level demographic and socioeconomic indicators (3/3) POPULATION SIZE IN VIETNAM ( 000) 84,309 5,550 31,226 36,026 41,179 45,651 49,071 24,636 25,703 24,473 22,230 20,537 22,897 20,949 21,609 22,557 22,780 Source: 88,473 5,795 93,572 6, yrs yrs Euromonitor 98,360 7, F yrs POPULATION BY AGE IN 2016( 000) 80+ yrs 580 1, yrs yrs yrs 882 1, yrs , yrs , yrs , yrs , yrs , yrs , yrs , yrs , yrs , yrs yrs ,289 3, yrs , yrs , ,763 10, F 65+ yrs Male Female Working age population Total (15-64 years) = 70% of total pop Young population Total (0-29 years) = 49% of total popn By 2025, Vietnam s population is expected to reach approximately million at CAGR of 0.94% in the period F - In 2016, Vietnam enjoys what is known as the golden population structure, which means for every two people or more working, there is only one dependent. This demographic bonus provides Vietnam with a unique socio-economic development opportunity to take advantage of the young labor force and push its economic growth - However, it is observed that the population in Vietnam is aging rapidly, and the proportion of older people will continue to increase which boosts demand for healthcare services Source: Euromonitor 13

14 Overview of healthcare indicators Healthcare expenditure PUBLIC AND PRIVATE HEALTHCARE EXPENDITURE ( F) Source: F 2018F 2019F 2020F 2021F Public expenditure (USD billion) Healthcare expenditure (% of GDP) Business Monitor International CAGR % 17.2% 7.9% CAGR 16-21F 8.6% 9.5% 7.5% Private expenditure (USD billion) Total healthcare spending (USD billion) The total health expenditure has increased over the years and is forecast to continue an upwards trend with 58.1% contributed by public healthcare expenditure by Vietnam s total healthcare expenditure accounted for 7.5% of its total GDP for 2016, which is higher than selected developed ASEAN countries such as Thailand, Singapore and Malaysia (6.2%, 6.1% and 4.5% respectively). By 2021, it is forecasted to decrease slightly to 7%; - The public healthcare expenditure overtook the private healthcare expenditure since 2012 due to the governments social health insurance program to increase prepayment in the healthcare sector; - In the next 5 years, public healthcare expenditure is predicted to increase at a CAGR ( F) of 9.5% compared to the period of 2011 to 2016 (17.2%). This is partly due to the government s effort in promoting partnership between public and private healthcare providers to share the cost; - Private healthcare expenditure is expected to grow at a CAGR of 7.5% with a large part of the growth due to increased insurance coverage for employees 14

15 Overview of healthcare indicators Hospital system in Vietnam ORGANISATIONAL STRUCTURE OF HOSPITAL AND HEALTHCARE SYSTEM IN VIETNAM Central Central-affiliated province/city MOH Other ministries Hospitals: Class Special, I State-level Departments of health Hospitals: Class I, II - The Ministry of Health (MOH) of Vietnam looks after the health sector for the government. MOH manages a number of health institutions including national hospitals, research and institutes, universities and colleges. - Vietnam operates a decentralised healthcare system where autonomy is given at the province, district and commune level to provide guidance, monitoring and supervision of the healthcare policies to their respective areas - Other ministries including MOD, MOT, MOIT, and MARD run health-care network of hospitals and clinics - There are 63 provinces in Vietnam and each province is divided into districts - Provincial health institutions consists of general, specialized hospitals, and medical centers. Besides, each province usually has a medical college or secondary medical school offering programs in medicine, nursing, midwifery, medical technology and pharmacy depending on the province s medical demand. District District Health Centers Hospitals Class II, III - Apart from general hospitals, intercommune polyclinics, and maternity homes, district health centers also offers medical and preventive services. - Other department such as the population, food safety management agencies involve in health sector depending on the population size and local provisions. Commune Commune Health Stations - Commune health stations are responsible for providing primary health care services for people in the commune. Source: World Health Organization, Vietnam s Ministry OfHealth 15

16 Overview of healthcare landscape National-level hospital infrastructure HOSPITALS BREAKDOWN BY PUBLIC AND PRIVATE Private 13.7% 1,346 hospitals Public 86.3% 1,161 hospitals 3.4% 79.2% 3.6% NUMBER OF HOSPITALS IN VIETNAM ( ) HOSPITALS CAGR , % 1, % 0.8% 1,117 1,161 Source: Ministry of Health Other ministries/ State-owned corporation General Statistics Office, Business Monitor International NUMBER OF HOSPITAL BEDS IN VIETNAM ( ) 254,885 Source: BEDS 209,485 6, , Public General Statistics Office, Business Monitor International 14, , Private Department of Health CAGR % 17.7% 3.4% Source: 2011 Public 2016 Private General Statistics Office, Business Monitor International In 2016, there was a total of 1,346 hospitals in Vietnam with the majority of public hospitals directly managed by departments of health of each province / city, while the remaining owned by the Ministry of Health, other ministries and state-owned corporations. - In the last five years, private hospitals increased by 52 hospitals due to the government's promulgation of public-private partnership (PPP) policies to help reduce the overload of public hospitals, as well as adjustment in health insurance policies in 2016 that bring greater revenue for private hospitals. - Meanwhile, the number of public hospitals expanded by 44 hospitals over the last five years with financial support from the government. - Number of hospital beds in the last five years increased by 45,400 beds contributed both by the expansion of public and private hospitals. The government aims to grow the number of private hospital beds to account for 20% of total hospital beds by 2020, through the implementation of public and private partnership. 16

17 Legal forms of operation in healthcare sector

18 Legal Forms of Operation in Healthcare (1/2) Business Form of operation Scope of operation of legal entity Foreign participat ion ratio Local partner required (Y / N) Capital requirement (Yes/No/ How much) Other requirements Notes Healthcare treatment - Legal entity: 100% Foreign Invested Enterprise (FIE) and Joint Venture (JV) - Business Cooperation Contract (BCC - not popular) - Rep. Office (RO) for nonprofit purposes - Hospital services - Medical and dental services - Exclusion: Emergency evacuation services, homecare and nursing services are not committed to open to foreign investors, foreign investment would be subject to approval on caseby-case basis. 100% No Yes Capital investment requirement: - Hospital: USD20 million - Polyclinic: USD2 million - Specialized clinic: USD200,000 - Qualified personnel and facilities - Operational licenses Family Medical Practice, a 100% FIE, was granted with emergency evacuation services, homecare, nursing services Pharmaceutical - Legal entity: 100% FIE and JV - RO (for nonprofit purposes) All activities (manufacturing, import, export, storage, testing), except for distribution 100% No No, but must be appropriate for the business - Qualified personnel and facilities - Operational licenses No FIE licenses for import of pharmaceuticals as of today 18

19 Legal Forms of Operation in Healthcare (2/2) Business Form of operation Scope of operation of legal entity Foreign participation ratio Local partner required (Y / N) Capital requirement (Yes/No/ How much) Other requirements Notes Medical device - Legal entity: 100% FIE and JV - RO (for non-profit purposes) All activities (manufacture, import, export, distribution) 100% No No, but must be appropriate for the business - Qualified personnel and facilities - Operation licences Medical training & education - Legal entity: 100% FIE and JV - RO (for nonprofit purposes) University, short-term training, vocational training 100% No Yes Capital investment requirements: - University: USD6,500/student, minimum USD13 million - Vocational training school: USD2,600/ student - Short-term training school: USD900/student - Qualified personnel and facilities - Operational licenses Hoa Lam Shangri-La obtained approval from PM for setting up a foreigninvested international medical and pharmacy university in

20 Market trends & opportunities

21 Global drivers on healthcare Globalization, consumerism and prosperity are major drivers that impact healthcare in Southeast Asia, including Vietnam Globalization Consumerism Prosperity Globalization world is becoming smaller: cheap air travel, connectivity, internet, medical tourism Consumerism - Increased awareness and self-decision making in choosing of medicaltreatment options: potential treatment, available hospitals and choice of physicians Prosperity Increasing disposable income, financial independence and health awareness has led to consumers spending more on health prevention and treatment 21

22 Market trends Vietnam National Goals From Vietnam Sustainable Development Strategy and Goals for (to be extended to 2030): To raise the quantity and quality of healthcare services To speed up comprehensive healthcare Focusing on proactive preventive medicine, timely and effectively control epidemic diseases, early detect and timely cure diseases Consolidate and enhance medical system towards diversification of healthcare models and stakeholders, in which public healthcare establishments take the leading role Establish the system for provision of comprehensive healthcare services, focusing on basic health services and primary healthcare services Improve the quality of healthcare rehabilitation services at all levels Reduce patient overload in central-level hospitals. Upgrade infrastructure and working conditions of communal or ward medical stations Speed up human resource development for healthcare sector and social workers; train community health workers, medical technicians. 22

23 Market - Key trends Shifting from Hospitals to Primary Care and Home Care, and developing Medical Centers of Excellence Universal Healthcare Coverage and Insurance reform Shifting towards Top-up instruments and Private insurance Health IT and digital solutions PPP (Public-Private-Partnership) in healthcare Next growing medical devices and pharmaceutical manufacturing industry 23

24 Market - Key challenges Increase public trust and quality of care Patient journey and experience Patient education and change of mindset Training, medical education and qualifications Quality and safety standards (JCI) Healthcare for all universal coverage 24

25 KPMG Limited Branch No. 115 Nguyen Hue Street, Ben Nghe Ward District 1, Ho Chi Minh City, Vietnam Tel: Markets Group Ms. Van Ly, Markets Manager vly@kpmg.com.vn Mobile: kpmg.com/socialmedia kpmg.com/app The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG Limited, KPMG Tax and Advisory Limited, KPMG Legal Limited, all Vietnamese limited liability companies and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo are registered trademarks or trademarks of KPMG International.