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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
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
TourismTelecomMaritimeFinanceConstructionBusinessAir TransportCountry
Sub-Sectors Tabled in 3rd Package
32401127776518Total
3521844Viet Nam
3322863Thailand
3123741Singapore
47-4892Philippines
3121742Myanmar
31-1791Malaysia
36-487-Lao PDR
69128112Indonesia
3325841Cambodia
14-4872Brunei
TourismTelecomMaritimeFinanceConstructionBusinessAir TransportCountry
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
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
Commitments in Healthcare Services
(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
(4) Unbound except as indicated in the horizontal section
Malaysia
Private hospital services
National TreatmentMarket AccessCountry
Commitments in Healthcare Services
(1) None
(2) None
(3) None
(4) Unbound
(1) None
(2) None
(3) None
(4) Unbound except as indicated in the horizontal section
Dental Services
(1) None
(2) None
(3) None
(4) Unbound
(1) None
(2) None
(3) None
(4) Unbound except as indicated in the horizontal section
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
(4) Unbound except as indicated in the horizontal section
Singapore
Medical services
National TreatmentMarket AccessCountry
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]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
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
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(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
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(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]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
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
Direct Insurance Companies
[AFAS-2]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(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
Direct Insurance Companies
[AFAS-2]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
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]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(1) Unbound(2) None
(3) None
(4) Unbound except as indicated in the horizontal section
(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]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(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]
National TreatmentMarket AccessCountry
AFAS & GATS Commitments
(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]
National TreatmentMarket AccessCountry
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