Author: Nino Kokashvili
Introduction
Trading between countries is one of the most visible consequence of globalization. Countries have possibilities to use their comparative advantages and gain from trade. Still, there is no clear conclusion about the direction of causality between economic growth and trade (Frankel and Rommer (1999)), but most studies conclude that opening up to international trade ends up with higher economic performance (Krugman (1979), Grossman and Helpman (1991), Young (1991), Lee (1993)), through economies of scale, facilitate the diffusion of knowledge, foster technological progress, knowledge transfers from host to home country and encourage competition both in domestic and international markets.
On the other hand, the dynamics of the value of export does not provide an optimistic view. Since 2010 growth rate of export had decreasing trend, which ended up to the negative growth in 2015. We have to emphasize an interesting issue that export of commodities characterizes much more decreasing trend than export of service (Intentional trade center). Japan as a country oriented to export should take some steps to adequately response the problem of general decreasing trend of export, especially in commodities. One possible solution to focus more on service export which is more demanding in the last decade.
Currently, 79% of total export of Japan is export of commodities and only 21% is the export of service(http://www.intracen.org/itc/market-info-tools/trade-statistics/). On the other hand, top exported services are: Charges for the use of intellectual property (22.2%), Transport (21.9%) and Travel (20.8%) (international trade center). Among them the share of travel in total service export increases year by year and in 2015 this figure reached to 25%. We know that the number of travelers in japan has increasing trend but how Japan can promote more visitors in the future. In this paper we mostly focus on Medical service export of japan because Japanese unique health care system is accepted worldwide. Among different types of export of medical service we study the possible potential of medical tourism.
Global tendency of medical tourism
The globalization of healthcare has given rise to a new form of tourism that is commonly known as health tourism. Based on the definition of Bookman and Bookman (2007), “medical tourism is a travel with the aim of improving one’s health, and also an economic activity that entails trade in services and represents the splicing of at least two sectors: medicine and tourism. Within the health tourism arena, medical tourism is among the fastest growing sectors, and many countries are now making legal and practical plans to attract medical tourists.
In general it is extremely difficult to measure the size of the market and the number of medical tourists in the world but based on the methodology provided by “Patients Beyond Borders’s” (http://www.patientsbeyondborders.com/medical-tourism-statistics-facts), they estimates that market size is USD 45.5-72 billion, approximately 14 million cross-border patients worldwide spending an average of USD 3,800-6,000 per visit, including medically-related costs, cross-border and local transport, inpatient stay and accommodations.
Market size is crucial but potential growth is vital. Taking into account the population aging and people high motivation to take care themselves and also travelling possibilities, Patients beyond Borders’s estimates that the worldwide medical tourism market is growing at a rate of 15-25%.
In Southeast Asia, the health sector is expanding rapidly and at the same time medical tourism is emerging as a lucrative business opportunity (Pocock and Phua (2011)). It is a stylized fact that medical tourist flow come from developed countries to developing one to get cheaper and high quality medical service. But form this general picture Japan is a good exemption, because Japan as a high developed country with modern technologies offers cheap medical service to everyone either local with unique healthcare system or foreign medical tourists.
Because there is no reliable data for recent years, a Ministry of Economy, Trade, and Industry of Japan estimated medical tourists for fiscal 2012 at 27,000 visitors. On the other hand, they expected that the number of medical tourists would increase up to 60,000 visitors. Chart 2. Provides information about the distribution of medical tourists by country. We see that most medical tourists come from the neighbor countries, such as China (48.1%), South Korea (12.2%) and Russia (10.7%).
Chart 1: Distribution of medical tourists in Japan in 2012 by country
| Compiled by authors. Source: Nippon.com |
Medical Tourism Index
The Medical Tourism Index (MTI) is a new type of country-based performance measure to assess the attractiveness of a country as a medical tourist destination. Based on this dataset Canada is ranked as number one medical tourists’ destination in the world. Japan has its 12thposition, but we have to mention that Asian countries such as: Singapore (4thplace), India (5th place), South Korea (8th place) have higher score than Japan. On the other hand, Japan is more competitive than Thailand (18th place), Philippines (19th place) and Taiwan (20th place). All of these mean that in Asia competition is higher but Japan has potential to be dominants in this region.
Chart 2. Medical Tourism Index, 2016
| Compiled by author based on medicaltourismindex.com |
Why medical tourism can be successful in Japan
Rich cultural heritage, beauty of the place and warmth of Japanese hospitality has always attracted tourists to this place. In the last decades, however, unique healthcare has been added to the list of reasons for visiting Japan. It is not a new or surprising fact. Japan enjoys the best health status in the world, with the highest life expectancy (84 year)(World development indicators, latest data 2015. World Bank, http://data.worldbank.org/indicator/SP.DYN.LE00.IN) and lowest infant mortality rate (2 per 1000 live births). Furthermore, healthy eating habits of the Japanese people is another crucial contributor to good health. All these are the logical result of the world-class healthcare services provided in Japan. Low-cost and high-quality healthcare service is the main comparative advantage of the country which should be used for promoting the medical tourism. Following aspects make Japan a good choice for all your healthcare needs:
1. Lower costs
Lower price is the main advantage why healthcare in Japan can be attractive for foreigners. The government of Japan controlled the cost of healthcare through the Unified Fee Schedule. On the other hand, all hospitals in japan are operating as non-profitable organizations, which means that they are not concentrating on profit, they just try to cover all costs and have zero margin. This makes costs much lower than in case of profitable businesses.
The per capita healthcare expenditure in Japan is 30 percent lower than in Germany and 60 percent lower than in the United States of America (World development indicators, latest data 2014. World Bank http://data.worldbank.org/indicator/SH.XPD.PCAP). One more interesting insight from the data is that starting from 2012, healthcare expenditure in Japan has decreasing trend while the similar expenditure is increasing in other countries like in United States, OECD, EURO area. This fact also supports the comparative advantage of Japan.
Chart 3: Dynamic of healthcare expenditures by country, 2003 – 14
| Source: World Bank, World development indicators |
2. Quality of healthcare service in Japan
Based on the measure of the health care system efficiency, provided by World Health Organization, Japan is in top 10 countries with the most efficient health care system (Tandon et al. (2000)). If we compare the ranking of Japan and its direct neighbors, we see that there is a huge difference. Russia is
ranked 130thand China – 144th, this statistics simply show that Japan can have a comparative advantage than its neighbor countries. It is also noticeable that Japan has higher ranking position than other developed countries.
This measure covers not only the costs of health care system but also the quality and responsiveness of the system. If we concentrate more on the quality of the health care system in Japan we should keep in mind that these following characteristics:
Infrastructure of healthcare facilities - With access to world-class technology, Japanese healthcare facilities boast highly advanced medical equipment. The quality standard of Japanese healthcare facilities matches the best in the world.
Highly trained and skilled staff - Most of the doctors in Japan have either studied or practiced overseas. The combination of skills and cutting edge technologies makes Japan as a unique choice to meet any healthcare needs.
Source: Tandon et al. (2000) |
3. Priority of the government
Medical tourism as a “new” approach to high economic growth is not new in case of Japan. Democratic Party of Japan was the first which started actively promotion of medical tourism. This promotion had the following consequences. In 2011 January, DPJ government launched a “visa for medical stay” (Ministry of Foreign Affair of Japan). program that grants long-term stays to medical tourists and approval for visa holders to travel back and forth between their home countries and Japan. In the same year, in April new website and call center opened for inquiries from foreign countries. The most crucial was the fact that in 2012 established Japan Medical Service Accreditation for International Patients and for 2015 11 institutions have been accredited.
The current government medical policy of Japan has prioritized the expansion of the national medical technology and services outside the country, internationally. Changes are explained by several reasons, such as, respect of the Japanese general principle about healthcare that it historically non-profitable industry in Japan. Also, international expansion of medical technology and services stimulate the growth of other related industries. But on the other hand, policy that concentrates on exporting medical service outside the county is based on exactly the same circumstances on which medical tourism inside the country stands on. Both concerns are relied on the successful Japanese medical system and aim to gain economically for Japan. Moreover, medical tourism itself is a part of medical export and is often called as one of the branches of it. Therefore, activates that are represented by medical tourism also reflect current government policy needs and implications. While expending internationally in medical service describes one type of medical export activates, medical tourism appears as another. Thus, focusing on both branches of medical export should turn out to be more beneficial for a whole Japanese economy.
Beautiful destinations to get the full medical service
Together with its rich culture and a sense of hospitality, Japan has a lot to offer when it comes to a relaxed vacation in the midst of snowy mountains and cherry blossoms. It makes Japan a perfect place for medical tourism as the quiet beauty of the country helps patients to have a fast recovery after treatment.
Possibilities, Challenges and potential effect of medical tourism in Japan
Possibilities
Medical tourism is developing and especially Asian countries are trying to attract more and more medical tourists from the higher income countries. On the other hand the majority of medical tourists in Asia come from neighboring countries (Pocock and Phua (2011)). In this competition japan needs more specific positioning strategy to expand its market share. Being a neighbor of China is assumed as a huge possibility for Japan. China is a growing market taking into account both economic factors and also the population. There are some hospitals in Japan which are more focus on Chinese patients, such as Nippon Medical School Imaging Center for Healthcare, Kameda Medical Center in Kamogawa, and St. Luke’s International Hospital in Tokyo ( Japanese Healthcare Attracts Medical Tourists).
Based on the statistics provided by Kameda Medical Center, there were 50 Chinese patients in 2014, but in 2015 the number of patient from China increased more than 3 times and reached 160 patients. If we generalize this trend to the whole industry, we can say that there is a huge demand from China in Japanese medical service and Japan should meet the demand. On the other hand, weak Japanese currency is an additional advantage which attracts medical tourists in the country (Currency exchange rates JPY/USD).
Challenges
If we talk about challenges, we can use Competitive Medical Tourism Destination Model provided by Lagiewski and Myers (2008) which emphasize on three most crucial pillar for medical tourism development:
- · Medical Facilities & Services;
- · Relationship & Connection to Specialized Medical Tourism Operators;
- · Core Tourist Attributes of the Destination.
In case of Japan the first component of Medical facilities and services are more or less achieved. But there are some limitations in other two pillars. Language and cultural barriers are visible and many healthcare institutions in Japan are cautious about internationalization. A very few professionals in the Japanese healthcare industry speak in English. This has become a huge barrier for medical tourists.
Cost of Living is another important issue in Japan. While medical technologies and services available in Japan attract medical tourists, the high cost of living makes a negative effect on foreigners to stay in Japan for a long-time.
Relationship & Connection to Specialized Medical Tourism Operators is the field which need more development to meet the standard of medical tourism. Without such brokerage companies it is practically impossible to make a development of this industry. Japan can take an example from other already well know medical intermediate companies such as “PlanetHospital” (PlanetHospital
http://www.planethospital.com/).
Potential effect of medical tourism
If we go back to definition of medical tourism, it is explained as “A travel with the aim of improving one’s health, and also an economic activity that entails trade in services and represents the splicing of at least two sectors: medicine and tourism” (Bookman and Bookman (2007)). This means that medical tourism have some spillover especially in tourism industry. Higher number of patients in the country is also higher number of tourists. Many tourists automatically means currency inflow in the country. On the other hand, inward flow of foreign currency supports growth in health, tourism, and infrastructure industries, thereby improving aggregate economic development and appreciate local currency (Hopkins et al. (2010)).
Compared to other channel of medical service export like service centers overseas, medical tourism has several advantages. The first and the most crucial is that medical tourism reversal the migration of medical professionals to developed countries (Hopkins et al. (2010), Pocock and Phua (2011)). So, medical tourism industry can be seen as a tactic to reduce international emigration of health workers, particularly of specialists.
Another crucial part for the further development of medical industry is to maintain future human capital capacity. Medical tourism creates an excellent opportunity of collaboration of national hospitals and top medical universities in the world. Such collaboration practice is very common nowadays. For example, Singapore’s National University recently opened a graduate medical school with Duke University in the USA, and Malaysia’s Sunway University medical school trains students in partnership with Monash University in Australia and many other examples.
Moreover, Medical tourism can play a significant role to wider economic development, which is strongly correlated with improved population health status as a whole, e.g. increased life expectancy, reduced child mortality rates (Chopra and Van Der Hoeven (2009)).
Conclusions and recommendation
While export of commodities has a global decreasing trend, Japan as an export oriented country should try to find some way to expand its export, through service industry. On the other hand, the Japanese government has identified its healthcare industry as a key economic growth driver. Currently, government is focusing on both: improving medical facilities for international patients coming to Japan and on exporting Japanese medical services to foreign destinations.
With its high technology, affordable prices and a good reputation Japan has a great potential to be the main destination for medical tourists. The influx of foreigners seeking medical tourism is also boosted by the relaxed visa conditions and weak yen. On the other hand, medical tourism also has some spillover if we take into account that medical tourism is not only medical service, but it also represents “tourism”. So these potential patients are potential tourists and they support countries’ tourism potential. Large number of tourists automatically mean more capital inflow in the country and stronger currency. On the other hand, Non – profitable styled medical healthcare system in Japan marks its advantages of industry and helps its farther development. Medical tourism in Japan can be profitable for the whole country without making the medical industry itself profitable.
For further development of medical tourism industry, together with low-cost and modern healthcare services, tourism medical operator service is essential. Medical tourism operator plays a key role as an intermediary for the medical tourist. Medical tourists would appear to rely heavily on the guidance and suggestions of the medical tourism operator. Thus, Shosha as a huge business association which includes several firms operating in medical service and management is advisable to actively start medical brokerages activities, which means that they should promote the whole service to patients.
And finally, if a destination wants to be competitive due to the low-cost, state-of-art medical service model, it is recommended that more effort be directed toward branding the destination by the government side.
Based on these possibilities and challenges of Japanese Medical tourism industry the forwarding steps should be taken by government. The government should promote Japan and help it to become the one-stop destination for all medical woes. On the other hand there is a chance of some kind of collaboration with other already existed successful countries in the industry like India or Malaysia.
The potential for medical tourism in Japan is without doubt and the government should continue putting its efforts in encouraging more medical tourists to visit Japan. The availability of the most modern technology along with skilled medical practitioners can help Japan poise itself as the world’s top leader in healthcare.
