Foreign Direct Investment in Health Services

Abstract

Foreign direct investment (FDI) in health services hardly existed 15-20 years ago. Health care is considered a universal human right. Many countries have included the right to a free access to healthcare in their constitutions. The public sector has typically been a dominant or a major provider of healthcare in most countries. Yet economic forces have made it increasingly difficult for countries to maintain an exclusively public ― sector dominated model of health care. This has opened the door to the private provision of health services. Consequently, many developing countries, particularly in Latin America and Asia, have significant private medical sectors. While allowing or accepting the private provision of health services, countries have also opened to FDI in these services, seeing in it the opportunity for cost savings, easing the pressure on public systems, and access to better quality care. Some countries consider FDI as the opportunity to help them develop exports of health services. But FDI, as all private provision, can raise challenges in promoting equitable and affordable access to health services. The paper documents the emergence and growth of FDI in health services, discusses its drivers, potential benefits and risks associated with this FDI, as well as the underlying policy issues. A key policy conclusion is that foreign investment may yield many benefits for a host developing country, but if structural and regulatory deficiencies are not addressed, these benefits may not materialize and existing structural distortions may be aggravated. Domestic policies are thus central to protecting certain aspects of domestic health care systems and to addressing concerns related to the private provision, including foreign provision.