Mr. Albert FRANCESKINJ, Partner, Attorney at Law, Member of the Paris Bar, and Registered Foreign Lawyer in Vietnam, shares his thoughts with VET about Vietnam’s hospital system and investments in the sector.
How would you evaluate the state of Vietnam’s healthcare sector?
The healthcare sector is still developing and equitization has begun. There are many regulations to be introduced by the government and the existing legal framework is fairly complete but improvements are still needed. It is a conditional sector so you can’t expect it to be simple. Industry players must pass assessments and control. This is needed when you are dealing with health, especially public health. Local governments need to exert control and assess whether investors are experienced or have sufficient funds to invest, and this is complicated.
Vietnam is currently equitizing State-owned hospitals. How do you view this move? Will there be any difficulties?
We need time to learn lessons from this. Equitization is an easy task for the government. There are a lot of interests and the government must address both private and public interests. We can see in other sectors that equitization is not a smooth process. The public health sector is quite large so I understand that the government should not do anything rash and proceed cautiously. As the needs of the population are huge and the public health sector cannot fulfill them, steps must be taken progressively and results evaluated step-by-step and hospital-by-hospital in order to adjust the process if necessary. I don’t think we need to act in a hurry even though we need to move forward, because the situation is serious and expectations are high.
What are your thoughts on limitations of Vietnam’s public hospital system?
It is a big issue for the population. Public hospitals are often overcrowded and even though the doctors and medical personnel are very experienced they cannot satisfy demand from patients and quality will go down. Indeed, because of overload you can’t really talk about ‘quality’. The right direction is to equitize into the right hands. The government is looking for new investment tools, for example public-private partnerships (PPP). I know some foreign groups are investing under these new tools, like PPP. So to relieve the public health sector, but at the same time the equitization of the public health sector must continue and this is the direction the Vietnamese Government has taken. But, once again, it should not be hurried.
How do you see the development of Vietnam’s healthcare sector over recent years?
There has been a lot of investment from Vietnamese individuals and organizations. Some are professionals in the healthcare sector but some are not. I think investment should be reserved for professionals and not just by rich people when they have no direct interest or experience in the healthcare sector. People should not consider healthcare as a purely profit-making sector. The health of the population is the future of the country. There must be a balance between public and private interests, but I understand this is not easy. Everyone can openly invest everywhere. It would be better if people could focus on their particular sector and specialize in their industry.
There are not many foreign organizations involved in Vietnam’s healthcare sector. Why is that the case and what are the obstacles preventing them from doing so?
There are cultural obstacles and other obstacles relating to business practices. For example, when foreign investors want to buy a share in a private hospital they must first identify and evaluate the target. Vietnamese habits are not favorable to foreign investors. Indeed, when local investors have a successful private hospital or clinic they aren’t interested in working with other investors, especially foreign investors. Only when they face financial difficulties do they start to look for co-investors. They then do not consider their previous debts as thir own, instead viewing them as debts also to be held by the new investor. This is often a bone of contention between Vietnamese businesses and foreign investors. Secondly, the seller often says ‘If you are interested in my company, it must be worth something, even if it is having financial difficulties.’ Local investors often fail to make an objective evaluation of their enterprise. So when people discuss working together or a merger and acquisition (M&A), the local seller always considers that the value of their company is high. This is quite common.
Other investors would consider 100 per cent foreign investment projects but formalities are very complicated and nobody knows how long it will take to be granted the necessary licenses. The licensing process is a real obstacle course. Pricing is another obstacle to also take into consideration.
Many investors do want to participate in Vietnam’s healthcare sector. Should they cooperate with an existing Vietnamese hospital or open a new hospital?
They prefer joint ventures with Vietnamese businesses but would like have management control of their investment. They seek a majority stake but also understand that because of local practices they a local partner who will guide them through the necessary procedures, formalities, and local practices. I think that in most cases they are really only looking for a minority local partner. And they are also looking at equitization opportunities.
To be frank, they don’t view the equitization of public hospitals as being suitable initially. They don’t have sufficient understanding of local organization to win bids, even if they are strong enough. They understand they have little chance of winning the first bid so they will come afterwards. As local practices are still unclear to them and not perceived as really transparent, foreign investors understand that they have to look for other opportunities somewhere else.
Vietnam Economic Times, Issue 272 – October 2016