health insurance and health services in aseanunpan1.un.org/intradoc/groups/public/documents/... ·...

Health Insurance and Health Services in ASEAN Framework Agreement on Services

byTan Tai Hiong & Tri S. Djandam

ASEAN Secretariat

Asia-Pacific Summit on Health Insurance and Managed Care

Jakarta, 22-24 May 2002

Presentation Outline

ASEAN Framework Agreement on Services (AFAS) and Liberalization of Services Trade in ASEANHealthcare Services Liberalization in ASEANHealth Insurance and Financial Services Liberalization under AFAS

ASEAN Framework Agreementon Services (AFAS)

Liberalization of Services Trade in ASEAN

The Origin of AFAS

ASEAN Framework Agreement on Services (AFAS) was signed by the ASEAN Economic Ministers during the 5th ASEAN Summit held on 15 December 1995 in Bangkok, Thailand.AFAS adopts the structure and approach of General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO).

Why AFAS

To complement the establishment of ASEAN Free Trade Area (AFTA) aiming to make the region a globally competitive manufacturing base.To strengthen ASEAN’s services sector in an expanding global market for services. Services account for at least 20% of recorded world trade as well as the majority of domestic activities, and is expected to reach 50% of world trade by year 2020.

The Objectives of AFAS

To enhance cooperation in services amongst Member States in order to improve the efficiency and competitiveness, diversify production capacity, and supply and distribution of services of their service suppliers within and outside ASEAN.To eliminate substantially restrictions to trade in services amongst Member States.To liberalize trade in services by expanding the depth and scope of liberalization beyond those undertaken by Member States under the GATS with the aim to realizing a free trade area in services.

GATS - Plus

Liberalisation in services is achieved through negotiations among Member States to arrive at GATS-plus commitments.For WTO members, it means commitments that are better than GATS or the offer of new service sectors not covered under GATS.For non-WTO Members, it must be commitments that are no less favorable than the existing service regime.

Coordinating Committee on Services

Negotiations in services trade are being conducted through the Coordinating Committee on Services (CCS). The CCS was established in January 1996 and has seven negotiating groups under its purview corresponding to the seven priority sectors: air transport, business services, construction, financial services, maritime services, telecommunication, and tourism.

Negotiations under the CCS

An important preliminary step in the negotiation process is the exchange of information about services regime among Member States.Member States are expected to request market access and national market commitments from other Members.Member States are expected to make offers of market access and national treatment to other Members. Such offers are applicable to all Members (Most Favored Nation Treatment).

Modes of Services Supply

Mode 1: Cross-Border SupplyThe service crosses border, independent of the supplier or the consumer

Mode 2: Consumption AbroadThe consumer or his/her property crosses border

Mode 3: Commercial PresenceService supplier is a locally established office

Mode 4: Movement of Natural PersonService supplier remains as a non-resident

Limitations in Services Trade

Market Access

• Number of Supplier• Value of Transaction• Number of Operations• Number of Natural

Persons• Type of Legal Entity• Participation of Foreign

Capital• Other Measures

National Treatment

• Tax Measures• Nationality Requirement• Residency Requirement• Licensing, Standards

and Qualifications• Registration

Requirement• Authorization

Requirement• Ownership of Property of

Property/Land• Other Measures

Liberalization Commitments

No Schedule of Commitments

With Schedule of Commitments

Unbound

Limitations

None

Progress of AFAS

To date, ASEAN Economic Ministers (AEM) have signed three Packages of Commitments in two rounds of negotiations:

Round 1 (1996 – 1998 )• 1st Package, signed on 15 December 1997• 2nd Package, signed on 16 December 1998

Round 2 ( 1999 – 2001 )• 3rd Package, signed by 31 December 2001

Sub-Sectors Tabled in 1st Package

2218--24Total

31-----Viet Nam

5-2----Thailand

1-----1Singapore

1----2-Philippines

4------Myanmar

2-1---2Malaysia

3------Lao PDR

2-3----Indonesia

-------Cambodia

1-2---1Brunei

TourismTelecomMaritimeFinanceConstructionBusinessAir TransportCountry

Sub-Sectors Tabled in 2nd Package

11241127365512Total

1137743Viet Nam

12234102Thailand

-11111-Singapore

1125771Philippines

1212121Myanmar

-4-4715-Malaysia

2222222Lao PDR

29-11121Indonesia

3--1-12Cambodia

-2-161-Brunei


Sub-Sectors Tabled in 3rd Package

32401127776518Total

3521844Viet Nam

3322863Thailand

3123741Singapore

47-4892Philippines

3121742Myanmar

31-1791Malaysia

36-487-Lao PDR

69128112Indonesia

3325841Cambodia

14-4872Brunei


The Third Round of Negotiations

Launched by ASEAN Economic Ministers (AEM) at their 33rd Meeting held in Ha Noi, Viet Nam on 15 September 2001 Begins in 2002 and end in 2004 Aims to cover all sectors and modes of supply

Mutual Recognition Arrangement

During the 7th Summit in Brunei Darussalam on 5 November 2001, ASEAN Leaders mandated the start of negotiations on Mutual Recognition Arrangement (MRA) to facilitate the flow of professional services under AFAS.CCS is currently considering a probability to conclude a Framework Agreement for the MRA vis-à-vis pursuing sectoral MRAs for different disciplines.

Parameters to Guide Liberalization

The 32nd AEM held in Chiang Mai, Thailand on 5 October 2000 adopted parameters to guide long-term liberalization in trade in services.

Key objective is to achieve free flow of services by 2020 as envisaged by ASEAN LeadersFlexibility could be accordedMilestones should be setPeer Review should be establishedAll commitments are legally binding

Healthcare Services Liberalization in ASEAN

Commitment in Healthcare Services

ASEAN Member States have not scheduled any commitments on healthcare services under AFASHowever, 3 ASEAN Member States (Brunei, Malaysia, Singapore) have scheduled commitments in healthcare services under the GATS

Commitments in Healthcare Services

(1) None

(2) None

(3) None

(4) None other than:practice only in private hospitals of at least 100 beds;practice only at a specified location and a change of location requires approval; andthe setting up of individual or joint group practices is not permitted

(1) None

(2) None

(3) Medical speciality services may be supplied only by a natural person

(4) Unbound except as indicated in the horizontal section

Malaysia

Medical speciality services

(1) None

(2) None

(3) None

(4) Unbound except as indicated under horizontal measures

(1) None

(2) None

(3) None

(4) Unbound except as indicated under horizontal measures

Brunei Darussalam

Medical and dental services

National TreatmentMarket AccessCountry


(1) None

(2) None

(3) Establishment of feeder outpatient clinics is not permitted

(4) Unbound except for the categories of natural persons referred to under market access

(1) None

(2) None

(3) Economic needs test;

• Only through a locally incorporated joint-venture corporation with Malaysian individuals or Malaysian-controlled corporations or both and aggregate foreign shareholding in the joint-venture corporation shall not exceed 30 per cent; and

• The joint-venture corporation shall operate a hospital with a minimum of 100 beds


Malaysia

Private hospital services



(1) None

(2) None

(3) None

(4) Unbound

(1) None

(2) None

(3) None


Dental Services

(1) None

(2) None

(3) None

(4) Unbound

(1) None

(2) None

(3) None


Veterinary Services

(1) None

(2) None

(3) None

(4) Unbound

(1) Unbound due to lack of technical feasibility

(2) None

(3) None, other than the number of new foreign doctors registered each year may be limited depending on the total supply of doctors


Singapore

Medical services


Health Insurance and Financial Services Liberalization under AFAS

Financial Services Liberalization

On 28 June 1999 AEM agreed to request other ASEAN ministerial body (including Finance Ministers) to take the lead in service liberalization in their respective sectors.Negotiations in financial services sector are being conducted through the Working Committee on ASEAN Financial Liberalization under AFAS (WC). The WC was established in 2001.

Negotiations under the WC

An important step of the negotiation is an exchange of information about financial services regime among Member States, including GATS commitmentsMember States are expected to make offers of market access and national treatment to other Members.Member States agree to schedule commitment in at least one common sub-sector for each round of negotiation.

Liberalization Packages

The 1st liberalization package for financial services under AFAS was signed by ASEAN Economic Ministers on 16 December 1998, concluding the 1996 – 1999 roundThe 2nd liberalization package was signed by ASEAN Finance Ministers on 6 April 2002, concluding the 2nd Round ( 1999 – 2001 )

Health Insurance Services Classification

Classification of health insurance services is based on 1991 UN Statistical Office’s Central Product Classification (CPC) Code.

Non-life insurance servicesAccident and health insuranceMarine, aviation and other transport insuranceFreight insuranceFire and other property damage insurancePecuniary loss insuranceGeneral liability insuranceOther insurance services n.e.c

812981291812938129481295812968129781299

DescriptionCPC Code

Insurance Services Commitments

7 ASEAN Member States (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Viet Nam) scheduled their commitments on Non-life insurance during the past two rounds of negotiations6 ASEAN Member States (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand) scheduled commitments in Non-life insurance under the GATS

AFAS & GATS Commitments

Cambodia

(1) None(2) None

(3) None

(4) Unbound (see horizontal measures) ; Unbound (except as indicated in the market access column.)

(1) Unbound(2) Compulsory insurance of Motor Third Party

Liability and Workmen’s Compensation can be purchased only from insurance companies established in Brunei

(3) Commercial presence is permitted only through insurance companies that are registered in Brunei

(4) Unbound (see horizontal measures) ; Unbound (except at the level of managers, executives and specialists)

Entry is limited to a three year period that may be extended for up to two additional years for a total term not to exceed five years.

Brunei

Direct insurance (non-life) including disability income, accident and health insurance and contracts of fidelity bonds, performance body or similar contract of guarantee. (8129)

[GATS]



General Conditions: All Market Access and National Treatment limitations specified in the Non-Banking Financial Services Sub-sector will be eliminated by the year 2020 subject to similar commitment by other Members; temporary entry will be granted to technical expert(s)/adviser(s) for no longer than 3 (three) months per person for any given year; only directors, managers, and expert(s)/adviser(s) can be assumed by expatriates with maximum stay of 3 (three) years and can be extended.

Indonesia

Non-Life Insurance Services (8129)

[GATS]

[AFAS-2]

(1) Unbound

(2) Unbound

(1) Unbound

(2) Unbound except if:

(a) There is no insurance companies in Indonesia which could handle the insurance risks of the object in question

(b) There is no insurance company in Indonesia which want to carry out an insurance coverage of the object in question

(c) The owners of insurance objects in question are not Indonesian citizens or Indonesian legal entities



(3) As specified in the General Conditions

(4) As specified in the Horizontal Measures; Expatriate Charges: subject to charges levied by National, Provincial and Municipal Governments; any expatriate must hold a valid working permit issued by the Ministry of Manpower; Any expatriate must meet immigration requirements and procedures to enter the territory of the Republic of Indonesia

(3) As specified in the Horizontal Measures and General Conditions ; Commercial Presence of the foreign service provider(s) may be in the form of joint venture and / or representative office. Joint venture : i) should be in the form of Limited Liability Enterprise, ii) not more than 49% of the capital share of the Limited Liability Enterprise may be owned by foreign partner(s).

(4) Unbound except for director and technical advisor/expert

Indonesia

Non-Life Insurance Services (8129)

[GATS]

[AFAS-2]

Lao PDR



(1), (2) Unbound except as otherwise specified in the schedule.

(3) None except as indicated in the financial sector horizontal section

(1), (2) Unbound except as otherwise specified in the schedule.

(3) Branches of foreign insurance companies are required to be locally incorporated by 30 June 1998 and foreign shareholding not exceeding 51% is permitted.

Foreign shareholding not exceeding 51% is also permitted for the existing foreign shareholders of locally incorporated companies, provided aggregate foreign shareholding in such companies does not exceed 51%.

New entry is limited to equity participation by foreign insurance companies and aggregate foreign shareholding but shall not exceed 30%.

Unbound for new licenses.

Malaysia

Direct Insurance Companies

[AFAS-2]



Acquisition by a foreign insurance company of an aggregate of more than 5 per cent shareholding must meet at least one of the following criteria:

(a) has the ability to facilitate trade and contribute to financial and economic development of Malaysia;

(b) The country of the foreign insurance company has significant trade and investment interests in Malaysia;

(c) The country of the foreign insurance company does not have a significant representation in the Malaysian insurance industry; or

(d) The foreign insurance company has the ability to provide technical expertise and know-how to contribute to the financial and economic development of Malaysia.

Malaysia


[AFAS-2]



(4) Unbound except for the categories of natural persons referred to under market access.

An insurance company is not allowed to acquire more than 5% share:

(a) In another insurance company in Malaysia that carries on the same class of insurance business as that carried on by it; or

(b) In an insurance broking company.

(4) Unbound except the following:(a) Unless otherwise specified, temporary

presence of natural persons is offered only in respect of supply through the mode of commercial presence.

(b) two (2) senior managers for branches of foreign insurance companies and locally incorporated insurance companies with an aggregate foreign shareholding of 50% or more.

(c) five (5) specialists are to be allowed for each institution for areas relating to:underwriting of specialized classes of general business; information technology; and actuarial functions.

(d) Entry shall be limited to a maximum period of five years.

Malaysia


[AFAS-2]



Myanmar(1) Unbound

(2) Unbound(3) None

(4) Unbound

(1) Except for marine hull and marine cargo insurance, risks located in the Philippines shall be insured with the companies authorized to transact business in the Philippines

(2) Same as (1) above(3) Market access is limited to:(a) Acquisition of up to sixty percent (60%) of the

voting stock of an existing domestic insurance company.

(b) Investing in up to sixty percent (60%) of the voting stock of a new locally incorporated insurance company.

Participation of non-Filipino citizens in the Board of Directors of a locally incorporated insurance company is limited to one-third of the Board's total membership.

(4) Unbound, see the horizontal section.

Philippines

General Non-life

[AFAS-2]



(1) Unbound(2) None

(3) None


(1) Unbound(2) None except for compulsory insurance of

Motor Third Party Liability and Workmen’s Compensation which can be purchased only from licensed insurance companies in Singapore

(3) Foreign parties can only acquire equity stakes of up to 49% in aggregate in locally owned insurance companiesUnbound for issuance of new insurance licenses and establishment of new representative offices.

(4) Unbound except as indicated in the horizontal section.

Singapore

Direct insurance (non-life) including disability income, accident and health insurance and contracts of fidelity bonds, performance body or similar contract of guarantee.

[AFAS-2]



(1) Unbound

(2) None(3) None

(4) None

(1) Unbound except for international marine, aviation and transit and all classes of reinsurance

(2) None(3) Foreign equity participation limited to 25 per

cent of registered share capital.

New establishment is subject to license approved by the Minister with the consent of the cabinet.

(4) Only senior managerial personnel, specialist and technical assistants with the approval of the Insurance Commissioner.

Thailand

Non-life Insurance(8129)

[GATS]



(1) Unbound(2) Unbound(3) Unbound

(4) Unbound

(1) Unbound except marine cargo insurance(2) Unbound(3) By the year 2000, maximum of [2] joint

ventures and 100% foreign owned in non-life insurance to be established. Foreign invested of non-life insurance companies are allowed to provide insurance and insurance-related services only to the foreign invested area. After 5 years from the first year of earning profit, 100% of foreign owned companies in non-life insurance have to divest at least 30% of their share equity to domestic ones. Minimum legal capital of an insurance joint venture is 2 million USD and that of 100% foreign owned company is 5 million USD

(4) Unbound

Viet Nam

Non-life Insurance(8129)

[AFAS-1]


Epilogue

Benefits of Liberalization

More foreign investment in healthcare and health insurance services sectorsPromotes efficiency in the domestic healthcare and health insurance services provisionNew products and know how are made available throughout ASEAN Member StatesFacilitate greater demand on healthcare and health insurance services

Future Direction of Liberalization

Liberalization under AFAS will continue through subsequent rounds of negotiationsDevelopments in ASEAN will be closely related to the developments under GATSDevelopments in health insurance services will have linkage to the developments of healthcare servicesLiberalization will go hand-in-hand with capacity building initiatives

Resources on the Web

www.aseansec.org economic cooperation“Finance” section: financial services’commitments (incl. health insurance) of ASEAN countries“Services” section: AFAS and commitments of non-finance services of ASEAN countries

www.wto.org/english/tratop_e/serv_e/serv_commitments_e.htm

List of schedules of commitments of all WTO members under the GATS

http://www.aseansec.org/

http://www.wto.org/english/tratop_e/serv_e/serv_commitments_e.htm

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