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!

Vietnam, a nation marked by its breathtaking landscapes and vibrant culture, has transformed into an economic powerhouse in Southeast Asia. As foreign investors set their sights on Vietnam, they recognize that the journey toward sustainable growth hinges on robust infrastructure. The backbone of a thriving economy, infrastructure lays the foundation for trade, investment, and innovation. Modern transportation networks, energy grids, and digital connectivity form the arteries that pump vitality into every corner of the nation. Thus, understanding the current landscape of infrastructure financing becomes a compass guiding investors towards lucrative opportunities.

Current landscape of infrastructure financing in vietnam

Vietnam's vision for the future is painted on an infrastructure canvas that spans transportation, energy, technology, and urban development. Projects like the North-South Expressway, which seeks to connect the country's two major cities, Ho Chi Minh and Hanoi, epitomize the scale and ambition of these initiatives. Urban hubs like Ho Chi Minh City and Danang are poised for transformation through smart city solutions. These projects mirror Vietnam's determination to craft an infrastructure ecosystem that fosters efficiency, sustainability, and competitiveness.

Yet, the path to realizing these grand ambitions is lined with challenges. The financial demands of such projects often exceed conventional funding sources. Navigating the complexities of regulatory frameworks and mitigating risks in unfamiliar environments can be daunting for potential investors. There's a delicate balance between the need for profitable investments and the socioeconomic impact of these projects. As a result, innovative financing mechanisms and partnerships are being explored to bridge the funding gap.

Vietnam's government has emerged as a pivotal player in driving infrastructure development. The introduction of Public-Private Partnerships (PPPs) is a testament to the government's commitment to attracting private sector involvement. By facilitating collaboration between public and private entities, PPPs infuse fresh capital, expertise, and innovation into infrastructure projects. The government's role also extends to providing a stable regulatory environment, reducing bureaucratic hurdles, and establishing dedicated funds to support these initiatives.

Government initiatives to attract foreign investors

Vietnam's pro-business stance is reflected in its policies designed to attract foreign investors. 

Incentives for the chosen investor in the form of PPP

According to Article 30 of Decree No. 35/2021/ND-CP, investors with approved project proposals shall get a 5% preference when assessing bids. In addition, a 3% preference shall be granted to investors who commit to use domestic contractors for at least 25% of the project’s total investment value.

Meanwhile, when participating in the selection of international investors, if the investors pledge to use domestic goods, supplies, materials and equipment for at least 25% of the project’s total investment value, they shall enjoy a preference of 2% in the assessment of bids.

Incentives for Smart City investment

Vietnam, with 48 out of 63 provinces and cities under central governance, is actively shaping smart city initiatives. These encompass plans for entire provinces or specific urban areas.

To foster smart city development, Vietnam has introduced key documents, such as:

• Official Letter No. 10384/VPCP-KGVX on outlining sustainable smart city principles globally and domestically, 
• Document No. 58/BTTTT-KHCN on guiding ICT principles for smart city construction in Vietnam, 
• Decision No. 950/QD-TTg on approving the sustainable smart city project from 2018 to 2025, 
• Document 693/BXD-PTĐT on detailing the implementation of sustainable smart city development in Vietnam, among others.

Particularly, the Politburo's Resolution 31 charts Ho Chi Minh City's path to 2030 and beyond, envisioning digital leadership and development across various sectors. Initiatives include the Digital Transformation Program, the Ho Chi Minh City smart city project, and support for the innovation startup ecosystem.

In addition, on June 16, 2023, Decision No. 700/QD-TTg sanctioned Hanoi's Master Plan adjustments toward a modern smart city. The Hanoi Party Committee's Program No. 03-CTr/TU focuses on urban enhancement and economy until 2025, aiming to invest in new smart-oriented urban areas by then.

Notable Smart City Projects Include:

• Tay Mo - Dai Mo - Vinhomes Park new urban area project in Nam Tu Liem District, Hanoi.
• Hanoi's Dong Anh district, with a 4.2 billion USD investment, prioritizes the Smart City project, streamlining initial construction procedures.

Incentives for Developing Key Economic Zones (KEZs) in Vietnam

As outlined in Article 23 of Decree 35/2022/ND-CP:

• Economic zones are given priority for investment, with funding from state budget and legal sources, dedicated to constructing technical, social, and environmental projects.
• Key infrastructure projects, essential for economic zone advancement, may secure additional funding through compliant bond issuance.
• Investment in vital technical and social infrastructure, public utilities, and service projects in economic zones grants investors support from official development assistance (ODA), concessional loans, and technical aid, as per the law.

Types of infrastructure financing in Vietnam

Vietnam stands at the forefront of Asia's infrastructure drive, channeling substantial resources to spur economic growth, elevate living standards, support energy transition, and bolster resilience, all accounting for around 5.7% of GDP.

The National Master Plan, spanning 2021-2030 with a visionary outlook to 2050 as outlined in Resolution No. 81/2023/QH15, underscores the imperative of a spatial development model. This blueprint accelerates modernization and synchronicity across Vietnam's infrastructure landscape.

Moreover, Vietnamese Government-led endeavors promote sustainable infrastructure, manifesting through investments in renewable energy sources, incentivizing green buildings, and advocating for electric vehicles. PwC also emphasized the necessity for green infrastructure components, advocating for projects that facilitate a just transition to a low-carbon economy while strengthening climate responsiveness. This clarion call highlights the pivotal role of renewable energy sources, necessitating capacity building and skill development. 

To call for investment in infrastructure development, Vietnamese Government has facilitated various modes of infrastructure financing within Vietnam, including:

• Direct Government Investment: Presently, government agencies, including local governments and state-owned enterprises, predominantly finance Vietnam's infrastructure initiatives. However, private sector involvement remains limited.
• Bank and Credit Institution Financing: The backbone of private sector projects in Vietnam, loans from banks and credit institutions serve as the principal funding source.
• Public-Private Partnerships (PPPs): Enacted through the Law on Public-Private Partnership Investment No 64/2020/QH14, PPPs forge fixed-term collaborations between the state and private-sector entities, enticing private sector engagement.
• Market-Based Instruments: Regulatory frameworks such as Securities Law No. 54/2019/QH14, Enterprise Law No. 59/2020/QH14 (pertaining to shares and equity), and Decree No. 153/2020/ND-CP (pertaining to privately placed corporate bonds and corporate bonds in international markets) facilitate capital mobilization through bonds, stocks, and securities.
• Official Development Assistance (ODA): Regulated by Decree No 114/2021/ND-CP, ODA constitutes foreign donor-provided capital to bolster developmental and social welfare initiatives. It spans various forms, including programmes, projects, non-projects, and budget support.

Recently, a groundbreaking seminar by the Vietnam Center for International Arbitration, Vietnam Confederation of Commerce and Industry (VCCI), and United States Agency for International Development (USAID), underscored the need for innovative investment methods. One such proposition involves leveraging existing infrastructure assets to finance new projects using an Asset Recycling (AR) approach. This approach, utilized by Indonesia and India, harnesses revenue from current government assets to fuel new infrastructure development.

Final Thoughts

In a world of interconnected economies, Vietnam emerges as a captivating investment destination. Its evolution from a nation marked by its history to a nation driven by its future is a testament to the power of vision, determination, and collaboration. As the Vietnamese government paves the way for foreign investors through favorable policies and partnerships, the role of infrastructure development in shaping the nation's destiny becomes clearer.

Foreign investors venturing into Vietnam are not merely joining a growth story; they are contributing to its authorship. With infrastructure financing as the cornerstone, the canvas of Vietnam's future awaits the brushstrokes of those who recognize the beauty of progress. As the journey unfolds, the world watches with anticipation as Vietnam transforms, and foreign investors reap the rewards of their foresight.

Don't miss your chance to be part of this transformative journey. Take action now and explore the possibilities of doing business and investing in Vietnam. Reach out to our team to gain valuable insights and guidance on navigating Vietnam's dynamic investment landscape. 

Together, let's unlock the immense potential and build a prosperous future in the vibrant Vietnamese market!