Growing Healthcare Spending in Southeast Asia Brings Opportunity

In both absolute and per capita terms, healthcare spending grew substantially across Southeast Asia in recent years. According to data from the World Health Organization, per capita healthcare spending growth was particularly high in Indonesia, the Philippines and Myanmar. Growth exceeded 30% in most other Southeast Asian countries over the past four years.

SEA health spend per cap

As one might expect, average per capita spending in Southeast Asia remains relatively small by developed-world standards, but nonetheless leads several other developing world regions, including South Asia, Sub-Saharan Africa and the MENA region. As a region, average per capita spending in Southeast Asia grew at a healthy 37.3%, putting it roughly on par with other high-growth developing regions like South Asia and Latin America. 

Global health spend per cap
Despite healthy per capita spending, however, Southeast Asian countries on average spend less on healthcare as a percentage of GDP than any other region in the world. While North America and the European Union spent 17.2% and 10.2% of their GDP on healthcare respectively in 2012, Southeast Asia only spent 3.9% that same year. This is less than poorer regions like Sub-Saharan Africa and South Asia. 

global health spend as GDP
Of course, healthcare spending as a percentage of GDP differs materially between Southeast Asian countries. Vietnam leads the region in this regard, with 6.6% of its GDP having gone towards healthcare in 2012. Myanmar, which was formerly ruled by a military junta that prioritized military spending over most public services, lags the region by a wide margin. Most other countries fall closer to the median. 

SEAsian health spend of GDP

At BDG, we believe that fast-growing per capita spending coupled with low overall spending as a percentage of GDP creates big opportunities for healthcare companies of virtually all types, from device manufacturers to healthcare information systems to pharmaceutical companies and everything in between. The region also has a robust medical tourism market, since countries like Singapore, Thailand and Malaysia offer high-quality services at relatively low prices for international travelers from the developed world. 

In general, Southeast Asia’s consumer markets are on fire due to strong economic growth, a growing middle class and other favorable economic circumstances. These strong consumer demographics will drive demand for greater access to higher-quality healthcare services in many key markets. Of course, the opportunity differs substantially between ASEAN countries, which fall into varying income brackets and have different overall levels of economic development.  Regulatory policies, entry costs, cultures and other factors are far from uniform in this diverse region. 

Opportunities in the healthcare sector are offset by many challenges, including market fragmentation, regulatory changes, IP protection issues, urban-rural divides, and other barriers to entry. In future articles, BDG will explore some of the specific challenges and market forces impacting Southeast Asia’s healthcare space today.