The hub of wellness and medical services
Building on its world-class infrastructure in medical products and services, Thailand is actively pursuing its ambition of becoming the leading destination for medical tourism.
In 2015, the medical tourism segment maintained its record of strong growth, with local media reporting revenue from medical tourism accounting for roughly 0.4% of GDP at a value of THB 105 billion (USD 3 billion) from income earned by private hospitals. This represents revenue growth of up to 15% year-on-year.
While the health services segment of the tourism industry represents only a fraction of overall arrivals and revenue, it is a growing and increasingly profitable market. Current estimates indicate that roughly two million foreign patients come to Thailand annually for some form of medical treatment. This number is set to grow as the government is firmly behind continuing to build Thailand as a regional powerhouse in-line with moving the country forward through the “Thailand 4.0” economic model, for which Medical Hub is one of ten key strategic growth engines.
Text in box: Hospitals in Bangkok serve more than 43% of medical tourists coming to Asia. In-line with this growth, foreign investment in Thailand’s health sector is also increasing.
In-line with the growth, foreign investment in the Thai health sector is also increasing. Greater overseas interest, from Japan, Malaysia and Singapore in particular, should serve as a spur to locally-based service providers, which will need to work harder to maintain their competitive edge in the market as the segment is expected to consolidate in a bid to expand its reach.
Private hospitals are taking action. For example, Bangkok Dusit Medical Services (BDMS) is investing THB 4bn (USD 122.7m) on new facilities at its Bangkok Hospital. BDMS is adding 300 beds to be reserved for overseas patients, of which 100 will be dedicated to customers from the Middle East and Myanmar with the balance for patients from western countries.
Boosting Thailand’s Medical Hub status
In 2016, the Thai Government announced a ten-year strategic plan to be implemented from 2016-2025. The plan aims to develop and consolidate the economy as a hub for wellness and medical services. It further envisages four interweaving strands of related activities: Wellness (including preventive treatments), provision of medical services, outputs from academic research, and medically-related products such as vaccines and medical technology and equipment. Collectively, these strands will greatly strengthen the healthcare sector.
As part of this strategy, the BOI is offering a five-year corporate tax exemption for entities involved in the manufacture of pharmaceuticals. In addition, if such entities submitting their investment applications in 2017 will receive a corporate income tax exemption for up to eight years.
Currently, the national infrastructure for healthcare provision is comprised of over 1300 hospitals. This includes over one thousand government-funded hospitals and more than three hundred private hospitals. To strengthen the stated ambition of becoming the hub for the provision of wellness and medical services, the Thai government is emphasizing the importance of quality, especially through external assessment by accrediting institutions. Accreditation means that leading providers of medical infrastructure can serve as useful models for other institutions.
Quality Healthcare through Quality Accreditation
The Joint Commission International (JCI) is considered the quality benchmark for global healthcare industries. To date, JCI has accredited 53 hospitals nationwide from Chiang Mai and Phitsanulok in the north to Phuket and Hat Yai in the south. Additionally, the Healthcare Accreditation Institute of Thailand has awarded four hospitals with the Advanced Healthcare Accreditation (HA).
The Institute’s stated mission is to support, enhance and develop the quality of healthcare provision. Recognition by domestic and international agencies helps convey trust and a balance between the ongoing quest for quality medical services and the broader goal of national economic development.
A 2015 consultancy white paper described the development of facilities for healthcare provision in Tier-2 cities. These regional cities, including Chiang Mai, Khon Kaen and Phuket, have comparatively large populations but healthcare infrastructure that is less developed than in Bangkok. Tier-2 cities serve as important regional hubs for healthcare provision, including specialist treatment and care. As such, these cities can lead in the development of the quality of infrastructure in provinces that are geographically removed from the capital thereby strengthening the medical footprint for quality services and care nationwide.
Data from the Economist Intelligence Unit and the World Health Organization (WHO) suggests that Thailand invests 4.2% of GDP in healthcare (2012 data). This is some way behind OECD countries such as the US, Germany and Japan, but is above average for the member-states of the ASEAN Economic Community (AEC). By 2015, government spending on healthcare was THB 12.5 billion (USD 376.3 million), while privately-funded healthcare amounted to THB 4 billion (USD 115.8 million). A critical success factor is the recruitment, training and retention of qualified medical professionals, who are currently in comparatively low numbers in the Thai healthcare infrastructure.
Realizing that a shortage of qualified healthcare professions may impede efforts to achieve satisfactory levels of economic and social development, part of the strategic initiatives focus on enhancing current human and technological resources. Generous benefits for incoming expatriate medical professionals and educators address the other important dimension of human resources.
Pharmaceuticals playing to Thailand’s strengths
While wellness and medical tourism represents a huge and growing segment, the industry extends further into related sectors that also play to Thailand’s strengths. The country’s pharmaceutical market is considered to be the largest and most developed in Southeast Asia, and is projected to achieve the rank of the eighth largest market in the entire Asia-Pacific region in 2017. Against this backdrop, the pharmaceutical market in ASEAN is growing at an unprecedented pace. Thailand’s export of pharmaceutical products has grown steadily over the past five years, more than 6% annually, with most exports going to countries in the ASEAN region. The pharmaceutical manufacturing industry, both brand name and generic, has ample room to grow in Thailand, not only in increasing exports, but also as substitution for imported drugs, and is thus encouraging investment in this sector.
The pharmaceutical market in Thailand is expected to increase from THB 203 billion (USD 5.91 billion) in 2015 to THB 325.3 billion (USD 9.47 billion) by 2020, according to research and consulting firm GlobalData. The company’s report from November 2016 states that the primary driver of this strong pharmaceutical expansion in Thailand is the treatment of chronic diseases in the elderly population. Obesity and other non-communicable diseases such as diabetes, hypertension, and cancer have increased over the past few years due to an increasing elderly population and less healthy lifestyles.
As the country moves towards becoming Asia’s healthcare hub through its medical tourism sector, the pharmaceutical industry is riding on its success, says the report.
The BOI will promote the manufacture of pharmaceuticals and medical devices to strengthen competitiveness in this industry. As part of the new policy, the BOI offers pharmaceutical manufacturers a five-year corporate income tax exemption. If such entities apply for BOI privileges in 2017, they will receive a corporate income tax exemption for up to eight years.
Text in box: Thailand’s vitamin and dietary supplements market has high potential due to strong demand, as Thais are among the top consumers of vitamins and dietary supplements in the world. In 2013, the sales value of dietary supplements in Thailand was estimated at USD 833 million, with a projected annual growth rate of 10-15 percent over the next five years, reaching USD 1.7 billion in 2018.
Building on world-class medical infrastructure
The government’s ambitions to turn a comparative advantage into a competitive advantage through Thailand as a regional hub for wellness and healthcare are strengthened through an acknowledged world-class medical infrastructure. This is a crucial dimension to implementing the stated vision, while the country must further pursue advancements and deepen its ongoing commitment to the vital contributions made by science and technology to both the medical sector.
The BOI, in setting out a strategic policy to promote Thailand as a medical hub, understands and supports the increased demand in the healthcare market, which can lead to greater opportunities in medical services, as well as the manufacture of pharmaceuticals and medical devices, which will contribute to strengthening Thailand’s strong position.
With the Thai government’s progressive policies focusing on innovation and long-term sustainable growth, and within the framework of Thailand 4.0, Thailand is well-placed to realize its stated vision of becoming the foremost global destination for medical tourism, and a hub of wellness and medical services driving economic and social development both domestically and throughout the region.