ASEAN Economic Community’s Impact on Healthcare Services

Chula 52 ASMI am writing this in Bangkok following a very engaging session on the impact of the ASEAN Economic Community (AEC) on healthcare goods and services. For those who may not be familiar, the AEC is an aspiration articulated by the region’s leaders to establish “regional economic integration”. The AEC is intended to have 4 key characteristics: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy.

There are many useful quick reads, e.g. the Q and A from the Business Inquirer and a distilled commentary on why the US should support the AEC from the East West Center. Lawyer Edmund Sim blogs about the AEC and is a good periodic read. The official AEC web pages on the main ASEAN website provides the politically correct messaging and sound bites but doesn’t give much critical analysis of the challenges faced. No matter really as the business and national papers do a good job at being ‘devil’s advocate’, e.g. ABS-CBN News, Reuters.

I have summarized the outstanding issues relevant to healthcare in the table below:

Core Element Principal Considerations
Free flow of goods Zero tariff and removal of Non-tariff Barriers; Single   licensing with harmonization of standards; Differential pricing of   pharmaceuticals and medical devices across ASEAN nations
Free flow of services Legal status of Cross-border health services; information   flow; issues related to mutual recognition
Free flow of investment; Free flow of capital Impact of private investment on public healthcare   services- manpower egress, ‘demonstration effect’; consequences of   consolidation and ‘mega-healthcare services groups’; acceptability of healthcare   services providers under foreign ownership
Free flow of skilled labor (including Mutual   Recognition Agreements) Impact of South to North manpower flows; Harmonization of   Standards; MRA does not lead to free flow of skilled labor- still many   barriers to overcome

My good friend Dr. Piya from Chulalongkorn University, Dr. Chatree Duagnet from Bangkok Dusit, Dr. Watchai Charunwatthana from the Ministry of Public Health, and myself were the four speakers/panelists in the afternoon session on ‘Hospitals and Health Service Systems after AEC 2015’ which was part of the Chulalongkorn University School of Medicine 52nd Annual Scientific Meeting. I spoke on healthcare stakeholders in the AEC process (Slides attached).201306 AEC Healthcare Bangkok

My take-aways from the session crystallized after post-session discussions with Piya:

  1. TIMELINES
    • Despite the earlier optimism, the 2015 ambition for integration is not likely to happen. The leaders have moved away from earlier ‘hard’ targets and the lingo has shifted to 2015 being a milestone in the AEC process rather than a target.
    • There is much skepticism that ASEAN will be able to get its act together. However, this should not deter countries from starting to think about the AEC, talk about it and prepare for its eventuality. My personal view is that 2015 is a pipe dream but the fundamental motivations for establishing the AEC remain unchanged. I agree with Dean of the Lee Kuan Yew School of Public Policy Kishore Mahbubani’s assessment that “over time and following the ASEAN pace, gradually the ASEAN Economic Community will come to be”.
  2. COMPLACENCY
    • Thailand (and to a lesser extent, Indonesia) seems most prepared for the AEC. Dr. Prasan, governor of the Bank of Thailand warned 2 years ago: “The greatest threat is remaining complacent and not preparing for these changes”. Chulalongkorn University’s theme for the conference? Healthcare beyond Boundaries: ASEAN Initiative! Thai medical friends shared that they were constantly exposed to discussions about the AEC and what it might mean.
    • In Singapore, we are incredibly complacent, uninterested or perhaps simply ignorant about the AEC. Preparing for this conference, I asked many colleagues about the AEC and only one was interested and had actually done some research. He is a radiologist and perhaps more so than other specialties by virtue of having tasted outsourcing of radiology reporting by a public healthcare cluster to India, was concerned about the radiology profession “not preparing for these changes”.
  3. REGIONAL INTEGRATION ALREADY HAPPENING
    • IHH Healthcare Berhad is already the dominant private provider in Singapore and Malaysia and rapidly expanding in other ASEAN geographies. During our discussion, Dr. Chatree shared Bangkok Dusit’s high level plans and ambitions beyond Thailand and the immediate region. It’s clear that regional integration, at least at the ownership level is already a reality and it is a matter of time before this translates into operational synergies and integration. How will this transform the way healthcare is actually delivered? Will the private sector grow by leaps and bounds? What are the implications for efficiency, equity and healthcare accessibility for the low income groups?
    • The relaxing of restrictions on foreign ownership which is a key aspect of the AEC will further accelerate this process by encouraging large funds to invest more aggressively across the region.
    • The CLMV governments (Cambodia, Lao PDR, Myanmar and Vietnam) are being encouraged to pursue public-private partnerships to expand the funding available for healthcare provision and it would not be surprising if the ‘private’ part of the equation comprises some of the existing major players.
    • Regional integration may drive profound change in the way healthcare is delivered. It might be positive, it might be negative, but the fear is the complacency and the ill-preparedness of governments, businesses and professionals as alluded to above.
  4. MORE DIALOGUE NEEDED
  • There seems to be a dearth of discussions  on AEC and the impact on healthcare at 2 levels- amongst the healthcare community of policy makers, payers, providers and so on, and also between the healthcare community and trade officials negotiating the finer details of the AEC.
  • This does not bode well for good, considered decisions that strive for win-win outcomes as certain key stakeholder perspectives may not be represented or under-emphasized.
  • There also seems to be little certainty or leadership. Serge Pun, Chairman of Yoma was quoted in a Reuters report as saying “We talk about ASEAN integration and we actually don’t know what we are going to integrate. Or at least, the vast population doesn’t. The vast number of businesses doesn’t.”
  • Non-government agencies can play a significant role here. In the business world, the ASEAN Business Club has been established to foster awareness and also support the stated AEC ambitions. Initiated by Malaysia’s Air Asia and the Philippines’ Ayala group, the ABC states in its preamble: “We have come together to form ASEAN Business Club at a critical moment in economic history. A new global order is coming into being centered around Asia, in our own backyard. This new order is dominated by large economic entities. Individually, we are dwarfed by these economies and have little more than a marginal role on the global stage. Together, however, we are a market of 600 million and have a GDP of over US$2 trillion.” Universities have formed the ASEAN University Network to promote deeper understanding, cooperation and solidarity.
  • In the healthcare sector, I do feel that think tanks and universities together with providers can play a substantial role in mitigating the confusion by hosting workshops, policy forums etc. to openly discuss the AEC and the impact on healthcare across the region. There is a crying need for thought leadership- who will rise to the challenge?
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2 comments

  1. Hi Dr Lim,

    I read with great interest about your thoughts on Asean and its exciting prospects

    I was wondering what are your thoughts on Dr Devi Shetty and his healthcare model (HBR – Khanna T et al., 2006) of having large scale niche operations in one area to reduce costs for patients.

    Whether a) it was possible to integrate Asean healthcare to concentrate niche surgery in a few centers just like how in UK, certain surgeries, i.e children’s surgery are concentrated in a few distinct centers, birmingham, manchester, great ormond

    b) whether the development of a asean microinsurance for such an endeavour would be possible?

    Entering into the medical workforce in Singapore certainly looks promising

    Cheers

    1. Hi Julian. Thanks for the comment. I actually have used Dr. Shetty’s Narayana Healthcare (new name) as a case study in graduate teaching. I think the economies of scale from what NH has done are substantial, some term it the ‘McDonald-lization’ of healthcare. There can be much more thinking along these lines even within countries; there is often so much duplication of scarce resources even within countries. I recall an interview by Dr. Hsu Li Yang with Harvard economist William Hsiao (published in the SMA News) who doubted Singapore had the numbers to staff two world-class academic medical centers.
      At least Singapore tries to concentrate in the example you mentioned, pediatric diseases into one hospital, although it is not obvious the harmonization between KKH and the National University Hospital pediatrics services.
      I am personally doubtful ASEAN governments can come together to agree on a Shetty-type model across borders. Just too much local politics, national pride, pricing differentials etc. at this point in time. However, in the private sector, I see to some extent this is already happening. The private sector will find the efficiencies with much less sentimentality. Take for example the Asian Centre for Liver Diseases and Transplantation. It is based in Singapore but has presence in Vietnam and Malaysia (Dr. Tan see patients in iHEAL Medical Center). Its patient pool extends far beyond Singapore and “Over 90% of the Centre’s patients come from South-east Asia, South Asia, Indochina, the Middle East and Russia”. Of course, this is a pure private enterprise and so the impact on healthcare for the average Asian/ ASEAN citizen is small.
      On the issue of micro-insurance, I see potential but again the obstacles are formidable. The insurance industry as a whole in Asia is not terribly sophisticated presently and the issues of differential price points, coverage etc. would make it challenging. Technically, it is a good idea but operationally I think it would be a long gestation. That said, nothing to stop good people from advocating and pushing this forward inch by inch!

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