With the coronavirus expected to remain a persistent threat to the global population for many years to come and with healthcare technology rapidly advancing, Thailand is looking at tapping into the strategic advantages of its competitive industrial and healthcare supply chain and improved R&D resources to propel the country’s medical device technology to the forefront of the global market.
Enhancing the competitiveness of the local medical device industry is a key component of Thailand’s policy to promote a sustainable healthcare system and overall economic development. The policy will support the country’s aim of improving not only the universal healthcare coverage it provides for its own citizens but also its competitiveness as a medical tourist destination by facilitating the development and utilization of new discoveries in life science and innovations in medical devices.
The Ministry of Higher Education, Science, Research and Innovation1 estimated that Thailand’s medical device industry expanded by 8-10% during 2019-2020, as the country established itself as the largest exporter of medical devices in the Association of Southeast Asian Nations (ASEAN) region. Meanwhile the local manufacture of medical devices was also bolstered by a host of factors that included robust support from the public sector under its policy of promoting the development of the country’s healthcare ecosystem to be a leading global medical hub by 2025, rising demand to treat illnesses affecting the aging population and novel diseases, as well as the increasing number of tourists seeking healthcare services in Thailand.
In the period before the pandemic, Thailand was drawing an average of 3 million foreign medical tourists per year. The success of the country’s medical tourism industry is supported by 69 hospitals which had attained accreditation from the Joint Commission International (JCI) in 2019, the largest number of JCI accredited hospitals in ASEAN and the second largest number in Asia, behind only China.
At present, there are approximately 1,500 medical device manufacturers operating in Thailand, benefiting from the country’s comprehensive industrial supply chain which offers cost-effective sourcing of premium-grade raw materials. A study by Krungsri Research Intelligence2 reported that Thailand’s overall industrial supply chain was the 35th most competitive out of 64 countries worldwide, with coke and refined petroleum as well as rubber and plastic in 9th place and food & beverages and healthcare standing equally in 11th place.
In the results of its survey3 released in the second half of 2019, the Japan External Trade Organization (JETRO) indicated that Japanese firms in Thailand planned to source 61% of the parts and materials for their manufacturing activities from within ASEAN, including 55% from Thailand.
The overall competitiveness of Thailand’s manufacturing standards is shown by its leading position at the regional level in many industries, including automation and robotics, automotive, biotechnology and electronics. These successes underscore Thailand’s high level of craftsmanship, which is essential for the quality control needed in medical device manufacturing and medical engineering.
Ramping up the Ecosystem of Innovation
Thailand’s policy on healthcare sector development focuses on two key areas. Ramping up technology development through investment in innovation and quality testing facilities will enable local manufacturers to test their products, while foreign investment is being promoted to enhance the technology capacity of the supply chain.
As one measure to support local innovators and manufacturers in scaling up their R&D to international standards, the Thai government has created a national innovation list which registers innovations by companies operating in Thailand in many industries, including medical devices. With registered products, eligible for procurement by state hospitals, Thailand targets having around 30% of all medical device and pharmaceutical products procured by state hospitals to be locally-produced by 2025. Following the creation of the list in 2015, there are currently 257 medical devices active on the national innovation list, out of which 215 are pharmaceutical products, 26 medical devices and 16 medical consumables.
To improve the capacity building of research in the medical field, Thailand has encouraged greater collaboration among the public sector, private sector and academic institutes and promoted the supply of medical researchers. In terms of research and innovation facilities, Thailand’s efforts to facilitate local innovation will focus on building local standard testing centres and labs for research on medical campuses and in the Eastern Economic Corridor (EEC), the country’s pilot high-technology special economic zone, located in the Eastern region.
BOI Incentivises Healthcare Investment
Under its policy to attract foreign investment to help upgrade technology in the local medical device industry, the Thailand Board of Investment has introduced both non-tax and tax incentives aimed at facilitating the development of the entire healthcare and medical industries ecosystem. The BOI’s support covers activities ranging from the manufacture of medical devices and pharmaceutical products to the development of healthcare facilities and clinical trials, with an additional incentive offered to R&D and productivity enhancement.4
As the manufacture of medical devices is considered a priority activity, the BOI is granting corporate income tax exemption of 8 years on the manufacture of medical devices classified as high-risk or high-technology, 5 years of CIT exemption on other medical devices and 3 years of CIT exemption on medical devices made of fabrics or fibres.
To promote Thailand’s operation of contract research organisations (CRO) and clinical research centres (CRC), the BOI is also offering 8-year CIT exemption to organisations which collaborate with and employ Thai researchers.
For manufacturers of active ingredients, the BOI is offering 8-year CIT exemption on ingredients used in targeted medicine and 5-year exemption for ingredients used in traditional targeted medicine. Meanwhile, operators of medical centres for excellence are entitled to 8-year CIT exemption.
To facilitate advancement in life science research, the BOI has made additional incentives available for organisations which operate in the Genomics Thailand project at Burapha University in the EEC. Eligible organisations will benefit from an additional 50% CIT deduction for two years on top of the baseline 5-8 years of exemption.
As Thailand targets becoming an innovation-driven economy, the BOI has recently announced enhanced tax incentives to drive business to increase investment in R&D in local operations. As such, the BOI is now offering longer tax breaks to a maximum of 13 years for example projects that invest or spend at least 200 million baht or 1% of total sales from the first three years of operations will be entitle to one-year additional CIT exemption, with no ceiling.