Health Insurance and Health Services in ASEAN Framework Agreement on Services by Tan Tai Hiong & Tri S. Djandam ASEAN Secretariat AsiaPacific Summit on Health Insurance and Managed Care Jakarta, 4 May 00
Presentation Outline ASEAN Framework Agreement on Services (AFAS) and Liberalization of Services Trade in ASEAN Healthcare Services Liberalization in ASEAN Health Insurance and Financial Services Liberalization under AFAS
ASEAN Framework Agreement on 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 5 th ASEAN Summit held on 5 December 995 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 0% of recorded world trade as well as the majority of domestic activities, and is expected to reach 50% of world trade by year 00.
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 GATSplus commitments. For WTO members, it means commitments that are better than GATS or the offer of new service sectors not covered under GATS. For nonwto 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 996 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 : CrossBorder Supply The service crosses border, independent of the supplier or the consumer Mode : Consumption Abroad The consumer or his/her property crosses border Mode 3: Commercial Presence Service supplier is a locally established office Mode 4: Movement of Natural Person Service supplier remains as a nonresident
Limitations in Services Trade Market Access National Treatment Number of Supplier Value of Transaction Number of Operations Number of Natural Persons Type of Legal Entity Participation of Foreign Capital Other Measures 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 (996 998 ) st Package, signed on 5 December 997 nd Package, signed on 6 December 998 Round ( 999 00 ) 3 rd Package, signed by 3 December 00
SubSectors Tabled in st Package 8 4 Total 3 Viet Nam 5 Thailand Singapore Philippines 4 Myanmar Malaysia 3 Lao PDR 3 Indonesia Cambodia Brunei Tourism Telecom Maritime Finance Construction Business Air Transport Country
SubSectors Tabled in nd Package 4 7 36 55 Total 3 7 7 4 3 Viet Nam 3 4 0 Thailand Singapore 5 7 7 Philippines Myanmar 4 4 7 5 Malaysia Lao PDR 9 Indonesia 3 Cambodia 6 Brunei Tourism Telecom Maritime Finance Construction Business Air Transport Country
SubSectors Tabled in 3 rd Package 3 40 7 77 65 8 Total 3 5 8 4 4 Viet Nam 3 3 8 6 3 Thailand 3 3 7 4 Singapore 4 7 4 8 9 Philippines 3 7 4 Myanmar 3 7 9 Malaysia 3 6 4 8 7 Lao PDR 6 9 8 Indonesia 3 3 5 8 4 Cambodia 4 4 8 7 Brunei Tourism Telecom Maritime Finance Construction Business Air Transport Country
The Third Round of Negotiations Launched by ASEAN Economic Ministers (AEM) at their 33 rd Meeting held in Ha Noi, Viet Nam on 5 September 00 Begins in 00 and end in 004 Aims to cover all sectors and modes of supply
Mutual Recognition Arrangement During the 7 th Summit in Brunei Darussalam on 5 November 00, 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 visàvis pursuing sectoral MRAs for different disciplines.
Parameters to Guide Liberalization The 3 nd AEM held in Chiang Mai, Thailand on 5 October 000 adopted parameters to guide longterm liberalization in trade in services. Key objective is to achieve free flow of services by 00 as envisaged by ASEAN Leaders Flexibility could be accorded Milestones should be set Peer Review should be established All 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 AFAS However, 3 ASEAN Member States (Brunei, Malaysia, Singapore) have scheduled commitments in healthcare services under the GATS
Commitments in Healthcare Services Country Brunei Darussalam Medical and dental services () None () None (3) None Market Access () None () None (3) None National Treatment Malaysia Medical speciality services (4) Unbound except as indicated under horizontal measures () None () None (3) Medical speciality services may be supplied only by a natural person (4) Unbound except as indicated in the horizontal section (4) Unbound except as indicated under horizontal measures () None () None (3) None (4) None other than: practice only in private hospitals of at least 00 beds; practice only at a specified location and a change of location requires approval; and the setting up of individual or joint group practices is not permitted
Commitments in Healthcare Services Country Malaysia () None Market Access () None National Treatment Private hospital services () None (3) Economic needs test; Only through a locally incorporated jointventure corporation with Malaysian individuals or Malaysiancontrolled corporations or both and aggregate foreign shareholding in the jointventure corporation shall not exceed 30 per cent; and The jointventure corporation shall operate a hospital with a minimum of 00 beds (4) Unbound except as indicated in the horizontal section () None (3) Establishment of feeder outpatient clinics is not permitted (4) Unbound except for the categories of natural persons referred to under market access
Commitments in Healthcare Services Country Singapore Medical services Dental Services Veterinary Services () Unbound due to lack of technical feasibility () None (3) None, other than the number of new foreign doctors registered each year may be limited depending on the total supply of doctors (4) Unbound except as indicated in the horizontal section () None () None (3) None (4) Unbound except as indicated in the horizontal section () None () None (3) None Market Access (4) Unbound except as indicated in the horizontal section National Treatment () None () None (3) None (4) Unbound () None () None (3) None (4) Unbound () None () None (3) None (4) Unbound
Health Insurance and Financial Services Liberalization under AFAS
Financial Services Liberalization On 8 June 999 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 00.
Negotiations under the WC An important step of the negotiation is an exchange of information about financial services regime among Member States, including GATS commitments Member 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 subsector for each round of negotiation.
Liberalization Packages The st liberalization package for financial services under AFAS was signed by ASEAN Economic Ministers on 6 December 998, concluding the 996 999 round The nd liberalization package was signed by ASEAN Finance Ministers on 6 April 00, concluding the nd Round ( 999 00 )
Health Insurance Services Classification Classification of health insurance services is based on 99 UN Statistical Office s Central Product Classification (CPC) Code. CPC Code 89 89 893 894 895 896 897 899 Description Nonlife insurance services Accident and health insurance Marine, aviation and other transport insurance Freight insurance Fire and other property damage insurance Pecuniary loss insurance General liability insurance Other insurance services n.e.c
Insurance Services Commitments 7 ASEAN Member States (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Viet Nam) scheduled their commitments on Nonlife insurance during the past two rounds of negotiations 6 ASEAN Member States (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand) scheduled commitments in Nonlife insurance under the GATS
AFAS & GATS Commitments Country Brunei Direct insurance (nonlife) including disability income, accident and health insurance and contracts of fidelity bonds, performance body or similar contract of guarantee. (89) [GATS] Market Access () Unbound () 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. () None () None (3) None National Treatment (4) Unbound (see horizontal measures) ; Unbound (except as indicated in the market access column.) Cambodia
AFAS & GATS Commitments Country Indonesia NonLife Insurance Services (89) Market Access National Treatment General Conditions: All Market Access and National Treatment limitations specified in the Non Banking Financial Services Subsector will be eliminated by the year 00 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. () Unbound () Unbound [GATS] () Unbound except if: () Unbound [AFAS] (a) (b) (c) There is no insurance companies in Indonesia which could handle the insurance risks of the object in question There is no insurance company in Indonesia which want to carry out an insurance coverage of the object in question The owners of insurance objects in question are not Indonesian citizens or Indonesian legal entities
AFAS & GATS Commitments Country Indonesia NonLife Insurance Services (89) [GATS] [AFAS] Lao PDR Market Access (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 National Treatment (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
AFAS & GATS Commitments Country Malaysia Direct Insurance Companies [AFAS] Market Access (), () Unbound except as otherwise specified in the schedule. (3) Branches of foreign insurance companies are required to be locally incorporated by 30 June 998 and foreign shareholding not exceeding 5% is permitted. Foreign shareholding not exceeding 5% is also permitted for the existing foreign shareholders of locally incorporated companies, provided aggregate foreign shareholding in such companies does not exceed 5%. New entry is limited to equity participation by foreign insurance companies and aggregate foreign shareholding but shall not exceed 30%. Unbound for new licenses. National Treatment (), () Unbound except as otherwise specified in the schedule. (3) None except as indicated in the financial sector horizontal section
AFAS & GATS Commitments Country Malaysia Direct Insurance Companies [AFAS] 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) (b) (c) (d) Market Access has the ability to facilitate trade and contribute to financial and economic development of Malaysia; The country of the foreign insurance company has significant trade and investment interests in Malaysia; The country of the foreign insurance company does not have a significant representation in the Malaysian insurance industry; or The foreign insurance company has the ability to provide technical expertise and knowhow to contribute to the financial and economic development of Malaysia. National Treatment
AFAS & GATS Commitments Country Malaysia Direct Insurance Companies [AFAS] 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 () 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. National Treatment (4) Unbound except for the categories of natural persons referred to under market access.
AFAS & GATS Commitments Country Myanmar Philippines General Nonlife [AFAS] Market Access () 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 () Same as () 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 nonfilipino citizens in the Board of Directors of a locally incorporated insurance company is limited to onethird of the Board's total membership. (4) Unbound, see the horizontal section. () Unbound () Unbound (3) None (4) Unbound National Treatment
AFAS & GATS Commitments Country Singapore Direct insurance (nonlife) including disability income, accident and health insurance and contracts of fidelity bonds, performance body or similar contract of guarantee. [AFAS] Market Access () Unbound () 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 companies Unbound for issuance of new insurance licenses and establishment of new representative offices. (4) Unbound except as indicated in the horizontal section. () Unbound () None (3) None National Treatment (4) Unbound except as indicated in the horizontal section
AFAS & GATS Commitments Country Thailand Nonlife Insurance (89) [GATS] Market Access () Unbound except for international marine, aviation and transit and all classes of reinsurance () None (3) Foreign equity participation limited to 5 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. () Unbound () None (3) None (4) None National Treatment
AFAS & GATS Commitments Country Viet Nam Nonlife Insurance (89) [AFAS] Market Access () Unbound except marine cargo insurance () Unbound (3) By the year 000, maximum of [] joint ventures and 00% foreign owned in nonlife insurance to be established. Foreign invested of nonlife insurance companies are allowed to provide insurance and insurancerelated services only to the foreign invested area. After 5 years from the first year of earning profit, 00% of foreign owned companies in nonlife insurance have to divest at least 30% of their share equity to domestic ones. Minimum legal capital of an insurance joint venture is million USD and that of 00% foreign owned company is 5 million USD (4) Unbound () Unbound () Unbound (3) Unbound (4) Unbound National Treatment
Epilogue
Benefits of Liberalization More foreign investment in healthcare and health insurance services sectors Promotes efficiency in the domestic healthcare and health insurance services provision New products and know how are made available throughout ASEAN Member States Facilitate greater demand on healthcare and health insurance services
Future Direction of Liberalization Liberalization under AFAS will continue through subsequent rounds of negotiations Developments in ASEAN will be closely related to the developments under GATS Developments in health insurance services will have linkage to the developments of healthcare services Liberalization will go handinhand 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 nonfinance 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