# **I.  Introduction**

The performance of a country’s health sector is critical for the well-being of its citizens. Promoting quality health services to large population segments is a key ingredient to human development. It is also grounded in basic economic considerations. Caring for sick workers preserves a country’s stock of human capital, laying the foundation for sustained economic growth. The provision of health services also has important public good characteristics, in particular when it comes to containing the spread of infectious diseases such as HIV/AIDS, tuberculosis and malaria.

Given the centrality of healthcare to human well-being, policy reform discussions in the health sector tend to be of a sensitive nature—be it in poor or rich countries. The provision of health services is typically not regarded as an economic transaction in the way the purchase of a car or a train ticket would be. Indeed, many countries have inscribed a basic right to healthcare in their constitutions, sometimes mandating the provision of services free of charge. Trade policy discussions in the health sector add another layer of sensitivity. Health services are commonly not viewed as a tradable commodity that can be subject to global market forces. The idea of foreign medical institutions providing essential services to the local population may be perceived as encroaching on national sovereignty.

Notwithstanding these sensitivities, healthcare policy does involve serious economic choices. Today, medical technologies exist that can completely cure many ailments and provide effective treatment against others. Yet bringing diagnostic tools, advice, clinical treatment, drugs and vaccines to patients requires resources that are scarce in every country and that can be employed elsewhere in the economy. Few countries can afford state-of-the-art healthcare for every citizen. Choices about what kind of health services are provided to which segments of the population have to be made—explicitly or implicitly. Generally, these choices will depend on a country’s level of economic development. To illustrate, if Malaysia were to spend the same per-capita amount of money on healthcare as Switzerland, Malaysia’s health expenditure would be roughly equal to its gross domestic product (GDP), leaving no money for food, housing, clothing, or transportation. For Thailand, Indonesia, and Cambodia, health expenditure would be, respectively, twice, five times, and thirteen times the value of national GDP.<sup>1</sup> No country leaves the provision of health services entirely to market forces. Governments intervene in a number of ways, by directly providing health services, financing healthcare through public insurance mechanisms, and regulating private health services and private health insurance. At its core, healthcare policymaking involves complex trade-offs between promoting equitable and affordable access to a basic set of health services at minimum quality, creating incentives for efficiencies in the healthcare system, and managing constraints in central and state-level government budgets. International trade in health services influences these trade-offs. It can present opportunities for cost savings and access to better quality care, but it can also raise challenges in promoting equitable and affordable access.

> 1 According to the World Health Organization (2005), Switzerland spent $4,219 per person on health in 2002.  Data on ASEAN countries’ population and GDP are available from the World Bank’s World Development Indicators.

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