Medical Tourism in Developing Countries

96 ● Medical Tourism in Developing CountriesHaving the advantages discussed in this chapter does not imply thatcountries face no obstacles in their promotion of medical tourism.To the contrary, there are numerous hurdles, both domestic and international,that have to be overcome, circumvented, and otherwise dealt with(these are discussed in chapter 6). To the extent that a country hassucceeded in developing a medical tourism sector, it implies that its advantageshave offset the obstacles it faced.Advantage I: Competitive PricesThe ten countries under study are able to offer medical tourism services atcompetitive prices due to both micro and macro reasons. With respect tothe former, the low cost of production and the downward pressure on pricesdue to competition are crucial. With respect to the latter, the value ofnational currencies is relevant. In the ensuing discussion, quality is assumedto be constant across providers.Low Cost of ProductionAccording to Vega, the quality of medical services across the world hasbecome similar and it is the price of services that constitutes the majordifference (such that countries that can provide comparable medical touristservices at lower prices have an advantage over those that can’t, assumingconstant prices across providers of vacation and travel packages). 1 Whatexplains the price differences among medical tourism providers in developingcountries? According to Teh and Chu, it is differences in cost thatdetermine price differences. 2 Among these, costs of physical capital inputsand highly skilled labor are the most important, especially in invasive anddiagnostic medical tourism.The destination countries under study have managed to keep costs ofcapital and highly productive labor low relative to the more developed countries.How is this possible? How can these countries provide state-of-the-artmedical care at a fraction of the price charged in the West? The medicalservice that is sold to foreigners is built on a hierarchy of intermediate supportingservices whose value is added to create the final total cost. All servicesin poor countries are generally cheaper than in rich countries, as JagdishBhagwati noted in his study of service trade. 3 Moreover, these countries havebenefited from cost-reducing advances in medical technology. As discussedbelow, all are conducting research and development that provides more efficientmethods of production and adapts technologies to local contexts.Finally, the medical tourism industry relies on local capital and labor inputs,