Vietnam's Resolution 198/2025/QH15 offers a 3-year Corporate Income Tax (CIT) exemption for newly established Small and Medium-sized Enterprises (SMEs). This article details eligibility criteria, including Enterprise Registration Certificate (ERC) requirements and SME classification, and provides strategic advice for foreign investors.
Within the pharmaceutical landscape, many international organizations predict a persistent surge in investments, underscored by an upward trajectory in mergers and acquisitions. With a populace of 100 million and its strategic geographic location facilitating entry into neighboring markets, Vietnam emerges as a beacon for investments aimed at propelling its domestic pharma and medicine market, enhancing its competitive edge, and reducing reliance on external sources.
The Current Outlook of Vietnam's pharma and medicine market
As emphasized by the Deputy Minister of Planning and Investment, Vietnam's healthcare domain, particularly the pharmaceutical sector, is undergoing rapid expansion. Valued at over 20 billion USD, the pharmaceutical market constitutes roughly 6% of the GDP in 2022. Expert predictions anticipate this value to ascend to around 23.3 billion USD by 2025 and further elevate to approximately 33.8 billion USD by 2030.
Moreover, Vietnam's pharmaceutical market showcases robust momentum, marked by a 10.6% compound growth rate. This ascent is evidenced by the market's valuation, which surged from 3.4 billion USD in 2015 to an impressive 7 billion USD in 2022. Of particular note, domestic production contributes about 45% to the total value of therapeutic drugs.
Experts project that by 2030, Vietnam's drug market could reach an overall value of about 13 billion USD, accompanied by an anticipated per capita drug expenditure of around 75 USD. Notably, IBM Technology Group (USA) foresees Vietnam's medical and pharmaceutical market soaring to nearly 16.1 billion USD by 2026, positioning the nation as a pivotal contender for pharmaceutical advancement within Southeast Asia.
The Ministry of Health also underscores a concerted commitment to ensuring the availability of quality drugs at reasonable prices, catering to medical treatment, examinations, and preventive care. This endeavor has resulted in the expansion of drug production, evidenced by 228 GMP-WHO compliant factories, including 18 production lines adhering to EU-GMP standards. Among these facilities, 7 specialize in vaccine production, 6 in secondary vaccine packaging, and 77 in the manufacturing of medicinal herbs, mirroring the dynamic growth of Vietnam's pharmaceutical sector.
Nonetheless, in comparison to the sector's potential and demand, these figures appear modest, necessitating collaborative efforts from both domestic and foreign players.
Opportunities are open for investors in Vietnam’s pharma and medicine market
At a recent seminar titled "Implementing Resolution 29: A New Approach in Medical and Pharmaceutical Industry Development", the discourse discussed the analysis of Resolution No. 29-NQ/CTN by the Central Government. The seminar explored the action program designed to sustainably develop the biotechnology and pharmaceutical sectors.
Attendees unanimously acknowledged the advantageous circumstances that position Vietnam's medical and pharmaceutical domain to attract foreign capital. These factors encompass strategic geographical advantages, political stability, consistent economic growth, and robust international integration through free trade agreements and bilateral partnerships with global economic players.
In addition, three pivotal strategies for pharmaceutical enterprises in the forthcoming era are innovation in novel drug products, development of natural-origin products, investment in high-quality human resources, and expansion of production facilities to meet international standards.
Amidst a global landscape marked by an 8% decline in global M&A volume and a 15% reduction in value during the initial half of 2023 (PwC's Global M&A Trends Report, 2023), the pharmaceutical sector persists as a magnet for investor interest. PwC's experts underscore the need for readiness in the face of a dynamic second half of 2023, driven by the alignment of buyer-seller pricing and a collective push towards advanced technology and AI-powered solutions to tackle evolving challenges and strategies.
In concurrence with these viewpoints, KPMG's assessment highlights Vietnam's potential to emerge as a regional pharmaceutical and medical nucleus, capable of robust pharmaceutical exports to ASEAN nations. The sector's resilience and adaptability, exemplified by rapid innovation during the COVID-19 pandemic, positions it for future growth.
Projections from the Vietnam Pharmaceutical Corporation (Vinapharm) anticipate the nation's pharmaceutical industry to achieve an 8% revenue increase in 2023, reaching 169 trillion VND (approximately 7.2 billion USD).
Challenges ahead the road
In addressing the anticipated challenges, Mr. Emin Turan, Chairman of Pharma Group, offers insights that shed light on the unique hurdles within the pharmaceutical sector. It's noteworthy that out of an exhaustive 10,000 drug trials, only a minute fraction—just 1—culminates in a successful product. Even more striking is the fact that merely a third of these successful products manage to transition into commercialization.
This stark reality underscores the immense risks associated with pharmaceutical research and development. Global biopharmaceutical companies are collectively committing over a staggering $1 trillion to research and development activities by 2030. This massive investment reaffirms the high-risk nature of the industry.
Meanwhile, in Vietnam, though foreign enterprises express interest in becoming strategic partners with domestic counterparts, the journey isn't without complexities. For state-owned enterprises, the process proves intricate, while private enterprises often grapple with corporate governance standards that fall short.
A noteworthy voice, Mr. Do Van Su, Deputy Director of the Foreign Investment Department, aptly characterizes this landscape, drawing attention to the persisting family management approach prevalent in many Vietnamese businesses. This tendency imparts opacity and susceptibility to family influences, thereby necessitating governance enhancements.
In parallel, the insights of Prof. Dr. Nguyen Hai Nam, Rector of Hanoi University of Pharmacy, shed light on a significant bottleneck. Attracting investment to the pharmaceutical sector is constrained by its demanding nature, necessitating a high degree of expertise and carrying inherent risk.
For instance, the span from project formulation to investment approval, averaging a five-year period, is considered lengthy by industry standards. At the same time, crafting a new drug, commencing from the initial research phase to obtaining regulatory approval, spans a time-prolonging and resource-intensive period of 10 to 15 years. The cost of shepherding a novel drug through this intricate journey comes with an astonishing price tag of approximately $2.6 billion.
These statistics provide a glimpse into the immense complexities and financial commitments involved in pharmaceutical innovation. Thus, foreign-invested enterprises, in particular, seek a more open investment mechanism. Furthermore, the absence of preferential loan programs geared towards high-tech ventures within the pharmaceutical sector underscores an area ripe for advancement.
These challenges collectively underscore the nuanced landscape that investors and decision-makers must navigate. A multifaceted approach, informed by evolving governance structures and policy enhancements, holds the key to unlocking the sector's potential. As we forge ahead into this landscape, Viettonkin remains committed to steering you through these complexities, armed with strategic insights and tailored solutions. The roadmap may be intricate, but with astute guidance, the transformative potential of Vietnam's pharmaceutical industry beckons.
Final Thoughts
It's clear that Vietnam possesses an unprecedented opportunity to leverage its experiences and harness advancements in science and technology. These factors can accelerate the establishment of a robust healthcare infrastructure and a sustainable pharmaceutical industry. To materialize transformative progress, it's crucial to embrace a new approach that actualizes the objectives outlined in Resolution 29/NQ-CP.
In pursuit of this goal, stakeholders must prioritize institutional reform, define explicit objectives to expedite public access to innovative medicines, and devise adaptable medical financing mechanisms that harmonize the interests of all stakeholders. The sector's vibrancy should be rooted in scientific prowess, fostering an ecosystem fueled by competition, innovation, and comprehensive integration to enhance Vietnam's pharmaceutical competitiveness regionally and globally.
If you want to start a business in Vietnam’s pharma and medicine industry, Viettonkin can be your trustworthy partner! With a seasoned team dedicated to unraveling the potential that lies within Vietnam's pharmaceutical sector, we can help you navigate through the complex legal process and land at your targeted market successfully. Together, we can chart a course that leads to remarkable opportunities and impactful contributions within this burgeoning industry!
