Investment incentives for pharmaceutical industries are not somewhat new but have been specifically addressed in Decision 1165/QD-TTg dated October 9, 2023, of the Prime Minister on approving the National Strategies on developing the pharmaceuticals industry until 2030 with the vision to 2045. Accordingly, the Decision highlights the promulgation of policies to encourage investment and incentives at the highest level for research, technology transfer, and production of drugs as well as long-term, transparent, and preferential policies to become high-value production centers in the region. However, for preferential policies in the pharmaceutical industry to be effective and strongly attract investment activities, should there be more breakthrough movements?
Specialized planning for the development of the pharmaceutical industry
Developing the pharmaceutical industry in a specialized manner is one of the key points of Decision 1165. Accordingly, two important duties are set out to develop the pharmaceutical industries:
Firstly, prioritizing the investment and development of pharmaceutical industrial parks to attract investors who are capable of implementing projects to produce copyrighted brand-name drugs, process copyrighted drugs as soon as their patents or related exclusive certificates expire; specialty drugs, generics with high-tech dosage forms; vaccines, technology transfer bio-products, multivalent vaccines, drugs and vaccines to prevent emerging, dangerous and highly infectious diseases in the community and expanded immunization vaccines; and
Secondly, developing specialized labs to research and develop drugs, in which the State takes the lead and offers appropriate incentives to companies and research centers so as for them to make investments.
In reality, the above missions have been implemented to a particular degree. For investment in the development of pharmaceutical industrial parks, at the Dialogue Conference between the Ministry of Health and pharmaceutical companies to be held at the end of 2023 in Da Nang, the Ministry of Health said that it has worked with Thai Binh Provincial People's Committee and Ho Chi Minh City People's Committee to promote the establishment of pharmaceutical industrial parks in these two localities. Recently, Ho Chi Minh City People’s Committee has just issued Decision No. 657/QD-UBND on approving the project to “Develop pharmaceutical industries in Ho Chi Minh City until 2030 with the vision to 2045”, in which, the city has planned to turn Le Minh Xuan 2 industrial park into a specialized “medical - pharmaceutical” industrial park[1]. Meanwhile, in Thai Binh Province, the consortium among Markara Capital Partners Pte., Ltd – Sakae Corporate Advisory Pte.,. Ltd – Newtechco Group Joint-stock Company is proposing a project to develop a pharmaceutical–biology industrial park to carry out research and development, and manufacture of drugs and drug ingredients[2]. Such movements show that Vietnam is creating a special zone to develop the pharmaceutical industry. The establishment of pharmaceutical industrial parks will create favorable conditions for the issuance and implementation of the specialized policies made for this industry.
For research and development, the Ministry of Planning and Investment is considering developing the Decree on the establishment, management, and use of the Investment Support Fund to assist enterprises investing in research and development hubs. This would benefit pharmaceutical manufacturing companies as the operation of these companies is often attached to researching and developing pharmaceutical products. Therefore, the Decree thereof is expected to become the basis for supporting pharmaceutical companies in the coming time.
Highly breakthrough policies on investment incentives and support needed
Although it has been oriented to be developed in a specialized way, to build a sustainable pharmaceutical industry and avoid dependence on foreign markets, there is still a need for more innovative policies on investment incentives and support.
The author implies that attracting high-quality personnel is one of the most important policies for the development of the pharmaceutical industry in Vietnam. Compared to countries within ASEAN or India, Vietnam can hardly rely on market size or technology factors to attract investors. In essence, the technology transfer in drug production does not only require technology conditions but also high-quality personnel to receive the transferred technology. In the short term, choosing to attract high-quality personnel seems to be a more possible solution compared to developing technological infrastructure. By having specialized pharmaceutical industrial parks, Vietnam can rely on the advantage thereby to attract high-quality personnel. Some options can be considered such as offering supportive remuneration funds for leading experts, or excellent scientists working for pharmaceutical companies and setting out policies on housing, working environment, and entertainment so that they can feel secure to work and develop their careers in Vietnam. In the long term, training high-quality personnel should also be put into consideration. Moreover, the training and development of high-quality personnel are also eligible to be funded by the Investment Support Fund. Therefore, the cost of training high-quality personnel borne by investors investing in pharmaceutical research and development may be backed by Vietnam. With the advantage of the young population, the orientation to develop high-quality human resources from the beginning will ensure a supply of quality employment, meeting the increasing requirements of expertise and skills to be able to develop the pharmaceutical industry.
In addition, when zoning the pharmaceutical industry as the prioritizing industry for development, the State should issue more specialized incentive policies for pharmaceutical companies within the existing industrial parks. Especially, at the time when industrial parks are only in the planning stage for development, competent agencies can consider forms of incentives and initial investment support such as support for investment in technical and social infrastructure systems, etc. inside and outside the fence of investment projects, supporting investment costs to create fixed assets to attract more companies to invest in, reducing the initial costs that these enterprises have to spend to invest or move to operate in pharmaceutical industrial parks.
Not only that, for pharmaceutical companies to implement drug research and development or receive technology transfer to produce copyrighted original brand name drugs, it is necessary to have an appropriate cost support plan for companies to invest, because these are activities that create high-value products for Vietnam's pharmaceutical industry.
In the context where Vietnam officially codified a global minimum tax at the beginning of the year, large-scale multinational companies will be significantly affected. The most obvious effect is that major companies in Vietnam will no longer enjoy preferential corporate income tax rates. This can have a strong impact on investment decisions in Vietnam of major pharmaceutical corporations in the world because now Vietnam has lost a huge advantage in attracting investment. Therefore, to attract investment in the pharmaceutical industry in the coming time, especially foreign investment activities, the author implies that it is necessary to take more breakthroughs in policies on pharmaceutical industry development incentives, ensuring the creation of commensurate value for investors and increasing Vietnam's competitive advantages compared to other countries in the region.
