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What are the goals and benefits of Health Tourism “Free Zones”?

In his Second Opinion column, Dr Constantine Constantinides from healthCare cybernetics looks at the growing interest in Healthcare Free Zones, how they may aid the development of medical tourism and what is needed to take them forward.

According to Der Spiegel, the German government is working on a six-point plan, aimed at supporting economic development in EU countries facing economic difficulties, which foresees the creation of Free Trade Zones.

A Free Trade Zone refers to a designated area in which companies are taxed very lightly or not at all in order to encourage economic activity.

Currently (2012), 31 countries have one or more free trade zones. Currently (2012) only Dubai has a Free Trade Zone dedicated to healthcare.

During or after 2012, I expect to see other countries announce the establishment of Healthcare Free Zones. And at least one country feels that if one Free Zone is good, four or more is probably better!

Turkey has four cities wanting to become Health Tourism Free Zones, as part of Turkey’s newly-announced Free Zone policy and strategy.

Free Zones replace…medical tourism cities, hubs and clusters

Forget the scores of “medical tourism cities, in name only” and self-proclaimed “medical tourism hubs” and “medical tourism clusters”. They are “old hat”. The future points towards the establishment of Health Tourism Free Zones.

The goals associated with any Free Zone are to:

Create employment
Create “shared wealth”
Stimulate the economy

Experience and observation indicate that Free Zones:

Stimulate national economies
Create employment at all educational levels
Provide value added community benefits
Increase infrastructure development and utilization

The advantages of Healthcare Free Zones

The most obvious competitive advantage of Health Tourism Free Zones, as Health Tourism Destinations, is related to cost and thus pricing levels. Less or no taxation means that services can be offered at lower prices.

Let us not forget that Free Trade Zones are also actual or virtual Free Ports. This means that importing equipment to set up facilities is not subject to import duties. This makes it more cost-effective (and attractive) for providers of services to set up a business.

The other benefit of such Zones is their ability to stimulate development in complementary industries, as well, including:

Travel
Tourism
Hospitality
Mass Catering

Creating a Healthcare Free Zone

So…how much does it cost to create a Healthcare Free Zone?

Surprisingly, starting a Free Trade Zone does not necessarily require millions of dollars. There are examples of Free Trade Zone projects that did not require funding support. Free Trade Zone projects seem to be more effort intensive rather than capital intensive. Nevertheless, the issues of financing and investment usually arise.

The issue of investment

The first thing that promoters of Free Zone Development will start looking for are financial investors (an elusive species…) Surprisingly, though, we read stories in which Fund Managers actually pursue project promoters with offers to invest. They view Free Trade Zones supported by the State or Government as secure infrastructure investments.

In rare cases, wise and enlightened governments introduce the idea of creating economic free zones. In most instances, however, for those coming up with the idea, it is a matter of having to lobby the government.

In this case, the principal challenge and difficulty is to convince Government that the country has “nothing to lose” and potentially “much to gain”. The exercise involves going from Minister to Minister explaining the net benefits to the National Economy. We know that getting any Minister to agree to anything is difficult and time-consuming. And, as one would expect, getting all the relevant Ministers, and the Government, to approve, and vote into law, such an initiative, proves very difficult indeed.

Experience, regarding the establishment of Free Trade Zones, indicates that the initiative needs to be led from the very top (decision-making level). Guidance and input from outside “experts” is essential, but will only produce limited results without the blessing and active support of key Ministers and Ministries.

Access to logistics

The term logistics comes from the Greek word logistiki meaning financial organization, and primarily refers to the management of the movement or flow of goods, services and persons. Experts on the subject point out that Free Zones rely on “logistics”, and that it is pointless and a waste of time and effort to even consider establishing a Free Trade Zone if the logistics are wrong.

Logistics in this instance take the form of access /accessibility:

Sea Port
Air Port
River Port
Highway / Road
Railway

The other “access” needs include:

Adequate power and ideally, access to an alternative power source.
Availability of high speed telecommunications.
Access to a pool of available labour.
Access to a sophisticated and transparent banking system (without over-regulation from the Central Bank)

The need to tap into complementary fields of expertise

When it comes to implementing plans for Free Trade Zones, having the knowledge is a “good thing” but what is really needed, is the ability (and proof of prior experience) to implement the business model. There is a need for expertise (or access to expertise) in such fields as banking and finance, administration, ICT, human resources development, engineering and planning (and quite a few more!).

But even Free Zone Experts will need to tap into sector-specific expertise when it comes to sector-specific Free Zones such as Healthcare Free Zones.

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Profile of Dr Constantine Constantinides

Dr Constantine Constantinides runs healthCare cybernetics, a “think and do tank” with a recognized competency in Health Tourism Integration and Development. His home base is on the island of Samos in Greece.