Turkey, Indonesia, Iran: Three smaller but growing medical device markets

You’ve heard the acronym many times: BRIC – Brazil, Russia, India, China. Much attention has been paid to these growing markets since the term was coined in 2001. To be sure, thousands of medical device companies from Europe and North America have turned their sights on China and Brazil as a way to supplement lagging domestic sales.

While these markets are large and offer outstanding growth opportunities for medical device companies, there are other smaller markets that have quietly been growing outside the spotlight.

Turkey, Indonesia and Iran

Healthcare spending in these markets is fairly small now, but China and Brazil were small healthcare markets 20 years ago too. Currently, these markets account for more than $186 billion in healthcare spending and share characteristics that should make them appealing to medical device exporters.

  1. Per capita growth in healthcare spending of 125% or more from 2001-2011.
  2. 85% or more of devices are imported, little domestic competition.
  3. Growing economies and personal incomes, which typically correlate with rises in healthcare spending.  

Let’s examine each market.

TURKEY: the crossroads of Europe and the Middle East

Despite recent political unrest, Turkey has been attracting a lot of positive attention in recent years. Many people mistakenly assume that secular Turkey is an Arab country. It is not. The predominant language is Turkish, not Arabic. Also, due to its geographic position at the crossroads of Europe, Asia and the Middle East, Turkey is a fusion of political, cultural and business ideals.

Turkey is a candidate for joining the European Union. Given its growing economic influence and large population, some countries such as Germany are opposed to Turkey’s proposed ascension to EU membership. Nonetheless, membership in the European Union could happen within the next 10 years and would likely benefit the Turkish economy and boost healthcare spending. If successful, Turkey would be the largest and most populous European country by the time ascension occurs after 2020. The country has 76 million people now and is twice the physical size of Germany.

Growing demand for healthcare in Turkey

According to data from the World Bank, per capita health expenditures have risen from $155 in 2001 to $696 in 2011. That’s a tremendous increase in just 10 years. During the same period, GDP in Turkey has risen from $196 billion to $775 billion, a four-fold increase. This makes Turkey one of the 15 largest economies in the world.

The Turkish government has been taking steps to open the healthcare market to more private industry, which should lead to significant investment in new facilities. One such step is a new government plan that allows private industry to build and operate new hospitals that will be leased by the government.

Fortunately, in its long-term bid for ascension to the European Union, Turkey recognizes European CE Marking for medical devices. Thus, a company with CE can register their devices with the Turkish Ministry of Health and appoint a local “Authorized Representative” for regulatory issues located in Turkey.

According to Espicom, the medical device market in Turkey is about $2.2 billion. Barring a significant escalation of long-term civil unrest, it seems that Turkey is poised for continued economic expansion, rising incomes, and in turn, more demand for medical devices. As the existing medical device industry in Turkey is rather nascent, the country offers good opportunities for manufacturers ready to stake their claim to Turkey’s growing potential.

INDONESIA: The leading economy in SE Asia

Most Americans and Europeans would be hard pressed to correctly identify Indonesia on a map. Even fewer would guess that it’s the forth most populous country in the world behind China, India and the USA.

With more than 240 million people, this aggregation of islands in Southeast Asia has seen its economy grow by an average of 6% since 2009. It is the largest economy in Southeast Asia and growth projections through 2014 point to similarly impressive results. Between 2001 and 2011, GDP grew more than 5x from $160 billion to $847 billion.

Per capita healthcare spending is far lower than Turkey or Iran. Health expenditures per capita are very low at only $127 per person in 2011.

However, consider this. Not long ago the Indonesian government passed the Social Insurance Providers Board (BJPS) Law which will provide healthcare coverage to everyone. At present, about 56% of Indonesians have healthcare coverage of some sort. The program is supposed to take effect in January 2014 and will provide government-funded free treatment for major illnesses. The vast expansion means that more than 100 million more Indonesians will have more access to healthcare. This, in turn, will increase demand for devices. Whether the government will be able to keep its promise and properly fund the mandate is another story.

Even before this law was passed, medical device imports had grown at a compound annual growth rate of 35% between 2007 and 2011^. Still, this is starting from a small base. Espicom estimates the medical device market to be worth roughly $500 million.

While Indonesia’s economy and healthcare system remain fairly unsophisticated, it is improving to meet the demands of a large population with rising incomes and more demand for healthcare. Urbanization is also happening very rapidly in Indonesia and with this shift to the cities comes improved access to healthcare facilities.

Because the domestic medical device industry is largely non-existent, long-term growth opportunities exist for medical device companies with patience and foresight. With 240 million people, a booming economy, and declining poverty, there’s nowhere to go but up over the next decade.

IRAN: Separating political rhetoric from the facts

Iran is enigmatic because so much of our perception is based on government propaganda and control over the media. While significant philosophical differences and mistrust exists between our governments, the political bluster should not dissuade you from objectively evaluating Iran’s potential as a market for your devices.

Iran has roughly the same population as Turkey, about 75 million people. Its economy has grown briskly, primarily due to a burgeoning oil and gas sector. Between 2001 and 2011, per capita spending on healthcare increased 163%, due partly to increased government investments in healthcare infrastructure.

Let’s dispel a few misconceptions about a country once characterized as a member of the “Axis of Evil.” First, like Turkey, Iran it is NOT an Arab country. The primary language is Farsi, not Arabic.

Second, American companies CAN ship medical devices to Iran. Yes, there are sanctions that apply to a huge variety of products, but most devices are permitted under the US Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). The sanctions are administered through the Office of Foreign Assets Control (“OFAC”) within the US Treasury Department and a TSRA license must be procured from OFAC before you can export.

In addition to OFAC requirements, the US Bureau of Industry and Security (BIS) lists products subject to export control.

The TRSA license requirement applies to American companies. There are several steps in obtaining a TRSA license, but a medical device manufacturer should have little problems procuring one if all steps are followed. Your government may impose its own set of regulations which may be more or less strenuous.

Before you start doing online searches on BIS lists or how to get your TRSA license, you need to know all medical devices imported into Iran must have European CE Marking certification and FDA clearance/approval. This is required by Iran’s Ministry of Health and Medical Education (MOHME).

Summary

Medical device manufacturers would be wise to invest their time in explore these under-served, yet growing, markets. Individually, they are relatively small now but healthcare spending is growing 2-3 times faster than the US, Japan or most countries in Europe. As was the case with China, 10-20 years from now you might wish you were one of the forward thinking companies who established an early foothold. Dip your toe in the water now.

^ Source: Espicom

Quick Facts:

Country Name Population Gross Domestic Product (GDP) in 2011* Total spending on healthcare in 2011** Health expenditure per capita (USD)**
Turkey 76 million $775 billion $86 billion $444 in 2001
$1,161 in 2011
(+161%)
Indonesia 240 million $847 billion $31 billion $54 in 2001
$127 in 2011
(+133%)
Iran 75 million $331 billion $70 billion $354 in 2001
$929 in 2011
(+163%)

* Source: World Bank, USD
** Source: World Health Organization. In PPP.

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