Healthcare – Thriving in the most populated state of Malaysia

Selangor has become a role model of modern Malaysia with advanced infrastructure, job opportunities and a high standard of living. From this successful policy-background of urbanization and thereby population growth, new key challenges arise and often require new technologies from abroad. Healthcare, including in a wider sense related industries from pharmaceuticals to medical devices, is probably the most formidable of those challenges.

With 5.6 million citizens living directly in Selangor and being in close proximity of the Federal Territories of Kuala Lumpur (1.7 million) and Putrajaya (0.1 million), the healthcare sector in Selangor caters to the highest population-density of Malaysia in the most populated state. In this environment of dynamic growth, the society is aging fast and catching up with the western world, which will result in about 10% of the population being 60 and above in 2020. Related healthcare challenges are surging. Based on an improving standard of living the likeliness of lifestyle diseases such as morbidity, diabetes, heart or liver diseases, has been rising ever since. Especially the generation 60+ is prone to overweight according to a recent survey, which found 23.2% of people between 60 and 69 to suffer from this condition. Facing a population growth of at least 1.6% in Selangor, more pharmaceuticals, medical devices and healthcare services are needed. How does Malaysia cope with this demand? Most sophisticated devices and supplies are imported from overseas until today, which offers a huge potential for German manufacturers.

The Malaysian government started to promote Healthcare Tourism already in 2005. The initiative targeted affluent foreigners with a more affordable and in regional perspective a more advanced healthcare system. In 2009, this effort led to the foundation of the Malaysian Healthcare Travel Council (MHTC) to professionalize promotion and marketing. The council currently promotes 69 private panel hospitals, of which 18 are located in Selangor and 22 in Kuala Lumpur. With some top medical device companies such as Siemens Healthcare located in Malaysia, especially privately operated Malaysian hospitals are well equipped for foreign patients. It is not surprising that under these circumstances, the Klang Valley (Selangor and Kuala Lumpur) boasts an occupancy rate of more than 70% in all hospitals. This is close to the maximum, since at least 10% have to be reserved for emergencies.

_{Table 1: Investment Projects – Healthcare in Selangor (2012)}

Operator	Project	Beds	Operational
KPJ Healthcare	KPJ Klang Specialist Hospital	200	2012
Sime Darby Healthcare	SDMC Ara Damansara	220	2012
Sime Darby Healthcare	SDMC ParkCity	300	2013
Others	Columbia Asia Hospital Petaling Jaya	90+	2014

^{Sources: KPJ Healthcare, Sime Darby Healthcare, The Star 2011/2012}

While medical doctors and experts in many fields are needed urgently, private healthcare providers continue to expand with modern hospitals trying to meet the rising demand. The largest private operator KPJ-Healthcare Group, but also other players such as Pantai-Parkway or Sime Darby Healthcare are entering the market with several modern and specialist hospitals in Selangor. Table 1 is giving an idea of already announced or started projects. It is also worth mentioning that the thriving private healthcare sector is outmatched in numbers by a rather complacent public hospital sector. Public healthcare is cheap in Malaysia, but does often not meet the highest international standards. Modern equipment is rare and the replacement rate low.. Nevertheless, the sheer number of publicly operated hospitals is significant enough to create market potentials for foreign and domestic suppliers.

Until today, the vast amount of medical equipment is still acquired abroad or procured from multinational corporations invested in Malaysia. With a growth rate of about 10%, the medical device sector has become an interesting potential for German suppliers of advanced healthcare equipment. Many products have still to be imported, but some homegrown Malaysian businesses are now global market leaders. In Selangor especially the rubber glove industry is acknowledged for its globally leading brands such as Top Glove or Hartalega Holdings. Top Glove is said to maintain a global market share of 25% and plans to expand this share to 30 % during the next years. Being the world’s largest rubber glove manufacturer, the company plans to invest RM 3 billion in several facilities worldwide, which includes plants in Selangor. Top Glove has shown great interest in German process technology and machinery to reduce the dependency on manpower. This trend extends into many sectors due to a recently introduced minimum wage policy in Malaysia. Another trend is also playing into the hands of machinery manufactuerers. Globally, rubber gloves are replaced by more hygienic synthetic products. Consequently, Top Glove expands its activities in the product line of synthetic rubber gloves, which will require new equipment and machinery. The global trend to reduce natural rubber gloves and replace them with synthetics starts to put pressure on many manufacturers.

Since Top Glove follows a quite aggressive expansion strategy, Hartalega Holdings also announced a new and fully integrated high-tech factory, which includes a 58-MW-Biomass power plant, research and recreation facilities on 100 acres of land. The project is valued at RM 1.5 billion and will certainly be located in Selangor. With an estimated workforce of 4.600 employees, the facility marks a significant step forward and will require substantial automation technology to achieve an output of 24.5billion units per annum. Besides, Hartalega has to respond to the same trend for synthetic gloves as Top Glove.

_{Table 2: Top Pharmaceutical Companies in Malaysia 2011/12}

Position	Company	Market Share (%)	Growth (%)
1	Merck, Sharp & Dohme	8.5	14.0
2	Pfizer PH	7.7	5.1
3	Glaxosmithkline PH	6.6	-11.6
4	Sanofi-Aventis	5.2	8.4
5	Novartis	4.7	12.6
6	Roche Pharma	4.7	5.1
7	Astrazeneca	4.1	5.0
8	Pharmaniaga	3.1	2.8
9	Abbott Pharma	3.1	13.2
10	Janssen Cilag	2.4	1.7
11	Idaman Pharma	2.1	12.4
12	Boehringer Ingelheim	2.1	13.4

^{Source: IMS Health 2011}

The rubber glove industry demonstrates the innovative energies and talents in Selangor’s industries, since rubber has a long history in Malaysia. Pharmaceuticals again is a rather new industry with less historical baggage, but also rather in an early stage of development. In ther words, most pharmaceuticals still have to be imported from the developed world, but domestic manufacturers are catching up. The large generic drug market from India starts to create spillover effects into Selangor, which might increase based on a recent Investment and Trade agreement. In addition, international corporations such as Bayer Schering PH, Boehringer Ingelheim and Merck Sharp & Dohme are active in Malaysia, but often do not produce in the market. This is surprising in so far, since Malaysia offers a far better legal framework and a stronger protection of intellectual property. Accordingly, registering devices or pharmaceuticals in Malaysia also opens doors within other members of the Association of Southeast Asian Nations (ASEAN), which will become more significant with further economic integration in the next few years. Back in Malaysia local manufacturers Idaman Pharma and Pharmaniaga command a market share of 2.1 % and 3.1% respectively, compared to 8.5% of market leader Merck Sharp & Dohme. Both Malaysian players are located in the Klang Valley and manufacture in Selangor. In addition, large multinationals such as GlaxoSmithKline or the local Chemical Company of Malaysia established manufacturing operations in the state. While northern Malaysia also hosts some pharmaceutical companies, most sales and representative offices are located in Selangor’s pulsating commercial hub of Petaling Jaya. Selangor can be considered to be the heart of healthcare and especially the related manufacturing sector.

Looking at the trends of healthcare and related industries, Selangor and its facilities provide an excellent springboard for further business activities into Malaysia and ASEAN. With excellent logistics facilities, a Top 13 World Container port and two airports, Selangor is a powerhouse of connectivity. As soon as the ASEAN Economic Community is implemented, the region will become even more attractive due to lower trade barriers and mutual recognition of product registration in a market of more than 600 million people. In this context, new projects have already been confirmed in the pharmaceuticals sector, which will clearly increase the manufacturing capacities of the state tapping future potentials. Furthermore, Chinese medical device manufacturers have been evaluating Selangor as a potential investment destination in 2012. Indian and Chinese corporations are set to be the next generation of industry movers and shakers, but US, Japanese and European corporations still dominate the market.

This article has been published in the AHK Malaysia Magazine " MGCC Perspectives" May/June 2013.