New Opportunities Arising
As the pandemic of the COVID-19 virus rapidly increased the global use of medical devices, the Thai government is stepping up its efforts to attract foreign investors looking at expanding their manufacturing base in this promising industry.
The continuous growth of Thailand’s healthcare services from the population, medical tourists and expatriates has driven the growth of the medical device supply chain.
According to Thailand’s Food and Drug Administration, the country is home to around 500 medical device manufacturers and 2,500 medical device importers operating at present.
Ranging from small and medium-sized enterprises to international giants, the companies are catering to the demand for a variety of products, ranging from disposable rubber gloves and medical textiles to highly complex surgical robots for domestic use to distribution to nearby countries of Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) and worldwide.
Official figures from Thailand’s Office of Industrial Economics show that the value of Thailand’s medical device market rose to US$6 billion (176 billion baht) in 2019, a 70% increase over the decade.
Among the ten ASEAN countries, Thailand has the highest total value of imports and exports of medical devices. Seventy percent of the medical devices manufactured in Thailand are exported and the remaining 30% distributed for domestic uses.
The trend highlights Thailand’s vibrant medical device industry and the country’s growing significance as a manufacturing and assembly hub in ASEAN.
Most of the international shipments were disposable products (84%), followed by durable items (15%) and reagents and test kits (1%). Notably, reagents and test kits grew over twofold, disposable devices 5%, and hardware 3% in 2018 from 2017.
The pandemic of the COVID-19 virus significantly increases the use for wearable medical devices such as face masks, face shields, goggles, protective gowns, and gloves as well as respirators and ventilators.
Thailand-based medical device manufacturers will have growth prospects from aging Thai and ASEAN populations which will continue to increase the use of medical devices to treat chronic diseases and support lifestyles of the elderly. Thailand is forecast to have more than 20% of the population aged over 60 years old by 2031.
The government’s continued support for Thailand to become one of the world’s significant medical hubs, and improved confidence in the Thai medical system at global level, will increase the number of medical tourists to Thailand once travelling restrictions in many countries are eased.
Thailand’s reliance on medical devices imports, such as some raw materials for disposable devices and sophisticated medical devices such as electromechanical devices and hospital hardware, represent a great opportunity for multinational manufacturers of medical devices to substitute the imports with local manufacturing.
Thailand Board of Investment (BOI) is aiming to attract foreign investors to set up new bases or form joint ventures with local sub-contractors to manufacture medical devices, through several programs and incentives. It is also assisting foreign assemblers and manufacturers with sourcing high-quality parts and components from local small and medium-sized enterprises.
Embracing the New Normal
Thailand’s competitive biotechnology which is driven by supportive intellectual property protection, technically equipped workforce, and rich biological diversity benefits research and development activities aiming to cure the COVID-19 virus pandemic and several other prevalent diseases.
The pandemic also improves the way people take healthcare precautions for medical visits and receive medical services. Hence the use of more advanced technology such as medical robotics, software and telemedicine is set to rise.
Many hospitals and healthcare facilities in Thailand are applying digital technology on their services such as use of smartphone technology to assist with access to medical services (eHealth and mHealth), Electronic Medical Records and telemedicine to provide medical advice remotely, as well as Remote Health Monitoring Devices based on sensor technology.
Thailand has positioned itself as a manufacturing hub of advanced medical equipment that includes robotics software and hardware as part of a robust supply chain in the Asia and Pacific region. The government has aimed to broaden the research activities in medical robotics. Some success stories include elderly care robots, robot-assisted therapy for people with special needs and arm rehabilitation robots.
The International Data Corporation estimates the global robotics for medical use market to be worth US$188 billion in 2020, with Asia and the Pacific accounting for over two thirds of the total investment worldwide.
Strategic Geographic Location
In addition to Thailand’s strengths in supplying the increasing demand for healthcare, the country’s geographic location gives it an outstanding comparative advantage. Located in the heart of the ASEAN region, the country’s infrastructure allows businesses to connect with emerging markets, especially in the CLMV (Cambodia, Laos, Myanmar, Vietnam) countries which provide a combined market size of more than 172 million people.
To move closer to its ambitious goal of becoming a global medical hub, Thailand’s government has implemented various initiatives aimed at empowering the country’s medical industry and its ecosystem. One of the new opportunities is the EECmd, a development plan within the Eastern Economic Corridor (EEC) specifically dedicated to developing the medical industry by enhancing research and development in the medical sector. Covering 220 acres of land, the EECmd will host some of the world’s leading medical researchers and practitioners in the Thammasat Integrated Medical Innovation Centre which locates the Medical Hub and Senior Complex to be a significant healthcare centre at the global level, particularly for the elderlies.
BOI Measures Driving Investment
To ensure adequate supply of medical equipment to cope with the COVID-19 virus pandemic the BOI has broadened tax incentives to support production of pharmaceutical-grade ethanol with eight-year corporate income tax exemption and non-woven fabric used for manufacturing of medical equipment with a five-year corporate income tax exemption.
On top of the existing three-to-eight-year corporate income tax exemption, eligible businesses will now enjoy an additional incentive of three years of 50% tax reduction. Eligible sectors under the incentive program include the production of medical devices and parts, non-woven fabric such as spunbond or meltblown used as raw materials for masks or medical devices, Active Pharmaceutical Ingredients for target medicines and biotechnological production for vaccine and test kits. The measure covers applications submitted between January and June 2020 with a compulsory domestic distribution or donation of at least 50% of output taking place in 2020-2021.
For manufacturing companies wishing to adjust their production lines to produce medical devices, the BOI has also granted exemption on import duties for necessary machinery with the condition that the import procedure must take place by 2020 and the application is filed by September 2020.
As part of non-tax privileges, the BOI grants permission to promoted non-Thai companies to own land and their non-Thai shareholders to hold unlimited sharing holding.
To promote investment in the medical industry in EECmd, the BOI gives 50% deduction from the normal rate of corporate income tax on the net profits derived from the investment for a period of two years.
The BOI grants so-called smart visas that enable high-skilled professionals, investors, executives, and entrepreneurs in startups in Thailand’s 13 targeted industries and their families to stay in the country to up to four years without having to obtain a work permit. The “Affluent, Medical and Wellness Tourism” and “Medical Hub” are the two industries of the total targeted which covers a wide range of healthcare businesses.