ASEAN Economic Community and Health Services Trade

Valerie Gilbert Ulep

Visiting Research Fellow, Japan Center for Economic Research

Tokyo, Japan

Supervising Research Specialist, Philippine Institute for Development Studies

Makati City, Philippines

Abstract

Over the years, the Association of Southeast Asian Nations (ASEAN) has progressed from a loose to a stable regional organization. In the advent of globalization and regionalism, it has gained enormous potential not only for economic trade, but also for exchange of political and socio-cultural values. To demonstrate the strong commitment of the region, the 10-member countries envisioned an ASEAN Economic Community (AEC) in by 2015. Under AEC, there will be free flow of goods and services intra and extra-regionally. Healthcare services are being eyed as one of the key areas to liberalize. However, given the complexity of healthcare as a public good, what are the potential effects of trade in the general healthcare system of countries in the region? This paper has two objectives: (1) determine the extent of trade in health services in the ASEAN region and (2) determine the potential effects of ASEAN Economic Integration on the healthcare system.

Table of Contents

I. Background .......................................................................................................................................... 1

II. Brief background of AEC .................................................................................................................. 1

III. Services Trade in ASEAN ................................................................................................................ 3

a. Services and services trade .............................................................................................................. 3

b. Trade in health services ................................................................................................................... 5

IV. Health status and outcomes ............................................................................................................. 6

a. Health status ..................................................................................................................................... 7

b. Fertlity and population trends ........................................................................................................ 8

c. Disease trends ................................................................................................................................... 9

d. Healthcare outputs .......................................................................................................................... 9

V. Prospects and implications of AEC in the health sector ............................................................... 14

a. Cross-border supply (Mode I) ...................................................................................................... 14

b. Consumption abroad (Mode II) ................................................................................................... 16

c. Commercial presence (Mode III) .................................................................................................. 17

d. Temporary movement (Mode IV) ................................................................................................ 18

VI. Barriers to free trade liberalization .............................................................................................. 19

VII. Policy implications ........................................................................................................................ 20

Bibliography .............................................................................................................................................. 21

List of Tables

Table 1. Components of AEC blueprint .................................................................................... 2 Table 2. Share of service industry on the total GDP ..................................................................... 3 Table 3. Modes of trade in services ............................................................................................ 3 Table 4. Value of trade in services, 2000-2012, ASEAN (in ten million) ...................................... 4 Table 5. Share of services on total trade, 2000-2012, ASEAN (in ten million) .............................. 4 Table 6. Share of different industry in the total value of trade, ASEAN, 2012 .............................. 5 Table 7. Examples of traded health services by mode ................................................................ 6 Table 8. Total Fertility Rates, population and annual population growth rate, 2012 ......................... 8 Table 9. Sources of health financing, by country ........................................................................ 10 Table 10. Health facility, by ownership ..................................................................................... 11 Table 11. Frequency and growth rates of graduates and enrollees of healthcare related courses in

ASEAN ................................................................................................................................. 13 Table 12. Examples of telemedicine models in well-economically integrated economies ............ 15 Table 13. Comparing the prices of healthcare services ................................................................ 17 Table 14. Example of commercial presence of foreign firms in ASEAN .................................... 17 Table 15. Number of health workers migrating to Singapore and Saudi Arabia, Philippines,

1995-2010 ............................................................................................................................. 18 Table 16. Commitments under mode III .................................................................................... 19

1

ASEAN Economic Community and Health Services Trade

By: Valerie Gilbert Ulep1

I. Background

Over the years, the Association of Southeast Asian Nations (ASEAN) has progressed from a loose to stable regional organization. In the advent of globalization and regionalism, it has gained enormous potential not only for economic trade, but also for exchange of political and socio-cultural values. To demonstrate the strong commitment of the region, the 10-member countries envisioned an ASEAN Economic Community (AEC) in 2003. The blueprint outlining the specfics of this community was released in 2007. ASEAN targets the establishment of AEC by 2015. Although there are factors that hinder the full implementation in the short term, economic integration is an indispensable direction for the region. As every member country aspires for economic competitiveness, AEC appears to be an instrument for economic growth in the medium to long term. The elements stipulated in the AEC blueprint cover range of economic, socio-cultural and political commitments. However, relevant to this study, the creation of single market and production base, which will allow services to flow freely intra and extra-regionally is one of main thrusts of AEC. By deepening trade liberalization, it is expected that member countries would loosen their barriers to allow free flow of investments, labor and information. AEC traverses the deeper motivation of trade liberalization and economic integration, which is sustaianable and equitable distribution of income and social provisions. Healthcare is one of the indispensable social provisions. As more countries begin to embrace the global campaign for universal healthcare (UHC), significant programmatic and policy effect have been poured in the sector. Over the last decade, significant improvements were identified like higher fiscal space for health and changes in the health policy directions. However, despite these efforts, many countries in the region are still suffering from poor health outcomes. Given the increasing commitment towards UHC and momentum to adopt AEC, what are the potential outcomes of AEC in the health systems? Will the AEC live up a vision of equity in the healthcare sector? It is important to understand that liberalization might alter the current health system dynamics as there will be fundamental changes in policies towards human resources, healthcare education and regulation. This technical report aims to achieve the following: (1) determine the magnitude of trade activities in health services in the ASEAN region and (2) determine the potential effects of liberalizing the healthcare market in the healthcare system.

II. Brief background of AEC

ASEAN Economic Community is one of three pillars of the envisioned ASEAN Community. The two other pillars are: ASEAN Security Socio-cultural Communities. As stipulated in related documents and agreements, AEC is a key strategy to “transform ASEAN into a stable, prosperous and highly competitive region with equitable economic development, and reduced poverty and socio economic disparities” (ASEAN, 2007). In 2003, the leaders of ASEAN declared the ASEAN Economic Community blueprint at the Bali Concord. In 2007, at the 11th ASEAN Summit, the leaders made strong commitment to accelerate the implementation of AEC by 2015. AEC envisages the following: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy. Each characteristic can be achieved by implementing the specific action points (as shown in Table 1):

1 He is a Visiting Research Fellow at Japan Center for Economic Research in Tokyo and Supervising Research Specialist at the Philippine Institute for Development Studies in Manila.

2

Table 1. Components of AEC blueprint

Characteristics SpecificsProduction of single market or production base (A). a. Free flow of goods

b. Free flow of services c. Free flow of investments d. Free flow of capital e. Free flow of skilled labor f. Identification of priority areas for integration

Economic competitiveness (B) a. Competition policyb. Consumer protection c. Intellection property rights d. Infrastructure development e. Taxation f. E-commerce

Equitable development (C) a. SME developmentb. Technical development integration

Integration to global economy (D) a. Policies and approaches towards integration to global economy

b. Enhance global participation in the global supply networks

ASEAN has been allowing the free movement of goods and services under several free trade agreements. However, under AEC, trade practices will be deepened as more merchandise goods and services will be free-flowing intra and extra-regionally. The expansion of trade practices under AEC increases the demand to change wide range of political and economic structures and policies. These include streamlining existing regulatory standards (e.g. mutual recognition agreements) and adoption of new laws to stir foreign investments and competition. Rationalizing economic integration as anti-poverty and inequality instrument

The goal of AEC is poverty and inequality reduction (ASEAN, 2007). Over the last decade, the economic growth in the region has been impressive. Many Southeast Asians were pulled out from poverty. However, despite these gains, poverty and inequality still persist especially in low and middle-income countries in the region. Perennial poverty with high-level inequality must be addressed as this affect long-term economic growth. Inequality impedes the growth of the middle-class and restricts sustainable production of human capital, which then adversely affects labor productivity in the long run (ERIA Research Institute Network, 2013).Inequality also traverses other domains of society by infecting social and political stability. But how integration and trade liberalization affect social development? Economic integration is argued as potential instrument in improving social and human development via four pathways: (1) income, (2) access to services, (3) empowerment and (4) sustainability (UNDP). Although some empirical evidence attribute economic integration to greater income inequality and lower wage of skilled workers, convincing body of literature shows positive effects on welfare. Studies on the effect of economic blocs like East Asian Community and Southern African Development Community suggest positive impact on higher income, income equality and economic growth (Ezaki and Nguyen, 2008; Jeanette and Enciso, 2011; Mashayekhi, Peters and Vanzeta, 2012). Income is underpinned by employment, and economic integration open doors for greater employment opportunities. Standard economic theory like Stolper-Samuelson explains the positive effect of economic integration, such as expansion of comparative advantages among countries. As countries build comparative advantages, it results to better employment, efficiency and innovativeness. This is also facilitated by greater cross-border movement of human resources, infrastructure investments and common policies and regulation. The quality of employment has also important bearing on social and human development. Although no empirical existing evidence to support this, the highly competitive environment in an economically integrated market, it can possibly increase the demand for better work conditions and benefits.

3

Prices also play an important link between employment and human development (UNDP, 2011; Prina, 2007). Economic studies on different industries shows decrease in the prices of goods and services (especially the prices of domestic firms) in multi-lateral trade environment (Tovar, 2003: Yang and Hwang. 2003). As economic integration promotes competition in the market, the efficiency of producers improves, thereby decreases the price of services and goods.

III. Services Trade in ASEAN Parallel with the objective of this report, this section focuses on the current trends of services trade (including health services) in ASEAN. Merchandise goods that affects social health provisions (e.g. trade of drugs and medical devices) is not included in this report.

a. Services and services trade Services industry is the second largest origin of Gross Domestic Product (GDP) in ASEAN. However, in Singapore and the Philippines, service industry is the lifeblood of their domestic economies as it accounts for more than 50 percent of their GDP. Other countries have stagnating or decreasing share of the service industry, but the value is increasing in steady pace (see table 2).

Table 2. Share of service industry on the total GDP

Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Brunei 35.3 38.8 38.2 34.6 31.0 27.5 26.1 28.0 25.3 33.7 32.5 27.7 28.2

Cambodia 39.1 40.3 41.5 40.1 41.7 41.2 40.8 41.3 41.3 41.3 40.7 39.8 40.1

Indonesia 38.5 38.3 40.1 41.1 41.0 40.3 40.1 39.5 37.5 37.1 37.7 38.2 38.6

Lao PDR 38.2 38.9 37.8 37.7 40.5 39.2 37.0 37.0 36.6 38.3 35.5 35.7 35.8

Malaysia 43.1 45.8 45.9 44.1 42.2 45.4 44.9 45.4 44.9 49.8 48.5 47.8 49.1

Myanmar 33.1 32.4 32.5 35.1 35.4

Philippines 51.6 52.3 52.3 52.7 52.9 53.5 54.1 54.5 53.9 55.2 55.1 55.9 57.1

Singapore 65.4 68.1 68.1 68.8 67.1 68.4 68.7 71.1 73.5 72.5 72.5 73.3 73.2

Thailand 49.0 48.7 48.1 46.0 46.3 45.8 44.9 44.6 44.4 45.2 43.0 43.7 44.2

Vietnam 43.1 43.0 43.0 42.5 42.5 42.6 42.7 42.8 42.5 43.4 42.9 42.0 41.7

World 66.7 67.7 68.3 68.5 68.2 68.4 68.4 68.6 69.1 70.9 69.9

Source: Analysis of the World Bank data Services comprise of activities that are not easily customized and therefore require direct interaction and transaction between provider (producer) and consumer. Unlike merchandise goods, services are usually intangible, non-storable and consumption is simultaneous with production. However, as argued by many economists, services can now be customized because as technology progresses [Mortensen, 2008]. In principle, how services are traded? In merchandise goods, trade occurs when there is free movement of tangible products from one foreign country to another. In services, people and information are the usual ‘carriers’. Based on the General Agreements on Trade in Services (GATS), there are four modes of trade in services (see table 3):

Table 3. Modes of trade in services

Mode of supply FeaturesMode 1: Cross-border supply Suppliers resident in one country provide services in another country

without physical movement of neither supplier not consumer Mode 2: Consumption abroad Consumer resident in one country travel to the country of suppliers to

consume a services

4

Mode 3: Commercial presence Firms moving to the long location through establishment of foreign affiliate or branch

Mode 4: Temporary movement of natural person

Individual suppliers travelling temporarily to the country of the consumers to provide a services

Source: GATS GATS paved the way for the more formal recognition of trade in services. The creation of GATS underpinned by the objectives of merchandise trade as enshrined in GATT (General Agreement on Tariff and Trade)—“ensuring fair and equitable trade practices, stimulating activity and promoting trade and development through progressive liberalization” (World Trade Organization, 1995). Over the years, the value of traded services has increased significantly. According to Mortensen (2008), the value of traded services in 2008 is USD 2.7 trillion, a 347 increase from 1990. However, the share on the total trade remained constant at 20 percent. In Southeast Asia, the total value of services trade in 2012 is approximately USD 530 billion, a 237 percent increase from 2000. The share on the total trade hovered around 16-17 percent over the last decade, only the Philippines and Singapore have an increasing trend. The growing share of services trade on the total trade in these two countries reflects their service-oriented economies (see Tables 4 and 5). If GATS classification of trade in services is followed, the aforementioned estimates can be grossly underestimated. As of this writing, the only possible source of data is the Expanded Balance of Payments (EBOPS) database of the United Nations and World Trade Organization. According to Mortensen, the total value of modes 3 and 4 might not be totally captured in the EBOPS. By looking at direct investments (inbound and outbound) and foreign worker salaries, the more realistic value of modes 3 and 4 can be captured. The United Nations attempted to capture direct investments on services through the FATS, remittance and foreign worker salary databases. However, these databases are still incomplete.

Table 4. Value of trade in services, 2000-2012, ASEAN (in ten million)

Country 2000 2002 2004 2006 2008 2010 2012 Percent change

Brunei Darussalam 96.6 130.3 161.9 195.9 227.0 143.1%

Cambodia 75.6 98.0 131.9 210.3 269.1 282.5 273.7%

Indonesia 2,085.4 2,287.7 3,291.0 3,291.0 4,349.0 4,286.0 5,386.0 158.3%

Lao PDR 21.9 20.9 22.0 28.6 52.2 117.7%

Malaysia 3,069.0 3,134.0 3,638.0 4,529.0 6,136.0 6,466.0 8,013.0 161.1%

Myanmar 76.9 70.0 67.6 83.6 91.7 19.3%

Philippines 862.4 885.8 986.3 1,275.1 1,827.4 2,546.0 3,249.0 276.7%

Singapore 5,860.0 6,202.0 9,086.0 12,527.0 18,078.0 19,941.0 23,780.0 305.8%

Thailand 2,927.0 3,213.0 4,206.0 5,719.0 7,916.0 7,935.0 10,269.0 250.8%

Viet Nam 595.4 664.6 876.7 1,022.2 1,496.2 1,738.1 2,212.0 271.5%

ASEAN 15,670.2 16,706.2 22,467.4 28,881.5 40,442.7 43,194.6 52,909.0 237.6%

Source: UN data on services trade Note: UN data on services trade is based on Expanded Balance of Payments; base year for % change is 2000 and end year is the latest available data

Table 5. Share of services on total trade, 2000-2012, ASEAN (in ten million)

Country 2000 2002 2004 2006 2008 2010 2012

Brunei 11.0% 11.1% 9.5%

Cambodia 2.4% 2.6% 2.2% 2.4% 1.8% 1.8%

Indonesia 17.9% 20.5% 21.8% 16.9% 14.0% 12.7% 12.4%

Malaysia 14.6% 15.4% 13.5% 13.4% 14.8% 15.1% 15.9%

Philippines 10.3% 10.4% 10.3% 11.2% 14.3% 18.8% 21.7%

Singapore 17.7% 20.4% 19.6% 19.7% 21.6% 23.1% 23.2%

Thailand 18.2% 19.4% 18.0% 18.0% 18.2% 17.3% 17.6%

Viet Nam 16.5% 15.4% 13.0% 10.8% 9.4% 10.0% 8.8%

ASEAN 16.1% 17.3% 16.6% 16.0% 16.6% 16.7% 16.5%

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11

voluntary insuranceSingapore (1) Medical savings; (2) Private insurance and OOPMyanmar Direct government revenue and tax; (2) OOP and (3) donors Brunei Direct government revenue and taxLao Social protection schemes for civil servants, community-based insurance, OOP Service delivery/infrastructure Service delivery cover the networks of health facilities (both primary care center and hospitals that delivers high level of care). In ideal scenario, the population should have access to primary care centers for basic and general healthcare needs. If higher level of care is needed, they should be referred to hospitals. To have this ideal eco-system, primary care facilities, which can be managed and owned by the government or private entities should be close and widely accessible to the people, while hospitals should be strategically located to facilitate referral system.

The countries in ASEAN demonstrate a hetergeous health delivery system, from almost purely private, mixed to almost public primary care and hospital systems. In Singapore, almost 80 percent of primary care centers and hospitals are managed by the sector. In the Philippines and Indonesia, half of the hopsitals are privately-owned. In contrast, almost all hospitals are controlled by the government (see table 10).

Table 10. Health facility, by ownership

Countries Primary care provision Hospital provisions Singapore 80 percent of the pimary care clinics

are operated by the private sector. The remaining 20 percent are ‘polyclinics’ are owned by the government

Majority private hospitals

Philippines Primary care are delivered by both public and private in a highly-segmented market set-up. There is no data on the share of private and publicly-managed primary care facilities.

56 percent of the hopsitals are privately-owned

Malaysia Primary care are delivered by both public and private in a highly-segmented market set-up. Out of the 3145 primary centers, around 45 percent are owned by the private sector

No data

Lao PDR Primary care are delivered by both public and private in a highly-segmented market set-up. Out of the 1000 primary clinics, around 200 are privately owned.

No data

Vietnam There are around 31, 000 private clinics in Vietnam compared to 11, 000 community health centers managed by the government. Around 60 percent of those who seek outpatient care goes to private clinics.

Out of the 725 hospitals, around 85 are privately-owned．Unlike the primary care system, only 4 percent of those admitted patients goes to private hospitals.

Brunei The 30 primary care centers are all government-owned

Majority are public hopsitals

Myanmar No data No data Cambodia No data No data Thailand Almost all the primary sations are 1,002 public hospitals and 316

Indonesia

Human re

In ASEANThe threerelative to(see figure

F

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12

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Figure 8.

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Table 11.

ASEAN

Country

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Share of en

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ojection estima

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ushed many on. However,nt became ris beginning

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rolled and g

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ates were used

ed an upsurgThe sluggish college en, as barriers relativet to pg to slow dow

and growth

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14

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15

In D2D, the most common type of telemedicine, local physicians contact foreign counterparts to refer patient’s case for further evaluation and diagnosis. In tele-radiology and tele-cardiology, the two most popular types of telemedicine, local physicians send laboratory image results then send them to specialist in other foreign specialty hospitals for clinical interpretation and diagnosis. In D2P, local patients contact directly foreign health facilities (sentinel) for clinical advice or guidance. Telemedicine is still in infancy as most existing models are in pilot or experimental stages. However, in more developed and integrated economic blocs, cross border telemedicine has been well utilized to address supply-side constraints to improve healthcare access. In the case of European telemedicine arrangements, the lack of specialized physicians in some countries like United Kingdom and Sweden (e.g. radiologist) prompted hospitals to outsource diagnostic services of other EU countries. Telemedicine has also improved cost-efficiency and waiting time of patients. Case studies in Spain and Sweden observed the following efficiency gains: (1) reduction of waiting time by 50-58% percent; (2) reduction in the cost of hiring new radiologic technologists; (3) reduction in the cost of services and (4) 85 percent of the Present Value of benefits went to patients (Cikowski, Lindskold , Malmqvist , & Billing , 2006). Table 12 shows selected examples of cross-border telemedicine models:

Table 12. Examples of telemedicine models in well-economically integrated economies

Sample models Remarks European Union telehealth models Hospitals in UK send radiology images to accredited

radiologists in Belgium. Hospitals in Sweden send radiology images to clinics in Spain, which re-sends the images to other radiology clinics in 14 EU countries.

Baltic eHealth Project The Baltic eHealth project involved a network of 200 hospitals from Denmark, Sweden, Norway, Estonia and Lithuania. Three hospitals from Denmark, Estonia and Lithuania used the network to establish a cross-border teleradiology service. X-ray images taken in Denmark were transmitted via a secure connection for reporting in Estonia and Lithuania

The Swinfen Charitable Trust established a telemedicine link in Bangladesh, between the Centre for the Rehabilitation of the Paralysed in Dhaka and medical consultants abroad. This low-cost telemedicine system used a digital camera to capture still images, transmitted by email

How can cross-border telemedicine be used to augment the healthcare services? In ASEAN, one of the perennial problems that hinder healthcare access is the lack of health workers. The scarcity is also coupled with the misdistribution of health workers, as most of them are concentrated in highly urbanized areas leaving geographically isolated islands and poor areas unmanned. The poor working condition and

Local hospital

(refering hospital)

Foreign hospital

(referral hospital)

Patient

Local patient

Foreign health

facility

16

the lack of financial incentive have discouraged them to work in these areas. Given this condition, telemedicine can be used as one of the potential solutions to augment the supply-side. Most of existing telemedicine arrangements is utilized within local boundaries (e.g. Buddy Works of the Philippines) and few cross-border models but caters extra-regional clients (e.g. Teleradiology Solutions Inc. of India that caters clients in Singapore and US). There is no reported value or extent of usage of telemedicine is the region. There are several issues that impede the growth of cross-border telemedicine in the region. The lack of legal basis occurs as one of the major bottleneck. As of this writing, there is no regional framework and agreement that should clearly stipulates the acceptability, practice and regulatory issues with regard to telemedicine. The lack of such framework or agreement cannot clear the issues on professional certification and standards, accountability and region-wide accepted process and clinical practice guidelines (Lops, 2008).

b. Consumption abroad (Mode II)

In mode II, consumers travel to other countries to avail services. In the context of health services, medical tourism is one of the most concrete examples that fall under this category. Medical tourism is the actual consumption of health services by foreign patients. The industry has a long history. But not until recently, the growth became promising. In 2012, medical tourism was valued at USD10.5 billion and estimated to reach USD 32.5 billion in 2019 with at 18 annual growth rate (Transparency Market Research, 2013). Four countries in the ASEAN region are in the top destination of medical tourists (see figure 10). Thailand is on the top. The country attracts around 1.2 million medical tourists a year followed by Singapore, Malaysia and Philippines (see figure 10). The highly competitive medical tourism industry in the region is attributed to: following: (1) increasing healthcare cost in many developed countries; (2) changing demographic and epidemiologic patterns all over the globe and (3) increasing demand for aesthetic procedures and other personal healthcare services that are not covered by the typical insurance systems in developed countries (Picazo, O, 2013). As benchmark, table 10 shows the lower costs of countries with high inbound medical tourists (Philippines and Thailand) compared to US.

Source: Picazo (2013)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Figure 10. Number of medical tourist, 2010

17

Table 13. Comparing the prices of healthcare services

Philippines US ThailandDental bridge surgery 360-600 5,500 290-430

Lasik-eye 1000-1500 3000 650-900

Heart-bypass surgery 11,000-25,000 90,000-145,000 23,000-25,000

Noselift 400-1000 4000-12,000 600-2,500

Source: Picazo (2013) There are positive and negative impacts of medical tourism. Medical tourism provides additional revenues for the government from the large spending of medical tourists, which could be good in the domestic economy. The industry could also have spillover effects on other industries, particularly services sector such as transportation and accommodation (Lunt, Smith, Exworthy, Green, & Horsfall, 2011). Medical tourists have also higher demand, which could improve the overall healthcare quality in the country (Picazo, 2013; Ramirez de Arellano, 2011). However, one of the negative effects cited is the effect on medical inflation, which may have serious distributive consequences for domestic patients (WHO, 2009). Though cross-subsidization in the use of specialized machines may also occur to mitigate this potential problem (Singapore model) (Lunt et al, 2011).

c. Commercial presence (Mode III) In mode III, foreign companies acquire local companies in the form of portfolio investments, commercial loans or foreign direct investments. In the health sector, foreign companies usually invest in local hospitals/clinics. FDI in the healthcare sector is driven primarily by the growing demand for quality healthcare infrastructure because of increasing middle-class population and medical tourism. In the ASEAN region, data on the total value of foreign investments in hospitals is not readily available. However, there are noted investments of foreign companies in countries in the region (see table 11).

Table 14. Example of commercial presence of foreign firms in ASEAN

Country of Origin Investment

Vietnam V Intertnational and Viet-France International

(France), Fortis Healthcare Group (India),

Columbia Asia (Malaysia), Family Medical

Practice (Israel).

Philippines Bamrungrad (Thailand), Lombard (US)

Singapore Bamrungrad (Thailand)

Indonesia First Real Estate Investment Trust (Singapore),

Columbia (Malaysia)

Myanmar Metro Pacific Group (Philippines)

Malaysia Raffles (Singapore) Sarvamangla (2013) argued improvement in infrastructure, quality and standards as the positive effects of activities under mode III. In the case of Thailand and Philippines, to ensure that the quality of healthcare services is at par with other hospitals, many hospitals are now seeking international accreditation bodies. Spill over effects were also noted improvement in the supply of diagnostics and laboratory equipment (Sarvamangla, 2013; Smith, 2004). However, there are also negative effects, Increase in curative care instead of primary care utilization

might occthe healthpublic to f(Chanda, 2

In mode Itransient mproductionactive in tsending co In the AStransient m2000 to 2started to healthcare

Source

Table 15.

1995-2010

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19

VI. Barriers to free trade liberalization Notwithstanding the promises of deeper free trade liberalization under AEC, there are existing barriers that impedes free movement of services to materialize in the region. Among all the four modes, explicit policy barriers are seen in mode III (commercial presence) and mode IV (transient migrants). In general, government do not restrict telemedicine. Since this services are conducted electronically, it may be hard to impose limiations. While government usually do not restrict its citizens to seek medical care in other countries (Arunanondchai & Fink, 2007). For commercial presence, the explicit barriers identified include foreign equity limiations and need identification. Table 13 shows of the latest commitment of the 10 countries in easing the restrictions under mode III under AEC. It appears commitments varies across country. Countries like Lao, Vietnam, Cambodia and Philippines plan to be less restrictive, while countries like Malaysia, Thailand and Indonesia impose equity restrictions and need identification before foreign investments in hospitals are granted.

Table 16. Commitments under mode III

Country Mode 3

Hospital Clinic

Philippines Up to 100% foreign equity participation is allowed

Up to 100% foreign equity participation is allowed. Special services, 70 percent equity allowed.

Thailand Thailand may prescribe, in any area, numbers of hospital, or types of medical services to be provided in the hospital.

Foreign equity participation must not exceed 49 per cent of the registered capital. The number of foreign shareholders must be less than half of the total number of shareholders of the company

Malaysia Only through a locally incorporated joint-venture corporation with Malaysian individuals or Malaysian- controlled corporations or both and aggregate foreign shareholding in the joint-venture corporations shall not exceed 70 per cent

Cambodia No limitation except at least one director for technical matters must be Cambodian. For dental services, provision is permitted through a joint venture with Cambodian juridical persons

No limitation except at least one director for technical matters must be Cambodian. For dental services, provision is permitted through a joint venture with Cambodian juridical persons

Singapore Foreign equity ownership permitted up to 70 % Foreign equity ownership permitted up to 70 %

Lao Joint venture with Lao service suppliers is allowed for hospitals with more than 100 bed capacity. 100 percent equity is allowed.

Joint-venture with Lao services suppliers and foreign equity participation limited to 49%

Vietnam None None Myanmar For hospital services, joint venture with

Myanmar citizen or enterprise with 51% foreign equity is permitted. Foreign organizations and persons are not allowed to own land in Myanmar.

For hospital services, joint venture with Myanmar citizen or enterprise with 51% foreign equity is permitted. Foreign organizations and persons are not allowed to own land in Myanmar.

Indonesia For hospital services in East Indonesia region (except in Makasar and Manado) Joint venture with foreign equity is up to 70 percent. In Medan and Surabaya up to 51%.

Joint venture with foreign equity participation up to 70%, except in Makasar and Manado up to 51%

Brunei No stipulated limitation No stipulated limitation Source: ASEAN

20

For transient migration of health workers, the policy directions for each country also varies. The entry of foreign health workers in countries like Malaysia and Singapore is subject to economic or need test, while the Philippines and Indonesia totally restricted it. In Thailand, although the country allowed foreign health workers, there are other impediments such as language certification.

VII. Policy implications Given the general issues, there are some potential action points that can be pursued at the regional level:

Development of regional position on the practice, use and other issues related to telemedicine. As noted in the earlier section, there is no clear-cut guidelines or legal business tackling this mode. The region can study the EU model on telemedicine.

As echoed by Arunanondchai & Fink, the region can pursue activities that would imporove the the quality of health services thorugh medical training and knowledge exchange programs. Transfer of skills could also be promoted by region-wide training initiatives and the harmonization of course curricula.

Provide more empirical evidence on the effect of trade in the health services of the region using

different macro-economic techniques.

21

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