Free of legislation restricting foreign trade and the movement of capital, Hong Kong may be the most open market economy in the world. The territory possesses one of the world’s largest harbors, a duty-free port with excellent shipping facilities, which contributes to the largely international nature of its business activities. Additionally, in accordance with the General Agreement on Trade and Tariffs (GATT), the Hong Kong government assumes no predisposition towards specific suppliers, hence there is a strong encouragement to foreign exporters to conduct business there.
As per capita income has risen in recent years, people in Hong Kong have successfully demanded better medical and healthcare services. The Hong Kong government has promoted standards by widely publicizing health awareness, as well as committing significant sums of money. In the 1990-91 financial year, the Hong Kong government spent a total of US $900 million on medical and health products and services.
Residents demonstrate this heavy emphasis on the importance of health in their enthusiastic consumption of both curative and preventative medicine. While both public and private sectors render a complete rage of healthcare services, the long delays and impersonal services of public clinics are unappealing to many of Hong Kong’s population. Many people are ready to pay significantly more to see private physicians, even for the most minor of afflictions.
In this climate of eager healthcare consumption, private suppliers of medical services have profited. As many as 70% of all patients visit private doctors, whose fees are generally 10-100 times higher than those of the public sector. While the sometimes-outrageous fees of these physicians have drawn criticism from healthcare reform advocates, the Hong Kong government, unlike those of many Western nations, is committed to a “hands-off” or free market attitude towards the private healthcare sector.
Facts about Hong Kong (1992)
|Per capita GDP||US $16,400|
|Doctors registered with Hong Kong Medical Council||6,381|
|Life expectancy (1993)||77.7 years|
Medical Device Market
The overall medical device import market in 1992 was worth $342 million, a 20% increase compared with $285 million in 1991. Historically, this market has been dominated by foreign suppliers; the leading exporters are currently the US, with 30% of the market, Japan (26%), China (11%) and Germany (9%).
How the system works
Most end-users of medical supplies are hospitals. Because around 83% of hospitals are government-run or assisted, companies intending to export to Hong Kong must recognize the importance of the government in the area of health care. Two organizations are of particular importance: the Hospital Authority and the Government Supplies Department (GSD).
In December 1991 the government established the Hospital Authority to manage government hospitals. For its first year of operation, the organization received a budget of $1,500 million. Since then, the Hospital Authority has quickly grown in size and importance to become one of the territory’s largest employers, second only to the government. The GSD is responsible for the purchase of all goods and services, including medical, demanded by the government. Based on specifications outlined by a committee of the Hospital Authority, the GSD administers the actual procurement of the required medical supplies.
Foreign companies interested in supplying medical products to the Hong Kong government must first register with either the GSD or Hospital Authority. (Although end-users generally prefer FDA, BS, IEC, etc. approved medical devices, these products are not required to be registered in Hong Kong.) This process requires the company to provide background information about its business, including annual reports, sales catalogues, product literature, past business experience, etc. All registered companies will be informed by the GSD when a public tender is offered.
In accordance with GATT, the government must advertise and open to competitive bidding any purchase equal to or exceeding $150,000. The GSD considers quality, service, price, and delivery when making purchases, and in theory therefore does not consistently return to the same suppliers every year. Direct sales to hospitals are feasible but most foreign companies rely on local distributors, which can provide on-site maintenance, service, training, and a presence when necessary.
Western suppliers interested in exporting medical devices to Hong Kong should consider, in particular, diagnostic equipment.
In 1991 Hong Kong consumed diagnostic products worth $119.4 million, 139% more than the year before. This dramatic increase is directly related to the government’s intention of replacing all outdated equipment. Growth is expected to continue over the next few years.
Hong Kong produces no diagnostic equipment domestically so foreign suppliers do not compete with local manufacturer. US diagnostic equipment is the most widely used, but Japanese products are particularly popular for their compactness and German products for their reliability.
There are also specific opportunities in Hong Kong’s medical device market for cardiac output analysers, CT brain scanners, hydrometers, thermometers, pyrometers, ophthamological instruments, optical micro-scopes, photocolposcopes, ultrasound scanners and X-ray apparatus.
The future of Hong Kong
As 1997, the year in which Great Britain will return Hong Kong to China, approaches, the question of the territory’s future status has become a hot topic.
Officially Hong Kong will become the Special Administrative Region (SAR) of the People’s Republic of China, but this title tells little about its practical ramification. Mainland Chinese commonly describe the post-1997 future as “one country, two systems.” Hong Kong is generally expected to continue its capitalist system at least until 2047, as agreed in the Hong Kong accords, but will have to compete in the future with other rapidly developing Chinese cities to distinguish itself.
Considering China’s own investments in Hong Kong, Hong Kong’s huge investments and infrastructure in China, China’s dependence on Hong Kong for foreign exchange and its largely positive reaction towards Hong Kong’s economic growth and stability, there exists a very realistic optimism that China will permit Hong Kong to continue its current economic practices. In addition, Hong Kong serves as the gateway to China’s huge and growing market for many Western firms.
As with any changing political situation, there are no absolute certainties regarding the post-1997 future of Hong Kong, but Western companies should recognize the positive as well as the negative when contemplating business opportunities in the region. The potential profit for Western companies conducting business with Hong Kong is huge and should not be over looked.