- The ongoing COVID-19 pandemic has exposed the cracks in the current health sector. From 2019 to 2020, investment in the health-care sector dropped by 45 per cent and continued to decline in 2021 to 34 per cent in the first three quarters of 2022.
- Globally, greenfield investment in the health sector, from 2008 to 2021, fluctuated considerably, falling by 28 per cent between 2008 and 2012 and then increasing by 97 per cent to US$ 24 billion by 2021. Global peaks and falls have been replicated in the FDI received by countries in the Asian and Pacific region, while the share of global inward FDI in the health sector in Asia and the Pacific has declined over the period.
- Greenfield FDI in the health sector in Asia and the Pacific was 49 per cent lower in 2021 compared to 2008. However, prospects for 2022 look better, with an increase of 78 per cent in the first quarter of the year, compared to the same period in 2021.
- On individual subsectors, between 2008-2021 in Asia and the Pacific, the pharmaceutical subsector attracted the highest amount of greenfield investment, US$ 32 billion. It attracted more than twice the investment that went into the medical devices subsector, which was second (US$ 20 billion). They were followed by biotechnology (US$ 17 billion) and health-care subsectors (US$ 10.8 billion).
- Prospects for the pharmaceutical subsector in Asia and the Pacific are subdued for the remainder of 2022, with a steady value of US$ 96 million worth of greenfield investments undertaken in the first quarter of 2022 in the pharmaceutical subsector. For medical devices, however, the first quarter of 2022 witnessed a sharp increase in investments, reaching US$ 1.2 billion. At the same time, the biotechnology subsector only reached US$ 55 million. Investment in the health-care subsector in 2021 was also more promising, with an uptick reaching close to US$ 60 million.
- FDI flows through cross-border M&As have been on a constant rise since the early 2000s, with the total value of projects increasing from US$ 2 billion to US$ 10.6 billion from 2001 to 2020. Most M&A deals in the region took place in the pharmaceuticals subsector – close to 2,500 between 2010 and 2020. This was followed by the health-care subsector and then biotechnology.
- Mergers and acquisitions in the Asia-Pacific region have been larger than greenfield investment for the health sector, where ownership of assets is valued, given the health sector’s strategic importance in most countries.
- China was the largest receiver of inward greenfield FDI during 2008-2020, followed by India (US$ 14 billion), Singapore (US$ 9 billion) and Malaysia (US$ 5 billion).
- Between 2008 and 2021, the United States was the largest investor in the Asia-Pacific region’s health sector, making up 35 per cent of all health-related greenfield investments in the region. Switzerland, Japan, Germany and France followed the United States as the largest sources of investment. Together, those five countries accounted for 66 per cent of all health-related investments in the Asia-Pacific region.
- In terms of intraregional investors, firms from China, Japan, the Republic of Korea, Singapore and India led investments in the health-care sector in the region. In 2021, however, Asia-Pacific economies saw decreasing outward investment explained by the delayed COVID-19 wave, which hit the region in 2021.
- Investment policies in the region have varied widely and have not all been promotion-related. Ten countries in the region, namely China, India, Indonesia, the Lao PDR, Malaysia, Mongolia, the Philippines, Thailand, Viet Nam, and Myanmar, impose some type of entry restrictions (out of the total 70 surveyed by UNCTAD for WIR 2021). In terms of subsectors, health-care facilities and medical services stand out as the most protected.
- Many countries in the Asia-Pacific region have invested in the health sector as a core policy objective. Countries such as Sri Lanka, Brunei Darussalam, Bhutan, Timor-Leste and Thailand have prioritized FDI in the health sector.
- Certain key challenges exist in the region, such as the limited capacity of countries in the region to attract the quantity and quality of investment needed. These include poor regional and domestic investment ecosystems, the lack of capital, technology, skills, low regulatory capacity, and poor infrastructure and related services.
- Countries in Asia and the Pacific will need to create and improve an ecosystem of coherent policy and transparent regulatory institutions. In tandem, Governments will need to invest in skills development, technological capacity and health infrastructure relevant to achieving growth in the sector. Regional cooperation and political commitment to openness for investment will be crucial to helping economies build back better and harness the potential of FDI.
22 September 2022
22 September 2022