I think everyone knows the SWOT model. One of the external threats (or opportunities) is that of government. For a hypothetical example, if you have a business selling widgets and the government passes a law stating that only they can produce and sell widgets then that could kill your company. In some countries the threat posed by government intervention is low with the law being stable and the government having a very low influence on the healthcare industry – with laws being well established and new laws only being introduced after industry-wide consultation and plenty of warning. Many Western countries fall into this category.
However, my experience in Asia is that government can have an enormous influence on healthcare, such that the industry environment can change very quickly due to new or changing laws.
The influence of government in the SWOT analysis is probably one of the most difficult things to explain to Western companies trying to break into the industry in Asia. The other difficult thing that I really struggle with trying to get Westerners to understand is the importance of the concept of face – but that is something I will write about in another post.
Why is it difficult for Western companies to understand the legal situation in Asia? I believe it is because they only have their experience of the legal environment in their own country to draw upon and naturally project this experience onto countries in the East, expecting the law in the East to behave the same way as the law in the West. Invariably the conversation with the Western company trying to break into the market goes something like this:
Them: What does the law say? If we follow the law then we can’t go wrong.
There are several layers to this complex problem of the law and to help me try and organize it I will cover it in the following sections:
- Which law is being implemented
- What is the interpretation of the law
- New laws being introduced
1. Which law is being implemented?
I read or heard somewhere that the issue with countries with higher levels of corruption isn’t that they don’t have enough laws, but in fact have far more laws than less corrupt countries. The explanation for this is that countries further to the right of the corruption continuum do not remove obsolete laws but keep them on the books. There is a brief discussion of this argument here. These laws are not marked as obsolete, so there is always the danger that they could be implemented at the whim of the governing body. Therefore, the first key success factor in running a hospital or clinic is to know which laws are actively being implemented.
I would be reticent to not point out that every country has some level of corruption. Transparency.org examines this each year and publishes the rankings.
Now I know you, dear reader, are very smart and so I’m sure you are immediately thinking “even if there are more laws, why don’t you just follow all of them?”. Well, existing laws typically are ambiguous (see section 2) and often the old ones are impractical or even contradictory, and therefore it is impossible to follow all the laws on the books.
Taking China as an example, a key department in China hospitals which does not exist in the West is “Medical Affairs” (医务处), which sometimes is translated as the government relations department. Because this department doesn’t exist in the West it is frequently misunderstood by foreigners. The job of this department is to not only know the laws pertaining to operating a hospital or clinic, but more importantly to know which ones are actually being implemented. Now you may be asking the question “can’t we just ask the government which laws are in effect?”. Unfortunately this won’t work as you will simply be told (unless you have a relationship with the right person in government) that “all laws are in effect”.
In my experience the first reaction of many Westerners hearing this news is denial. If you were with me right now as I’m typing this you would hear me audibly sigh deeply. This is because I’ve personally found it difficult to deal with this phase of denial from some Westerners. Why denial? I think because the Westerner feels that the situation of there being ambiguous laws and laws not being implemented is not “logical” (when actually the issue is the Westerner does not understand how business is done, and/or cannot accept how business is done). They find it almost impossible to not point out how illogical this situation is, and some may even believe that they have discovered something that the authorities are unaware of and just need to point out this inefficiency in order to get things changed in their favor. Of course the authorities are well aware of how the legal system operates in their own country and who knows, may internally be confused at why this foreigner is trying to tell them how to operate their laws! Invariably the local government person is extremely polite and passes the message that they cannot do what the foreigner is requesting. In some cases, I’ve seen Westerners think that somehow the local authority they are talking with didn’t understand what they are trying to explain, or that the translator they are using didn’t translate properly, and so will try again to point out their logic. This makes a very awkward situation for the locals as the problem is that it is the Westerner who doesn’t understand, not them. In the worst case scenario the foreigner becomes angry with the official, putting the company in grave danger as this angry behavior can quickly become an issue of “face”.
The situation becomes even more complicated in China because laws are not implemented & interpreted uniformly between areas. It is critical to note that government administration in China healthcare is divided into Ministry of Health (central), provincial, city (municipal), and finally district levels and therefore the same law can have a different interpretation and implementation at each level. Taking into account that contemporaries of each level can also have different interpretations and implementations (e.g. which laws are being implemented and how they are interpreted at Anhui provincial level can be different than what is being implemented & how it is interpreted at Jinan provincial level), China should be approached with a mindset of it being like Europe where each country have their own laws.
So how do you overcome this challenge if you are a foreign company looking to operate a hospital in China? The key is to hire a local into a position in the Medical Affairs department as soon as possible. This person must have excellent “guanxi” (关系) – i.e. connections – into the local healthcare industry. This person with their connections will be able to directly approach the head of the government department in which you are trying to obtain information regarding a law(s), and get an answer that will be pretty reliable. Note that I don’t say “100%”, as this is pretty much impossible to get. Note too that you will never get this information in writing. I’ve seen many cases of foreign company staff – often company lawyers – asking for the official to put it in writing or some kind of 100% guarantee. That isn’t how the system works and putting this type of condition on the official will threaten the relationship your medical affairs person has with the official. Doing business in Asia has risks, you can lessen the risk but not 100% mitigate it.
Note also that you are highly unlikely to get access to this key person without your local with the connections. This is why “guanxi” is so critically important in China.
It can be difficult to find the right person to be head of your Medical Affairs department. Some foreign companies have hired a local person who claimed that they have amazing connections into all the right government departments, and consequently found it was not the case – unfortunately after losing a lot of investment. My advice is that you need someone who you trust understands the industry, to vouch for the person who you hire to help you connect with the right government authorities. Also, just as in Europe you would not assume that the laws in Poland would be the same as the laws in the Netherlands, you need to find the right person for each of the different geographical areas in which you do business (in China this means each different city, province etc.).