Vietnam’s Medical Device Industry: Key Insights for Entering the Market
Over the past decade, Vietnam has experienced rapid economic growth and population increase, making it an attractive destination for foreign investors in the public healthcare sector. Vietnam’s healthcare industry is considered a national development priority, receiving increasing financial support and investment incentives from the government over the years.
In addition to economic growth, the COVID-19 pandemic has driven healthcare demand in Vietnam. During the pandemic, enhanced government support for healthcare spending and improved access to medical services have reinforced the sector’s top priority status.
In the healthcare field, most medical devices in Vietnam are imported from multinational corporations, making the medical device sector one of the most promising areas for foreign investors.
Opportunities in the Medical Device Sector
Vietnam faces a shortage of affordable generic drugs and limited production and innovation of medical devices to meet domestic demand. This presents a bright outlook for foreign companies looking to penetrate the market.
Import Trends
Reports indicate that over 90% of Vietnam’s medical devices are imported, with 55% coming from Japan, Germany, the U.S., China, and Singapore. Domestic manufacturers account for less than 10% of the local market.
From 2014 to 2019, the value of imported medical devices grew by 51%, increasing from $359.1 million to $543.5 million. Experts predict the sector will continue to expand from 2020 to 2025, offering positive prospects for foreign investors.
Market Entry Requirements
Vietnam’s healthcare sector, especially the medical device industry, is tightly regulated. Imported devices must comply with licensing requirements governed by the Ministry of Health (MOH).
Foreign companies must register a legal entity in Vietnam and obtain import licenses to operate. Many sell products through local agents or distributors. While product registration is not mandatory, exporters must submit Certificates of Free Sale (CFS) issued by Vietnam’s embassies in their home countries.
Decree No. 36 mandates that all imported medical devices must have Marketing Authorization (MA) licenses, a prerequisite for market entry. This process can take 1-2 years, requiring companies to devise detailed strategies and maintain perseverance and flexibility.
Strategies and Local Partnerships
Building strong partnerships with domestic companies through joint ventures or mergers and acquisitions (M&A) is vital for success. Understanding regional market dynamics is also crucial, as northern Vietnam focuses on government agencies and national healthcare institutions, while southern Vietnam serves as the industrial hub with numerous private organizations.
Competitive Landscape
Vietnam’s medical device market is dominated by foreign suppliers, creating intense competition among international businesses. Over 400 companies from 25 countries participated in the Vietnam Medipharm Expo 2020, highlighting the strong interest in this lucrative market. Major competitors hail from the U.S., Japan, Germany, South Korea, and China.
Local manufacturers, though not primary suppliers, produce over 600 products approved by the MOH, including implants, surgical instruments, diagnostic equipment, and consumables. Foreign investors should be mindful of their presence.
Tax Incentives
Vietnam offers competitive tax policies, including:
- Corporate Income Tax (CIT) incentives.
- Exemptions on import duties and land rental fees.
Foreign businesses can benefit from a 10% CIT rate throughout their project duration, with exemptions for the first four years and a 50% reduction for the subsequent five to nine years, depending on the project location. Land rental fee exemptions last at least seven years.
Challenges for Foreign Investors
While opportunities abound, investors face challenges such as intense competition and stringent regulations. The medical device industry is governed by strict technical standards and import-distribution rules, with existing frameworks lacking clarity, leading to legal uncertainties.
Future Outlook
Vietnam is expected to amend its regulatory framework, enhance tax incentives, and introduce clearer policies to attract more foreign investments into the medical device industry. With a growing aging population, increasing healthcare demands, and favorable government support, the medical device market in Vietnam presents a compelling opportunity for foreign investors to thrive.