Foreign investors keep glacial to potential healthcare sector

A lot of preferences awaiting investor

According to Tran Quoc Khoa, a senior official of the Ministry of Healthcare, Vietnam now has 137 operational private hospitals, including six foreign invested hospitals, and about 30,000 consulting rooms.

Most of the private clinics have small scale with just 50-60 beds, mostly located in big cities. Only 28 provinces have private clinics and one mountainous province – Yen Bai – has private clinic.

The investment capital of private hospitals is really modest. The six foreign invested hospitals have the initial investment capital of 94 million dollars. Meanwhile, consulting rooms have the capital between 200,000 and 2 million dollars. Foreign investors have not paid their attention to the healthcare sector in Vietnam over the last 10 years.

According to Nguyen Ba Cuong, deputy Head of the Foreign Investment Agency under the Ministry of Planning and Investment, by July 2012, Vietnam had licensed 78 foreign invested projects in the healthcare sector which have the total investment capital of 1.16 billion dollars. These included 10 clinics, 66 consulting rooms and two pharmacy companies.

The figures prove to be too modest if compared with the great potentials of the Vietnamese market. A report by EIU (Economist Intelligence Unit), the spending on healthcare services in Vietnam would increase from 7 billion dollars in 2010 to 11.3 billion dollars in 2015, which means the average growth rate of 10.3 percent per annum.

Especially, Vietnam keeps the doors open widely for foreign investors, offering an open legal framework with reasonable requirements.

According to Khoa, in principle, foreigners, who practice as doctors in Vietnam have to be fluent in Vietnamese. However, if they are not fluent in Vietnamese, they can hire interpreters. There are three branches in the northern, central and southern regions which are ready to organise tests and grant Vietnamese language skill certificates to foreigners and interpreters.

The requirement proves to be very easy, if noting that in other countries, all the people who practice as doctors must be fluent in the indigenous language.

Regarding the licensing to consulting rooms, the current laws stipulate that Vietnam only grants license once for the whole life of the projects. Meanwhile, in other countries, the licenses always have fixed validity period.

The current Investment Law also favours the investments in the healthcare sector. The investors in the field can enjoy the low corporate income tax rate of 10 percent for the whole life of the projects, after they can enjoy the tax exemption for 4 years and the 50 percent tax reduction in the next years. Especially, they can enjoy lower land leasing fee for at least seven years.

Meanwhile, local authorities lay out the red carpet to welcome investors. Hanoi, for example, has decided to reserve land for the two big healthcare centers in My Dinh and Gia Lam areas to attract foreign investment.

But foreigners still turn away

Also according to Khoa, though the number of Vietnamese clients is high, their financial capability remains low, which does not allow them to afford the high healthcare service fees charged by private clinics.

Tran Dai Thang from Lobby Vietnam Club, said that it’s less profitable to invest in the healthcare sector than in the real estate projects.

The money poured into real estate projects can bring the profit higher by two or three folds, while investors do not need to have huge investment capital. Meanwhile, the investment rate for clinics is very high, up to billions of dollars, while it would take much time to take back the investment capital.