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 <u>poorer, ASEAN countries.</u> 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<br>|in USD<br>||Cost<br>|s compared to t<br>|he USA<br>|
|---|---|---|---|---|---|---|---|
||USA|Singapore|Thailand|India|Singapore|Thailand|India|
|Heart bypass|130000|18500|11000|10000|14.2%|8.5%|7.7%|
|Heart<br>valve<br>replacement|160000|12500|10000|9000|7.8%|6.3%|5.6%|
|Angioplasty|57000|13000|13000|11000|22.8%|22.8%|19.3%|
|Hip<br>replacement|43000|12000|12000|9000|27.9%|27.9%|20.9%|
|Hysterectomy|20000|6000|4500|3000|30.0%|22.5%|15.0%|
|Knee<br>replacement|40000|13000|10000|8500|32.5%|25.0%|21.3%|
|Spinal fusion|62000|9000|7000|5500|14.5%|11.3%|8.9%|

**Source:** Herman (2009), based on Einhorn (2008) and authors’ calculation.

# <u>Mode 3</u>

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

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