WPS5115
Policy Research Working Paper 5115
Trade in Health Services
What's in it for Developing Countries?
Olivier Cattaneo
The World Bank
Poverty Reduction and Economic Management Network
International Trade Department
November 2009
Policy Research Working Paper 5115
Abstract
This study summarizes the existing knowledge and and minimize the latter--of trade in the health sector. It
relevant abstracts and case-studies on the design of is designed for non-trade (health) experts to understand
health and/or trade reforms and policies. The study how trade can help to improve health systems and access
aims to contribute to the understanding of the potential to health services, and for trade specialists to understand
benefits and risks--and ways to maximize the former the specific characteristics of the health sector.
This paper--a product of the International Trade Department, Poverty Reduction and Economic Management Network, and
the DFID supported Global Trade and Financial Architecture project--is part of a larger effort in the department to explore
the role of services trade for development and will appear, in a revised version, in a forthcoming World Bank publication..
Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author wishes to thank
Bernard Hoekman, Sebastian Saez, Nora Dihel, and Michael Engman for their valuable comments. The views expressed
are personal and should not be attributed to the World Bank. The author may be contacted at ocattaneo@worldbank.org.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the
names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Produced by the Research Support Team
TRADE IN HEALTH SERVICES:
WHAT'S IN IT FOR DEVELOPING COUNTRIES?
Olivier Cattaneo
World Bank
Key words
WTO, Trade, Health services, GATS, Medical tourism, Medical travel, Movement of health
personnel, Brain drain, Health shortages, Regulation of health services.
JEL classifications
F13, F14, F15, F16, F22, F24, H51, I11, I18, J61.
TRADE IN HEALTH SERVICES:
WHAT'S IN IT FOR DEVELOPING COUNTRIES?
Trade in health services in a nutshell
A number of countries are competing to become key exporters of health services. In particular,
the growing phenomenon of health tourism appeals to many developing countries where clinics
servicing foreign clientele flourish. An increasing number of countries offer attractive surgery,
recuperation and rejuvenation holiday packages, from South Africa or Costa Rica to Thailand or
India. On the demand side, the US remains the largest consumer of health services worldwide.
Deloitte Consulting (2008) estimated that 750,000 Americans went abroad for health care in
2007, with a projected growth rate of 100 percent from 2007 to 2010, to reach six million
outpatients in 2010. On the supply side, developed and developing countries are competing: over
35 countries serve more than a million medical tourists annually. In 2008, more than 400,000
non-US residents sought care in the US and spent almost USD 5 billion for health services; they
were 1.2 million in Thailand, 450,000 in India, 410,000 in Singapore, and 300,000 in Malaysia.
Motives behind the cross-border movement of patients do vary a lot, however, and not all
countries compete on the same market segments: there is a case for specialization in market
niches on the basis of each country's resources and trade opportunities.
Medical tourism has received significant media coverage and attention. However, trade in health
services is not limited to the cross-border movement of patients, which represents only one of the
four possible modes of services delivery identified by the General Agreement on Trade in
Services (GATS) � mode 2 (see Table 1). Other key components include the temporary
movement of health professionals to deliver services across borders (mode 4, e.g., cross-border
movement of doctors and nurses), foreign establishment (mode 3, e.g., the opening of a branch of
a clinic in abroad), and the cross-border provision of health services through technological means
(mode 1, e.g., telemedicine). In addition, a number of other services and goods are traded at the
margin of health services: it is a common characteristic of many services that they enable trade in
other sectors.
Trade in health services potentially has significant effects on the availability of these services, the
quality of the health system, and the population's health at large in both the exporting and the
importing countries. Effects of trade in health services also considerably vary from one mode of
delivery to another, and imports often appear more important than exports to improve one
country's domestic health system. An excessive enthusiasm for medical tourism that is not
backed by serious business plans or coherent government policies could result in a low return on
investment, lead to frustrated expectations, and prejudice local supply of health services. Not all
countries have a comparative advantage in health services trade. While a carefully designed trade
strategy in the health sector could have significant positive spill-over effects on the domestic
supply and access to health services (in addition to the global positive impacts of trade), a poorly
designed strategy could divert already scarce resources from developing countries' peoples in
need.
Health is not any commodity or service; it is a public good. Trade in health services could directly
contribute to reaching � or missing, if negative effects prevail � health-related Millennium
Development Goals.1 Trade objectives in the health sector should be compatible with other
1
Millennium Development Goals pertaining to health include: MDG 4 (Reduce by two thirds the mortality
rate among children under five), MDG 5 (Reduce by three quarters the maternal mortality ratio; Achieve,
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legitimate social objectives (e.g., universal access). Health is also a highly regulated profession;
here again for legitimate purposes: even more than other professional services, medicine is
characterized by the asymmetry of information between the service provider (doctor trained to the
practice of medicine) and the patient (seeking treatment). Regulation of the health sector is
necessary to protect patients against malpractice. Trade promotion in the health sector is therefore
not about deregulating, but better regulating, and sometime even regulating more, e.g. to adopt
higher quality standards for hospitals and clinics. Similarly, trade promotion is not about
challenging the public health sector, which often plays a crucial role in the supply of health (and
medical education) services, but about designing efficient services in a more competitive
environment. Experience shows that public involvement is often necessary to the success of
export promotion strategies in the health sector. Nonetheless, private investment (including
foreign investment) remains a crucial factor of success, in particular where public resources are
too scarce to maintain an efficient health system.
Table 1. What do we mean when we talk about trade in the health sector?
Trade in health services Trade in ancillary services Trade in goods associated with
health services
Mode 1 - Tele-medicine, including - Distance medical - Health care equipment
diagnostics, radiology education and training - Drugs
Cross-border - Medical transcription, - Medical waste
Supply back office - Prosthesis
- Medical research tools
and databases
- Medical insurance
Mode 2 - "Medical tourism", i.e. - All activities associated
voluntary trip to receive with health tourism (e.g.
Consumption medical treatment abroad transport, hotel,
abroad - Medically-assisted restaurant, paramedical,
residence for retirees local purchases, etc.)
- Expatriates seeking care in - Local medical education
country of residence and training of foreign
- Emergency cases (e.g. nationals
accident when abroad)
Mode 3 - Foreign participation or - Foreign-sponsored
ownership of education or training
Commercial hospital/clinic or medical centers
presence facilities (e.g. capital - Foreign-sponsored
investments, technology medical research
tie-ups, collaborative facilities
ventures)
Mode 4 - Movement of doctors and - Movement of doctors
health personnel for the and health personnel for
Presence of purpose of commercial other purposes (e.g.
natural medical practice education or training)
persons
Sustainability of public health insurance schemes, ageing of the population, and related-supply
bottlenecks in the health system are among the drivers of frustrations and outbound medical
tourism in the North. Most developing countries face far more critical health issues: critically low
medical density, poor quality of the infrastructure and services, etc. that combined with other
factors result in poor public health and higher mortality rates. In all those countries, trade in
by 2015, universal access to reproductive health), and MDG 6 (Halt and begin to reverse the spread of
HIV/AIDS; Achieve, by 2010, universal access treatment for HIV/AIDS for all those who need it; Halt and
begin to reverse the incidence of malaria and other major diseases).
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health services should not only be seen as a source of income in the balance of payments, but
primarily as a means to remedy shortages and improve domestic health systems. Therefore, the
main challenge will be to find adequate accompanying policies that aim to maximize the positive
domestic spillovers and minimize the negative domestic spillovers of trade in health services.
Also, the focus of media and many expert studies has been mainly on North-South (when it
comes e.g. to the movement of patients) or South-North (when it comes e.g. to the movement of
doctors and nurses) trade. The potential of South-South trade has often been ignored or neglected,
in sharp contrast with the reality of trade: in Tunisia, for example, Libyans represent more than 80
percent of the foreign medical patients; similarly, more than 80 percent of the Omani patients
treated abroad went to India. There is a case for further cooperation in the South, e.g. for the
creation of regional health centers of excellence (for medical education and/or treatment) that
would help sharing the cost of medical education and infrastructure and reaching a critical size
for writing off investment in technologies.
There are a number of studies that extensively cover the topic of trade in health services (see e.g.
Bloui, Drage, and Smith, 2006). The ambition of this paper is more modest: it is an effort to
summarize existing knowledge and to select most relevant abstracts and case-studies that could
help any individual or organization involved in the design of health and/or trade reforms and
policies understanding the potential benefits and risks � and ways to maximize the former and
minimize the latter � of trade in the health sector. It is designed for non-trade (health) experts to
understand how trade can help improving health systems and access to health services, and for
trade specialists to understand the specific characteristics of the health sector.
The first section of the paper explores what a country could expect from increased imports and/or
exports of health services, and what accompanying policies may be needed to maximize the
benefits and minimize the costs of opening. The second part briefly outlines strategies to foster
trade in the health sector that combine domestic reforms and offensive trade negotiations.
1. WHAT TO EXPECT FROM INCREASED TRADE IN HEALTH SERVICES
The impact of trade on countries' health systems may vary a lot according to various factors,
including the mode of services delivery, the structure of the domestic market for the provision of
health services, and the adequacy of accompanying regulations and policies. In other terms, trade
in health services may create opportunities and have a number of benefits � not only for the
business partners involved in trade, but for the population as a whole, but it could also potentially
have a cost and negative effects. This section of the study reviews those effects, and suggests
solutions � on the basis of country case-studies � to maximize the positive and minimize the
negative spill-over effects of trade. It also stresses that the common tendency to protect the
domestic market against imports could prove particularly damaging in the health sector: imports
are just as important as exports � if not more important. Given that the four modes of services
delivery are intertwined, it could also prove a vain attempt. For example, a country that does not
allow foreign investment in the health sector or does not allow foreign doctors to practice locally,
might be able to limit its imports under modes 3 and 4; this policy is very likely, however, to
result in higher imports under mode 2, since a number of nationals will seek treatment abroad to
access a certain quality of care (technologies and internationally reputed doctors); this would
create further inequalities in access to health care, and money spent on health care abroad would
never benefit the domestic system � unlike, potentially, foreign investment or the domestic
practice by a foreign doctor.
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Successively, this section analyses the impact of trade from the perspective of the importing and
exporting parties, underlining potential threats and opportunities, and ways to minimize the
former, and maximize the latter.
Who is the exporter? Who is the importer?
Under mode 1, the exporter and the importer do not move across borders � the service only crosses the border:
A patient in country A (importer) receives treatment from a doctor located in country B (exporter).
A hospital in country A (importer) outsources transcription services in country B (exporter).
Under mode 2, the importer moves across the border toward the exporter:
Country A (importer) sends patients for treatment in country B (exporter).
A tourist from country A (importer) received treatment while traveling to country B (exporter).
Under mode 3, the exporter moves across the border toward the importer:
Country A (importer) authorizes the establishment on its territory of a medical facility partially owned � and
eventually operated � by a healthcare provider from country B (exporter).
Under mode 4, the exporter moves across the border toward the importer:
Country A (importer) authorizes a health professional from country B (exporter) to practice medicine on its
territory and on a temporary basis.
1.1. The import side: Using trade to improve domestic access to better quality health
services
Most countries, in particular but not exclusively in the South, suffer from shortages in the health
sector (human and/or capital). Increasing imports, through foreign direct investment or other
channels, could contribute to remedying these shortages, although it could present some
challenges for countries where private participation to the provision of health services has been
deliberately limited. Indeed, there is a case for increasing some types of imports provided
adequate accompanying measures are taken.
Benefits (realized and expected) from imports
The benefits of imports will vary according to the mode of services supply, and according to
whether the service is provided/consumed locally (e.g. imports under mode 3) or abroad (e.g.
imports under mode 2), in other terms, whether the money spent benefits the domestic (minus
leakages) or a foreign health system.
Mode 1
Telemedicine remains underdeveloped. One could imagine that the benefits would be the same as
for mode 2, without the inconvenience associated with travel (i.e. the same benefits available to
more people). These would include: the alleviation of some human and infrastructure resources
constraints, in particular in remote and underserviced areas, and broader access to higher quality
personnel, diagnosis and treatment. Same as under modes 3 and 4, one could imagine that trade
under mode 1 would promote knowhow and technology transfers.
With regard services such as medical transcription, trade reduces the cost of operating medical
practices, and therefore makes access to medicine theoretically more affordable.
Mode 2
The treatment of patients abroad helps alleviating some of the domestic human and infrastructure
resources constraints. The case of Oman (case-study n�1) is typical of a developing country with
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low medical density that needs to send patients abroad, at least in the short term, until adequate
treatment is provided locally. In Oman, and in a number of other countries, the travelling patient
can seek reimbursement if the treatment is not available locally. This sponsoring is very costly,
however, and not all countries can afford such schemes. In addition, in many developing
countries, medical travel remains driven by a lack of confidence in local health care providers,
and remains perceived a luxury rather than a necessity.
In countries, mainly in the North, where treatment is more expensive than in competing health
services provider countries, imports under mode 2 could ease some tensions on health insurance
systems and make them sustainable. According to Mattoo and Rathindran (2005), the healthcare
system of the US would save USD 1.4 billion annually if only one in ten patients were to go
abroad for a limited set of 15 highly tradable, low risk treatments.
Case study n�1:
Remedying Health Shortages Through Trade under Modes 4 and 2 � The Case of Oman
Oman is an upper-middle income, resource-rich, and labor-importing country. The health sector is no exception, and
Oman is a net importer of health workforce. In 2003, the Ministry of Health employed 18,558 professionals, of whom
almost 40 percent were foreigners � up to 76 percent of the physicians. Most health administrators are Omani nationals.
The same year, there were 2,838 health professionals employed in the private sector, and 95 percent were foreigners
(mostly from India, Egypt, Pakistan, Philippines, Sudan, and Iraq).
Foreign Professionals Working in the Public Health Sector in Oman
100
90
34 39
80
Percentage workforce
51
70 64 65
60 76
50
40
66 61
30
49
20 36 35
10 24
0
Physicians Dentists Pharmacists Nurses Assistant Total
pharmacists workforce in
MOH
Omani Foreigners
Source: WHO
Despite these significant imports, the Omani health sector still falls below international benchmarks with a density of
12.6 doctors, 31.6 nurses, 0.7 pharmacists, and 0.7 dentists per 10,000 inhabitants (MOH, 2006). Therefore, Oman has
to supplement these imports under mode 4 with imports under mode 2, i.e. send some of its patients for treatment
abroad. Accordingly, there is an official policy to sponsor Omanis for treatment abroad if not available locally. The
average annual cost was USD 3 million for 2001-2003. The number of patients treated abroad has dropped from 418 in
1990 to 237 in 2006 due to public investments in the sector. In 2006, 44 Omani patients were treated for neoplasm
abroad (compared to 180 in 2000), 58 for orthopedic diseases, 39 for cardiac diseases, and 31 for ophthalmologic
diseases. Targeted public investment can help significantly reduce the cost of these healthcare imports. For example,
government-funded medical travel for oncology fell by 92 percent from 2004 to 2005 after an oncology center opened.
At the margin of healthcare services, Oman also imports medical education services under Mode 2: in 2003/2004,
1,341 medical students received foreign training � 52 percent were government sponsored, and 48 percent self-
sponsored.
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Omani Patients Treated Abroad, 2006
Egypt
1 Thailand
Jordan Other
1
USA 1 6
3
Kuwait
4
Germany
8
UK
31
India
182
Source: MOH of Oman, 2006
Source: Suleiman (2005) and Ministry of Health of Oman (www.moh.gov.om)
Mode 3
Foreign investment plays a crucial role in many parts of the economy, both in developed and
developing countries. However, due to the structure of many health systems, the role of the public
sector in health, and the difficulty to articulate public and private interests in the provision of
health services, foreign direct investment (FDI) in the health sector has remained underdeveloped
in many countries. Potential gains are nonetheless important and should not be neglected.
Foreign investment could bring new resources to the health system, foster competition among
health services providers (raising standards, quality, and lowering prices), and encourage
technology and knowledge upgrades and transfers (e.g. training of medical and management
personnel, or economies of scale on medical supplies). It could reduce the burden on public
spending, including by reducing the need for sponsoring expensive treatments abroad, and create
more jobs. The case of India (case-study n�2) perfectly illustrates these effects (and their limits).
It should be noted that the provision of health-insurance services (primarily through modes 3 and
1) by foreign companies also could have an important impact on the sustainability of the domestic
health systems and facilitate access to health services.
In India, for example, Hindustan Latex Ltd and Acumen Fund (USA) created a joint venture to
develop a small chain of high-quality and affordable (30-50 percent of regular price) maternity
hospitals designed to serve the low-income population of underserviced Indian regions. Initiators
of this initiative hope it could serve as a global model for increasing access to qualitative and
affordable health care for the world's poor.2
2
See http://www.lifespringshospitals.com.
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Case Study n� 2:
Remedying Health Shortages Through Trade under Mode 3 � The Case of India
The Indian healthcare delivery market is one of the largest service sectors in the economy (estimated USD 18.7
billion and 4 million jobs) that has grown at about 13 percent annually in recent years. Nonetheless, India's health
sector still falls well below international benchmarks � including in comparable developing countries � and needs to
scale up considerably in terms of the availability and quality of its physical infrastructure and manpower. Given
the growing demand, the significant and growing role of the private sector in healthcare delivery and expenditure (75
percent of total healthcare expenditure, with public health expenditure accounting for less than 1 percent of GDP,
compared to an average 3 percent in developing countries, and 5 percent in developed countries), and the huge
investment needs, there has been growing interest among foreign players and non-resident Indians to enter the Indian
healthcare market.
The Indian foreign investment policy is very liberal for hospitals, and foreign investors do not face major regulatory
hurdles to entering the Indian market. Some 90 FDI projects in hospitals and diagnostic centers have been approved
during the 2000-2006 period, for a total of USD 53 million, and covering both developed (Australia, UK, US, Canada)
and developing countries (UAE, Saudi Arabia, Malaysia, Singapore, Mauritius). This list, however, does not include
the well-known corporate hospitals in the country (identified projects were small or mid size hospitals, within the 1-2
million dollar investment range), and FDI sometimes is received only for routing purposes (e.g. a promoter company
based in Mauritius for tax benefits only). Overall, it appears that foreign investment in Indian hospitals remaines
limited, notwithstanding the liberal regulatory framework. According to one estimate, foreign investors have
tapped only 10 percent of the Indian healthcare market.
It is perceived that there will be increased inflow of foreign funds into India's hospital segment in the near
future, with major expansion plans by existing and prospective corporate players. These include huge medical cities
with large super-specialty or multi-specialty hospitals and integrated healthcare services as well as scaling up of
existing operations and setting-up of new hospitals around the country. While there are several prospective players in
the Indian hospital market (e.g. Dubai, Singapore, the International Finance Corporation), the main source countries for
FDI are anticipated to remain the US, UK, Australia, and Singapore. It is also recognized that large investments (USD
100 million or more) can only happen through investments in corporate hospitals (chain), and that India would
take some time before it can replicate the developed country model of very large corporate chain hospitals given the
average size of hospitals in those countries is several times that of some of the largest hospitals in India (e.g. 10,000
versus 2,000). Reputation and brand value are key to accessing funds through private equity, foreign institutional
investors, or external commercial borrowing. Hence, new hospital projects would primarily have to rely on domestic
debt and would not see much foreign capital inflows except through individual non-resident Indian investors or through
groups of small investors.
A further analysis of the reasons for the limited presence of foreign investment in Indian hospitals reveals a number of
external and domestic constraints. These include the fact that the number of foreign players is limited, there are many
competing investment destinations, and there are difficulties for foreign players in entering independently and in
maintaining joint ventures. In addition, the gestation period in hospital projects is long and investors may not be willing
to make such a long term commitment. More importantly, various domestic factors adversely affect the returns to
investment in hospitals in India: high initial establishment costs (e.g. prohibitive cost of procuring land), low health
insurance penetration in the country (i.e. smaller consumer base for corporate hospitals), restrictions on medical
training and providers (i.e. supply bottlenecks and adverse effects on the quality of the personnel), high cost of
importing medical devices (and a limited domestic manufacturing capacity in this area), other regulatory deficiencies
(e.g. lack of standardization, proper governance, and quality assurance), and lack of policy clarity and priority to the
healthcare sector. Thus, the Indian experience shows that a liberal foreign investment policy is not enough to
secure a strong foreign participation in the hospital segment.
Looking at the impact of foreign investment in hospitals in India, it has been observed that:
- Foreign funded hospitals are likely to focus on more advanced procedures and specialty areas;
- They are more likely to focus on curative and intervention oriented treatment than on preventive and long-term
kind of treatment;
- They are likely to employ a higher ratio of technology to personnel in their healthcare delivery and thus involve a
substitution of human resources with technology and equipment;
- They are likely to invest much more in medical equipment and devices and also in specialized and experienced
medical personnel, thus involving a focus on high-end human resources and high-end technology;
- They tend to have better systems and processes and usage of IT, which creates more efficient and professional
work environment;
- They pay higher rates to staff at all levels and particularly to senior medical personnel;
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- They are more likely to attract overseas doctors and specialists than other hospitals;
- They are more likely to be accredited domestically and/or internationally;
- Their costs are likely to be comparable to or slightly higher than those of non foreign funded large hospitals;
- Their costs will tend to be higher than for small and medium size nursing homes and hospitals, mainly due to
greater capital intensity and focus on quality systems and processes and focus on hygiene;
- There could be positive externalities in other areas, some of which could further drive foreign investment in
hospitals;
- They could draw away medical personnel at all levels form other hospitals and could adversely impact the quality
of medical manpower available to competing institutions;
- There is likely to be closure of substandard institutions, some consolidation of the hospital segment, and new
kinds of arrangements could emerge between larger and smaller players as the healthcare sector evolves;
- There could be greater segmentation between the public and private sector with resource flows towards the latter,
greater wage disparity, unless innovative arrangements emerge between the two segments and reforms are
undertaken in the public sector hospitals.
While there are clearly concerns about the equity, affordability, and market segmentation implications of
growing foreign investor presence in India's hospital segment, it is evident that the root cause lies in structural
problems that are already present in the healthcare sector, such as lack of affordable health insurance schemes or
inappropriate regulations on medical education providers. Therefore, the benefits of foreign investment in hospitals are
likely to outweigh these adverse effects, and the solution lies in strengthening the public healthcare system, in
amending certain regulations that affect all players, and in introducing schemes, which provide affordable
access to healthcare for all and not in restricting foreign investment.
Source: Rupa Chanda (2007).
Mode 4
A number of developed and developing countries resort to mode 4 imports to remedy shortages in
key health personnel. From the importer's perspective, this reduces the cost of medical education
and training, allows greater flexibility in the management of health personnel, and provides
access to top-quality personnel trained in specialties that are sometime not available locally. In
turn, this contributes to facilitating technology and knowledge transfers.
The flexibility of mode 4 also allows some countries to remedy health care provider shortages in
remote or underserviced areas (see e.g. Canada). In many countries, the attribution of visas to
health personnel is subject to economic need tests.
Risks associated with increased trade / aversion to opening
Domestic health markets are highly regulated and often characterized by a high level of
protection against imports. Motives underlying some level of regulation and/or protection may be
legitimate, although a number of measures allow mitigating the risks and maximizing the benefits
of opening. Here again, a distinction should be made according to the mode of service supply,
and to whether the service is provided/consumed domestically or abroad.
Mode 1
So far, trade in health services under mode 1 has remained limited mostly due to technological
reasons. With the current level of technological development, mode 1 does not appear cost
efficient. For other services ancillary to health, such as back office or transcription services, the
argument may not prevail; however, these activities could be a challenge for regulators, e.g. with
regard securing confidentiality of medical information.
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In general, mode 1 imports could fall in the cracks of domestic regulation. How to ensure that a
doctor operating abroad meets all the qualification criteria required or respects applicable
deontological rules? Mode 1 trade in health services could increase the risks of malpractice,
unless an adequate regulatory framework is put in place.
Mode 2
Mode 2 � and trade in general � should not become a substitute for domestic reforms. In the case
of Oman (case-study n�1), government-sponsored medical travel is supplemented by domestic
reforms aimed at limiting imports under mode 2: between 1990 and 2006, the number of Omani
seeking treatment abroad has been halved; investment in an oncology center made the number of
patients seeking such treatment abroad drop by 92 percent. In Abu Dhabi, government-funded
medical travel for cardiology decreased by 55 percent from 2004 to 2006 after a cardiac-surgery
team with significant international experience set up shop in the Emirate (Ehrbeck, Cuevara, and
Mango, 2008). Mode 2 imports are only a second best and should remain a temporary solution
awaiting domestic capacity building.3
Mode 2 presents similar regulatory challenges as mode 1. How to control the quality of the
services provided abroad? Who should bear the costs of follow-up operations in case of medical
complications (many insurances refuse reimbursement of such operations)? On what basis should
reimbursement be done? Answers to these questions have important ramifications: at stake are the
equity of access (if, absent an adequate sponsoring/insurance scheme, only the rich can afford to
seek treatment abroad) and the quality of health care. For patients, travel abroad remains
suboptimal due to the inconvenience of travel and the desire to undergo medical procedures in a
familiar environment.
It should be noted also that resources spent abroad are diverted from the domestic health system
and the dynamic effects are confined abroad. In addition, the unit cost of hospital care highly
depends on the volume and overall capacity utilization of a facility; thus, increased imports under
mode 2 result in higher treatment costs at home (and, worth case scenario, for those who cannot
afford traveling).
Mode 3
The impact of imports under mode 3 will considerably vary according to the nature and the
objective of the investment. It is often feared that foreign establishments will only target a foreign
traveling clientele or a rich domestic clientele: this again would raise concerns regarding equality
of access to health care. Moreover, foreign establishments (supposedly paying higher salaries
than the public or domestic private sectors) could divert scarce human resources to treat a
fortunate clientele, to the detriment of the poor and the objective of universal access to health. For
the government, this internal brain drain is a lots return on public investment on education. This
could also add to the initial cost of attracting foreign investors (fiscal incentives, building
infrastructures, etc.).
There are, however, a number of measures that a government can take to mitigate these risks.
Leakages are higher if the markets are segmented: for example, in Tunisia, offshore clinics
benefit from a higher degree of openness to trade (e.g. investment incentives for foreigners,
3
It remains necessary for government to prioritize their expenses in the health sector; the cost of certain
technologies might justify for some countries to continue sending patients abroad instead of diverting
resources from other more vital investments.
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authorization for foreign doctors to practice) but can treat local patients only within a certain legal
limit (20 percent of the clientele). As a result, there are more leakages, and spillover effects for
the local population are minimal. On the contrary, in Indonesia, foreign investment is directed to
private wings in teaching and tertiary care hospitals in cities other than Jakarta. There, positive
spillover effects are maximized. Similarly, in the case of Thailand (case study n�6), the
government has introduced compulsory public service and requires from the private sector a
contribution to investment in education (to both avoid and compensate for the effects of internal
brain drain).4
Mode 4
Imports under mode 4, if not properly managed, could raise a number of issues. First, mode 4
movements of personnel are often mistaken with permanent migration. Then, the media has
related a number of stories where nurses, and sometimes doctors, from developing countries had
been exploited while working on assignments abroad. Foreign temporary employees could be
perceived as a threat by national employees if different labor conditions (including salary) apply.
This is unfortunately a frequent scenario, and while not a disincentive for mode 4 trade, importing
countries should make special effort to avoid such abuses, and better regulate the temporary
movement of health personnel.
1.2. The export side: Trade in health services as an engine of growth and diversification
Exports are the focal point of attention of a large segment of the literature on trade. Gains
promised to participants to the global race for medical tourism have generated a few vocations.
Long neglected, trade in health services appears as a credible engine of export growth and
diversification in selected developing countries. While the benefits could be important, it should
be noted that not all countries have a comparative advantage in the sector, and some forms of
export could have negative effects domestically unless adequate accompanying measures are
taken.
Global trade and prospects at a glance
Statistics on trade in services � at large � are scarce and imprecise, in part because services are
non-tangible and hence long considered as non-tradable. Health is no exception, and it remains
difficult to assess the real size of the global health services trade market. Estimates vary
significantly: for example, a 2004 McKinsey study reported that 150,000 foreigners visited India
for treatment that year, while a most recent 2008 study by the same consulting firm suggested that
"the market is not as large as reported" and placed the current market at 60,000 to 85,000 medical
tourists a year (Ehrbeck et al., 2008). Another consulting firm, Deloitte (2008), estimated the
world medical tourism market to be around USD 60 billion in 2008 (estimated to grow to USD
100 billion by 2010) and one million+ medical tourists annually, with 750,000 for the US alone
(estimated to grow to 6 million by 2010).
Despite these variations, it is widely recognized that trade in the health sector has a strong growth
potential. It is also recognized that developing countries will potentially be the main benefactors
of these new trade opportunities. Factors of growth include: ageing of the population and growing
demand in the North (shortages of health care providers), rising income (and hence demand) and
4
These measures could also have negative effects, such as increasing absenteeism in the public sector, and
should be designed with great care.
- 11 -
emergence of a middle class in the South. These factors, combined with an increasing control of
spending in the North, create new trade opportunities, in particular for developing countries.
Deloitte (2008) plans on a 100 percent annual growth of outbound medical tourism in the US over
the next few years. It remains that a number of obstacles need to be removed, such as the absence
of portability of health insurance, for trade to really flourish.
Not all trade modes are equally developed and have similar prospects. A recent ECIPE study
suggested that there was a great deal of variation within different segments of international trade
in health services. The author suggested (focusing on the European Union) that, for the most part,
international trade was conducted through the movement of foreign health professionals between
countries (mode 4), as well as the presence of foreign healthcare firms in local markets (mode 3).
Trade based on the travel of healthcare consumers to foreign markets remained very low (mode
2), but still significantly higher than international cross-border trade in health services (mode 1)
(Herman, 2009).
It should be reminded also that a number of ancillary services and products are traded at the
margin of the global health services trade. These include medical education and training, offshore
business services, paramedical and wellness, health insurance, pharmaceuticals and medical
equipment/supplies, etc. Sometime, health services are also commingled with other services, such
as tourism and travel (see case-study n�3) or real estate (e.g. retirement homes with medical
facilities). The global health market is therefore much larger than rough estimates on services
suggest.
Case Study n�3:
Travel and Health Industries Commingling � The Case of Thai Airways
A number of travel and leisure companies have invested in the health sector and/or offer their clients packages that
include some health care. For example, Thai Airways offers a number of health packages through its Royal Orchid
Holidays program. These include:
Package in Bangkok
Superior Physical-Check-Up at Bangkok Hospital (3 hours)
Medical Check-Up: Hearth Care Programme at Bangkok Hospital (3-4 hours)
Premier Healh Examination at Bumrungrad International (3-4 hours)
Physical Check-Up at Ramkhamhaeng Hospital (3-4 hours)
The Dental Examination and Cleaning at Bumrungrad International (30 minutes)
Package in Chiang Mai
Physical Check-Up at Chiang Mai Ram Hospital (3-4 hours)
Check-Up at Rajavej Chiang Mai Hospital (3-4 hours)
Package in Phuket
Medical Check-Up at Bangkok Phuket Hospital (3-4 hours)
Source: www.thaiair.com
Mode 1
As suggested above, trade in health services under mode 1 remains largely anecdotal at this stage,
at least if one adopts a narrow definition of health services (for precise definitions, see Nielson,
2006). If one includes off-shoring of other business or financial services, such as medical
transcription or health insurance and claims processing, then the market is larger and largely
untapped: according to McKinsey (Figure 1) up to 55 percent of these jobs in the high income
countries' health sector could be outsourced. Most outsourcing would be done domestically, but
some developing countries could capture part of the market. In the case of the Philippines (see
case-study n�4), exports of medical transcription services has grown over 100 percent annually
for the recent years.
- 12 -
Figure 1: Health is a sector with strong potential for outsourcing
5 60
Share of jobs in high income countries that
could be outsourced (right hand scale)
50
4
igh com cou try jobs
Aggregate number of jobs that could
be outsourced (left hand scale)
40
n
illion of jobs
3
e
30
s
P cen of h in
M
2
20
er t
1
10
0 0
Packaged IT services Banking Insurance Pharma Auto Health care Retail
software
Source: McKinsey Global Institute (2005).
Case Study n�4:
Exports of Off-shore Medical Transcription Services � The Case of the Philippines
The Philippines have benefited from the first wave of off-shoring of medical transcription services (i.e. the process of
interpreting/encoding electronically the oral dictation of health professionals regarding patient assessment, therapeutic
procedures, diagnosis, and so forth). The first large medical transcription company (Outsource Transcription
Philippines Inc.) started in the late 1990's, and benefited from a rapid expansion of medical transcription needs in the
US due to changes in health insurance accountancy requirements (1996 Health Insurance Portability and Accountancy
Act). The demand for outsourced medical transcription services in the US is growing at 20 percent per year, coupled
with a 10 percent decline in the number of transcriptionists in the US each year. The US therefore remains the main
driver of trade in this field.
The Philippines comparative advantage in this area is mainly explained by its pool of English-speaking workers (third
largest English speaking nation in the world with a 94 percent literacy rate). Transcriptionists are usually medical
school college graduates who work part time while preparing for the Philippines' Board exams. The country also has a
strategic location, with 12 hour time difference with the US. In addition, the government provides strong incentives for
foreign investment in the sector, and supported the industry by implementing key regulations (e.g. on e-commerce and
data protection) and developing the IT infrastructure.
As a result, medical transcription outsourcing has grown at a 130 percent rate between 2001 and 2004 � by far the
fastest growing outsourcing sector in the country. The majority of the 25 companies exporting these services in 2004
were owned by US investors, and should benefit from an acceleration of the outsourcing phenomenon. In 2004, USD
13 billion were spent on medical transcription in the US, with only USD 2.3 billion on outsourcing. In absolute value,
Philippines' exports still represent less than 1 percent of the market, and the growth potential remains substantial.
Recent projections suggest that the Philippines will continue to be among the largest markets for medical transcription
outsourcing over the next 5-7 years, and could contribute to filling the 47 percent supply gap in the US transcription
market.
Source: Blouin et al. (2007); Arunanundchai and Fink (2007).
Mode 2
As suggested above, estimates of the number of patients traveling to seek care abroad
significantly vary from one source to another. According to some WHO official, this number
could reach 4 million patients a year, with over one million for Thailand alone (India, Singapore
- 13 -
and Malaysia due to reach this level by 2012), and an estimated global market of USD 20 to 40
billion (to reach over 100 billion by 2012) (Drager and Smith, 2009).
But is it all trade? As illustrated in Figure 2, McKinsey adopted a narrow definition of medical
travel, to exclude expatriates seeking care in their country of residence (25 to 30 percent of all
patients treated abroad) and travelers seeking emergency cares (30 to 35 percent); in total,
medical travelers would represent only 35 to 45 percent of all patients treated abroad.
Figure 2: A definition of medical travel
All international inpatients* receiving care
100%
Subtract expatriates
seeking care in their -25 to -30%
country of current
residence
Subtract emergency cases -30 to 35%
35-45%
Medical travelers
* Outpatients are excluded from analysis because providers don't collect detailed outpatient data; a few providers,
however, have substantial numbers of international outpatients.
Source: Ehrbert et al. (2008).
An important question, beyond statistics, is the rationale of medical tourism. Why do patients
seek treatment abroad? According to the same study by McKinsey, the main drivers of medical
travel are as follows (Figure 3):
- most advanced technology;
- better quality care for medically necessary procedures;
- quicker access for medically necessary procedures;
- lower cost care for medically necessary procedures; and
- lower cost care for discretionary procedures.
- 14 -
Figure 3: Motivation for medical travel
Quicker access for
medically Better quality care
necessary for necessary
procedures 15 procedures
Lower-cost care
for medically 32
necessary 9
procedures
Lower-cost care 4
for discretionary
procedures
40
Most advanced
technology
Note: 100% = 49,980 patients (number of patients comes from providers that participated in research; total market size
assumes that participating providers represent 60-80% of market)
Source: Ehrbert et al. (2008).
In other terms, the main driver of trade in health services is quality, not price. This suggests that
high income countries will remain popular destinations for medical tourists (and therefore
exporters of health services), and low and middle income countries with less sophisticated health
systems will remain importers of health services under mode 2. It also suggests that there is
significant room for South-South trade and a potential high return on qualitative investments
made in the health sector in the South. Finally, it shows that North-South trade is confined to a
small portion of the market (quicker access and lower cost drive less than 30 percent of trade) and
probably does not deserve the excessive attention it has received so far � at least under the current
conditions (and in particular with regard portability of health insurance, keeping in mind that the
US is by far the largest consumer of health services in the world, followed by the European
Union).
These statistics and conclusions seem to be correlated by empirical observations. In the case of
ASEAN (case-study n�5), which hosts the top medical tourism destinations in the world, about 70
percent of exports are regional, i.e. South-South (with the exception of Thailand that seems to
attract Japanese clients), and probably driven by access to better quality care and more advanced
technologies.
Case Study n�5:
Exports under Mode 2 � The Case of ASEAN
Export revenues Number of patients Origin of patients
Malaysia (2003) RM 150 million (USD 40 More than 100,000 60% from Indonesia, 10%
million) from other ASEAN
Singapore (2002) USD 420 million 210,000 45% from Indonesia, 20%
from Malaysia, 3% from
other ASEAN
Thailand THB 20 million in 2003 470,000 in 2001, 630,000 42% from Far East
(USD 482 million) in 2002, 974,000 in 2003 (mostly Japan), 7% from
ASEAN
- 15 -
Three of the top six medical tourism destinations in the world are in the ASEAN region. As illustrated in the table
above, Thailand, Singapore and Malaysia have become major exporters of healthcare, servicing both developing
countries in the ASEAN region and developed countries such as Japan.
The competitiveness of these three countries primarily stems from two factors. First, due to lower labor costs, they can
offer medical services at significantly lower price than their industrial countries competitors (see table above on world
price comparisons � one third or half of the price). Ancillary services are also much cheaper: a hospital bed in the US is
almost 25 times more expensive than in Thailand. Second, hospitals in those countries have established a reputation for
high quality services. In Thailand, service quality has been explicitly promoted by an accreditation system administered
by a dedicated government agency � the Institute of Hospital Quality Improvement and Accreditation. The top-rated
establishments of the country usually treat foreign patients; they also happen to offer specialized services not available
in other, especially poorer, ASEAN countries.
Source: Arunanundchai and Fink (2007).
It remains that some developing countries might want to target niche markets, and continue to tap
into the North-South trade potential. For these countries, the two main drivers of trade will be a
quicker access and lower costs. Malta, for instance, specializes in the provision of healthcare
services for which the waiting list is longest in the United Kingdom, such as hip or knee
replacements (Table 2). The cost-driven market is limited by the absence of portability of health
insurance that confines the market to discretionary procedures, such as plastic surgery, or creates
an important threshold (the comparative price is not the price of the intervention, but the cost to
the patient after reimbursement). A number of countries have therefore packaged their medical
services with other services, such as tourism, so that the cost becomes only part of the equation. It
should be noted that this niche market strategy could pay in the medium-long run, given the
forecasted increasing needs in the North, and the necessity for high income countries to contain
their health expenses and make their health insurance schemes sustainable.
Table 2: Comparative costs of surgical procedures
Costs in USD Costs compared to the USA
USA Singapore Thailand India Singapore Thailand India
Heart bypass 130000 18500 11000 10000 14.2% 8.5% 7.7%
Heart valve 160000 12500 10000 9000 7.8% 6.3% 5.6%
replacement
Angioplasty 57000 13000 13000 11000 22.8% 22.8% 19.3%
Hip 43000 12000 12000 9000 27.9% 27.9% 20.9%
replacement
Hysterectomy 20000 6000 4500 3000 30.0% 22.5% 15.0%
Knee 40000 13000 10000 8500 32.5% 25.0% 21.3%
replacement
Spinal fusion 62000 9000 7000 5500 14.5% 11.3% 8.9%
Source: Herman (2009), based on Einhorn (2008) and authors' calculation.
Mode 3
Commercial presence constitutes an important mode of international trade in health services,
commonly taking the form of joint ventures between domestic and foreign partners either in
equity (e.g. hospital) or non-equity (e.g. management) investments (Drager and Smith, 2009).
India (case-study n�2) is a good example of vivid trade under mode 3, with close to a hundred
FDI projects in hospitals and diagnostic centers approved during the 2000-2006 period, for a total
of USD 53 million, and covering both developed (Australia, UK, US, Canada) and developing
countries (UAE, Saudi Arabia, Malaysia, Singapore, Mauritius).
According to UNCTAD, the number of mergers and acquisitions in the health and social services
sector has boomed in recent years, to reach about USD 14 billion in 2006 (sales) (Figure 4).
Available data does not allow, however, determining the share of developing countries in mode 3
- 16 -
exports. It remains that the largest health services companies have headquarters and operate in
high income countries (mainly US, UK, and Canada), and a vast majority of developing countries
do not export health services under mode 3.
Figure 4: Mergers and acquisitions in the health and social services sector
(sales in USD)
Source: UNCTAD, online FDI database
Mode 4
"Remittances" and "compensation of employees" are the two items of the balance of payments
that are commonly used as an estimate of exports under mode 4. Developing countries largely
dominate the list of top remittance-receiving countries, with USD 27 billion a year for India,
close to 26 billion for China, 25 billion for Mexico, and 17 billion for the Philippines; in total,
yearly remittances in the world represent close to USD 300 billion (World Bank, 2008).
Remittances have become a major source of income for many developing countries, including for
those exporting health labor. This data only vaguely reflects mode 4 trade, however, since one
cannot distinguish between remittances of permanent v. temporary migrants, or between
remittances of workers in the service v. other sectors. As a result, measuring exports under mode
4 in one specific sector, such as health, is strictly impossible, and no satisfactory proxy exists.
Despite this lack of reliable data, one could assume that mode 4, along with fast-growing mode 2,
is a main channel of developing countries' exports in the health sector. Some countries, like the
Philippines, have specialized in training nurses "for export". Increasing health personnel
shortages in high income countries also guarantees that this segment of the market will continue
growing at a fast pace. In 2004, the UK reported that close to 10 percent of its healthcare labor
force was staffed with foreign nationals (and 18 percent of its doctors) � number that must have
increased since; the Netherlands reported that close to 14 percent of its healthcare labor
workforce were foreign nationals (Herman, 2009). On average, 10 percent of the African-trained
physicians now reside in the US or Canada � up to 43 percent for Liberia and 30 percent for
Ghana (Table 3). In the case of Tunisia (case-study n�6), nurses represent the bulk of the
expatriate healthcare workforce, and percentages are much lower: this suggests that healthcare
personnel movement is primarily driven by financial incentives and the absence of opportunities
at home (the lower the domestic income and the less opportunities at home, like in Sub-Saharan
- 17 -
Africa, the more movement). This also suggests that, given wealth differentials among
developing countries, there is a considerable potential for South-South trade under mode 4: in the
case of Tunisia, Saudi Arabia is by far the main destination of the moving healthcare labor
workforce, and the Gulf captures more than 80 percent of total flows.
Table 3: African physicians practicing in the US and Canada
Country of origin Number of African- Number of African- Number of % of total African-
trained physicians trained physicians physicians trained now in USA
in USA in Canada remaining in home or Canada
country
Nigeria 2158 123 22894 9
South Africa 1943 1845 23844 14
Ghana 478 37 1210 30
Ethiopia 257 9 1564 15
Uganda 133 42 722 20
Kenya 93 19 4001 3
Zimbabwe 75 26 1694 6
Zambia 67 7 676 10
Liberia 47 8 72 43
Other 12 countries 83 35 12912 1
Total/Average 5334 2151 69589 10
Source: www.human-resources-health.com
Case study n�6
Exports under Mode 4 � The Case of Tunisia (year 2004)
Physicians Technicians Nurses Total Percent
Saudi Arabia 65 336 827 1,228 53%
Qatar 6 229 130 365 16%
UAE 9 107 163 279 12%
Kuwait - 1 55 56 2%
Europe 1 2 278 281 12%
Others 21 18 81 120 4%
Total 102 693 1,534 2,329 100%
Number 13,330 10,799 28,537 52,666
remaining at
home
Source: Achouri and Achour (2005), based on Tunisian Agency of Technical Cooperation.
Here again, one should interpret these numbers with caution, since mode 4 covers only the
temporary movement of persons, and in many cases the intent (with or without success) of the
migrant it to permanently stay in the host country.
The expected benefits from health services exports
For all four modes of delivery, exports generate income that benefits the domestic economy and
contributes to improving the balance of payments. The dynamic effects of this income will then
vary depending on the mode of services delivery.
Exports under mode 1 increase the revenues of domestic health services providers, allow further
investment, and potentially improve their profitability, competitiveness (e.g. through economies
of scale), etc. They also create opportunities for healthcare providers at home (e.g. work on new
technologies) and help preventing international brain drain.
Exports under mode 2 have similar effects. As previously observed (see potential risks of imports
under mode 3 above), spill-over effects will depend on the legal/regulatory framework and
- 18 -
business model adopted by the exporting country: these effects will be maximized if the local
population can benefit from the infrastructure and treatments developed for foreign patients, or if
part of the benefits made by local health services providers are re-injected (i.e. invested) in the
domestic health system. The example of Morocco illustrates the different channels dynamic
effects of mode 2 exports can take: the high concentration of tourists resulted in an increased
supply of health services (available to both foreigners and locals), and the opening of residences
for retirees (that provide medical services) somewhat changed local attitude toward elders. The
necessity to conform to international standards to export also creates local emulation. Doctors,
nurses, and other healthcare personnel are offered greater opportunities at home, and mode 2
exports create a disincentive to expatriation. In sum, a properly designed strategy to export health
services under mode 2 has the potential of improving access to better quality healthcare services
for the local population.
Exports under mode 3 are returns on investment that are pretty similar to those in any other
sector.
Exports under mode 4 could be an important source of income (see e.g. remittances of Filipino
nurses). This income would directly benefit the local population (recipients of the remittances),
and hence public health. Benefits for the exporting country's health system are indirect only:
temporary movement abroad provides the local healthcare providers with a number of
opportunities, including access to training, new technologies, acquisition of additional skills and
specialization, etc. Upon return to their origin country, those healthcare services providers will
make the local population (and their local colleagues) benefit from those skills acquired abroad.
Given the fast evolution of medicine, these movements across-borders are particularly important
to the sector.
Potential risks associated with health services exports and measures to mitigate them
The risks associated with exports in health services largely mirror those described above for
imports, and therefore can be quickly reviewed.
For modes 1 and 2, the main risk is the diversion of scarce human and financial resources to
healthcare services entirely dedicated to the treatment of foreign patients. The case of Thailand
(case-study n�6) reveals that an additional 100,000 foreign patients seeking medical treatment in
the country could lead to an internal brain drain of 240-700 doctors. Exports of health services
therefore represent a challenge for the objectives of universal access and equity of access to
quality health services. The internal brain drain also represents a loss of public investment in
medical education and training. Potentially, the richest local clientele is also diverted to these
high-end healthcare services providers to the detriment of the profitability/sustainability of the
public health sector. As suggested above and in the case of Thailand, however, a number of
accompanying policies could help minimizing these diversion risks, including through the cross-
fertilization of public and private health initiatives.
The risks associated with exports under mode 4 primarily depend on the intentions of the migrant.
While brain-circulation should be encouraged � and mode 4, as a regulated scheme of temporary
movement of personnel, is a factor of brain-circulation � brain drain could have dramatic effects
on the local public health. Opportunities for individuals can translate into losses for societies.
This is particularly true in the health sector, where the medical density dramatically varies across
countries and, within countries, across regions. If anything, a well-regulated trade under mode 4
should contribute to preventing brain drain (agreements on mode 4 can include a return scheme),
since nothing can prevent people from leaving a country. Some countries, like the Philippines,
- 19 -
have introduced special curricula and created private schools for training nurses desiring to move
abroad. The benefit of such scheme is to limit the government losses (in terms of education) and
avoid poaching into the local supply of healthcare providers (since the two training curricula are
separate). Some foreign governments have also offered to sponsor some of these dedicated
schools in developing countries, which would contribute to reduce even further the risks of public
resources' leakages. In the case of South Africa (case-study n�9), some private health services
providers have concluded agreements with foreign healthcare networks to provide short-term
opportunities for their staff abroad, while controlling returns (this personnel is prohibited from
working in the UK system for two years after the completion of their temporary assignment
within the UK branch of the South-African group).
Case Study n�7
Mitigating distributive and other adverse effects of trade in health services � The Case of Thailand
The combination of a rapidly rising domestic demand for healthcare, a rapid increase in medical tourism, and a publicly
subsidized medical education system that supplies health professionals to both the public and private sectors, presented
a formidable policy challenge for policymakers. Thailand's experience with `flanking policies' aimed at mitigating
distributive and other adverse impacts of mode 2 trade in health services provides an important set of possible options
for policymakers in countries looking to promote medical tourism to draw upon.
The problems:
In Thailand, private hospitals that treat foreign patients do not participate in social health insurance schemes.
Foreigners and upper-income Thai pay out of pocket or are covered by private health insurance. This diverts medical
personnel away from public hospitals that serve Thai patients only; many of which participate in the social health
insurance schemes. By one estimate, an extra 100,000 patients seeking medical treatment in Thailand leads to an
internal brain drain of 240-700 doctors (Fink, 2007; Pannarunothai and Sunak, 2004). A related concern is that tertiary
medical education is provided almost exclusively by the public sector, thus private exporting hospitals hire from the
same resource pool as public hospitals but do not share the costs of medical education.
The solutions:
Thailand has long enforced a three-year compulsory public service for medical graduates. Two-third of these graduates
work in rural areas. Financial incentives for rural doctors include hardship allowance, no-private-practice allowance,
overtime and special service allowances. After implementation of the universal coverage in 2001, financial incentives
were announced in 2004-05, as a result of which a new medical graduate in the most remote rural district can earn a
salary equal to that of a senior doctor in the central department with 25 years of experience. In 2004, the government
approved the "One District, One Doctor Project", under which new medical students are recruited from high schools in
rural districts, educated in a local university and local hospital, and retained to work in their own districts. These
measures are aimed at curbing urban concentration of medical professionals � an important concern in Thailand. In
mid-2004, the government also approved a project to rapidly increase the acceptance of medical graduates during 2005-
14. The first batch of these graduates is expected in 2011. This highlights the need for a long term and pro-active
approach to human resource planning in the health sector, where the duration of education is long. Finally, awards and
high-level career classifications encourage rural service and counter internal brain drain.
These measures on the supply side are supplemented by measures on the demand side, e.g. health promotion
campaigns, that are expected to curb the domestic population's need for heavy healthcare � as opposed to preventive
care.
Source: Blouin et al. (2007).
2. WHAT CAN BE DONE TO FOSTER TRADE IN HEALTH SERVICES?
Increasing trade in health services could be beneficial to both importing and exporting countries,
in the high-income as well as in the poorest developing countries. A number of conditions are
attached to success, however: the market is very competitive, and not all countries have a
comparative advantage in health services; countries interested in entering and contesting the
market need to carefully assess their resources and design trade promotion strategies that have
both domestic and international dimensions.
- 20 -
The previous section reviewed the potential benefits and risks of trade opening from a public
health perspective, suggesting accompanying measures to make the most of trade. This section
consists of a check-list of questions/measures to be raised/adopted by governments to design
effective trade strategies in the health sector.
2.1. Assessing and fixing the fundamentals, including the regulation of the health sector
Trade does not take place in a vacuum. The same way trade alone is not enough to fix a country's
health system, a country cannot pretend contesting the international health services market if its
domestic health system is dysfunctional. A country cannot suddenly decide to export health
services the same way it could with other basic goods, such as asparagus or fresh-cut flowers, if
only due to the high-level of human expertise and technology required. There are some basic
prerequisites for trade in health services, and a number of elements have been identified that
make a country attractive e.g. for medical tourists or foreign investors.
Country endowments: strengths and weaknesses
With a view to determine whether a country could pretend entering and contesting the world
health services market, a common first step is the assessment of the country's strengths and
weaknesses � and eventually the design of policies to best exploit the strengths and remedy the
weaknesses. The so-called SWOT analysis (strengths, weaknesses, opportunities, and threats) is a
diagnostic and planning tool commonly used in the private sector that could also be used as a
logical framework for our purposes.
The example of a SWOT analysis for Morocco (case-study n�7) reveals the country's current
competitive advantages and shortages in the health sector. It includes an analysis of strengths and
weaknesses (SW), which include: price competitiveness, availability, quality and reputation of the
health personnel (both doctors and nurses), geographical and cultural (including language)
factors, respect of international management or hygiene standards (e.g. ISO-certified clinics),
tradition of exports, organization of the sector (public v. private, critical size of clinics), etc.
In a second step, the analysis focuses on opportunities and threats, i.e. external factors affecting
the future of the market. From a trade perspective, this analysis is important because countries
want to diversify in sectors where international demand is growing and not declining. Also, the
parallel reading of "strengths" and "opportunities" helps finding the trade "niches" on which
countries could concentrate their efforts. Among identified opportunities, in the Maghreb region,
stood: the ageing of the European population (and parallel increase in demand for cares,
retirement facilities, accompaniment personnel), the health supply shortages in Europe and in
neighboring developing countries (waiting lists for certain operations, skill shortages in Africa),
the boom of cosmetic surgery, thalassotherapy and health tourism at large, the gaps in the
European health insurance mechanisms (and deterioration of the level of reimbursement, in
particular dentistry), etc. Identified trade "niches" included: the dental and prosthesis market, the
French-speaking comfort surgery and wellness market, retirement residential programs, etc.
Not all strengths and weaknesses have the same weight when it comes to triggering trade. As
previously mentioned, quality remains the main driver of trade in the health sector: entry cost on
the health services market is therefore very high in terms of education, training, and equipment.
Some countries, like Morocco, benefit from a traditionally well-trained medical personnel � one
cannot acquire a qualified labor force overnight, and even less a reputation overnight. Some
countries therefore resort to foreign labor in the short-run to supplement their own domestic
- 21 -
resources: in Malaysia, for example, the government has increased the allowed stay under a
medical visa from 30 days to 6 months. It should be added that good doctors are not enough, if
clinics/hospitals are not properly managed, or if nurses and other paramedical personnel are not
properly trained or qualified. Required investments in infrastructure and technology are also
important: in Taiwan, the government has announced a USD 318 million project to help further
develop the country's health services. Also, the absence of a world database on the safety and
quality of care has increased the importance of international voluntary standards: the Joint
International Commission (JIC) accredited over 120 hospitals worldwide, and several other
organizations, such as the International Society for Quality in Health Care (ISQUA), the National
Committee for Quality Assurance (NCQA), the International Organization for Standardization
(ISO), and the European Society for Quality in Healthcare (ESQH), have taken steps to ensure
that medical travelers receive the highest-quality cares (Deloitte, 2008).
Case-study n�7
SWOT Analysis, health services trade, Morocco
Strengths Weaknesses
- Lower cost of services compared to Europe. - No statistics and sectoral strategy at the government
- Cultural heritage, diversity of the landscapes and level.
tourist attractions, climate. - Only individual initiatives and difficulty to finance
- Geographical and cultural, including language, large scale projects.
proximity with Europe. - Skill shortages: Insufficient number of doctors and
- Facility of access to property and resulting strong key health personnel (absolute terms), and lower
foreign presence in residential areas (retirees and density of health personnel than Tunisia, Egypt,
temporary residents). Libya, and Algeria (relative terms).
- Qualification and reputation of the doctors or - Qualification of nurses and other medical staff.
hospitals, gained through training or exchanges with - Late in the race with Tunisia and other competitors.
foreign universities and medical institutions, and - Non application of international standards and
participation to networks with hospitals and research certifications (e.g. ISO).
centers abroad (in particular in France). - Absence of a clear legal framework for medical
tourism that could result in malpractice with an
important reputation risk.
- Strict nationality requirements that exclude
foreigners to practice (and invest).
Opportunities Threats
- Booming market of seniors and retirees (ageing of - Protectionist reaction of European countries and ban
the population): residential programs, medical of medical tourism.
accompaniment in Morocco and abroad, paramedical - Competition of emerging countries in Asia, Eastern
services. and Central Europe, and the region.
- Booming market of cosmetic surgery, - Loss of human resources through the permanent
thalassotherapy and other forms of health tourism at establishment abroad of key health personnel.
large.
- Booming market of dental surgery and prosthesis.
- Specialization in some advanced surgical procedures
to treat patients in the region: cardiology, cancer
treatment, epidemiology, etc.
- Expected shortages of certain medical personnel in
Europe.
- Off-shoring of certain medical services � use of the
existing infrastructure.
- Deterioration of the level of reimbursement of
treatments in Europe and development of the
portability of health insurance.
- Increasing need for medical training in the region:
Mauritania, Mali.
- 22 -
Improving domestic regulation and removing unnecessary obstacles to trade
A strict regulation of the health sector is needed, e.g. to avoid malpractice, or encourage the
choice of the most efficient providers. At the same time, most obstacles to trade in health
services � and services at large � are found in domestic regulations ("behind the border"
obstacles). A necessary step for countries aiming to enter and contest the world health services
market is therefore to initiate a regulatory audit, which objective will be to ensure that the
measures in place (1) contribute to achieving some legitimate policy objectives, and (2) are the
least trade restrictive to efficiently achieve these objectives.
The World Bank, the OECD, and the Australian Productivity Commission, among others, have
developed trade restrictiveness indexes that aim to identify common barriers to trade in services,
including in the health sector. While not addressing the question of the adequateness of the
domestic rules (and proportionality to the legitimate objective to be achieved), these help identify
possible red flags for foreign investors and best practices. In the case of Tunisia (case-study n�8),
for instance, all types of restrictions usually tested are present in the domestic regulatory
framework: this would suggest that the government will need to re-assess all these rules in light
of both its domestic public health and foreign trade objectives. These include rules pertaining to
the form of establishment, foreign investment, nationality and residency requirements, movement
of health personnel, etc.
Case-study n�8
Regulatory audit for health services in Tunisia
Type of restriction Medical
Form of establishment Clinic, hospital, individual practice
Foreign partnership/association/joint venture Authorized, restrictions apply
Investment and ownership by foreign professionals Authorized, restrictions apply
Investment and ownership by non-professional investors Authorized, restrictions apply
Nationality/citizenship requirements Must be Tunisian
Residency and local presence No
Quotas/economic needs tests on the number of professionals and firms Numerus clausus, e.g. pharmacy/ inhabitants
Licensing and accreditation of foreign professionals Possible recognition of foreign diplomas
Licensing and accreditation of domestic professionals Inscription on the Tableau de l'Ordre des
m�decins
Movement of people Usual visa conditions, exceptional
authorizations to practice (e.g. training)
Activities reserved by law to the profession Yes, practice of medicine
Multidisciplinary practices Authorized, restrictions apply
Advertising, marketing and solicitation Prohibited for doctors, authorized for clinics
with restrictions
Fee setting Yes, distinction between public and private
Note: This list is by no means exhaustive: it gives an idea of potential regulatory obstacles to trade. It also does not
address the question of the adequateness of the domestic regulations: some are fully justified to ensure the quality of
the service, but some might be more restrictive than necessary to achieve this end.
Source: World Bank staff compilation of laws and regulations, restriction index based on Nguyen-Hong (2000).
It appears often that facilitating trade is not about deregulating, but rather better regulating, and
sometime even filling regulatory gaps. For example, the deontology in medical tourism is often a
grey area with regard domestic regulations. It includes issues such as: the advertising of medical
services, the role of tour operators and other intermediaries between the patient and the doctor
which might affect the quality of the advice re- the decision to have surgery or the privacy of
medical files, etc. Without creating unnecessary obstacles to trade, a deontology code or a set of
rules might be necessary to prevent fraud and deceptive practices, not only for the sake of the
- 23 -
patients, but also for the domestic health services sector as a whole, since reputational risks are
particularly high in the health sector.
The difficulty of this regulatory review/reform exercise should not be underestimated. First, some
regulations that apply to the health sector are not sector-specific (e.g. some rules on foreign
investment or visa approvals) � a health sectoral strategy therefore requires cooperation among
ministries/agencies. Second, not all rules are set by the government: in many professions,
including the medical profession, the professional orders or associations can have important
delegations of public authority and regulate the profession (e.g. for the recognition of the
qualifications or the admission to practice) � a health sectoral strategy therefore also requires
cooperation between the government and the private sector/professional associations.
2.2. Promoting exports
In a highly competitive global market, it is not enough to fix the fundamentals, including the
regulatory framework, to suddenly become an exporter of health services. Like in any other
sectors, a trade promotion strategy is necessary to gain market shares abroad. The elaboration of
this strategy is foremost the responsibility of the private sector (or health services providers at
large), but the government also has a major role to play.
Business strategies: "niches" and markets to prospect
The description of the drivers of trade in health services under mode 2 suggests that not all
markets are contestable, and not all business strategies can be successful. For example, targeting
the French market for medical treatments that are fully covered by health insurance is useless; on
the contrary, targeting the UK market for medical procedures that are not quickly accessible in
the UK could be rewarding. The knowledge of foreign markets, including healthcare needs (age
structure of the population), medical supply (medical personnel density and shortages, in
particular by medical specialties), and health insurance coverage gaps, is essential to the design of
efficient export promotion strategies. The US is � and will long remain � the world largest
consumer of health services, and therefore a main target for health services exports. The
increasing demand for health services in high income countries and parallel increasing shortages
in healthcare supply could have major effects on trade opportunities: not only those so far net
exporting countries could become major importers of health services, but they could become
short of resources to supply those developing countries that were importing their services. Thus,
there would be room for the most advanced developing countries to contest market shares in the
North and in the South.
A good knowledge of the global supply, i.e. competition, is also required. Innovation, like for
trade in goods, is important for success: it could take the form of developing new technologies
and medical procedures, or packaging the health services differently (e.g. offer of health tourism
packages, airport pickup services, translation services, facilitated billing, etc.).
There are a number of success stories that should be looked at carefully by new entrants. The
cases of South Africa and Cuba (case-studies n�9 and 10) illustrate successful export promotion
strategies under mode 3 (establishment abroad) and mode 2 (health tourism).
- 24 -
Case-study n�9:
Seizing opportunities in the UK, the case of South-Africa
South African hospital companies have been successful in winning healthcare contracts abroad, and
particularly with the UK National Health Service (NHS). Netcare established in the UK in 2001. The
group's early project was to take part in helping to reduce waiting lists in selected areas: surgical centers in
Greater Manchester and Stracathro cumulated 8,000 procedures in the past year; cataract centers delivered
20,000 procedures to date; walk-in centers so far treated 30,000 patients. In 2006, Netcare led a consortium
that acquired GHG, owner of the largest independent hospital operator BMI Healthcare. This initiative
grew the business by 89 percent, transformed Netcare in one of the world's largest healthcare groups (119
hospitals and almost 11,000 beds), and gave Netcar an outstanding platform for enhancing its relationships
with the NHS. As part of this contract, Netcare sends teams of medical personnel from South Africa for
fixed-term periods to the UK. These personnel are prohibited from employment with the NHS for a period
of two years. Netcare has also piloted a project which allows nursing employees to work 4 to 6 weeks at a
time in foreign countries. The objective is to expose South African doctors and nurses to opportunities in
UK hospitals, and enable them to supplement their income with fixed term contracts abroad. Staff turnover
was significantly reduced as a result, and the group could retain skilled staff in South Africa.
South African healthcare groups are also targeting patients in Africa. Netcare has set-up a network of
`referral agents' in a number of African countries to attract patients to the group's hospitals and doctors in
South Africa. They also arrange transport, accommodation and recuperative care for these patients. Other
competitors have established foreign patient assistance centers in Johannesburg to assist with transport,
visas, accommodation and medical treatment for patients and their families. They employ English,
Portuguese and French speaking interpreters and clearly target African patients.
Source: www.netcareuk.com
Case-study n�10:
A successful government-led strategy to develop medical tourism � The Case of Cuba
The Cuban government views health export promotion as an important part of its overall economic development
strategy. Cuba has long been and remains a popular destination for medical tourism, attracting patients mostly from
South America, Europe, North America, and the Caribbean.
A number of specialized clinics in the country provide high quality care at competitive prices, and also function as
medical school training centers for nation and foreign students. Early in the process, Cuba's strategy focused on health
spas and mineral springs, travelers' medical back-up or emergency care, and supply of specialized medical care not
easily available to people from the Caribbean and Latin America. It also aimed at service differentiation, focusing on
treatment of certain kinds of skin diseases which are incurable in other countries, and on the development of new
procedures and drugs. This trade promotion strategy had underlying objectives: the employment of qualified health
service providers, the use of excess capacity to make medical and pharmaceutical products, and the use of trade
resources to invest in healthcare infrastructure and the public health system.
Cuba's success in health services trade can be attributed to foresight and long-term planning of the Ministry of Health
in collaboration with other institutions in the areas of tourism, migration, commerce and industry. An important factor
of this success has been the establishment of a state-run trading company SERVIMED, hosted by the Ministry of
Health, which supported the marketing and promotion of Cuban health services overseas. SERVIMED, together with
tour operators and travel agents in target markets, prepares health packages that include air travel (Cuba's national
airline) for the patient and accompanying persons, companion personnel from the arrival at the airport, 24h assistance,
treatment, repatriation, and post-surgery controls. SERVIMED relies on a network of 35 clinics and 42 resorts in Cuba,
private clinics overseas, and commercial representation in target markets like Argentina, Brazil, Chile, Mexico, and
Venezuela.
Cuba offers free or subsidized care to patients from some countries, essentially in Africa and Latin America. Cuba has
also concluded bilateral agreements with social security institutions in several Latin American and Caribbean countries
to facilitate trade. In addition, the government has provided for easy payment facilities with credit cards of any
convertible currency. Two smaller agencies have also been established in health tourism to provide rehabilitative and
convalescent health services through resorts and spas following the SERVIMED model.
Source: Blouin et al. (2007)
- 25 -
Reforming the institutional framework to promote trade
The above example of Cuba shows that a successful export promotion strategy in the health
sector is fully compatible with a large state involvement and the preservation of a predominant
public health sector. Indeed, experience shows that governments have played an important role in
the success of the leading health services exporting countries. Public involvement could be
crucial at all stages, from the design to the implementation of export promotion strategies.
A common problem is the absence of statistics on trade in health services that could translate, at
the government level, into the absence of coherent sectoral development strategies. For example,
with a view to elaborate an export strategy for medical tourism, it would be useful to know the
number of medical tourists, the type of procedures offered, the type and level of expenses of
patients, etc. Only rough approximations exist in most countries. Some countries have made
efforts to remedying this situation and improve their national statistics on trade in health services
by, for instance in Morocco, introducing a count of foreign patients treated in local hospitals. The
Manual on Statistics of International Trade in Services (United Nations, 2002) provides a useful
set of guidelines for governments willing to tackle this problem.5
Another related common problem is the absence of cooperation among ministries (e.g. health,
trade, and tourism) and dialogue among actors. Practically, too many actors are involved in trade
in health services that do not necessarily communicate among each other. These include: tour
operators, private practitioners, clinics, hospitals, research institutes, ministries, professional
bodies or associations, real estate developers, and (foreign/local) investors. Experience shows that
the best performing countries on the international trade in health services scene, such as Thailand,
have created horizontal administrative structures to coordinate domestic positions and strategies
on health tourism (sometime called "medical tourism observatories"). By contrast, the dispersion
of actors remains a technical challenge for lagging countries, for example in Maghreb, where
export success stories appear to result from individual and uncoordinated initiatives rather than
real strategies.
A number of countries have set up trade promotion agencies, primarily to encourage and facilitate
exports of domestic goods and services. It is often the case, however, that these agencies focus on
exports of traditional goods rather than services � and hence neglect the health services sector. In
the case of Cuba (case-study n�10), the creation of a dedicated agency in charge of promoting and
marketing Cuban health tourism has proven successful. Such function could be assumed by an
already existing trade promotion agency or part of the mandate of the administrative coordination
structure � depending on the country's specifics. In any case, marketing and promotion are
essential to boost trade in health services, in particular due to the absence of transparent
worldwide data on the quality of healthcare and the important role of reputation in consumers'
destination choice.
Finally, it should be noted that public (often university) hospitals have played an important role in
the development of many countries' reputation in the health sector, and often continue to
showcase knowhow and attract foreign patients or health professionals.
5
The Manual on Statistics of International Trade in Services has been developed and published jointly by
six organizations (UN, EC, IMF, OECD, UNCTAD, and WTO), managed through the mechanism of an
inter-agency task force. The Manual sets out an internationally agreed framework for the compilation and
reporting of statistics of international trade in services in a broad sense.
- 26 -
2.3. Using international cooperation (public and private) to promote trade
A number of obstacles to trade in health services are found in domestic regulation, and can be
addressed through unilateral domestic reforms. However, partners are needed to trade, and market
access can be hindered by other countries' policies. Hence, unilateral reforms can be traded for
concessions (market access) from major trading partners. Using the SWOT analysis terminology,
a country's opportunities and threats can reflect its offensive and defensive interests (and
therefore negotiating positions) in trade negotiations.
For example, the lack of portability of health insurance is the main obstacle to the development of
the health tourism market; the interdiction made (e.g. in France) to tour operators to sell health
packages, or the limited recognition of medical qualifications are other examples of external
obstacles to health trade. The removal of these obstacles to trade can be negotiated in a number of
trade forums and implemented through trade agreements that range from bilateral to multilateral
trade arrangements. It is the government's responsibility to design an offensive trade agenda and
actively use all available instruments to promote its trade interests in the health sector. The
private sector also has a major role to play in this process, indirectly, by informing the
government's negotiation positions, or directly, e.g. by encouraging exchanges of personnel or
mutual recognition of qualifications. Experience shows that pragmatic solutions could be found at
all levels of international cooperation.
Bilateral and regional initiatives/agreements
Bilateral and regional agreements are the most common instrument of trade promotion in the
health sector. They can be used to remove obstacles to trade and/or harmonize domestic rules
across the region (eventually to adopt regional rules). They can have very different shape,
content, legal value (binding and non-binding), and involve either or both developed and
developing countries. In part, this flexibility is the reason of their success in the health sector
where governments have to deal with a number of sensitive issues and fine-tune trade opening
with the realization of public health objectives. Examples of state to state agreements (in a broad
sense, not limited to trade agreements) include:
- Social security conventions and other agreements pertaining to the insurance coverage of
travelling patients: some social security institutions in Latin and Central America have
concluded bilateral agreements with Cuba that contain mutually agreed rates for the treatment
of their patients in the island; Libya and Algeria, respectively signed protocols with Tunisia
and Jordan, for sponsoring the treatment of their patients abroad (explaining the large success
of Tunisia on the Libyan market, primarily under mode 2);
- Bilateral labor agreements: for example between Germany and Croatia or Slovenia, between
the UK, India, the Philippines, and Spain, or between Norway and the Philippines for the
recruitment of nurses;
- Conventions on education and training of medical personnel that encourage the cross-border
temporary movement of health personnel;
- Bilateral/Regional free-trade agreements: an increasing number of FTAs cover health
services, such as the most recent European Economic Partnership Agreement with the
Caribbean region (for examples of health coverage in FTAs, see e.g. Mikic, 2007);
- Bilateral investment treaties: these mushrooming agreements could also be directly relevant
to trade in health services under mode 3.
The conclusion of a bilateral or regional trade agreement is not a guarantee of liberalization or
deeper market access in partner countries. The flexibility that made the success of these
agreements also constitutes their weakness, since a number of exceptions could be carved out in
- 27 -
each sector that potentially nullify or impair the partners' general commitments. The level of
implementation of the agreements also significantly varies from case to case. The example of the
US-Morocco free-trade agreement below illustrates how health services could be subject to many
more exceptions than other services sectors. It is often the case that health is excluded from
bilateral or regional negotiations, such as in the Euromed context.
Restrictions on health services trade listed by Morocco in the US-Morocco Free Trade Agreement
Annex I � Existing measures that are not subject to some or all relevant provisions of chapters 10 and 11
Physicians: A foreign physician may engage in the private practice of medicine only if he or she fulfills certain
conditions, including the following conditions, which are inconsistent with the obligations listed above:
(a) have permanent residency in Morocco;
(b) have status as the spouse of a Moroccan national or as a national of a State that has entered into an agreement with
Morocco authorizing a national of either State to practice medicine in the territory of the other State; and
(c) have government authorization.
Notwithstanding paragraphs (a) and (b), the Ministry of Health may authorize foreign physicians to practice in
Morocco for periods not exceeding one month with respect to specialties that do not exist in Morocco.
Establishing clinics or comparable medical facilities: Only physicians who have fulfilled the requirements for
practicing medicine in Morocco may establish private clinics and comparable medical facilities, such as birthing
centers, water therapy (thalassotherapie) centers, medical care centers and other centers providing in-patient care for
periods of at least twenty-four hours, kidney dialysis centers, radiotherapy centers, and chemotherapy centers.
Pharmacists: In deciding whether to authorize a foreign national to practice the profession of pharmacist, Morocco may
take into account the needs of the sector.
Pharmaceutical firms: The establishment in Morocco of a firm engaged in the manufacture or wholesale distribution of
pharmaceutical products is contingent on the requirement that 51 percent of the capital stock be held by pharmacists. A
majority of that 51 percent of capital stock (i.e., at least 26 percent of the total capital stock) must be held by persons
authorized to practice as pharmacists in Morocco. In an enterprise established in Morocco and engaged in the
manufacture or wholesale distribution of pharmaceutical products, the following persons must be pharmacists:
(a) in sole proprietorships, the sole proprietor;
(b) in corporations, the president and one-half plus one of the members of the board of directors;
(c) in limited-liability companies and limited partnerships, all managerial personnel; and
(d) in other types of enterprises, all the principals.
Dental surgeons, midwives, nurses and opticians: In deciding whether to authorize a foreign national to practice the
profession of dental surgeon, midwife, nurse, or optician, Morocco may take into account the needs of the sector.
Private biomedical analysis laboratories: A foreign pharmacist, physician, or veterinarian may establish, operate, and
manage a private biomedical analysis laboratory only if he or she fulfills certain conditions, including the following
conditions, which are inconsistent with the obligations listed above:
(a) have permanent residency in Morocco; and
(b) have status as the spouse of a Moroccan national or as a national of a State that has entered into an agreement with
Morocco authorizing a national of either State to establish, operate, or manage private biomedical analysis laboratories
in the territory of the other State.
Source: full text of the FTA available at www.moroccousafta.com.
In addition to these state to state agreements, a number of arrangements could be concluded
between public and private, or between private institutions, that also facilitate trade. Typically, a
number of hospitals (or universities) have concluded twinning agreements with counterparts
abroad that include provisions on the exchange of health personnel for training (or education)
purposes. Depending on the delegation of public authority they are granted, medical professional
associations can also agree on the mutual recognition of diplomas and qualifications with foreign
counterparts. Finally, the involvement of private insurance networks in health insurance
conventions could help removing the ultimate obstacle to trade in health services: the absence of
health insurance portability.
- 28 -
Finally, it should be noted that regional cooperation is a potential solution to some healthcare
shortages or a solution to mitigate some of the risks associated with increased trade. For instance,
the development of health centers of excellence in Africa could help neighboring countries to
share the cost of medical education and infrastructure investment.
Multilateral initiatives/agreements
A vast literature covers the topic of health services, the GATS, and multilateral trade
negotiations, and it is not the purpose of this paper to analyze the GATS provisions pertaining to
health (see e.g. Blouin et al., 2006, and WHO, 2005). A few remarks are nonetheless useful to
debunk the myth of the GATS.
The GATS allows enough flexibility for countries to maintain regulations that are essential to the
pursuit of important policy objectives, such as the protection of public health.6 The main
advantage of GATS commitments is to anchor domestic reforms into the international system,
and to preserve the government from later pressures of interests groups. It also sends a strong
signal to the investors' community as to the government's will to engage into and secure opening
and reform of the health services sectors. Multilateral negotiations also adequately supplement
regional ones: beside the economies of scale of negotiations, topics that are set aside in regional
negotiations can be more easily addressed within the WTO (balance of powers is different due to
the larger number of members). On the other hand, agreements are harder to reach: the Doha
round has been initiated 8 years ago and little progress has been made on services. The level of
commitments in the health sector remains particularly low, with only 39 percent of members with
commitments, i.e. the lowest percentage of all sectors (up to 95 percent of the members have
commitments in the tourism sector). Similarly, health is dragging in the GATS negotiations, with
only five developing countries offering further liberalization of the sector (Sauv�, 2007).
For each country engaged in the GATS negotiations, it is suggested to follow the following steps.
A first step would be to make a clear assessment of all rules regulating its health services sector
and bind no less than status quo. At no cost, this binding of already engaged reforms (status quo)
could give some bargaining chips to the government and help negotiating further market access
with its major partners. A second step would be to clarify existing rules, in order to measure the
eventual cost of opening, and elaborate a strategy to best harness the benefits of opening and
multilateral concessions. Where no clear rules exist, a country can keep the right to legislate at a
later stage, without slowing the liberalization process (sectoral opt out closes). A third step would
be to clearly define the country's offensive interests in the negotiations and bargain for some key
commitments of major partners: this could pertain to sectoral as well as rules negotiations.
Finally, it should be noted that the GATS is not the only relevant multilateral agreement relevant
to trade in health services. In the WTO, other agreements such as the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS) � for rules relating to patenting, for
example � or the General Agreement on Tariffs and Trade (GATT) � for commitments on non-
agricultural market access, for example on medical equipment and supplies � are also relevant
(WTO and WHO, 2002). Other international organizations, such as the ISO, also play a
fundamental role in setting standards in the health sector that are main drivers of trade in health
services. It is therefore important for all countries involved in international trade in health
services to actively participate to international rule making, implementation and enforcement.
6
GATS article VI is dedicated to domestic regulation.
- 29 -
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