Korea’s Growing FDI in the ASEAN Healthcare Sector
The demand for healthcare is growing rapidly in the Association of Southeast Asian Nations (ASEAN), driven by ageing populations and rising incomes. The unprecedented growth in personal healthcare spending in ASEAN has attracted increasing investment by foreign multinational corporations (MNCs), including Korean ones, in related fields. Facilitating this foreign direct investment (FDI) is the fact the Korean government has strongly supported Korean firms’ overseas investment in the medical sector as one of the growth engines for the country’s future economic development. While Korean firms in healthcare, to date, have invested in advanced countries (e.g., the United States/US, Canada) and large developing countries (e.g., China), the recent surge of related Korean FDI in ASEAN deserves attention. Until 2016, Korea’s FDI in ASEAN’s healthcare sector focused on Vietnam. In 2017, it expanded to Singapore and the Philippines and later other ASEAN countries such as Indonesia, Malaysia, Myanmar, and Thailand. The surge of Korean FDI in healthcare is not surprising. According to the International Healthcare Research Center (IHRC) Medical Tourism Index 2016, Korea ranked 8th among 41 countries due to its high-quality medical services. Korea is also strong in healthcare-related industries such as pharmaceuticals, medical instruments, and cosmetics. Korean healthcare products are viewed by ASEAN consumers as comparable to those of advanced countries in terms of quality, but much more affordable. These competitive factors can facilitate Korea’s overseas expansion in the healthcare sector, which has been dominated by advanced countries. The key motivation for Korean firms in ASEAN is no longer just to exploit the cheap labor and natural resources. Fast-growing incomes in ASEAN may reduce the attractiveness of efficiency-seeking FDI, but enhance its market attractiveness. Therefore, beyond the current major sectors of investment such as manufacturing and finance, Korean MNCs should diversify their investments into other sectors in ASEAN such as healthcare.