Vietnam pharmaceuticals healthcare report q3 2015

19 Table: Healthcare Expenditure Trends, Historical Data And Forecasts Vietnam 2011-2019.. 23 Table: Prescription Drug Market Indicators, Historical Data And Forecasts Vietnam 2011-2019.

Q3 2015 www.bmiresearch.com

VIETNAM

PHARMACEUTICALS & HEALTHCARE REPORT

INCLUDES 10-YEAR FORECASTS TO 2024

Report Q3 2015

INCLUDES 10-YEAR FORECASTS TO 2024

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: June 2015

© 2015 Business Monitor International Ltd

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copyrighted in the name of Business Monitor International Ltd, and as such no part of this

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as to the accuracy or completeness of any information hereto contained.

Report Q3 2015

INCLUDES 10-YEAR FORECASTS TO 2024

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: June 2015

© 2015 Business Monitor International Ltd

All rights reserved

All information contained in this publication is

copyrighted in the name of Business Monitor International Ltd, and as such no part of this

publication may be reproduced, repackaged,redistributed, resold in whole or in any part, or used

in any form or by any means graphic, electronic ormechanical, including photocopying, recording,taping, or by information storage or retrieval, or byany other means, without the express written consent

of the publisher

DISCLAIMER

BMI Industry View 7

SWOT 9

Political 11

Economic 12

Operational Risk 14

Industry Forecast 16

Pharmaceutical Market Forecast 16

Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) 18

Healthcare Market Forecast 19

Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 21

Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 22

Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 22

Prescription Drug Market Forecast 23

Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 24

Patented Drug Market Forecast 25

Table: Patented Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 26

Generic Drug Market Forecast 27

Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 28

OTC Medicine Market Forecast 29

Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 31

Pharmaceutical Trade Forecast 32

Table: Pharmaceutical Trade Data And Forecasts (Vietnam 2013-2019) 33

Table: Pharmaceutical Trade Data And Forecasts local currency (Vietnam 2013-2019) 34

Key Risks To BMI's Forecast Scenario 34

Macroeconomic Forecasts 35

Economic Analysis 35

Table: Economic Activity (Vietnam 2010-2019) 40

Industry Risk Reward Indices 41

Asia Pacific Risk/Reward Index 41

Vietnam Risk Reward Index 47

Rewards 47

Risks 47

Market Overview 49

Industry Trends And Developments 51

Epidemiology 51

Healthcare Sector 53

Hospital Sector 56

Table: Healthcare Resources (Vietnam 2009-2014) 56

Table: Healthcare Personnel (Vietnam 2009-2014) 56

Table: Healthcare Activity (Vietnam 2009-2014) 57

Private Healthcare Sector 59

Healthcare Insurance 61

Healthcare And Pharmaceutical Reform 62

Research And Development 63

Biotechnology Sector 64

Clinical Trials 66

Regulatory Development 69

Pharmaceutical Advertising 70

Intellectual Property Issues 71

Corruption 74

Pricing Regime 75

Reimbursement Regime 80

Pricing And Reimbursement Developments 81

Competitive Landscape 83

Research-Based Industry 83

Domestic Industry 84

Foreign Industry 85

Traditional Medicines 87

Pharmaceutical Distribution 88

Pharmaceutical Retail Sector 89

Table: Key Aspects Of Good Pharmacy Practice In Developing Countries 90

Company Profile 91

DHG Pharmaceutical 91

GlaxoSmithKline 93

Merck & Co 95

Novartis 97

Pfizer 99

Sanofi 101

Traphaco Pharmaceutical 104

Vietnam OPV Pharmaceutical Co 106

Vietnam Pharmaceutical Corporation (Vinapharm) 108

Vietnam Pharmaceutical Joint Stock Company (Ampharco) 111

Vidipha Central Pharmaceutical Joint Stock Company 113

Demographic Forecast 115

Table: Population Headline Indicators (Vietnam 1990-2025) 116

Table: Key Population Ratios (Vietnam 1990-2025) 116

Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 117

Table: Population By Age Group (Vietnam 1990-2025) 117

Table: Population By Age Group % (Vietnam 1990-2025) 118

Glossary 120

Methodology 122

Pharmaceutical Expenditure Forecast Model 122

Healthcare Expenditure Forecast Model 122

Notes On Methodology 123

Risk/Reward Index Methodology 124

Index Overview 125

Table: Pharmaceutical Risk/Reward Index Indicators 125

Indicator Weightings 126

BMI Industry View

BMI View: Counterfeit and substandard medicines will remain highly pervasive in Vietnam's

pharmaceutical market While this reflects the limited capacity of regulators to address the problem, its persistence also illustrates the presence of a sizeable market for manufacturers of counterfeit and low quality medicines We highlight that pharmaceutical products most affected by this practice are small molecule medicines.

Headline Expenditure Projections

■ Pharmaceuticals: VND80,731bn (USD3.81bn) in 2014 to VND92,719bn (USD4.32bn) in 2015; +14.9%

in local currency terms and +13.4% in US dollar terms

■ Healthcare: VND234,889bn (USD11.08bn) in 2014 to VND258,648bn (USD12.05bn) in 2015; +10.1%

in local currency terms and +8.7% in US dollar terms

Risk Reward Index

Vietnam's Pharmaceutical Risk Reward Index score for Q315 is 47.9 out of the maximum 100 The countryscored above average for some indicators and sub-indicators, including overall market expenditure, sectorvalue growth and pensionable population Consequently, with this moderate score, Vietnam is ranked 11thout of the 19 key Asia Pacific markets, level with Thailand and Indonesia

Key Trends And Developments

■ Vietnam has met international vaccine-management standards and is eligible for exporting its

domestically produced vaccines, according to World Health Organization (WHO) representativeLahouari Belghabi The country's National Regulatory Authorities has scored more than 90% in itscritical control functions during an assessment carried out by 14 WHO specialists The functions includesurveillance of vaccine performance in the field, regular inspections for good manufacturing practice andevaluation of clinical performance The country is among 39 countries that meet WHO's strict vaccinestandards, and is expected to become one of the world's leading vaccine producers in 20 or 30 years,Belghabi noted (Vietnamnet)

■ The Drug Administration of Vietnam has imposed fines and a two-year drug import ban on two foreignfirms after they were found to be selling unqualified medicines and pharmaceutical products from unclearorigins, reports Thanhnien News The DAV ordered Hong Kong-based Austin Pharma Specialties andChina-based CSPC Innovation Pharmaceutical to submit, from the profits made from these illegalproducts, USD30,625 and USD29,750 respectively On top of this, the agency fined the companiesVND160mn (USD7,300) each The alleged materials were used to manufacture omeprazole andpantoprazole, both 'proton pump inhibitors', commonly used to treat acid reflux and ulcers of stomach

■ Vietnam Social Insurance (VSI) is set to implement numerous measures in order to simplify healthinsurance procedures to encourage more people to buy insurance The development comes after thenumber of people buying health insurance in Q115 decline by 1.4mn, compared with Q414 The

measures are aimed towards achieving 75% health insurance coverage in 2015 Under the plan, the VSIwill work with the health ministry to spread awareness of the benefits of health insurance Thesemeasures will be taken in provinces and cities, where currently only 60% of the population is coveredunder health insurance Furthermore, health insurance will be allowed to be collected two times in a year,instead of just once as in previous years (Viet Nam News).

BMI Economic View

While the Vietnamese banking sector remains burdened by bad debts and the still-strong presence of stateenterprises, sustained rapid economic growth momentum and ongoing banking reform efforts by thegovernment should gradually strengthen the local banks The retail banking segment will be a key growthengine over the coming years owing to the relatively under-banked nature of the country

BMI Political View

Despite increasing political and international pressures, China will continue to hold a firm stance on itsnine-dash line claims to the South China Sea Therefore, there remains no end in sight to the ongoingmaritime dispute between Vietnam and China That said, we believe Vietnam will not want to strain tieswith China given the latter's increasing economic importance

Pharmaceutical SWOT Analysis

Strengths ■ Significant growth potential, given a large and growing population

■ The government's commitment to developing the health sector

■ Sizeable local generic drugs sector, which is being encouraged by the government

■ Strong traditional medicines segment with potential to improve the non-prescriptiondrugs market in the longer term, as long as sufficient investment in extractiontechnologies can be found

Weaknesses ■ One of the least developed pharmaceutical markets in Asia, with low per capita

spending on drugs

■ Counterfeit drugs account for a significant amount of market consumption

■ No bioequivalence requirement in place for locally made generic medicines

■ Little distinction made between prescription and over-the-counter drugs, with mostmedicines available without a prescription

■ Complex drug pricing policy biased towards local drug producers

■ Import-reliant market, especially in terms of high-tech products and activepharmaceutical ingredients, which makes it vulnerable to currency movements

■ Underdeveloped primary care services and a shortage of trained pharmacists arecontinuing to hamper access to medicines and product market penetration

■ Population concentrated in rural, rather than urban, areas, preventing access tomodern drugs and encouraging dependence upon traditional medicines

Opportunities ■ The Association of Southeast Asian Nations harmonisation initiative, including the

adoption of Western regulatory standards such as International Conference onHarmonisation and World Health Organization guidelines

Pharmaceutical SWOT Analysis - Continued

■ Introduction of five-year exclusivity for clinical dossier data encouraging based multinationals

research-■ If investment can be found for technological improvements, then there is greatpotential in the traditional Chinese medicine market, in addition to fledgingbiotechnology

■ Full World Trade Organization membership improving the trading climate andpotentially, in the longer term, redressing pharmaceutical trade issues

■ Requirement for domestic companies to comply with international goodmanufacturing practices should boost exports

Threats ■ Government resistance to aligning patent law fully with international standards

deterring multinational sector expansion

■ Need to resolve infrastructural and power supply issues, as well as higher educationprovision, before higher levels of foreign direct investment can be expected

■ The government is increasingly interfering in the industry, protecting indigenous firmsthrough the use of legal trade barriers, which will affect competitiveness

■ Pharmaceutical price inflation threatens to put medicines out of reach of the poor andtherefore limit market volume growth

■ Legalisation of parallel imports negatively impacting performance of patented drugs

SWOT Analysis

Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the coming years The one-partysystem is generally conducive to short-term political stability

■ Relations with the US have witnessed a marked improvement, and Washington seesHanoi as a potential geopolitical ally in South East Asia

Weaknesses ■ Corruption among government officials poses a major threat to the legitimacy of the

ruling Communist Party

■ There is increasing (albeit still limited) public dissatisfaction with the leadership's tightcontrol over political dissent

Opportunities ■ The government recognises the threat corruption poses to its legitimacy, and has

acted to clamp down on graft among party officials

■ Vietnam has allowed legislators to become more vocal in criticising governmentpolicies This is opening up opportunities for more checks and balances within theone-party system

Threats ■ Although strong domestic control will ensure little change to Vietnam's political scene

in the next few years, over the longer term, the one-party-state will probably beunsustainable

■ Relations with China have deteriorated over recent years due to Beijing's moreassertive stance over disputed islands in the South China Sea

SWOT Analysis

Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with

GDP growth averaging 6.5% annually between 2000 and 2014

■ The economic boom has lifted many Vietnamese out of poverty, with the officialpoverty rate in the country falling from 58% in 1993 to 17.2% in 2012

■ Vietnam has been strengthening its trade and aid ties in a bid to increase exports anddiversify its export sector

Weaknesses ■ Vietnam still suffers from fiscal deficits, leaving the economy vulnerable to global

economic uncertainties The fiscal deficit is dominated by substantial spending onsocial subsidies that could be difficult to withdraw

■ The heavily-managed and weak currency reduces incentives to improve quality ofexports, and also keeps import costs high

Opportunities ■ WTO membership and the ASEAN economic integration in 2015 should give Vietnam

greater access to both foreign markets and capital, while making Vietnameseenterprises stronger through increased foreign competition

■ The government has continued to move forward with market reforms, includingprivatisation of state-owned enterprises, addressing the high level of bad loans in thebanking sector as well as liberalising the banking sector

■ Urbanisation will continue to be a long-term growth driver The UN forecasts theurban population rising from 32% of the population in 2013 to more than 50% by theearly 2040s

Threats ■ Although inflation has subsided in 2014, complacency by the State Bank of Vietnam

on this front could result in a decline in investment

■ The potential for an escalation of political tensions with China over sovereign claims

to parts of the South China Sea could have a negative impact on the economy

SWOT Analysis - Continued

■ Market reforms could progress at a much slower pace as the government remainscautious about ceding ownership to foreign investors

Operational Risk

SWOT Analysis

Strengths ■ Vietnam has a high number of university graduates with skilled degrees and a high

literacy rate for its income level

• In addition to a number of regional and international flight options, Vietnam has anextensive inland waterway system

• Growing levels of foreign investment encourage further trade and spin-off industries

• Vietnam's rate of violent crime is generally low, and foreigners are unlikely to betargeted

Weaknesses ■ High labour costs increase overall operating costs, and difficulty in hiring foreigners

creates shortages of skilled labour

• Underdeveloped rail capacity overburdens the road network

• An underdeveloped banking sector decreases the options for keeping money in thestate

• Vietnam's military forces are only a quarter the size of China's, meaning that Beijingwould probably prevail in any naval battle over maritime disputes in the South ChinaSea

Opportunities ■ Explosive growth in demand for tertiary education will increase the number of highly

skilled graduates in the medium term

• Vietnam is easily accessible from the main shipping routes, and growth in the number

of port facilities will provide adequate capacity

• Increased foreign participation in the banking sector will increase the availability offunds for loans

Threats ■ Dysfunctional labour-management relations increase the risk of disruption and strike

action

SWOT Analysis - Continued

• Vietnam's reliance on imported oil poses risks in the form of energy and fuelshortages

• Corruption and inefficiency in the legal system

• Anti-Chinese violence, as seen in May 2014, could be a harbinger of wider politicaland social unrest

Industry Forecast

Pharmaceutical Market Forecast

Vietnam's pharmaceutical market was valued at

VND80,731bn (USD3.81bn) in 2014, a 16.5%

year-on-year increase in local currency terms Over the

forecast period to 2019, BMI expects

pharmaceutical consumption to reach

VND151,609bn (USD7.27bn) equating to a

compound annual growth rate (CAGR) of 13.4% in

local currency and 13.8% in US dollar terms Over

the extended forecast period to 2024, the CAGR will

be slightly lower, but will remain in double-digit

figures

Inflation will be a major factor in these high nominal

market growth rates However, we highlight that

there is considerable scope for increased

pharmaceutical consumption in a country where per

capita drug expenditure is just USD41.1 This,

combined with an expanding population, higher levels of health awareness and increased access to

pharmaceuticals, creates a strong base for market growth assuming the required resources are put intohealthcare sector development However, pricing remains a concern, due to a lack of controls and regulatorybias against foreign products

Additionally, some have blamed unscrupulous practices by pharmaceutical companies and prescribers forpharmaceutical expenditure being higher than necessary However, it is not just companies that bribeVietnamese healthcare professionals Patients pay doctors and nurses to avoid waiting lists and receiveabove-average care Those on low incomes that cannot afford 'gifts' for staff members have to use

overcrowded facilities and rely on relatives to complement the provision of care

In fact, according to a survey by the Vietnam Union of Science and Technology Associations published onthe VietNamNet Bridge website in September 2009, gifts - which we interpret mostly as cash, but can also

be physical goods - accounted for 9% of the cost of a health check-up The research was performed throughinterviews with 140 people in rural and urban areas who had visited public and private hospitals over the

Pharmaceutical Market Forecast

5 10 15

0 0.5 1 1.5 2 2.5

f = BMI forecast Source: National Sources/BMI

previous six months Interestingly, 'medications/examinations/tests' only accounted for 53% of expenditure.

It is not clear how the remaining funds were spent

Vietnam's regulators faced their greatest challenge with the country's entrance to the World Trade

Organization at the start of 2007 Foreign enterprises have been given the right to open branches in Vietnamand to import medicines directly, although they will still be barred from distributing their products As part

of its membership application, Vietnam pledged to set import duties at less than 5% for pharmaceuticalproducts and drug tariffs are expected to average just 2.5% within five years of accession

The liberalised environment could cause problems for Vietnam's small drug production sector

Nevertheless, while the government originally called on firms to adopt good manufacturing practice (GMP)standards by the start of 2010, the deadline was extended to the end of 2010 However, it was revealed thatcompanies that did not have accreditation could come up with provisory regulations Firms not planning toestablish GMP standards must either shift to other sectors or produce traditional medicines, the latter being

an area with problems of its own, as many traditional drugs are incorrectly labelled and dispensed byunqualified practitioners According to Savipharm, the country has 108 factories compliant to GMP-WHO,few plants compliant to EU and Japanese GMP as of November 2011 Meanwhile in January 2012, UnitedInternational Pharma Company became the first company with a facility that is compliant with the

Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S) GMPstandards

Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Pharmaceutical sales,

USDbn 2.4 2.8 3.3 3.8 4.3 4.9 5.6 6.4 7.3 Pharmaceutical sales,

USDbn, % y-o-y 17.9 17.0 16.2 15.6 13.4 14.2 14.5 13.8 13.2 Pharmaceutical sales,

VNDbn 50081.5 59213.7 69297.5 80730.9 92718.7 105798.3 119976.7 135251.2 151609.5 Pharmaceutical sales,

VNDbn, % y-o-y 27.4 18.2 17.0 16.5 14.9 14.1 13.4 12.7 12.1 Pharmaceutical sales

constant exchange

rate, USDbn 2.4 2.8 3.3 3.8 4.4 5.0 5.7 6.4 7.2 Pharmaceutical sales,

USD per capita 27.0 31.2 35.9 41.1 46.2 52.4 59.5 67.1 75.4 Pharmaceutical sales,

% of GDP 1.8 1.8 1.9 2.1 2.2 2.2 2.3 2.3 2.3 Pharmaceutical sales,

% of health

expenditure 29.0 30.5 32.5 34.4 35.8 37.1 38.2 39.1 39.8

f = BMI forecast Source: National Sources/BMI

Healthcare Market Forecast

In 2014, healthcare expenditure reached VND234,889bn (USD11.08 bn) which corresponded to year growth of 10.1% in local currency terms and 9.2% in US dollar terms We now forecast that the sectorwill reach a value of VND619,411bn (USD31.2bn) by 2024 Through to 2019 and 2024, the sector isprojected to grow at local compound annual growth rates of 10.1% and 10.2% respectively (10.5% and10.9% in US dollar terms)

year-on-Over the long-term, Vietnam's healthcare sector is forecast to grow in accordance with its strong economicgrowth However, we highlight that rising healthcare expenditure does not necessarily equate to qualityhealthcare provision

Moreover, despite a double-digit growth in healthcare expenditure, the country has yet to address the risingburden of communicable diseases such as tuberculosis, AIDS and hand, foot and mouth disease Much ofthis increased expenditure will be on health infrastructure, which remains basic in many rural areas Overthe longer term, this is likely to result in greater access to basic medicines

The country's low per capita health and pharmaceutical expenditure highlights the population's poor access

to healthcare services and low affordability levels for medicines - particularly high-value drugs Thisrepresents a short-term challenge for pharmaceutical firms, but over the long term, we believe economicdevelopment will aid growth in the pharmaceutical and healthcare sector Our Country Risk team remainsbullish about the Vietnamese economy as it forecasts strong economic growth through to 2024

In the meantime, the government has outlined plans for the investment of up to USD1.5bn in the

pharmaceutical manufacturing sector over the next 10 years to reduce reliance on imports The money is to

be used for a variety of programmes, including upgrading technology to meet good manufacturing practicestandards, the development and expansion of the pharmaceutical supply network to poor and remote areas,the establishment of joint ventures with foreign players and achieving a greater percentage of domesticpharmaceutical demand

The government's intention to invest in the development of its biotechnology sector is likely to act as acatalyst for wider industry reform, in particular concerning patent protection However, local drug

production is still weak and incapable of meeting domestic demand, although local regulation reform on aconsiderable scale is expected to attract foreign investment In some sectors, such as vaccines, considerableprogress has been made to increase Vietnam's self-sufficiency, with the country now producing sufficientmeasles vaccines domestically to meet national demand

To help make further progress, the government has outlined plans to invest USD241mn in eight projectswithin the local drug manufacturing industry This will include the construction of four pharmaceuticalplants in the next four years The authorities aim to have 80% of domestic demand met by local producers

by 2020, up from around 50% currently

In a workshop help by Vietnam Ministry of Health in August 2013 in collaboration between MedicalExcellence Japan and Japan's Ministry of Economy, Trade and Industry, the two countries reiterated Japan'ssupport towards Vietnamese healthcare through investment in three hospitals including: Bach Mai Hospital,Hue Central Hospital and Cho Ray Hospital

In an interview with local media, Vietnam News, Pham Le Tuan, deputy minister of health, stated thatpublic hospital fees will increase progressively until 2018, in line with Decree 85/2012/ND-CP In 2012, thegovernment increased the prices of three out of seven cost elements incurred by patients, which include thecost of medicines, chemicals, consumable materials, electricity, water, equipment maintenance and others.Under the plan developed by the Ministry of Health on increasing hospital fees, this will cover the

remaining four out of seven cost elements (beds, medical equipment, salaries, and other hospital operationcosts) These four elements were previously covered by the government

Timeline Of Hospital Fees Increments

■ 2014: Hospital fees charged to patients will include the bed cost for inpatient services and part of the cost

of their surgery

■ 2015: Fees will include medical equipment used for patient treatment, hospitals' management andoperating costs and 20-30% of hospital staff's basic salary at provincial hospitals in mountainous regions,central highlands and district hospitals in Ha Noi and Ho Chi Minh City

■ 2016-17: Part of the hospital fee will be used to pay basic salary cost for staff at provincial hospitals,central government hospitals and district hospitals in two major cities of Ha Noi and Ho Chi Minh City

■ Post-2018: full cost recovery policy for medical services will be implemented across the board

The deputy health minister believes that with these increments in fees service quality will improve

considerably, as hospitals will be dependent on patients He added that 'more patients mean more money forhospitals and their staff.' We highlight that this is potentially regressive as patients will have to shoulder theburden of healthcare costs due to low funding from the government In addition, we see a risk of

overcharging by hospitals if the implementation of these increments is not properly regulated Conversely,hospitals may also not generate sufficient revenues despite the implementation of the regulation In August

2013, Vietnam News reported that hospitals in Ha Noi ran into problems in applying new hospital fees due

to unclear regulations and staffing shortages

Nevertheless, as a result of these progressive increments, we have upgraded Vietnam's private healthcareexpenditure forecast, as the increased costs will be borne by patients rather than the government Through to

2019, we forecast that private health expenditure will increase at a compound annual growth rate of 10.9%(11.3% in US dollar terms) This growth rate is higher than government health expenditure (9.0%, 9.5% in

US dollar terms) We highlight that the government may spend savings generated elsewhere to boost healthservices, such as improving health infrastructure

Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Health

spending,

USDbn 8.346 9.286 10.146 11.080 12.048 13.280 14.766 16.421 18.265Health

spending,

USDbn, % y-o-y 16.27 11.27 9.25 9.21 8.73 10.23 11.19 11.21 11.23Health

spending,

VNDbn 172398.0 193834.4 213353.2 234889.2 258648.2 284857.1 313766.7 345654.3 380826.9 Health

spending,

VNDbn, % y-o-y 25.60 12.43 10.07 10.09 10.12 10.13 10.15 10.16 10.18Health

spending, % of

GDP 6.20 5.97 5.95 5.96 6.05 6.02 5.94 5.87 5.80

f = BMI forecast Source: World Health Organization (WHO)/ BMI

Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Govt health spend,

USDbn 3.775 3.953 4.250 4.573 4.907 5.345 5.881 6.482 7.157Govt health spend,

USDbn, % y-o-y 12.97 4.71 7.52 7.62 7.29 8.93 10.03 10.22 10.42Govt health spend,

VNDbn 77975.7 82501.7 89365.4 96948.7 105340.2 114640.3 124963.9 136442.3 149225.6 Govt health spend,

VNDbn, % y-o-y 22.04 5.80 8.32 8.49 8.66 8.83 9.01 9.19 9.37Govt health spend,

% total health spend 45.23 42.56 41.89 41.27 40.73 40.24 39.83 39.47 39.18

f = BMI forecast Source: World Health Organization (WHO)/ BMI

Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Private health

spend, USDbn 4.571 5.334 5.896 6.507 7.141 7.936 8.885 9.939 11.108Private health

spend, USDbn,

% y-o-y 19.14 16.69 10.54 10.36 9.74 11.13 11.96 11.86 11.76Private health

spend, VNDbn 94422.3 111332.7 123987.8 137940.5 153308.0 170216.8 188802.8 209212.0 231601.3 Private health

spend, VNDbn,

% y-o-y 28.70 17.91 11.37 11.25 11.14 11.03 10.92 10.81 10.70Private health

Prescription Drug Market Forecast

The market figures for the prescription and

non-prescription sectors are blurred by a lack of any

proper distinction between the two In fact,

according to some drugstores, only 20-30% of

patients buy drugs with a prescription Only

medicines that cause dependency, such as

benzodiazepines, are routinely refused sale without a

prescription Antibiotics are the most popular drug

sold without a prescription This has resulted in

worrying levels of antibiotic resistance For

example, nearly 70% of bacteria carried by people

living in urban parts of Vietnam are resistant to

penicillin

Nevertheless, the growth of the prescription

medicines market will outpace the growth of

over-the-counters mainly due to the influx of expensive

patented products from abroad and increased demand for sophisticated drugs Additionally, tighter

regulations in the pharmaceuticals sector as a whole are likely to lead to the introduction of stricter

dispensing guidelines with the good pharmacy practice recommendations established in 2011

By 2019, we forecast that prescription medicines will be worth VND113,807bn (USD5.46bn) at consumerprices, posting a compound annual growth rate of 13.8% in local currency terms (thus somewhat above thewider pharmaceutical market) In percentage terms, at this point, prescription drugs will account for 75.1%

of the total market, up from 73.8% in 2014, driven by expanded access to formal healthcare in rural areas

Demographic and environmental trends will be some of the key drivers of the prescription market in

Vietnam Respiratory problems are on the rise, including asthma and chronic obstructive pulmonary

disease, partly due to the high prevalence of smoking and partly due to poor air quality Manufacturers ofdrugs in the respiratory therapeutic category will, therefore, have considerable room for expansion over thecoming years Similarly, increased incidence of cancer, diabetes and hypertension among the Vietnamesepopulation will provide scope for drugmakers to expand

Prescription Drug Market Forecast

2010-2024 (2010-2024)

Prescription drug sales, USDbn (LHS) Prescription drug sales, % of total sales (RHS)

2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f0

5 10 15

0 25 50 75 100

f = BMI forecast Source: National Sources/BMI

One therapeutic area that has strong potential is oncology At an international scientific conference in April

2013, Mai Trong Khoa, deputy director of Hanoi-based Bach Mai Hospital, stated that Vietnam reportsabout 110,000 new cases of cancer annually, with over 73% of patients dying from the disease - one of thehighest rates in the world He added that the average death rate in developing countries is 67.8% while thatfor developed countries is 49.4% In January 2014 a representative from the Vietnam Social InsuranceAgency stated that cancer drugs account for a large percentage of insurance expenses Moreover,

prescribing patterns seem to be influenced by economic considerations, with drug companies payingcommissions to doctors who promote certain types of product The Ho Chi Minh City authorities conducted

an investigation into the practice, with findings revealing that a number of doctors were in receipt of morethan VND500mn (USD26,300) each month The investigators looked into the prescribing of Merck & Co's

hepatitis drugs - namely PegIntron (interferon Alfa-2b) in 50mcg and 80mcg dosages, with commissions

reportedly being in the region of 10% to 30% of the drugs' cost Joint monthly revenues for the two drugsare reportedly in excess of VND6bn (USD315,000) In September 2012, Nguyen Thi Kim Tien echoed asimilar view stating that prescribers receive 'commission' from foreign pharmaceutical firms therefore manyprescriptions contain expensive medicines

Local industry representatives claim that large firms can therefore gain an upper hand as they can afford topay higher commissions, although doctors' relationships with companies also have a role to play in theirdecisions Moreover, despite the existence of hospital medicine councils - which are in charge of makingprescribing suggestions and supervising prescribing patterns - many doctors can still suggest different types

of medicines to their patients Patients have also stated that commissions are widespread

Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Prescription drug sales,

USDbn 1.772 2.080 2.424 2.811 3.199 3.665 4.210 4.807 5.458Prescription drug sales,

USDbn, % y-o-y 18.38 17.39 16.55 15.95 13.78 14.59 14.85 14.19 13.55Prescription drug sales,

VNDbn 36603.2 43419.9 50982.2 59591.2 68668.6 78618.4 89454.7 101184.3 113806.8 Prescription drug sales,

VNDbn, % y-o-y 27.88 18.62 17.42 16.89 15.23 14.49 13.78 13.11 12.47Prescription drug sales, %

of total sales 73.1 73.3 73.6 73.8 74.1 74.3 74.6 74.8 75.1

f = BMI forecast Source: National Sources/BMI

Patented Drug Market Forecast

Value development of the patented drugs segment

and consequently the overall prescription segment

-will be hampered by the government's plan to

contain pharmaceutical costs through restrictions on

advertising and the request that hospitals and

medical professionals give preference to

domestically produced drugs, as well as the fact that

most of the insured now incur some sort of

co-payment Moreover, a number of high-value drugs

are due to come off patent in the coming years

Nevertheless, the price increase evident since the

start of 2011 may take the value of the prescription

and patented markets beyond current estimates By

2024, we expect the patented drug sector to reach

VND44,027bn (USD2.22bn) but represent a lower

percentage of the total market (17.6% versus 21.9%

in 2014) Over the 2014-2024 period, patented drugs are expected to post a compound annual growth rate of9.5% in local currency (10.3% in US dollar terms) - below the rate of the overall market development

Counterfeit drugs will continue to have a detrimental impact on patented drug sales over the forecast period,despite the government's efforts to the contrary The global economic slowdown has fuelled demand forcheaper drugs and counterfeit medicines are prospering as a result Supported by the World Health

Organization, police, customs and regulatory officials in the country have begun to coordinate their

activities, although little can be done in terms of enforcement without greater commitment to intellectualproperty rights as well as more stringent penalties for violators

Corruption also has a role to play in drug prices, with commissions paid to pharmacists and doctors by salesrepresentatives and distributors to persuade them to prescribe their product to push up the retail price ofmedicines Such practices can only damage the industry as a whole, putting many patented products beyondthe budgets of the majority of the Vietnamese population

Speciality medicines, such as central nervous system and cardiovascular drugs, are expected to be the keygrowth area, while an increase in cancer, diabetes and hypertension will also generate product demand

Patented Drug Market Forecast

2010-2024 (2010-2024)

Patented drug sales, USDbn (LHS) Patented drug sales, % of total sales (RHS)

2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f0

1 2 3

0 5 10 15 20 25

f = BMI forecast Source: National Sources/BMI

However, the basic nature of consumption is illustrated by the continued strong showing of antibiotics andalimentary/metabolism products The need to contain the HIV/AIDS epidemic and related health problemswill boost the antiretroviral sector, while the prevention of swine flu and similar diseases continues to drivethe growth of anti-flu drugs.

Table: Patented Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Patented drug sales, USDbn 0.560 0.644 0.736 0.836 0.930 1.043 1.170 1.304 1.445 Patented drug sales, USDbn,

% y-o-y 16.19 15.04 14.30 13.55 11.35 12.06 12.22 11.47 10.75Patented drug sales, VNDbn 11560.4 13437.9 15473.9 17713.2 19975.3 22363.9 24863.5 27455.7 30119.2 Patented drug sales, VNDbn,

% y-o-y 25.52 16.24 15.15 14.47 12.77 11.96 11.18 10.43 9.70Patented drug sales, % of

prescription sales 31.6 30.9 30.4 29.7 29.1 28.4 27.8 27.1 26.5Patented drug sales, % of

total sales 23.1 22.7 22.3 21.9 21.5 21.1 20.7 20.3 19.9

f = BMI forecast Source: National Sources/BMI

Generic Drug Market Forecast

Although the overall generic drug market is sizeable,

standing at around VND41,878bn (USD1.98bn) in

2014, approximately 52% of the overall market's

value, most products were actually low-quality

copies of unproven bioequivalence The Ministry of

Health is stepping up its efforts to address the

problem by enlisting the help of medical

professionals in the country, in a bid to improve

generic usage and the utilisation of domestically

made products in hospitals and clinics

Additionally, entrance into the World Trade

Organization should in theory, result in dubious

copy products gradually being purged from the

market, as the country brings its intellectual property

(IP) regime in line with Trade-Related Aspects of

Intellectual Property Rights (TRIPS) However,

given the notoriously poor standard of IP enforcement in the country, these illicit products will continue tohave a sizeable influence in the near future

Overall, generic products are likely to continue dominating the market in volume terms, and we forecast thevalue of the sector to reach VND147,207bn (USD7.42bn) in 2024, accounting for 58.8% of the total market(up from the calculated 51.9% in 2014) Vietnam offers strong prospects for generic market growth due tolow consumer purchasing power However, a number of obstacles still remain, such as a widespread beliefthat generic drugs are inferior to patented products and that in many cases, they are not that much cheaperthan patented counterparts They are also not as widely available as they could be

In an interview with local media VietNamNet Bridge, Vietnam's former deputy minister of health, Dr LeVan Truyen, stated in January 2014 that the population is still reluctant to use domestically producedpharmaceuticals Some of the key reasons mentioned include:

■ Several domestic pharmaceutical firms failing to 'provide enough evidence about the effects of theirdrugs compared with imported drugs', consequently 'deepening people's doubt on the effectiveness andreliability of local drugs'

Generic Drug Market Forecast

2010-2024 (2010-2024)

Generic drug sales, USDbn (LHS) Generic drug sales, % of total sales (RHS)

2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f0

2.5 5 7.5 10

0 15 30 45 60 75

f = BMI forecast Source: National Sources/BMI

■ Some drugs used in specialised and central hospitals are still protected by patents, preventing local firmsfrom producing them The situation is made worse by free trade agreements that may extend patent terms.

Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Generic drug sales, USDbn 1.212 1.436 1.689 1.976 2.268 2.623 3.040 3.503 4.014 Generic drug sales, USDbn,

% y-o-y 19.42 18.48 17.55 16.99 14.81 15.63 15.90 15.23 14.60Generic drug sales, VNDbn 25042.8 29982.0 35508.3 41878.0 48693.4 56254.5 64591.2 73728.6 83687.5 Generic drug sales, VNDbn,

% y-o-y 29.01 19.72 18.43 17.94 16.27 15.53 14.82 14.15 13.51Generic drug sales, % of

prescription sales 68.4 69.1 69.6 70.3 70.9 71.6 72.2 72.9 73.5Generic drug sales, % of

total sales 50.0 50.6 51.2 51.9 52.5 53.2 53.8 54.5 55.2

f = BMI forecast Source: National Sources/BMI

OTC Medicine Market Forecast

Despite the blurred distinction between prescription

and non-prescription products, over-the-counter

(OTC) healthcare has been achieving relatively

robust value growth in the last few years The value

of OTC sales is likely to reach VND59,232bn

(USD2.98bn) in 2024, up from VND21,140bn

(USD997mn) in 2014 At the same time, the sector's

share of the total market as a percentage is expected

to fall to 23.7%, from 26.2%, due to the rising value

of the prescription sector and more expensive

imports and stricter dispensing controls

Key drivers of OTC market growth will be mostly

limited to volume, as consumers become better

educated and more confident about self-medication

OTC drugs will also benefit as consumers' spending

power increases, and - in the case of the low income

population - they may well turn to OTCs and traditional medicines to seek cheaper alternatives to patenteddrugs

Another factor affecting the growth of the self-prescription market is that manufacturers import the bulk ofraw materials and active pharmaceutical ingredients, which disadvantages segments such as vitamins andanalgesics, especially given the local currency depreciation compared with key sources markets like China,Japan and South Korea

Nevertheless, despite these setbacks, vitamins and dietary supplements are one of the fastest growingsegments of OTC healthcare in Vietnam, with analgesics remaining the best sellers Single vitamin

supplements have become common household products in the country, while high generic penetration inthis area has helped to make the products affordable to the majority of consumers In fact, according to asurvey conducted by market research firm AC Nielsen in partnership with the Association of the EuropeanSelf-Medication Industry consumers in Vietnam (at 45% of the total) are among the most likely to take anOTC drug for a minor ailment as soon as symptoms are present

OTC Medicine Market Forecast

2010-2024 (2010-2024)

OTC medicine sales, USDbn (LHS) OTC medicine sales, % of total sales (RHS)

2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f0

1 2 3 4

0 6 12 18 24 30

f = BMI forecast Source: National Sources/BMI

Market research also established that it is common for people in Vietnam to ask the advice of unlicensedpharmacists or friends when choosing a medicine, rather than seeing a doctor and receiving a prescription.Concern surrounds pharmacists who offer customers prescription-only medicines over the counter, which inthe case of drugs such as antibiotics, can lead to resistance if they are overused Like many other Asiancountries, branding and advertising is becoming increasingly prevalent in Vietnam's OTC sector.

Meanwhile, BMI believes that there is great potential for Vietnam's traditional medicines (TM) sector as

long as the government can attract investment in extraction technologies, reduce Vietnam's reliance onimporting raw materials and in turn bring down the retail prices of such products With more than 4,000medicinal herbs and plants in the country, there could be myriad applications in the consumer health sector,which would boost the overall OTC market value

However, the government will also have to improve regulation of the sector It is estimated that up to 70%

of traditional medicines are fakes imported into the country Presently, the Ministry of Health (MoH) onlyallows around 15 herbal brands to be sold in Vietnam, although the market is saturated with unlicensed

offerings BMI believes that in the coming years, the MoH will increase its reliance on TM and the

cultivation of Thuong Hoang, a mushroom that has been used traditionally to treat cancer, is a positive step

in the right direction

In February 2011, Deputy Prime Minister Nguyen Thien Nhan stated that the government wants to continue

to nurture the traditional medicine sector and drafted a plan that aimed to modernise traditional medicine by

2020 under decree 2166/QD-TTg

Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019)

f = BMI forecast Source: National Sources/BMI

Pharmaceutical Trade Forecast

Vietnam is highly reliant on pharmaceutical

imports Data from UN Commodities Trade

Database (UNComtrade) showed that the country

imported USD1.8bn worth of pharmaceuticals in

2012 while exporting USD77.1mn worth of products

in the same period Imported pharmaceuticals were

mainly from France (USD235.9mn) India

(USD230.5mn) South Korea (USD164.4mn)

Germany (USD143.4mn) and Italy (USD93.9mn)

Meanwhile, the country exported to Germany

(USD9.7mn) Nigeria (USD5.6mn) Cambodia

(USD5.5mn) Japan (USD4.2mn) and India

(USD4.2mn) Given that the pharmaceutical sector is

still in its infancy, we expect such reliance on

imports to continue From 2014 to 2019, we forecast

that pharmaceutical exports and imports will see

local compound annual growth rates of 19.1% and

12.4% respectively in US dollar terms

Data from UNComtrade do not specify the type of finished pharmaceuticals traded (ie whether they arepatented or generic drugs) However, given that Vietnam is a developing country with low per-capita

pharmaceutical and healthcare expenditure (USD41.15 and USD120 respectively in 2014), BMI believes that the majority of the drugs consumed in Vietnam are generics imported from overseas BMI highlights

this reliance on imported products as a commercial opportunity for foreign drugmakers

However, while the pharmaceutical sub-sector may be growing at a double-digit rate, we caution that not allforeign drugmakers will be able to capitalise on this growth opportunity Doubts regarding drug quality andcounterfeit drug problems are two reasons why people prefer imported products in developing markets such

as Vietnam Consequently, we believe that careful branding and marketing is a vital method by which firmscan capture market share in Vietnam and other developing countries Companies that are able to engagephysicians (through their sales forces) initiate differential pricing policies and launch various corporatesocial responsibility programmes are likely to be seen in a more positive light than those that fail to do so - and are therefore more likely to succeed in Vietnam

Pharmaceutical Trade Forecast

2010-2019 (2010-2019)

Pharmaceutical exports, USDmn Pharmaceutical imports, USDmn

2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f0

2,000 4,000 6,000

f = BMI forecast Source: United Nations Comtrade Database DESA/UNSD, BMI

Free trade agreements are seen as an obstacle to the use of domestic drugs due to patent

conditions BMI notes that Vietnam is one of the member countries under the Trans-Pacific Partnership.

Interest groups from a number of countries such as Malaysia, Australia and New Zealand have warned ofpotential increases in drug prices, as there could be an extension of intellectual property rights involvingpharmaceuticals Should member countries agree to extend patent terms, all generic drug companies will beaffected

At the same time, the Vietnamese government is keen to increase domestic drug use in the country InDecember 2013, the Drug Administration of Vietnam launched a programme to raise awareness amongdoctors, hospital managers and the community on the use of locally produced drugs The country may opt tosubsidise more locally made drugs under the scheme, which would bring downside risks to foreign

o-y 16.16 15.57 12.40 13.21 13.47 12.80 12.17Pharmaceutical trade balance, USDmn -2,044.65 -2,354.81 -2,635.87 -2,974.17 -3,363.92 -3,782.53 -4,231.66

f = BMI forecast Source: United Nations Comtrade Database DESA/UNSD, BMI

Table: Pharmaceutical Trade Data And Forecasts local currency (Vietnam 2013-2019)

2013 2014 2015f 2016f 2017f 2018f 2019f

Pharmaceutical

exports, VNDmn 1,971,852.57 2,468,994.96 3,047,302.65 3,657,832.56 4,341,947.86 5,105,486.78 5,905,970.39 Pharmaceutical

f = BMI forecast Source: United Nations Comtrade Database DESA/UNSD, BMI

Key Risks To BMI's Forecast Scenario

The existence of rampant corruption will continue to hinder the country's progress in the pharmaceuticaland healthcare sector, bringing downside risks to its business environment In August 2012, it was revealedthat Vietnam's social health insurance funds are running a deficit, in part due to mismanagement of funds aswell as a result of corruption In March 2012, Doan Van Cuong, an ex-employee of the Can Tho socialinsurance department, made fraudulent claims He used the names of pregnant women and asked forpostnatal assistance worth VND119.5mn (USD5,730) even though these women were not his employees

Risks to export forecasts are mostly to the upside, from the point of view of volumes produced A number

of foreign players have - or are in the process of establishing - export ventures in the country The fact thatsuch facilities comply with international norms will continue to stimulate export potential

The current trend for regional harmonisation provides the ideal background for progress in Vietnam'shealthcare and pharmaceutical industries However, whether such reform can be carried out successfully is amatter for much conjecture given the disorganised state of the sector Nevertheless, Vietnam's World TradeOrganization membership since early 2007 is expected to continue to stimulate other similar deals in theregion

Macroeconomic Forecasts

Economic Analysis

BMI View: We hold a positive view of the Vietnamese economy on the back of rising foreign investor

interest, continued efforts by the government to improve the country's business environment, and the potential for greater private sector participation As such, we maintain our forecast for real GDP growth of 6.4% in 2015, up from 6.0% in 2014.

In line with our positive outlook for the Vietnamese economy, real GDP growth came in at 6.0% year (y-o-y) in Q115 While the latest reading represented a slowdown from the 7.0% headline figure in theprevious quarter, the economy nevertheless remains on a very strong growth trajectory The Q115 real GDPgrowth number also surpassed the Bloomberg consensus estimate of 5.7% Looking ahead, we expect theeconomy to continue growing robustly, on the back of greater foreign direct investment (FDI) inflows andongoing efforts by the government to improve the country's business conditions Some of these effortsinclude privatising the state-owned enterprises (SOEs), strengthening the banking sector and ensuring thatinflation remains manageable over the coming years Owing to a solid start to the year, which has

year-on-undoubtedly reinforced our bullish view of the Vietnamese economy, we maintain our forecast for thecountry's real GDP growth to accelerate to 6.4% in 2015 from 6.0% in 2014

Strong Growth Trajectory

Vietnam - Real GDP Growth, %

0 2 4 6 8

e/f = BMI estimate/forecast Sources: BMI, GSO

Broad-Based Growth Across Various Key Sectors

From a production perspective, the strong showing in the first quarter was rather broad-based In theindustry category, which accounted for 30.3% of nominal GDP in Q115, the manufacturing sector grew by

a robust 9.5% y-o-y, while construction growth came in at 4.4% y-o-y We expect the manufacturing sector

to remain a key driver of growth over the coming quarters The still relatively low labour costs in thecountry despite the recent wage hike, the generous tax incentives the government has to offer, as well as theready supply of a young and dynamic workforce will greatly entice foreign manufacturing firms to investand set up their production plants in Vietnam In a sign that the manufacturing sector has the capacity tosustain its current strong growth momentum, the Purchasing Manager's Index (PMI) came in at 50.7 inMarch, marking the 19th consecutive month of industrial output expansion (PMI figure above 50 representsexpansion)

19 Straight Months Of Expansion

Vietnam - Purchasing Managers' Index (PMI)

Source: Bloomberg, BMI

Relaxation Of Foreign Property Ownership Rule A Catalyst For Greater FDI Inflows

At the same time, we believe there is also strong upside potential for the real estate and construction sectors.The easing of foreign property ownership rules, due to take effect from July 2015, will allow greater foreign

participation in the country's property market, which has struggled over recent years (see 'Easing Of

Foreign Property Ownership Rules A Positive Step Forward', December 2, 2014) Looser monetary policy

by the State Bank of Vietnam (SBV) amid rapidly falling inflation (we are forecasting a total of 50 basispoints (bps) worth of cuts to the refinancing rate, taking it to 6.00% in 2015) would lend support to theproperty and construction sectors Meanwhile, regarding the other major categories, the services sector rose

by 5.8% o-y while the smaller 'agriculture, forestry and fishery' category posted positive gains of 2.1% o-y

Rapid Inflation Declines Provide Room For Further Easing

Vietnam - Headline Inflation, % chg y-o-y

Source: BMI, GSO

Strong Growth, Stable Inflation Work Wonders For Investor Confidence

Continued efforts by the Vietnamese government to foster macroeconomic stability will also help thecountry to attract greater foreign direct investment (FDI) inflows, and hence accelerate gross fixed capitalformation (GFCF) growth over the coming quarters and years We forecast GFCF to grow by 12.0% in realterms in 2015 from an estimated 9.5% in 2014 Indeed, following several economic missteps wherein thegovernment was fully focussed on boosting real GDP growth at the expense of inflation, efforts by theadministration to work towards achieving a balance between the two have since yielded positive results.The economy is currently resting on a growth-inflation sweet spot, with consumer price inflation (CPI)coming in at just 0.9% y-o-y in March (in part owing to the slump in global oil prices) versus the peak of23.0% in August 2011 Price stability and positive economic growth prospects will lend support to theVietnamese dong The confluence of these factors will restore and shore up investor confidence, enhancingVietnam's attractiveness as a place to invest and do business in

Improving Macroeconomic Fundamentals To Lend Support

Vietnam - Exchange Rate, VND/USD

Source: Bloomberg, BMI

Vietnam's Rising Stature As An Attractive Place For Investment

While total registered capital of newly licensed projects contracted 14.3% y-o-y to USD712.3mn in the firsttwo months of 2015 despite the 85.8% y-o-y increase in January, we believe the weak February

performance will likely be transient Informing our still positive outlook for investment growth are thereported plans by several large foreign enterprises to develop big projects in the country in 2015 Notably,

Samsung (one of the leading foreign investors in Vietnam) has plans to invest in energy, shipbuilding and

other infrastructure developments in the country through its various subsidiaries, with total investmentreported to be around USD20.0bn It is also looking to expand its mobile phone production capacity over

the coming quarters In addition, another multinational company, Procter and Gamble, will expand its

footprint in Vietnam through setting up a USD100.0mn factory at the Vietnam-Singapore Industrial Park inthe Binh Duong province that will manufacture razors for its Gillette brand