Life Sciences Cluster in Selangor (Part I: Healthcare providers)

(Part I: Healthcare providers). Selangor The Best Place for Medical Tourism Medical tourism is a new rapid growing trend in the healthcare sector. Despite global downturn, Malaysia maintains more than 20% growth in medical tourism over the past few years. In 2012, a total of 671,727 medical tourists arrived in Malaysia generating more than RM600 million in revenue. Due to strategic government support, a large number of private hospitals are actively participating in medical tourism. In this context, the report is answering some crucial questions. What are the driving forces of healthcare in Selangor? How does the state s healthcare service industry stand out? With excellent infrastructure and accessibility, Selangor is the best location in Malaysia to promote medical tourism. Currently, there are 71 private panel hospitals registered with the Malaysian Healthcare Tourism Council (MHTC), of which 20 are located in Selangor and 22 in Kuala Lumpur. 2013

Report on Life Sciences Cluster in Selangor - Summary 2013 Malaysia Selangor Rank in Malaysia Population (2012) 29.3 million 5.6 million 1 Average Annual Population Growth Rate 1.3% 1.3% 5 (2012) Average Life Expectancy (years) 74.8 (estimate) 75.7 (estimate) 4 GDP at constant 2005 Prices (2012, RM) GDP Growth (2012) 751,471 million (100%) 176,239 million (23.50%) 5.6% 7.1% 2 Investment Volume (2012, RM) 41 billion (100%) 11.7 billion (28.5%) 1 Workforce (2012) 13.1 (100%) 2.82 (21.5%) 1 Percentage of Total in Malaysia Market value of Malaysia Healthcare Sector (2012, 6.96 billion 2 billion (estimated) * 30.0 % RM) Total MoH Allocation (2012, RM) 16.87 billion 2.1 billion 12.4 % Number of Hospitals (2011) 339 100 * 29.5 % Number of beds (2011) 47,688 13,882 * 30.8 % Number of Hospital Doctors (2011) 16,493 6,324 * 38.3 % Revenue of Medical Tourism (2012, RM) 600 million 116 million (estimated) * 19.3% Medical Tourists (2012) 671,727 130,176 * 19.3 % Incentives for Medical Tourism Investment Tax Allowance of 100% is given on qualifying capital expenditure incurred on construction of new hospital / modernisation / refurbishment of existing hospitals. Healthcare services offered to foreign clients are qualified for tax exemption of 50%/100% on the value of increased exports income subject to 70% of the statutory income for each year of assessment. Double tax deduction for hospital applying for local or international recognised accreditation. More details on page 18-19 Useful Contacts Ministry of Health Malaysia: http://www.moh.gov.my/ Malaysia Healthcare Travel Council: http://www.mhtc.org.my/ Medical Tourism Selangor: http://www.medicaltourismselangor.com/ Malaysia Investment Development Authority: http://www.mida.gov.my Association of Private Hospitals of Malaysia: http://www.hospitalsmalaysia.org * Figures as per Klang Valley, inclusive Federal Territories Kuala Lumpur & Putrajaya 1 2

Table of Contents 1. Overview of Malaysia Healthcare Sector... 4 2. Growth in Malaysia s Healthcare Sector... 9 3. Growth Factors of Malaysia Healthcare Sector... 11 (1) Ageing Population... 11 (2) Urbanisation & Changes in Lifestyle... 11 (3) Strategic Location for Medical Tourism... 12 (4) Development of Supporting Industries... 12 4. Trends and Developments... 13 (1) Medical Tourism... 13 (2) Specialty Hospitals Focusing on Niche Areas... 22 5. Selangor at a Glance... 23 (1) Why invest in Selangor?... 24 (2) Investment Projects in Selangor (2012-2015)... 28 6. Main Sources... 29 3

1. Overview of Malaysia Healthcare Sector Healthcare in Malaysia has undergone drastic changes over the years. Today, Malaysia has an efficient and easily accessible healthcare system. According to Frost & Sullivan, the Malaysian healthcare market was valued at US$2.25 billion (approximately RM6.96 billion) in 2012. Picture 1: Transformation of Healthcare in Malaysia, Source: MHTC and SSIC 2013 Malaysia operates under a two-tier healthcare system, consisting of a government-run universal healthcare system (public sector) and a coexisting private healthcare system (private sector). Both the private and public healthcare sectors are still gradually expanding in terms of number of hospitals, with an estimated average annual growth rate of 2.4% and 2.6%, respectively. Based on Health Facts 2013 published by the Ministry of Health Malaysia (MOH), Malaysia s total expenditure on health was 4.4% of its GDP in 2011. Government and private funding accounted for approximately 53% and 47% of total health expenditure in Malaysia, respectively. 4

38,000 37,000 36,000 Total expenditure on healthcare (in RM million) 35,000 34,000 33,000 32,000 31,000 2009 2010 2011 Total expenditure on healthcare (in RM million) Chart 1: Malaysia Total Expenditure on Healthcare (2009-2011), Source: MOH 2012 Picture 2: Key Facts of Healthcare Sector in Malaysia, Source: MOH 2013 The increasing healthcare expenditure in Malaysia over the years (refer to Chart 1) is mainly driven by greater privatisation within the healthcare sector and rising patient demands for better healthcare. Healthcare services in Malaysia are currently dominated by private hospitals in terms of number of hospitals, where approximately 59% of the total hospitals in Malaysia are privately owned (Refer to Picture 2). The number of private hospitals has dramatically increased from 50 private hospitals in 1980 to 209 private hospitals in 2012. However, as public hospitals tend to be larger in size compared with private hospitals, public hospitals boast a capacity of 42,707 beds versus only 13,667 beds in private hospitals. 5

(1) Public Healthcare Sector Besides the main government agency i.e. the Ministry of Health Malaysia (MOH), the Ministry of Higher Education and the Ministry of Women, Family, and Community Development are also responsible for providing public healthcare services in Malaysia. Therefore, public hospitals can be broadly categorised into MOH hospitals and non-moh hospitals. There are currently 140 MOH hospitals (with a total of 38,978 beds) and 7 non- MOH hospitals (with a total of 3,729 beds). MOH hospitals can be further sub-categorised into 4 types of hospitals: a. District Hospitals District hospitals generally have 100-200 beds, and are run by 6-10 medical officers. b. State General Hospitals State General Hospitals have 500-1500 beds. Each state in Malaysia has one state general hospital, except for Sabah, which has two. c. National Referral Centre National Referral Centre is the highest level of hospital in the hierarchy. The hospital has 2800 beds and is located in Kuala Lumpur. It receives referrals from other parts of Malaysia, especially for special medical cases such as neurosurgery and radiotherapy. It also provides outpatient and inpatient care services for the surrounding population. d. Special Medical Institutions Special medical institutions provide inpatient services for specific diseases in Malaysia. For example, the National Tuberculosis Centre, the Hospital for Leprosy and mental hospitals. The government heavily funds the public healthcare sector, whereby patients are only required to pay a nominal sum for treatment. (2) Private Healthcare Sector All private medical facilities in Malaysia are required to be licensed under the Private Healthcare Facilities and Services Act 1998 (Act 586) (To download, kindly visit: http://www.moh.gov.my/acts/30). Private healthcare facilities and services must comply with the regulations and requirements of Act 586, as enacted by the Private Medical Practice Control Section 6

(CKAPS), Medical Practice Division, MOH, Private Medical Practice Control Unit (UKAPS) and State/Wilayah Persekutuan Health Department. Revenue Global Presence Revenue (%) derived from Malaysia RM 2 billion (2012) RM 6.98 billion (2012) RM 358 million (2012/6) 4 countries: 9 countries: 2 countries: Malaysia, Malaysia, Malaysia & Indonesia, Singapore, China, Indonesia (JV on Australia & India, Vietnam, 26/3/2013 combines Thailand Brunei, UAE & 3 hospitals from others Ramsay in Indonesia) Information in Malaysia 89% (2012) > 68% (2012) 100% (Only Malaysian hospitals during 2012/6) Brands KPJ Pantai (Contributed 68% of revenue), Gleneagles Market share (private) * Ramsay Sime Darby RM 300 million (2011) 4 countries: Malaysia, India, Vietnam & Indonesia 67% (2011) Columbia Asia 22% 15% 7% (estimated) 5% (estimated) 7

No. of hospitals Operating Beds Outpatients (2012) Inpatients (2012) Other Healthcare related Investments No. of employees Major Shareholders Development plans 22 11 3 10 2,600 1915 913 667 2.4 million Unknown Unknown Unknown 250,000 158,990 Unknown Unknown KPJ International University college of Nursing and Health Services (KPJUIC) IMU Health (Contributed 2.5% of revenue) & Pantai College 9000 Unknown (24,000 globally) Johor Corporation Khazanah Nasional Berhad (holding co.), Japan s Mitsui & Dubai s Albraaj Capital Six hospitals at various stages of completion will become operational between end 2012 and 2015 (average 2 new hospitals p.a) Development of KPJUIC Bukit Mertajam new campus & expansion of Nilai main campus By mid-2014, Gleneagles Penang will complete the renovation of the old building thus achieving a total capacity of 400 beds. Other hospitals such as Gleneagles Kuala Lumpur, Pantai Hospital Klang, Pantai Hospital Batu Pahat and Pantai Hospital Ayer Keroh too are undergoing or will undergo expansion. Preparations for the Pantai Hospital Manjung project are underway with the Manjung facility expected to commence operations in late 2014. IHH is also looking forward to the opening of new hospitals in Medini Malaysia and Kota Kinabalu in due course. Sime Darby Nursing and Health Sciences College & Mediplex Unknown Sime Darby Berhad & Ramsay Health Care Ltd (JV on 26/3/2013) Aims to have 12 hospitals in Asia over the next three to five years N/A Unknown Employees Provident Fund (30%) & International Columbia USA LLC (70%) Unable to obtain development information. However, third party sources revealed that Columbia Asia aims to increase the total number of facilities in Malaysia to 12 by 2012. However, official website only recorded 10 hospitals as at November 2013. It is likely that the 2 other planned hospitals Petaling Jaya & Sitiawan are still in progress * Based on the number of private licensed beds Chart 2: Key Players in Malaysia Private Healthcare Sector, Source: SSIC 2013 8

Many private hospitals in Malaysia have international accreditation, including the internationally recognised Joint Commission International (JCI) accreditation, as well as accreditation by the Malaysian Society for Quality in Health (MSQH). Both the JCI and MSQH accreditations are recognised members of the International Accreditation Federation Council (IAFC), a body under the umbrella of the International Society for Quality in Healthcare (ISQuA). Thus, patients are guaranteed with the best efficiency and quality. The fees for private healthcare services are paid by the patients themselves, their employers or insurance companies. 2. Growth in Malaysia s Healthcare Sector Malaysia s healthcare sector is currently experiencing healthy growth and is expanding rapidly to meet the increasing needs of the society. This is in line with the catalyst activities being implemented under the Malaysian Government s Economic Transformation Programme (ETP). According to Frost & Sullivan, the value of Malaysia s healthcare market is estimated to increase from US$2.25 billion (approximately RM6.96 billion) in 2012 to US$3.65 billion (approximately RM11.29 billion) in 2018, indicating a cumulative annual growth rate (CAGR) of 8.4% throughout the 6 years. Frost & Sullivan also revealed that the growth is in line with the Asia Pacific healthcare market that was worth US$369.9 billion in 2012 and is expected to reach US$752 billion in 2018, growing at a CAGR of 12.8%. This however contrasted with the global growth rates, which are continuing at less than an estimated 6% during the same period. In the meantime, Malaysia s healthcare expenditure is also expected to nearly double in the next six years, reaching up to RM68.4 billion in 2018 with an annual growth rate of 6.5%. In order to further develop Malaysia s healthcare infrastructure, the government will also continue to increase its public sector healthcare expenditure with the initiative to enhance collaboration between public and private healthcare providers. 9

As one of the 12 National Key Economic Areas (NKEAs), ETP has identified 13 Entry Point Projects (EPPs) within the healthcare sector. The healthcare sector is expected to leverage on private sector growth, especially through medical tourism. According to Frost & Sullivan, the private hospital market size in Malaysia is anticipated to grow close to US$5 million in 2016 at a CAGR of 18% during the period 2011-2016. On the other hand, the number of private hospitals in Malaysia will continue to increase and is expected to reach 239 by 2018. No EPPs Location Status 1 EPP 1: Mandating Private Insurance for Foreign Workers Nationwide 2 EPP 2: Creating Supportive Ecosystem to Grow Clinical Research Nationwide 3 EPP 3: Malaysian Pharmaceuticals Increasing Local Generic Manufacturing for Exports Nationwide 4 EPP 4: Reinvigorating Healthcare Travel Nationwide 5 6 7 8 9 10 11 EPP 5: Creating a Diagnostic Services Nexus EPP 6: Developing a Health Metropolis: A World-Class Campus for Healthcare and Bioscience EPP 7: Upscale Malaysia s In-Vitro Diagnostic (IVD) Industry EPP 8: Build Malaysian Showcase on Next Generation of Core Single Use Device (SUD) Products EPP 9: Become the Hub for High-Value Medical Devices Contract Manufacturing EPP 10: Malaysian Clinical Device Champions EPP 11: Medical Equipment Supply Chain Orchestration Nationwide Selangor Nationwide Nationwide Nationwide Nationwide Penang 12 EPP 12: Medical Refurbishment Hub Nationwide 13 EPP 13: Build Medical Hardware and Furniture Cluster Nationwide Operational Work in Progress Not Started Table 1: List of EPPs, Source: Economic Transformation Programme website 2013 10

3. Growth Factors of Malaysia Healthcare Sector (1) Ageing Population Malaysia currently still maintains a relatively young population, with only 6% of its population aged 60 years and above. However by 2020, Malaysia will be classified as an ageing nation with at least 10% of its population aged 60 years and above. By 2030, the population aged 60 years and above will further increased to at least 15%. As such, Selangor being the state with the most population will certainly face aging issues in the near future. Generally, elderly requires more healthcare services. This demographic shift will cause issues such as insufficient capacity and increase in hospital admissions, especially in public hospitals. Due to long queue and high waiting time, some elders from this segment of population might switch to private healthcare providers, thus creating wealth for private hospitals. (2) Urbanisation & Changes in Lifestyle According to Frost & Sullivan, approximately 2.6 million people are expected to move from rural areas to urban areas in Malaysia between 2013 and 2018. Increasing urbanisation is accompanied by growing consumer awareness, expanding of middle class population and changes in lifestyle, thus resulting in a greater demand for improved healthcare services. Although urbanisation is already very much accomplished in Selangor (91.4% in 2010), increasing construction activities and Malaysian s leaving their villages for the convenience of an urban life-style within the state indicate that urbanisation is still an on-going process. Furthermore, the availability of modern infrastructure encourages an unhealthy lifestyle among the society, which increases the risk of acquiring chronic diseases. According to Statistics on Causes of Death prepared by Department of Statistics Malaysia, heart diseases, pneumonia, diabetes, stroke, cancer, respiratory diseases, hypertension and kidney diseases are some of the main causes of death in Malaysia. Due to increasing lifestyle diseases among population, Malaysia would be a suitable market place for specialty hospitals. On the other hand, the increase in consumer awareness on a healthier lifestyle, for example a higher sensitivity for a healthy personal regime and 11

a stronger recognition of preventive medical care, leads to growth in number of medical check ups. (3) Strategic Location for Medical Tourism Driven by the rising affluence and increasing demand of quality healthcare, medical tourism will be one of the top growth sectors in Asia for both the short and medium terms. Malaysia is one of the key strategic destinations in Asia to promote medical tourism. (Medical tourism will be further discussed in the next section 4. Trends and Developments of the report.) (4) Development of Supporting Industries i. Medical Devices Industry The medical devices industry of Malaysia is mainly dominated by the production of rubber-based products (e.g. medical gloves and catheters). Malaysia is a world leading producer and exporter for catheters and rubber gloves, supplying up to 80% of the world market for catheters and 60% for rubber gloves (including medical gloves). Especially in Selangor, the rubber glove industry is recognised for its global leading brands such as Top Glove, Hartalega Holdings, Biomax Rubber Industries etc. Company Top Glove (World s largest rubber glove manufacturer) Location: Klang Hartalega Holdings Location: Bestari Jaya Biomax Rubber Industries Location: Sg. Buloh Expansion Plans - Reportedly, it currently maintains a global market share of 25% and plans to expand this share to 30% - Invest RM3 bn in several facilities worldwide, including Selangor - Invest RM1.5 bn to set up a new & fully integrated high-tech factory in Selangor - Invest RM52.6 million to set up its 2 nd Malaysian glove manufacturing facility in Kuala Selangor Table 2: Top Rubber Gloves Manufacturers in Selangor, Source: MGCC Perspectives September 2013 and the Sun daily 2013 Unfortunately, a massive amount of other medical devices is still acquired from abroad or from multinational companies in Malaysia. In order to remain competitive, Malaysia is gradually shifting towards the manufacture of non-rubber based medical devices made from plastics, silicone and 12

metal alloys, which are higher in value and at the same time providing cost advantage for Malaysia healthcare providers. With a growth rate of approximately 10%, the medical devices industry is also one of the targeted areas for further development by the Malaysian government. A total of 7 medical devices EPPs were formulated under ETP to drive growth of Malaysia s medical devices industry. ii. Pharmaceutical Industry The pharmaceutical industry is a fairly new industry in Malaysia and currently is in its early stage of development. Although most pharmaceuticals are still imported from the developed world, domestic manufacturers on the other side are gradually catching up. Reportedly, 75% of Malaysia s pharmaceutical market relies heavily on imported generic and patented drugs. However, with the patents on several major drugs poised to expire in coming years, Malaysia has positioned itself to exploit this opportunity by boosting its generic drug manufacturing capacity through EPP 3: Malaysian Pharmaceuticals Increasing Local Generic Manufacturing for Exports. Undeniable, Selangor is again a strategic choice for manufacturers in the pharmaceutical industry. Several local manufacturers and large multinationals including Idaman Pharma, Pharmaniaga, GlaxoSmithKline, Chemical Company of Malaysia Berhad etc. have already established manufacturing operations in the state. Most sales and representative offices for pharmaceutical products are also located in Petaling Jaya, Selangor. (Interested to find out more? Kindly stay tuned with SSIC for more reports regarding the medical device and pharmaceutical sectors.) 4. Trends and Developments (1) Medical Tourism Medical tourism, also known as health tourism or medical travel, is a rapidly growing sector catering patients who travel abroad to receive medical treatments. Generally, medical treatment and leisure activities are both integrated into a package for the patient. Medical tourism has grown significantly in the last 10-15 years. According to the World Travel & Tourism Council (WTTC), medical tourism 13

contributed 9% of global GDP (more than US$6 trillion) in 2011. The global medical tourism market is worth US$40 billion US$60 billion with an estimated 7 million medical tourists annually. i. Outlook in Asia Medical tourism is increasingly common in Asia, its market is expected to reach US$ 8.5 billion by 2013. The number of medical tourists arriving in Asia is estimated to reach 6.8 million by 2013 growing with a CAGR of 17.92% for the period of 2009-2013. Numbers 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 Asia - Forecast for Medical Tourist Arrivals (2009-2013) 0 2009 2010 2011 2012 2013 Numbers 3561811 4231394 4953320 5830578 6887782 Chart 3: Asia Forecast for Medical Tourist Arrivals (2009-2013), Source: A Blue Ocean for Malaysia s medical and tourism industry by Deloitte KassimChan 2012 Note: Total may vary if all individual countries are added due to difference in type of values given. Asia includes Malaysia, South Korea, Singapore, Thailand, Philippines and India only. ii. Medical Tourism in Malaysia The government of Malaysia started to promote medical tourism in 2005. The initiative targeted affluent foreigners with a more affordable healthcare system and in regional perspective a more advanced healthcare system. This effort led to the establishment of the Malaysian Healthcare Travel Council (MHTC) in 2009 to professionalise promotions and marketing. A medical concierge was also established in the Kuala Lumpur International Airport (KLIA) to answer enquiries and promote healthcare in Malaysia. 14

Medical tourism has emerged as one of the fastest growing segments in Malaysia over the past few years (more than 20% growth) despite the global economic downturn. In 2012, a total of 671,727 medical tourists came to Malaysia generating over RM600 million in revenue. MHTC expects to receive 700,000 medical tourists in 2013, generating expected revenue of RM630 million. Malaysia s target is to reach RM9.6 billion in revenue from around 2 million medical tourists by 2020. Malaysia Medical Tourism Statistics number of medical tourists revenue generated (RM'000) 341,288 374,063 392,956 336225 380000 253800 299100 288000 583,296 511000 671727 700,000 600000 630000 2007 2008 2009 2010 2011 2012 2013 (e)* Chart 4: Malaysia Medical Tourism Statistics, Source: MHTC 2012/2013 *(e) = estimated data Picture 3: Medical Tourists Arrival to Malaysia (2011), Source: MHTC 2012 15

Medical tourists arriving in Malaysia are overwhelmingly from ASEAN countries (60%), especially from Indonesia (57%). Others come from India, Japan, United Kingdom, China, United States, Australia, Middle East and Europe. With the support from Malaysian government, a large number of Malaysian private hospitals are actively participating in medical tourism. MHTC currently promotes 71 private panel hospitals. The treatments generally sought by medical tourists in Malaysia include predominantly cardiac, cosmetics, ophthalmology, dental, diagnostic services (MRI and CT scans) and orthopaedic. According to the Performance Management and Delivery Unit (PEMANDU), construction of 9 new hospitals under EPP 4: Reinvigorating Healthcare Travel, have been announced during the past 2 years. The hospitals will serve mostly local patients and some foreign patients. Operator Project No. of beds Operational KPJ Healthcare KPJ Dato Onn International 390 beds 2014 Specialist Hospital KPJ Bandar Baru Klang 200 beds 2012 Specialist Hospital KPJ Perlis Specialist Hospital 90 beds 2015 KPJ Pasir Gudang Specialist 120 beds 2013 Hospital Sabah Medical Centre 250 beds 2013 KPJ Pahang Specialist Hospital 160 beds 2014 Sime Darby Healthcare Amanjaya Specialist Centre SDMC ParkCity 300 beds 2013 SDMC Ara Damansara 220 beds 2012 Amanjaya Specialist Centre 108 beds 2014 Green Hospital Table 3: List of Hospital Projects under EPP 4, Sources: CIMB Economic Update August 2013, Kenanga Research April 2013, Economic Transformation Programme website 2013 Malaysia also aims to be the leader of healthcare services destination in the region. Under EPP 6: Developing a Health Metropolis: A World-Class Campus for Healthcare and Bioscience, Malaysia has plans to develop a world-class health metropolis in Selangor to serve as a critical part of the ASEAN healthcare ecosystem. The healthcare ecosystem consists patient services, research and healthcare education, which are all located in a large campus. Global examples are Harvard University s Longwood Medical Area and Stanford University s Bio-X Centre. 16

iii. Where Malaysia Stands? Although Malaysia is still lagging behind established neighbouring medical tourism locations such as Singapore and Thailand, the country is rapidly transforming into a popular destination for medical tourists. Why is Malaysia so attractive? Table 4: Comparison of Medical Tourism Sector between Malaysia, Singapore and Thailand, Source: A Blue Ocean for Malaysia s medical and tourism industry by Deloitte KassimChan 2012 (i) High Quality Healthcare Services Malaysia offers medical services similar with those in fully developed nations, nevertheless at a considerably lower cost. Healthcare providers in Malaysia have highly qualified doctors, well trained nursing staff, wellfurnished accommodation and adopt advanced medical technology. (ii) Competitive Market Pricing Malaysia offers relatively lower cost of healthcare services compared to other countries (refer to Table 5). The pricing for each private medical centre may also vary from one another, but still remained competitive. Therefore, overseas patients can use the money saved from lower medical expenses to travel around Malaysia and recuperate after treatment. 17

Procedures Heart Bypass 130,000 11,000 18,500 9,000 Heart valve replacement 160,000 10,000 12,500 9,000 Angioplasty 57,000 13,000 13,000 11,000 Hip Replacement 43,000 12,000 12,000 10,000 Hysterectomy 20,000 4,500 6,000 3,000 Knee Replacement 40,000 10,000 13,000 8,000 Spinal Fusion 62,000 7,000 9,000 6,000 *Fees expressed in USD Table 5: Comparison of Medical Cost, Source: Patient Beyond Borders, Josef Woodman 2007 (iii) Food and Leisure Malaysia is a perfect holiday destination for tourists as it is enriched with beautiful islands, beaches, national parks, cultural centres, amusement parks, historical and adventure spots. Besides, Malaysia offers a large variety of cuisine from aromatic Malay dishes to piping hot Chinese delicacies and spicy Indian food. International cuisine and vegetarian food are also available everywhere. Moreover, Malaysia is a paradise for shoppers with a wide range of shopping malls, night markets and street stalls. Selangor in close proximity to Kuala Lumpur offers perhaps the biggest variety of entertainment and leisure opportunities, including 30 shopping malls, several golf courses and the international Formula 1 course at Sepang. (iv) Connectivity Malaysia is in a strategic position with low barriers to accessibility. Cheap flights and convenient air travel are available in Malaysia. (v) Multi-cultural environment Malaysia is a multi-racial and multi cultural society whereby Malaysians are able to communicate in multiple languages, from main languages (English, Bahasa Malaysia, Mandarin or Tamil) to dialects (Cantonese, 18

Hokkien, Hakka etc.), thus enabling medical tourists from all over the world to communicate easily while seeking healthcare services in Malaysia. Moreover, as a country with reputed halal standards, Malaysia offers additional benefits to medical tourists from other Islamic countries such as those in Middle East. In short, Malaysia is a strategic location that allows medical tourists to experience world-class medical treatment in a multi-cultural environment with finest gourmet food and beautiful tourist attractions under one affordable package. Picture 4: Testimonials from Overseas Patients, Source: MHTC 2013 19

iv. (i) Government Incentives for Medical Tourism Incentive for Private Healthcare Facilities Companies that establish new private healthcare facilities or existing private healthcare facilities undertaking expansion / modernisation / refurbishment for purposes of promoting healthcare travel are eligible to apply for an income tax exemption equivalent to Investment Tax Allowance (ITA) of 100% on the qualifying capital expenditure incurred within a period of five (5) years. The allowance can be used to offset against 100% of the statutory income for each year of assessment. For purposes of this incentive, private healthcare facilities means private hospitals or ambulatory care centres. Eligibility Criteria: A. The company must be incorporated in Malaysia under the Companies Act, 1965. B. The project must be approved and licensed by the Ministry of Health (MOH) and registered with the Malaysia Healthcare Travel Council (MHTC). C. The application must be submitted to MIDA prior to commencement of business for new / expansion projects. a) The healthcare facilities must obtain Approval for Establishment / Expansion from MOH before submission of application to MIDA. b) The incentive is applicable for applications received by MIDA on or after 1 January 2010 but not later than 31 December 2014. For the purpose of ITA, qualifying capital expenditure in relation to private healthcare facilities means capital expenditure incurred on buildings, plant and machinery, medical devices and other facilities used in Malaysia solely for the purpose of the qualifying project. These qualifying capital expenditure shall be facilitated / verified by the Medical Practice Division, Ministry of Health (MOH) and approved by the Minister. (ii) Tax Exemption on the Value of Increased Exports Healthcare services offered to foreign clients are qualified for tax exemption of 50% on the value of increased exports income subject to 70% of the statutory income for each year of assessment. Foreign clients are defined as: 20

A company, partnership, organisation or cooperative society which is incorporated or registered outside Malaysia; A non-malaysian citizen who does not hold a Malaysian working permit; or A non-resident Malaysian living abroad. Effective from the year of assessment 2010 until the Year of Assessment 2014, this tax exemption rate has been enhanced to 100% and for the purpose of this incentive the following foreign clients are excluded: Non-Malaysian citizen that participates in Malaysia My Second Home Program and his dependants; Non-Malaysian citizen holding a Malaysian student pass and his dependants; Non-Malaysian citizen holding a Malaysian work permit and his dependants; or Malaysian citizens who are non-residents living abroad and his dependants. However, healthcare services offered to such foreign clients as mentioned above continue to enjoy existing tax exemption on statutory income to the amount of 50% of the value of increased exports. Claims should be submitted to IRB. (iii) Double Deduction for Expenses Incur in Obtaining Recognised Accreditation Private hospitals that incur expenses in obtaining domestic or international recognised accreditation such as from the Malaysian Society for Quality in Health (MSQH) or Joint Commission International (JCI) qualify for double deduction for the purpose of income tax computation. Claims should be submitted to IRB. 21

(2) Specialty Hospitals Focusing on Niche Areas As mentioned earlier, Malaysia offers substantial market potentials for specialty hospitals due to increasing lifestyle diseases in the society and gradually ageing population. Some private healthcare centres in Malaysia already started to adopt this differentiation strategy, focusing on niche areas for medical treatments and have achieved certain level of reputation. Name Description Prince Court Medical Centre* Specially built for plastic reconstructive and cosmetic surgery Pantai Hospital Group chain of 9 hospitals KPJ Healthcare chain of 21 hospitals Sime Darby Medical Centre Subang Jaya Centre of Excellence for Spine and Joint Surgery Reputed for knee and joint replacement surgery Reputed for cancer treatment and bone marrow transplant Sime Darby Ara Damansara Centre of Excellence for brain, heart and spine Owned a 3T MRI Sunway Medical Centre Reputed for the management of Parkinson Disease Gleaneagles Kuala Lumpur (1996) Reputable Centre of Excellence for neurology and neurosurgery Tropicana Medical Centre Remarkable success rates of 68.8% for fertility treatment iheal Medical Centre Known for less invasive bypass, angiogram, angioplasty and CT angiography Owned a 640 slice CT Scanner, the most advanced in the country * Prince Court Medical Centre is ranked the top hospital for medical tourists in 2013 by the Medical Travel Quality Alliance. Table 6: Examples of Specialty Hospitals in Malaysia, Source: MHTC 2012 22

5. Selangor at a Glance Currently, there are a total of 356 hospitals providing healthcare services in Malaysia, with 0.12 hospitals per 10,000 populations. Majority of the hospitals and beds are concentrated in Selangor, Johor, Federal Territories of Kuala Lumpur and Putrajaya. Picture 5: Key Facts of Healthcare Sector in Klang Valley (2011), Source: Clinical Research Centre 2012 Selangor is located in the heart of Malaysia, surrounding the Federal Territories of Kuala Lumpur and Putrajaya, forming the Klang Valley following the name of the river Klang. Due to Selangor s strategic position, Selangor has great potentials for medical tourism. Out of 71 private panel health tourism hospitals promoted by MHTC, 20 are located in Selangor and 22 in Kuala Lumpur. In regard to the good prospects, many statistics claim that Klang Valley produces an occupancy rate of more than 70% in all hospitals, which is close to maximum as at least 10% have to be reserved for emergency purposes. Bed Occupancy Rate (2011) Non Specialist Hospital Specialist Hospital Public 43.97 74.63 Private NA 50.61 Total 43.97 54.54 Table 7: Bed Occupancy Rate in Klang Valley (2011), Source: Clinical Research Centre 2012 Well-established private healthcare providers KPJ-Healthcare Group, Pantai-Parkway and Sime Darby Healthcare are among the pioneers and market players in the healthcare sector of Selangor. 23

(1) Why invest in Selangor? Picture 6: Key Benefits to Invest in Selangor, Source: SSIC 2013 i. Social and Demography Selangor being the most populous state with 5.6 million citizens and furthermore bordering the Federal Territories of Kuala Lumpur (1.7 million) and Putrajaya (0.1 million), the healthcare sector in Selangor serves the highest population density in Malaysia. The population growth rate of Selangor is at least 1.3%. Picture 7: Population density by state, Malaysia, 2010, Source: Department of Statistics Malaysia 24

According to 2010 statistics by Department of Statistics Malaysia, apart from the city-states Kuala Lumpur and Putrajaya with a 100% urbanisation, Selangor (91.4%) is known for the highest degree of urbanisation in a territorial state. As mentioned earlier, 2.6 million people are expected to move from rural areas to urban areas in Malaysia between 2013 and 2018, for which Selangor with its vast economy and proximity to the commercial hub of Kuala Lumpur will be a main focus area. In terms of healthcare, the region is experiencing typical challenges such as aging population, busy lifestyle, increasing lifestyle diseases, which are increasing the demand for hospitals and healthcare services in Selangor. ii. Availability of Excellent Infrastructure Another key advantage of Selangor is its excellent infrastructure and accessibility. Two major airports are located in the state, including Kuala Lumpur International Airport (KLIA) and Sultan Abdul Aziz Shah Airport or Subang Skypark. The strategic location provides convenience to medical tourists as they can easily access a variety of private hospitals located in Selangor and then easily proceed to their next vacation destination. The emergence of low cost airlines (eg. AirAsia, Firefly and Malindo) also make air travel even more affordable. Picture 8: Klang Valley Train Transit Network, Source: Malaysian Resources Corporation Berhad (MRCB) 2013 25

As shown in Picture 8, different parts of Klang Valley are also well integrated with highly developed road network and expanding public transports system. Highways and expressways make cars a very convenient way to get around. Currently, the Malaysia Commuter (KTM), RapidKL Light Rail Transit (LRT) and KL Monorail have also covered a large area of routes in Klang Valley. The rapid transit system is however undergoing extensive expansion and will be upgraded into a fully-fledged Mass Rail Transit (MRT) system in future. The Klang Valley MRT Project is expected to complete in 2017 and will provide an unmatched connectivity into the state of Selangor from the capital Kuala Lumpur and vice versa. iii. (i) Government Projects in Selangor EPP 4: Reinvigorating Healthcare Travel As mentioned earlier, construction of 9 new hospitals have been announced under EPP4 within the past 2 years, of which 2 projects are based in Selangor, which are KPJ Bandar Baru Klang Specialist Hospital and Sime Darby Medical Centre Ara Damansara. (ii) EPP 6: Developing a Health Metropolis: A World-Class Campus for Healthcare and Bioscience Malaysia plans to develop a world-class health metropolis in Selangor. The estimated investment of this project is RM1.1 billion. Private sector tenants will fund 90% of the investment while 10% of the funds are from the Economic Planning Unit s (EPU) facilitation fund. According to ETP document, Ministry of Finance will also provide tax incentives to companies that are qualified under the health metropolis status. The infrastructure development is expected to start in 2014 with Selangor state government and Petaling Jaya City Council (MBPJ) approving land zoning and construction plans. The health metropolis is expected to start operating in 2017 and will house a 320-bed hospital, a 338-room healthcare hotel, a medical research centre, convention and exhibition facilities and other supporting facilities. iv. Perfect State to Promote Medical Tourism Despite having high quality healthcare services, excellent transportation infrastructure and strong support from the government, a variety of 26

supporting sectors in Klang Valley, especially in food and leisure, further enhance Selangor s ability to promote medical tourism. There are several major tourist attractions, fun theme parks and iconic buildings in Klang Valley such as Petronas Twin Towers, KL Tower, Petaling Street, Batu Caves, I-City, Sunway Lagoon, Desa Water Park, Wet World Shah Alam etc., and can be visited within a day on organised or self-driven tours. One-day trips can also easily be arranged from Selangor to various cool hill resorts including Genting Highlands, Fraser s Hill, the French-themed Colmar Tropicale at Bukit Tinggi, Cameron Highlands etc. In addition, all kinds of food outlets from Western to ASEAN are available throughout the region 24/7. For a taste of local life, night markets and open-air food courts are certainly the best choices in Selangor. Year Klang Valley % in Malaysia 2012 515 18.9% No. of Hotels 2012 58,797 30% No. of Hotel Rooms 2013 35 26.7% No. of Golf Courses 2011 133 (estimated) 44% (estimated) No. of Malls Table 8: Leisure Facilities in Klang Valley, Source: Tourism Malaysia & Malaysia Property Inc. 2012/2013 27

v. Immigrants / Foreign Workers Based on Country Health Plan (10 th Malaysia Plan) 2011-2015, Malaysia has 2.32 million immigrants / foreign workers in 2010. Sabah (24.4%), Federal Territory Kuala Lumpur (7.3%) and Selangor (6.2%) recorded the highest proportions of foreign workers. Reportedly, 1.3 million foreign workers were registered with Foreign Medical Examination Malaysia and had undergone the examinations. According to the latest information from Immigration Department, foreign workers in Malaysia numbered 2.8 million as of August 31, 2012, comprising 1.5 million legal foreign workers (with Temporary Working Visiting Pass) and 1.3 million illegal foreign workers. Although Malaysian government has the intention to implement policies (e.g. minimum wage policy) to reduce Malaysia s dependencies on foreign workers in future, in the short term the current increase in foreign workers however provides opportunities for private hospitals in Selangor as the demand for medical examinations increases. (2) Investment Projects in Selangor (2012-2015) Operator Project No. of beds Operational KPJ Healthcare KPJ Bandar Baru Klang 200 beds 2012 Specialist Hospital KPJ Klang Bayuemas 60 beds 2015 Specialists Sime Darby SDMC Ara Damansara 220 beds 2012 Healthcare Columbia Asia Columbia Asia Hospital Petaling Jaya 90+ beds 2014 Table 9: Examples of Ongoing and Future Healthcare Investment Projects in Selangor, Sources: MGCC Perspectives Healthy Growth in the Malaysian Medical and Biotech Sector, Kenanga Research 2013 28

6. Main Sources l Malaysia Healthcare Travel Council: http://www.mhtc.org.my l Ministry of Health Malaysia: http://www.moh.gov.my l Frost & Sullivan: http://www.frost.com l Economic Transformation Programme: http://etp.pemandu.gov.my l Deloitte: http://www.deloitte.com l Department of Statistics Malaysia: http://www.statistics.gov.my l Clinical Research Centre: http://www.crc.gov.my/ l Medical Tourism Selangor: http://www.medicaltourismselangor.com l Malaysian-German Chamber of Commerce and Industry: http://www.malaysia.ahk.de/ l Malaysian Investment Development Authority: http://www.mida.gov.my l Kuala Lumpur Sentral: http://www.klsentral.com.my l Italian Trade Agency: http://www.ice.gov.it/ l Borneo Post Online: http://www.theborneopost.com/ l CNN Travel: http://travel.cnn.com/ l Global Travel Industry News: http://www.eturbonews.com/ l New Straits Times: http://www.nst.com.my/ l The Malaysian Insider: http://www.themalaysianinsider.com/ l Free Malaysia Today: http://www.freemalaysiatoday.com/ 29