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Vol 19, No. 09, September 2015   |   Issue PDF view/purchase
Healthcare in ASEAN

The Association of Southeast Asian Nations (ASEAN) is a geo-political and economic organisation comprising of Singapore, Indonesia, Malaysia, Thailand, the Philippines, Brunei, Myanmar, Cambodia, Laos and Vietnam. Established in 1967, the group has been instrumental in promoting the region’s economic growth and development. Collectively, the group has established economic links and entered into free trade agreements with various countries, including China, Japan, South Korea, India, Australia and New Zealand. With a combined nominal GDP of over 2T USD, ASEAN as a bloc is presently the fifth largest economy in the world.

In recent times, despite weak economic conditions in the US and EU as well as slowing growth in China, the ASEAN economy has maintained its robust growth trajectory. The secondary and tertiary economies of member countries have been growing rapidly. When the ASEAN Economic Community (AEC) is implemented at the end of 2015, the common economy is expected to join the ranks of China and Japan as a major economic growth force in Asia. Healthcare is a priority sector that the ASEAN governments have identified for region-wide integration. The upcoming AEC formation is expected to further accelerate the growth of the region’s healthcare industry, driven by additional foreign direct investments, freer flow of trade, manpower and capital within ASEAN, and growing affluence among ASEAN countries. Countries within ASEAN, with the exception of Cambodia, Laos, Myanmar and Vietnam, have already largely cancelled all duty taxes for trade between them. When the AEC is officially ‘launched’ later this year, the entire region will become a single duty free bloc. Table 1 below provides an estimate of the overall potential size of the AEC market.

The individual healthcare markets within ASEAN are at different stages of development. For instance, Singapore has been considered the most developed and efficient healthcare system in the region. Among its ASEAN peers, Singapore spends the most annually on healthcare on a per capita basis – at levels similar to those of advanced economies like Israel and Portugal. In comparison, Myanmar, which has only recently opened up to the rest of the world, spends on average only 20 USD on healthcare for each of its citizens. Table 2 below provides a comparison of the individual healthcare markets among selected ASEAN member countries and highlights the heterogeneity of the overall regional market.

The heterogeneity of the ASEAN healthcare market, coupled with its large size, offers tremendous opportunities to a broad range of medical device companies. Governments in the region share the common desire to enhance their healthcare systems and provide better quality care to their people. Their respective healthcare institutions also have country-specific needs and operate within different financial constraints. These two factors combine to create a significant demand for a broad spectrum of healthcare products and services.

The ASEAN Medical Device Market

Over the past few years, a significant number of global medical device companies have started to expand their footprints in ASEAN, actively engaging local healthcare institutions and key stakeholders in the respective member countries. These companies have recognised that ASEAN’s medical device market has many attractive characteristics, some of which are not found elsewhere in the developed economies or the large developing ones like China and India.

The region’s medical device market is expected to grow strongly and access to the market will improve in the coming years due to a number of factors. Firstly, the size of the middle class within the various member states is expanding rapidly and the Asian Development Bank expects this group to grow from 24% of the total population in 2010 to 65% by 2030. The various member countries are also affected by fast changing demographic trends such as population aging and urbanisation. These and other market drivers are expected to fuel further demand for more and better quality healthcare, and contribute significantly to the expansion of the region’s medical device market.

In addition, ASEAN has been developing a uniform system for registering and assessing medical devices across all member states. The ASEAN Medical Device Directive (AMDD) was signed by the 10 member countries in August 2014. The directive is expected to be rolled out by the end of 2015 and will require ASEAN members to adopt uniform classification criteria for medical devices. For medical device companies, this means that they will be able to more easily access a common medical device market with a market size of more than 600 million people.

At present, the penetration of medical devices into ASEAN is still relatively low compared to rapidly developing markets in China and India. While the healthcare systems of some of the bloc’s more populous members, such as Indonesia, Myanmar and Vietnam, are growing rapidly, they remain relatively underdeveloped. Thus, there is still much significant room for growth and the potential for medical device companies to expand into these markets. Furthermore, the different stage of development of each member country’s healthcare market presents medical device companies with the opportunity to enter the regional market using different strategies. For instance, a company selling expensive and sophisticated equipment may consider entering the more mature and wealthy Singapore or Brunei markets prior to expanding into middle-income economies such as, Malaysia and Thailand. On the other hand, a company that sells high volume lower cost medical products may prefer to simply tackle the larger market in Indonesia.

Another important consideration for medical device companies entering the ASEAN market is the lack of domestic competition in the region. For example, in China and India, global firms often have to contend with well-established domestic medical device companies, especially in the low-to-mid end market segments. In comparison, there are limited numbers of indigenous medical device manufacturers in the ASEAN member countries, except for notable surgical glove makers in Malaysia and Thailand, as well as a few small to mid-sized device manufacturers. Overall, ASEAN is a net importer of medical devices. Vietnam for example, currently imports 90% of all the medical devices used in the country.

Singapore – Gateway to ASEAN Healthcare Opportunities

As increasing number of global medical device companies come to realise the potential of the ASEAN healthcare market and the opportunities it has to offer, they will have to develop effective strategies to enter the market and select a suitable point of entry. For some of these firms, Singapore is an ideal gateway.

Given Singapore’s close proximity and trade linkages with other Asian countries, it also plays an important role as a sales and marketing gateway into the region. The availability of management talents who are familiar with the region, excellent transport and communications infrastructure, a transparent business environment and the ease of doing business, are just some of the factors that have convinced companies such as Becton Dickinson, Siemens and Medtronics to establish their regional or international HQs in Singapore, specifically to drive their business expansion in Asia.

Beyond managing their commercial activities in ASEAN through Singapore, some medical device companies have established manufacturing and R&D activities in Singapore. Although Singapore does not necessarily offer a low-cost manufacturing environment, companies producing medical devices in Singapore enjoy a stable, business-friendly and virtually corruption-free environment where intellectual property is respected and government support for the industry is strong. An article on the benefits of setting up a manufacturing site in Singapore may be found at the Singapore Medtech Portal website (www.medtech.sg/siting-a-biomanufacturing-facility-in-singapore).

Similarly, medical device companies that are conducting R&D activities in Singapore have benefited from the country’s conducive R&D environment. A large research talent pool, good R&D infrastructure, a robust IP regime and a vibrant local R&D community are just a few of the things that have helped persuade global medical device companies to set up their research operations in Singapore. More information on the R&D environment in Singapore can also be found at the Singapore Medtech Portal website (www.medtech.sg/research).

Though infamous for the limited land size and natural resources, Singapore is a key player within ASEAN’s medical device industry. Singapore has held a successful track record for industry development, and it will continue to play an important role in influencing the directions and to contributing to the growth of the region’s medical device market. Companies which are seeking to capture business opportunities in ASEAN’s medical device market will do well to consider Singapore as a “forward operating based” to support their activities in the region.

Singapore – the bellwether of ASEAN healthcare scene

Although Singapore is the smallest country in ASEAN, it is also has the most advanced healthcare service industry. The public healthcare system is very developed and the public healthcare institutions are often well-managed and well-funded. It strives to use the latest medical healthcare technologies. These institutions and their private sector peers are therefore influential customers whose purchasing-power and -decisions are often seen as a meaningful endorsement in Asia and beyond. Given its bellwether role in the hospital scene, medical device companies looking to sell to other customers in the region will be well-served to consider establishing reference sites in Singapore as part of their strategic push into the region. In fact, many international medical device companies are doing just that, and are now in a good position to grow in the region.

Asian Private Hospitals – A Key Customer Group

For medical device companies that are unfamiliar with the ASEAN healthcare market, one of the most obvious areas to investigate when evaluating the potential of the overall market will be the healthcare institutions in the region. For instance, ASEAN is home to some of the most successful private hospital operators in the world. These private hospitals provide healthcare services not only to local patients in their respective countries but often also to medical tourists from around the world. These hospitals are often among the first to deploy new healthcare solutions and devices that can make significant positive impacts on their patients’ treatment outcomes. The following table describes a few of the major hospital groups in ASEAN.

Table 3: Major Hospital Groups in ASEAN
Hospital Group Country Description
IHH Healthcare Malaysia World’s 2nd largest hospital operator by market capitalisation, IHH is publicly listed on both the Singapore stock exchange (SGX) and the Malaysia stock exchange (Bursa). The group operates hospitals and medical centres in 9 countries including Singapore, Malaysia and Turkey.

Website: www.ihh-healthcare.com

KPJ Healthcare Malaysia It is one of the largest private hospital company in Malaysia, operating hospitals in Malaysia and Indonesia. The company is listed on the Malaysia stock exchange (Bursa).

Website: www.kpjhealth.com.my

Raffles Hospital Singapore The Raffles Hospital is a tertiary hospital belonging to the Raffles Medical Group, which operates the largest private group practice in Singapore and is also publicly listed on the Singapore stock exchange (SGX).

Website: www.raffleshospital.com

Bumrungrad Hospital Thailand One of Asia’s busiest and largest hospitals, Bumrungrad sees over a million patients a year. It caters primarily to higher income market segments in Thailand as well as expatriates and medical tourists. Bumrungrad is publicly listed on the Thailand stock exchange (SET) and is very profitable.

Website: www.bumrungrad.com

Bangkok Dusit Hospital Thailand It is the largest private hospital operator in Thailand in terms of revenues and market capitalisation. It currently manages 40 hospitals under 6 hospital brands. Bangkok Hospital targets mainly the upper-middle to high income segment of the market, as well as expatriates and medical tourists.

Website: www.bangkokhospitalgroup.com

Siloam Group Indonesia It is one of Indonesia’s leading hospital operator and has been listed on the Indonesia stock exchange since September 2013. Its long term goal is to operate 40 hospitals by 2018 to cater to Indonesia’s rapidly growing middle and affluent class.

Website: www.siloamhospitals.com

Rumah Sakit Mitra Keluarga Indonesia Mitra Keluarga was established in West Java in 1993 and today operates 11 hospitals in Jakarta, Depok, Bekasi, Tegal, Sidoarjo, and Surabaya. It caters mostly to local patients.

Website: www.mitrakeluarga.com (in Bahasa Indonesia only)

About the Author

Derrick Tan, Ph.D. is the co-Director of AsiaPac Bio LLP, an information services and consulting firm based in Singapore that focuses on the biomedical sciences industry in Asia. Leveraging on AsiaPac Bio LLP in-depth knowledge of operations setup and regional business environment, Derrick and his consultants provide guidance to companies to navigate the complex business and governmental environment in the region’s life sciences industry. Our Singapore Medtech Portal (www.medtech.sg) offers information on Singapore’s medtech industry in an investor centric manner. The portal aggregates and distils information relevant to the biomedical sciences industry in Singapore.

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