The healthcare delivery market in ASEAN remains significantly under-penetrated and under-supplied, while demand continues to rise. By 2025, the per capita health care expenditure in ASEAN is expected to rise to USD 364.7. Health care spending in the region by that time is expected to reach at least USD 269 billion.
This emerging challenge provides extensive opportunities for the private sector, including foreign health care companies, to complement the efforts of the public sector in the delivery of care in the region. The provision of health care in ASEAN has traditionally been the responsibility of the public sector. With budgetary constraints, growing populations and changing demographics, the public sector faces significant challenges to meet current and future demand.
Investment Prospect in ASEAN’s Healthcare Industry
Private investment is seen to be a key feature and is significant across all healthcare segments in ASEAN, particularly in hospitals and pharmaceuticals. The private sector has been investing in and operating hospitals across ASEAN with different degrees of involvement.
In some Member States, private hospitals account for more than 50% of all hospitals or more than 20% of hospital beds. While in others such as the Lao People’s Democratic Republic, Myanmar, and Vietnam, private sector participation is relatively low but increasing.
Greenfield investment projects in the region rose by 43% in the past decade, from an annual
average of USD 1.4 billion in 2009–2013 to USD 2 billion in 2014–2018. Compared with other developing regions, ASEAN is witnessing more greenfield investment activities in healthcare.
Adding to that, the region has been receiving increasing attention from venture capital firms (VCs) in recent years, notably for startups. Their investment in healthcare is rising, with most deals in hospitals and pharmaceuticals. Most of the funding has come from investment by ASEAN VCs or by VCs based in the region, mainly in Singapore.
Meanwhile, the value of cross-border M&As in healthcare in ASEAN is relatively small due to the lack of healthcare assets, the less mature M&A environment as well as the regulatory environment. Small-value transactions and the lack of megadeals also contribute to the low M&A values. Most M&A transactions take place in the more developed ASEAN markets such as Malaysia, Singapore, and Thailand.
Market Factors Attracting Investments
Market factors, along with the relatively low-cost structure that enables the delivery of affordable health care services in the region are key aspects of investment decisions. Favorable and improving policy and regulatory environments that generate investment opportunities are also considered as important factors.
Some health care MNEs invest in the region to exploit and internationalize their proprietary advantages. In addition to market-seeking considerations, efficiency-seeking or low-cost production factors also continued to attract pharmaceutical companies to produce drugs and medicines in the region to supply to local markets and for exports.
Furthermore, some MNEs or foreign entities have invested in the healthcare industry in ASEAN because of strategic reasons. They seek a return on investment or to invest in strategic assets in rapidly growing industries, of which healthcare is one. Non-health care companies or conglomerates invest in healthcare to diversify their business portfolio or to seize investment opportunities in strategic health care assets in the region.
Key Features in the Industry
Healthcare is considered as one of the most prominent industries in the ASEAN’s services sector. It has significant implications for social, demographic as well as economic development. The industry encompasses the provision of medical care (curative, preventive and palliative), pharmaceuticals, medical technology and equipment, health insurance, research and development (R&D) centers and also educational institutions.
The growing economy and population will drive more demand for health care services. ASEAN is a USD 3 trillion economy and home to 650 million people, accounting for about 9% of the world population in 2018. The population is expected to reach nearly 700 million by 2025 and more than 790 million by 2050.
Adding to that, longer life expectancy and an increase in the older population will have implications for the demand for health and for geriatric care facilities in the region. The life expectancy among ASEAN countries has improved over the past 15 years. In 1990, average life expectancy was between 64 and 65 years old. By 2016, the average life expectancy had increased to 73 years. More than one-fifth of the region’s population is expected to be over 60 years old by the year 2050.
ASEAN is also witnessing a growing middle-class population, which is projected to reach 400 million by 2020, and affluent consumers who are more health-conscious. The growing middle-class base resulting in a continued rise in demand for health care as well as an opportunity for private investment in hospitals and other care services.
Rising per capita income and changing lifestyles are also contributing to the prevalence of chronic diseases such as diabetes and heart diseases, which require long-term treatment and care.