Trade Mission Colombia Health, Life and Sciences

Trade mission Colombia Health, Life and Sciences

Commissioned by the Netherlands Enterprise Agency

Certification of Authorship We hereby certify that we are the sole author of this report. All assistance we have received from outside sources have been documented in the report, as well as, listed after the conclusion and recommendations under “Work Cited”. This report was created exclusively and specifically by Group 1 for the Business in Latin America Minor at The Hague University of Applied Sciences and the Rijksdienst Voor Ondernemend Nederland (Dutch Enterprise Agency in English).

Date: 4 November 2018

1. Executive summary

The aim of this research is to identify the possibilities and opportunities for a successful entry into the Colombia Life, Sciences and Health industry. This research was conducted at The Hague University of Applied Sciences on the topic of Medical Devices, eHealth and Hospital building. It is the main goal to give advice to develop a successful Market Entry Plan on behalf of the RVO, for dutch companies willing to enter the Colombian market

The central question is: which are the Market entrance possibilities and barriers for Dutch Corporations? Medical Devices, eHealth and Hospital building are selected as high scoring markets and assessed on successfulness by the comparison of the following market analysis Methods created during our findings: Hofstede 6D Model, PESTEL analysis, the CAGE framework, SWOT and TOWS matrix. Furthermore, we included the market analysis, sub-sector analysis and competitor analysis to sketch and substantiate our recommendations.

In answering the main research question, based on the selected criteria, the results of this research show that the following subsectors we researched; Medical Devices, eHealth and Hospital building are the successful industries within Colombia, although each industry has their own limitations. These sub-sectors are potentially the one of the best industries for the Netherlands to explore in greater detail.

Based on this research, it is recommended to initiate research regarding specific requirements of industries in Colombia. The information provided should provide a clear and general insight in the Colombian health and life sciences industry. However, with most secondary research, it is recommended to gain a more recent insight of the health, life and sciences sector in Colombia by actually having in depth field research.

The team has established to develop the requirements, evaluate the alternatives and create the following report in order to give a clear picture of the possibilities and on the status of the (sub)sectors.

Table of contents

Certification of Authorship 3

1. Executive summary 5

Table of figures 9

2. Introduction 11

3. Hofstede’s 6D Model 13 3.1. Introduction 13 3.2. Power Distance 13 3.3. Individualism 14 3.4. Masculinity 14 3.5. Uncertainty avoidance 14 3.6. Long Term Orientation 15 3.7. Indulgence 15

4. Sustainable development goals 16 4.1. Introduction 16 4.2. Goal #3: Good health and well-being 16 4.3. Goal #17: Partnership for the goals 17

5. Pacific Alliance regarding Health, Life and Sciences sector 19 5.1. Introduction 19 5.2. Targets 19 5.2.1. Target #1: 20 5.2.2. Target #2: 20 5.2.3. Target #6: 20 5.2.4. Target #7: 20 5.2.5. Target #9: 21

6. PESTEL Analysis of Colombia 22 6.1. Introduction 22 6.2. Political 22

6.2.1. Mission 23 6.2.2. Vision 23 6.2.3. Proposed government budget of 2019 23 6.2.4. Political difficulties 24 6.3. Economical 25 6.3.1. Economy of health in Colombia 25 6.3.2. Free Trade Zones in Colombia 27 6.4. Sociological 28 6.5. Technological 29 6.6. Environmental 31 6.7. Legal 32

7. CAGE Framework 34 7.1. Introduction 34 7.2. Cultural Distance 34 7.3. Administrative Distance 34 7.4. Geographic distance 36 7.5. Economic Distance 37

8. Business Model Canvas 39 8.1. Introduction 39

9. SWOT Analysis 40 9.1. Introduction 40 9.2. Strengths 41 9.2.1. Subsectors in the Netherlands 41 9.3. Weaknesses 43 9.4. Opportunities 44 9.5. Threats 45

10. TOWS Analysis 47 10.1. Introduction 47 10.2. TOWS Matrix 47

11. Competitor Analysis 49 11.1. Introduction 49 11.2. Competitive rivalry 49

11.3. Threats of new entrants 50 11.4. Threat of substitution 50 11.5. Buying power 51 11.6. Supplier power 51 11.7. Conclusion 52

12. Market Analysis and Trends 54 12.1. Introduction 54 12.2. Medical Tourism 55

13. Sub-sector analysis 58 13.1 Introduction 58 13.2. eHealth analysis 58 13.2.1. eHealth in general 58 13.2.2. eHealth in the Netherlands 58 13.2.3. eHealth in Colombia 59 13.2.4. eHealth and the sustainable development goals 59 13.3. Medical devices analysis 60 13.3.1. Medical devices in the Netherlands 60 Core medical devices 61 13.3.2. Medical devices in Colombia 61 13.3.3. Medical devices and the sustainable development goals 62 13.4. Hospital building analysis 63 13.4.1. Hospital building in general 63 13.4.2. Hospital building in the Netherlands 63 13.4.3. Hospital building in Colombia 64 13.4.5. ACHC accreditation 65

14. STPD Analysis 66 14.1. Introduction 66 14.2. Consumer market segmentation 66 14.2.1. Segmenting business markets 68 14.3. Targeting 68

15. Five-year Forecast of the Health, Life and Sciences Sector in Colombia 70 15.1. Introduction 70 15.2. Forecast 70

16. Conclusion and Recommendations 72

17. Cited works 74

Table of figures

Figure 1 - 6D Model of Colombia and the Netherlands 12 Figure 2 - Goal #3 of the SDGs of the UN 15 Figure 3 - Goal #17 of the SDGs of the UN 16 Figure 4 - Political SWOT by Marketline 22 Figure 5 - Colombian inflation rate 22 Figure 6 - Free Trade Zones in Colombia 24 Figure 7 - Free Trade Zones focussed on the health sector (S.A.S.) 25 Figure 8 - Top 10 causes of death in Colombia 26 Figure 9 - R&D intensity in Latin American countries 27 Figure 10 - Carbon emissions comparison between Colombia, the Netherlands, USA and Russia. 29 Figure 11 - Overtime pay allowances in Colombia 30 Figure 12 - Cultural distances between the Netherlands and Colombia 32 Figure 13 - Geographical distances between the Netherlands and Colombia 35 Figure 14 - Health expenditures as a share of GDP, 2016. Provided by the OECD. 36 Figure 15 - Economic Distances between the Netherlands and Colombia 37 Figure 16 - Business Model Canvas of the Colombian Health, life and sciences sector 38 Figure 17 - MEdical technology market 2016 40 Figure 18 – Travel time to the nearest hospital in the Netherlands 41 Figure 19 - Travel time to the nearest hospital in (west/central) Europe 42 Figure 20 - TOWS strategy matrix 46 Figure 21 - the 5 forces by Porter 47 Figure 22 - the core medical devices conveyed in most healthcare facilities 56 Figure 23 - WHO mentioned goals on medical devices 58 Figure 24 - the ACHC Accreditation process in 6 steps. 61 Figure 25 - The Colombian population segmented in different groups of age. 63 Figure 26 - The Colombian population segmented in 6 groups 63

2. Introduction

In this report, research is done concerning the trade mission from the Netherlands to Colombia, focusing on the Health & Life Science Sector. The main focus in Colombia lays in the cities of Bogotá and Medellín/Calí/Cartagena. This report may provide focus areas and opportunities for Dutch companies to increase their business contacts or to expand to Colombia and to understand opportunities for doing business in this Latin American country.

In order to be able to obtain credible and up-to-date sources, a cooperation with Colombian students from the La Sabana Universidad has been established. This, while they have the opportunity to do more in-depth desk- and field research on Colombian, and therefore in Spanish, sources. As both parties will do deep research, a gap of opportunities in this sector will appear which may be interesting for Dutch companies to anticipate to.

In addition, the Health & Life Science Sector is very interesting to examine, due to the fact that the Netherlands is having a leading position in this sector in Europe. As Colombia strives for a similar healthcare system and high-quality hospitals, this trade mission is adecuatefor companies in the Netherlands to anticipate to. However, it needs to be stressed that Colombia is already advanced in this sector as they are number one of Latin America, and according to International Living, they are even number twenty-two on the world ranking list, which is higher than countries such as Canada and the United States (International Living).

The structure of this report will include multiple frameworks and analyses providing a clear overview of the situation within the Health & Life Science Sector in both the Netherlands and Colombia. At first, the frameworks will be discussed and are followed by multiple analyses such as the 6D Model by Hofstede. After, two of the seventeen Sustainable Development Goals (hereafter SDGs) relating to the Health & Life Science Sector are reviewed and linked with the information found during the research. Moreover, the Pacific Alliance has goal related to the SDGs, and therefore indirectly related to the Health & Life Science sector of Colombia. This may also create value for the participating companies to this Colombian trade mission. This, while the SDGs, and to accomplish them, are becoming more important in the coming years considering the climate crisis.

Overall, the trade mission of the RVO and similarities between the Netherlands and Colombia are making this research extremely important and could surely offer opportunities and understanding for Dutch companies to do business in Latin America.

3. Hofstede’s 6D Model

3.1. Introduction In this section, Hofstede’s 6D Model is . This model compares six cultural factors between countries. Based on these factors, not considering others, conclusions can be drawn in differences between certain countries. Besides, if a Dutch company has no experience with doing business in Latin America, and more specifically Colombia, Hofstede’s 6D Model provides a brief and general overview amongst the most important differences between both countries and their cultures.

Different books used by the students writing this report were used during their minor ‘Business in Latin America,’ which could provide more detailed and in-depth information on how to do business in Latin America. Assign these books as a supporting element regarding your company and its (future) business practices in Colombia in terms of differences in business culture. More information about these books can be required upon request.

Figure 1 - 6D Model of Colombia and the Netherlands

3.2. Power Distance The Netherlands scores 38/100 on this factor. The lower the number, the more independent the person is. This independency is in correlation with all fields: equal rights, responsibility, counting

13 on other employees or team members. Also, communication is more direct, and there is a more informal business environment. Whereas in Colombia, their score is almost twice as high. Their score outlines the fact that Colombians need more of authority from their managers, in which communication is more formal. Hierarchy plays a major role in Colombia. More feedback is required from a responsibility-required manager. In general, the Dutch are assumed to be more independent by their supervisor than in Colombia.

3.3. Individualism With an Individualism of 13/100, Colombia is ‘’we’’ orientated. This means that Colombia is more of a ‘family-first’ country. The Colombians value family, friends and relationships as one of the most important parts in their lives. A necessity is to be on the Colombian terms instead of the Dutch terms of doing business with the Colombians. This is also described in [book of Doing business in Latin America]. It is important to create a vast and highly healthy relationship with the Colombians, whereas in the Netherlands, business is done in a more direct way and more individually. Not a lot of stress is laid down on creating a ‘’we.’’

This could be a conflict when just starting out a business opportunity in Colombia, as their culture and especially their individualism is significantly different in comparison to the Netherlands.

3.4. Masculinity The Netherlands scores convincingly lower than Colombia. The Dutch are more of a feminine country than the Colombians are. This feminism is clearly integrated in the Dutch culture: upcoming trend of co-working spaces, women as the main earner in the family, more stay-at-home fathers (Redactie)

Colombia, on the other hand, is definitely more masculine. Colombians rather are striving to be the best, in comparison with other groups not within their relationship circle, than doing what they like to do. The people seek more status and affiliation rather than the Dutch.

3.5. Uncertainty avoidance The Dutch have a preference to avoid uncertainty. Business-orientated, the Dutch are willing to invest as an angel investor if that project/business is in their interests, as they are a feminine country. However, on political level, the Dutch governs many laws and legislations that avoid any uncertainty. Take the by-law-required health insurance, for example, that everyone is obliged to have.

Comparing Colombia with the Netherlands, Colombia significantly dislikes uncertainty. The rate of 80/100 could also be explained by the individualism factor. Colombians would only like to do trade with friends within their network of close relations. They want to know someone first before they do business with that person. It is part of their culture and the ‘Dutch way’ of doing business is not desired. The Colombians are seeking a beneficial, healthy and personal relationship before talking business (Lopez, A. How to Do Successful Business in Latin America: Your Own Guide to Export and Import. CreateSpace, 2014.)

3.6. Long Term Orientation The Netherlands focuses more on its long-term orientation, in comparison with Colombia. The Netherlands is a pragmatic country: it focuses more on the long term, prepare the younger generation by their educational systems. The Netherlands is multicultural, which means a great and vast Dutch culture is less present comparing to the culture of Colombia. The Colombians are classified as normative. They are more focused on their own traditions, without predicting the future necessarily. The Colombians are seeking short-term profits. A great example is the informal economy. This significant difference between the long-term orientation of the two countries should be considered and taken seriously.

3.7. Indulgence Colombia as well as the Netherlands are relatively on the same level of indulgence. Both countries take care of their lives regarding leisure, optimism, and spending money accordingly (‘’Colombia’’). Both countries emphasize the importance of socialization and nurturing their people. However, Colombia stresses relationships, family as well as business, as more important. Colombians don’t just do business in a direct and straightforward manner. Colombians take their time to understand and know you, before talking business, as already

15 stated in the Uncertainty Avoidance dimension (Lopez, A. How to Do Successful Business in Latin America: Your Own Guide to Export and Import. CreateSpace, 2014.)

4. Sustainable development goals

4.1. Introduction Hofstede’s 6D Model provided information about general cultural differences between the Netherlands and Colombia, which may be beneficial to have knowledge on for Dutch companies when doing business in Latin America and specifically Colombia. In this section, two sustainable development goals relating to the health, life and science sector are chosen to be linked to the Dutch trade mission to Colombia. Companies may consider making use of these sustainable development goals when doing business in Colombia in the Health, Life & Sciences sector.

Global warming is a fact. Currently, the world temperature has increased with 1 degree Celsius since the industrial revolution and is bound to an exponential growth. (NOS). As the climate is changing, Dutch companies investing and operating in Colombia are advised to take the 17 goals of sustainable development into account. From these total 17, two goals are the most relevant regarding the health, life and science sector. These are goal #3, good health and well-being, as most important. Secondly, goal #17, partnership for the goals should be taken into account. This, as without collaboration between continents, countries, cities, the health sector, hospitals and people, the potential opportunities and benefits cannot be achieved.

4.2. Goal #3: Good health and well-being Why does good health and well-being matters? According to the United Nations, it is important to build fortunate societies, with equalities in health. Preventing and eliminating HIV/AIDS and discrimination, and the fact that a healthy life is a human right are some of the reasons that health should be accessible for every human being. As major progress has been made already, the goal is to achieve universal health coverage (United Nations). This process will require significant amounts of financial funding. However, the costs will definitely outweigh the costs. At the end of the day, on the long-term all benefits will and have to outweigh the costs as we are fighting for a sustainable earth for our offspring’s.

Goal 3 provides 13 targets to achieve in 2030. The most relevant in regarding this report could be:

1. Reduce mortality ratio to less than 70 per 100,000 live births: As Colombia’s mortality ratio already decreased between 2007 and 2016, as stated later on in the PESTEL, it’s important to understand this ratio can decrease more as the Dutch have a mortality ratio of 7 deaths per 100,000 live births (The World Factbook: Netherlands).

2. Universal health coverage: New adopted payment plan by the Colombian government: EPS public health insurance (Marktverkenning, page 18)

3. Increasing health financing, recruitment and training of the health workforce: Colombia the best health sector in Latin America, could be a great example for other Latin American countries (TFHC).

4. Therefore, strengthen the capacity of all countries within the Latin American region

4.3. Goal #17: Partnership for the goals Why does partnership for the goals matters? According to the United Nations, everyone needs to be committed to achieve these goals: governments, scientist, students, the elderly, the young, and so on. Everyone should be included to make sure no one is left behind on the road towards 2030. Developed countries should assists developing countries. Like the Netherlands could help Colombia in terms of health in general, ehealth, hospital building, and medical devices. However, the process of the goals and the responsibility of achieving those are part of the country’s responsibility. (UN) The targets of goal #17 are divided under specific themes (‘’Global Partnerships – United Nationals Sustainable Development.’’):

1. Finance 3. Capacity building 2. Technology 4. Systematic issues

As stated before in the target of goal #3, Colombia is the pioneer in the health, life and science sector, and therefore it would be recommended to adopt the role as leader within the Latin American region. Fortunately, Colombia is going for sustainability, modernization of their health, life and sciences sector. The Colombians adopted a 10-year approach towards this sector to create and provide overall well-being, and more key targets including wellbeing and intersectoral strategies. Interestingly, these targets are aligned with the Dutch ones, as well. Therefore, it will back up the market (TFHC).

5. Pacific Alliance regarding Health, Life and Sciences sector

5.1. Introduction In this section, the Pacific Alliance regarding the health, life and science sector is reviewed. Due to the fact that Colombia is part of the Pacific Alliance it is vital for Dutch companies to understand what it comprises. The Pacific Alliance is a collaboration between Colombia, Peru, Mexico and Chile, being a regional integration seeking free trade of goods and services, political integration and development of their economies (Icetec Ltda.) Currently, the alliance focuses mostly on collaboration with Asia, think of similar organizations like ASEAN and APEC. The Pacific Alliance has drawn their vision for 2030, of which some of their targets aligns with the Sustainable Development Goals of the UN.

5.2. Targets First of all, by 2030, the Pacific Alliance is determined to achieve the Sustainable Development Goals (SDGs), along with their own sustainable agenda. Based on these goals, the alliance plans to achieve the following targets:

1. Aims to become the main, integrated and commercial platform in Latin America 2. Establishment of a structure cooperation with the European Union 3. Supporting Small Medium Enterprises (SMEs) financially and internationally 4. Promotion of multilateral trade 5. Active programs and cooperation with observant countries Of which the Netherlands is one of (ICetec Ltda) 1. More Pacific Alliance representation in the OECD

Besides, the Pacific Alliance aims to be more connected as well. The organization would like to set up a Digital Regional Market, with full digital connection between the people of the Pacific Alliance (7). Moreover, the SMEs are promoted with new technologies to grow (8). Ultimately, the Alliance is aiming for an ‘economy 4.0,’ which is the present change in the current economy (Karner) (9).

What important does these targets of the Pacific Alliance vision of 2030 have for the health, life and sciences and its three subsectors? This question is answered, if relevant, per target given above.

5.2.1. Target #1: If the Pacific Alliance actually becomes an organization like the European Union, many opportunities arise. Dutch companies which are going to invest now in the health sector of Colombia not only experience synergy due to sharing of knowledge, technologies and experience, but also seize opportunities in future expansion within the Pacific Alliance.

5.2.2. Target #2: With a structured cooperation with the EU, Dutch companies operating in the health sector are given opportunities in possible tax, financial and economic incentives. However, these incentives are already available in a Free Trade Zone, mentioned in the section of the CAGE Framework where the economic distance is discussed. Target #2 is basically aligned with target 4 and 5: more cooperation between the Netherlands and Colombia.

5.2.3. Target #6: Colombia recently joined the OECD as member (‘’OECD Countries Agree to Invite Colombia as 37th Member). The OECD stands for: Organization for Economic Co-operation and Development. The organization promotes economic development and increase in social well-being around the world (‘’About the OECD.’’). One of many topics the OECD discusses is health. With being an OECD country, Colombia could provide, along with Dutch (and Colombian) companies, great knowledge, experience and technology within the Latin American region. If other countries in the region benchmark Colombia’s health sector, the Dutch companies planning to do or already doing business in Colombia, could expand their business practices and projects to other surrounding countries (‘’Health’’).

5.2.4. Target #7: A digital Regional Market could increase the opportunities in the eHealth sector. With digital development, B2C and B2B practices could be improved and extended geographically and demographically.

5.2.5. Target #9: Economy 4.0 is turning the economy in a more, digital, data-based economy. the eHealth and medical devices sector could create value in the Colombian health sector by introducing smart products which are economy 4.0 ‘’proof:’’ artificial intelligence.

6. PESTEL Analysis of Colombia

6.1. Introduction In this section a PESTEL Analysis of Colombia will provide a comprehensive overview of the political, economic, sociological, environmental and legal areas of Colombia, focussing on the Health, life and science sector. The PESTEL is complemented with Hofstede’s 6 dimensions model.

6.2. Political

The Colombian government is a Presidential Republic and a democratic country. Every 4 years the president is elected by absolute majority vote, in 2 rounds if needed, for a single 4-year term. The current elected President Ivan Duque is of the ¨Centro Democratico¨ political party. The amendments are proposed by the government, by congress, by a constituent assembly, or by public petition.

The congress consists out of:

1. Senate (108 seats; where 102 are elected in a single nationwide constituency by party-list proportional representation vote, 2 elected in indigenous nationwide, 5 of the FARC and 1 for the runner-up presidential candidate in the recent elections) (all members of the senate serve 4 years), 2. The chamber of representatives (172 seats; where 165 are elected in multi-seat constituencies by party-list proportional representation vote, 5 members of the FARC, and 1 seat for the runner-up presidential candidate in the recent elections)

Colombia has numerous smaller political movements, such as Alternative Democratic Pole, Citizens Option, Conservative Party, Democratic Center Party, Green Alliance, Humane Colombia, Liberal Party, FARC, Radical Change and Social National Unity Party.

The Colombian government has its own Ministry of Health, called Ministerio de Salud y Proteccion Social. On their website, the ministry of health and social protection outlines the following mission and vision:

6.2.1. Mission ‘’Direct the health system and social protection in health through policies for the promotion of health, prevention, treatment and rehabilitation of illness and assurance, as well as inter-sector coordination for the development of policies on the determinants in health, based on the principles of efficiency, universality, solidarity, equity, sustainability and quality, in order to help improve the health of the people of Colombia.’’

6.2.2. Vision ‘’In 2021, be widely recognized as the leading agency for the establishment of policies that are responsive to the needs and expectations of citizens in health and social protection in health, through transparent, harmonious and participatory processes.

The Ministry recognizes, values and develops human talent, knowledge management and resources, in order for the country to have public policies aimed at the effective enjoyment of the right to health and social protection in health.’’ In short, the ministry provides policies to assure health services to the Colombian inhabitants, and their aim is to be the leading agency in the health and social protection sector, in 2021. This creates opportunities for the Dutch Health, life and sciences industry.

6.2.3. Proposed government budget of 2019 In April 2018, the Colombian government released their proposal on the financial budget of the upcoming year. The budget is projected on US$89.7 billion, which is 259 trillion Colombian pesos (CNBC).

Interestingly, 15.45% more Colombian pesos will be invested in the Ministerio de Salud y Protección Social in 2019, comparing with 2018: 24,671 in comparison with 28,483. The full overview of the budget is shown in appendix 1.

6.2.4. Political difficulties Corruption is one of the threats a Dutch company could face when doing business in Colombia. According to the Corruption Perceptions Index 2017 by Transparency.org, Colombia is ranked 96 out of 180 countries with a score of 37 out of 100. Their score over the period of 2012-2017 has barely improved: from 36 to 37 (e.V.)

In 2012, within a crisis of corruption, many people were striking and protested against this occurrence. Money assigned to be used for health purposes, was instead transferred to private ‘’Promoting Companies of the Health Service,’’ over a period of 10 years (América Economía).

On august 26 2018, Colombia held an anti-corruption referendum. Its aim was to measure the opinion of the Colombians regarding 7 amendments to fight corruption. (BCC News). The senate voted 84 in favour and 0 against the referendum. Even though 99% voted in favour of the 7 amendments, the by law pre-set minimum required voters of 12.1 million was not met, while only 11.6 million Colombians voted (Cobb).

The figure below shows a short analysis of the political landscape of Colombia. The figure shows a SWOT based analysis on the Colombian political system. It also shows corruption as a current challenge, as well as voter dissatisfaction as future risk. This risk can be related to the not legally achieved referendum regarding the 7 amendments to fight corruption. (marketline)

Figure 4 - Political SWOT by Marketline

Ultimately, in 2016, the Dutch minister of health, minister Schippers, signed a document to further enhance the bilateral trade within the health sector of the Netherlands and Colombia. One of the key subjects in this document was eHealth (TFHC).

Finally, the ministry of health provided their own organigram. This will make it easier for Dutch companies to determine if their field of business is related to a governmental institution. Hence, it could enhance/fasten the process of business establishment/exporting in Colombia. The organigram can be found here.

6.3. Economical Between 2005 and 2016, the Gross Domestic Product grew with an average of 4.3% annually, which makes Colombia the second largest in GDP growth, behind Peru. Projected is a growth of 2.7% in 2018. Inflation decelerates from 2015 onwards and is projected to stabilize in 2018 and 2019, as shown in figure 5 Consistently, the poverty decreased from 49.7% in 2012, to 28% in 2016.

Simultaneously as the people in poverty decreased, the middle class increased from 16.3% in 2012 to 31.1% in 2016. A greater middle class provides opportunities in the health sector as generally speaking more money is available for spending. Furthermore, according to ProColombia, the chemical products and life science accounted for 36% of the Colombian imports from the Netherlands between 2016 and 2017. Within the (health), life sciences industry in the Netherlands therefore already exists the knowledge on how to export to Colombia. Fortunately, ProColombia provided a legal guide on how to do business in Colombia, which can be found here. Unfortunately, this report is written in Spanish.

All in all, the macro economy of Colombia is fruitful. Inflation decreased to 3.0%, the middle class increased significantly, whereas simultaneously the people in poverty decreased from almost 50% to 28% in 4 years time. Besides, the Dutch life sciences sector, together with chemical products, already accounts for 36% of the imported products of Colombia.

6.3.1. Economy of health in Colombia Currently, multiple sources report a crisis in the Colombia health sector. La Republica announced in December 2017 that according to the Ministry of Health in Colombia 250 of the 947 public hospitals were in medium and high financial risks. A total of ‘’$2 trillion (Colombian pesos)’’ in deficits is mentioned by Claudia Ardila Cedeño.

This crisis resulted in hospitals being closed down, reducing of hospital beds and other services. One of the reasons of this crisis is the failure and ineffectiveness of Colombia’s EPS: Entidades Promotoras de Salud, health promoting entities (S.A.S.) Portfolio.co also mentions a financial crisis in the hospitals and clinics, as well as pharmaceutical companies. Recommended solution are given by the writer, Sarmiento, which include (Portafolio) 1. More effective use of resources; 2. Implementation of a new model focussed on care on the person; 3. Better controls and incentives; 4. Finance with the Colombian level of socioeconomic development.

In order words, Colombia is in a (financial) crisis regarding their ESP and costs. Dutch health sector related companies could play an important role in creating and/or help developing a solution for this existing issue. Moreover, according to El Tiempo, employees of a hospital in Calarcá are protesting to collect their salary, as they have not received anything in for 4 months, with no solution in sight (Sepúlveda). Besides the striker salary reimbursement, Periodismohumano mentions the negative side effects of the privatized health system: corruption and vanishment of millions of Colombian Pesos. Denero mentioned in 2017 three reasons that makes the sector prone to corruption: 1. The amount of money distributed through the health sector; 2. Fragmented, decentralized sector; 3. Its unclarity in both technical and financial information

The presence of corruption is backed up by Suárez-Rozo, in her report ‘’The Crisis of the Colombian Health System: An Approach from Legitimacy and Regulation’’ in which she and other researchers researched and investigated the different perspectives behind the Colombian health crisis. (Suarez-Rozo)

The main recommendation given by Denero is transparency of (financial) information (Salud). Therefore, complementing the financial issues, corruption is also a problem on a political level (‘’Periodismohumano.’’). However, Caracol reported positive expectations for the health sector and economy in 2018. Carlos Varón, Chairman of the board of directors of health association and health entrepreneur,

27 mentions that the even though the situation around EPS has stabilized and can be improved, the government has no trust.

Therefore, what should be taken into account for Dutch investors is the situation regarding the EPS and financially failing hospitals and clinics.

6.3.2. Free Trade Zones in Colombia Colombia has several Free Trade zones located in the following areas from north to south: 1. Atlantico 2. Bolivar 3. Norte de Santander 4. Antioquia 5. Santander 6. Valle del Cauca 7. Cundinamarca and Bogota

According to investinbogota.org, the city of Bogota is attractive for some sub-sectors of the general health, life and science sector. The organization claims that Bogota is an excellent economic opportunity to invest in life sciences, medical equipment and supplies, pharmaceuticals and cosmetics (Investincolombia.com.co).

Moreover, according to dinero.com, Colombia has 13 Free Trade Zones focussed on business in the Health sector. This could determine a strategic location for Dutch companies investing their capital in the Colombian health, life and sciences sector (Dinero). Figure 7 shows an overview of which zones are mostly used with the health sector.

Figure 7 - Free Trade Zones focussed on the health sector (S.A.S.)

Meaning that even though the health sector of Colombia is the best of Latin America, financial problems and (political) corruption holds the sector from growth, and more importantly attractiveness of foreign investors.

6.4. Sociological This part discusses the social aspect of Colombia. Demographics, earnings, illnesses and more. Colombia has a current population of 48 million people and the life expectancy in the country is on average of the total population 75.9 years. The Colombians earn $14,100 GDP per capita and a significant young population with a medium of 30 years (marketline). Only 6.5% of the country’s population is 65 years or older (marktverkenning).

In the past 10 years, Colombia has increased their health expenditures per capita from $214.35 in 2007 to 437.28 in 2016. However, when comparing the expenditures per capita worldwide, Colombia still provides US$500 less per capita. When reviewing the mortality rate and infant mortality rate per 1000 live births, Colombia has decreased these numbers to 15.3 and 13.1 (marketline). In the past these numbers have been significantly higher. Comparing this with the Netherlands where the mortality and infant mortality rate are 7 per 100000 lives and respectively 3.6 per 1000 lives. (The World Factbook: Colombia). Moreover, figure 8 shows the top 10 causes of death in 2012, as this was the most recent source found. More information on the WHO: Colombian country profile to be found here.

Figure 8 - Top 10 causes of death in Colombia

According to the CIA – The World Factbook, Colombia is one of the most unequal countries in the world when it comes to the distribution of incomes. Colombia ranks twelfth with a gini-coefficient of 51.1 in 2015. The more unequal a country is, the higher this number is. The Netherlands, for example, has a gini-coefficient of 30.3, which results in a ranking of #133. (‘’COUNTRY COMPARISON :: DISTRIBUTION OF FAMILY INCOME – GINI INDEX.’’) Hofstede’s 6 dimensions model shows a more detailed insight on social aspects of Colombia .

6.5. Technological Colombia is using many technological knowledges within the eHealth sector to compete within the Latin American market. Companies inside the country use it as a tool to gain competitive advantage over other companies. This technology can be reflected inside new materials, new processes of production, logistical advances, transport machines, informatics systems and equipment, and being updated on communication tools. In addition, Colombia has not well developed their technological environment. The country has not enough technical Knowledge in the eHealth Sector. Figure 9 shows the R&D intensity.

Figure 9 - R&D intensity in Latin American countries

Colombia’s technological development is not adequate as the country cannot be member of the Organization for the Economic and Co-operation and Development. This organization is to promote social and economic well-being worldwide. The members of this organization are ones to collaborate with, such as the United States as well as the Netherlands (‘’Members and Partners.’’). Although most of the Colombian citizens has access to internet, the Research & Development in Colombia is low in comparison to the Netherlands. Technological development is important in order to grow as a country, however, with low R&D, Colombia could suffer from lack of its general development as technological R&D is necessary in each sector of a health care system.

Even though Colombia has low R&D intensity, the Colombian Government created a technical policy: ‘’Plan de national de Desarrollo” (DNP) . This plan is part of the National Department of Planning of Colombia. ‘’The document that is the basis and provides strategic guidelines of public policy’’ is the purpose. This policy can be considered as the backbone and a strength regarding Colombia’s technological developments. Moreover, the Colombian healthcare system itself has seen major and rapid changes in recent decades (‘’Evaluating Value-Based Healthcare through technology: Colombia’s Instituto De Evaluación Technológica En Salud.’’). Evaluating value-based healthcare through technology plays nowadays an enormous role. In addition, doctors make decision based on technological evaluation and objective information which results in more effective outcomes. According to The

Economist (2016) “In emerging economies, value-based strategies are as crucial, if not more so, as in developing nations.”

6.6. Environmental Firstly, the Colombian people are influenced by the environmental regulations that companies have. Companies inside the country try to be environmentally friendly and adopted the last movements to save the world. Some companies invest in machines that reduce contamination and impulse programs to encourage people to recycle and reduce contamination (Rodriguez-Miranda, Juan Pablo) Environment- current issues: deforestation resulting from timber exploitation in the jungles of the Amazon and the region of Choco, illicit drug crops grown by peasants in the national parks, soil erosion, soil and water quality damage from overuse of pesticides, air pollution, especially in Bogota, from vehicle emissions. The country party to Antarctic treaty, Biodiversity, Climate change, Climate Change-Kyoto Protocol, Desertification, Endangered species, Hazardous wastes, Marine life conservation, Ozone Layer protection, Ship Pollution, Tropical timber 83, Tropical timber 94 and Wetlands (Semana, Sostenibilidad).

Secondly, Colombia has a serious threatening situation when it comes to the health sector while developing diseases as a consequence of environmental pollution, may cost the country billions. According to El Espectador (2013), A study carried out for the past four years by the Secretariat of Environment and the University of Los Andes determined that for a period of 10 years (2010-2020) Colombia may save 17.5 billion pesos if projects are aimed at reducing the levels of environmental pollution. Research has shown that during this period respiratory diseases may be caused by the polluting air that circulates through the environment. Furthermore, with improvements in the polluted air it will lead to a reduction in health conditions. According to El Espectador (2013), A study is carried out that for every peso that is invested in healthcare projects to achieve a cleaner air, resulted in economical achievement.

Not only national conflicts have negative impact, the CO2 emissions grew the last years as well. from the period of 2014-2015, the amount of CO2 emission grew from 57.5 million metric tons to 83.3 million in 2015. This rise could have impact on the human health directly, but also the emissions contribute to the current climate crisis (marketline). However, figure 10, compares the carbon emissions per country till 2015. This figure shows that in comparison with The Netherlands, the carbon emissions from Colombia are lower. Taken into account the difference

32 of population of both countries, per-person emissions are significantly lower (‘’Carbon Emissions: China United-States-of-America Russion-Federation.’’).

Figure 10 - Carbon emissions comparison between Colombia, the Netherlands, USA and Russia.

Nevertheless, despite Colombia having environmental related laws and regulations, the implementation of these are not done properly. Furthermore, the environmental performance index measures 180 countries on 24 indicators on how they perform regarding the health and ecological system. Colombia was ranked 57th out of the 180 countries on the environmental performance index, in 2016. On September the 25th, 2018, Colombia ranked 42. An increase of 15 places in 2 years’ time (‘’2018 EPI Results.’’)

6.7. Legal The Colombian Judicial system includes the constitutional court, the Supreme court of justice, the Council of state, the Higher Judiciary council, and the superior and municipal courts. Colombia experienced some minor problems with their legal factors affecting business. The last years Colombia has tried to strengthen these legal factors by sharpening laws that affect business negatively, starting with the “consumer law”. This law, originally named the 1480 law from 2011, specifies and emphasizes the superintendency and benefits in the country of Colombia. Sic.gov.co states the following points regarding the 1480 law:

1. ‘The protection of consumers from hazards to their health and safety 2. Access of consumers to adequate information to enable them to make informed choices 3. Consumer education 4. Freedom to form consumer organizations and the opportunity of such organizations to present their views in decision-making processes that affect them

5. And the special protection to children and adolescents, as consumers, according to what is established by code of childhood and adolescence (‘’Deputy Superintendence for Consumer Protection.’’)

6. Furthermore, Colombia uses their law system to exterminate discrimination. Both in the work environment and the private environment. There are numerous anti-discrimination laws in Colombia. These laws prohibit discrimination in the work environment due to; Age, Color, Sex, Race, Pregnancy, Disability, Cultural and ethnic origin, Language, Religion, and Political or Philosophical opinion.

Colombian employees face different work environments, but for every legal employee there working conditions regulations. Also called the minimum rights and guarantees available to all employees. In terms of salary: Ordinary salary and All-inclusive salary. All-inclusive salary: “Colombian payroll regulations allow employees to earn an all-inclusive salary, is intended to compensate ordinary work, night shifts, work on Sundays and holidays, legal bonuses, severance payments, interest on severance payments, and, in general, any other employment benefits. vacations” (Working Conditions in Colombia.’’).

According to the Colombian regulations, a working day cannot exceed 8 hours a day. And a working week cannot exceed 48 hours per week. On the other hand, according to article 162, Labor Code, “employees in positions of trust and management are excluded from regulations regarding the maximum legal workday” (‘’Working Conditions in Colombia.’’)

Although, there are exceptions: “Supplemental work or overtime, except in the cases provided in article 163 of the Labor Code, may only be performed two (2) hours per day and subject to express authorization from Ministry of Labor or an authority designated by it (article 1, Decree 13 of 1967).” (‘’Working Conditions in Colombia.’’)

Figure 11 - Overtime pay allowances in Colombia

7. CAGE Framework

7.1. Introduction In this section, a detailed CAGE distance framework is explained. CAGE stands for Cultural, Administrative, Economic and Geographic. The purpose of this framework is to identify certain differences or distances between the Netherlands and Colombia, which contributes towards the understanding of certain patterns in for example information and trade. In the figure below, a visual representation of the framework is displayed including all factors.

7.2. Cultural Distance The Netherlands and Colombia culture differences are significantly unlike each other. The 6 Dimensions Model from Hofstede already outlined the main factors regarding these cultural differences: power distance, individualism, masculinity, uncertainty avoidance, long term orientation, and indulgence. Table number 12 will provide a concise overview regarding cultural aspects of the Netherlands and Colombia.

Countries The Netherlands Colombia Language Dutch Spanish Religions 50% Atheist 90% Christian 24% Catholics 5% Atheist 6% Protestants 5% Others 20% Others Traditions Sinterklaas Feria de las Flores Sint Maarten festival de blancos y negros Carnaval Carnaval de Barranquilla Christmas Figure 12 - Cultural distances between the Netherlands and Colombia

7.3. Administrative Distance Having trade relationships with the Netherlands, the European Union will also be a business network of opportunities. According to the European Union External Action, Colombia is seen as European Union’s key partner in Latin America. Their relationship is based on trade

36 collaboration, sustainable development, Political dialogue and Europe’s support to peace in Colombia with threats such as the National Liberation Army (ELN in short).

Moreover, the World Health Organization provides a country cooperation strategy of Colombia (WHO, Country cooperation) This paper mentions the cooperation with other countries and Trade Unions, which include:

1. United Nations Development Assistance Framework (UNDAF): Colombia’s health priorities are in line as the UNDAF, which goals are to build peace and create sustainable development. This framework does provide a supporting coordination on how nations could development themselves, as well as in terms of health.

2. Bilateral donor countries: The European Union is a donor country for Colombia, and vice versa. Bilateral means that both the Netherlands and Colombia support each other, either financially or not, to improve their (health) sector.

3. Multilateral organizations: These include UNICEF, United National Development Program, but also the IMF. Here, the Netherlands and Colombia fund organizations which distribute financial funds to developing countries in certain needs. 4. 17 Sustainable development goals: Colombia as well abide by the sustainable development goals, hereafter SDGs. Goal #3 is the most related to the health, life and sciences sector in Colombia: Good health and well-being. (United Nations). Besides that, SDG gateway provides an overview of Dutch companies involved in the application of SDG goal #3 (All Organizations) Dutch Companies could ‘join in action’ in order to validate themselves regarding the SDGs in 2030. This ‘join in action innovation’ platform on the website provide a digital market of demand and supply taken into account the SDGs (‘’All Join in Action Invitations.’’) Regarding health, Colombia is actively striving to perform in the following sectors of international action: 1. Equitable-priced quality medication 2. Health focus to national drugs policies 3. Promotion of (public) health management and non-communicable diseases

4. International Health Regulations

All in all, Colombia is collaborating with international organizations, like the United Nations and the Pacific Alliance, to collectively achieve the sustainability goals by 2030. UNDAF provides a guideline on how to achieve these goals according to the UN Agenda of 2030 (‘’UNITED NATIONS DEVELOPMENT ASSISTANCE FRAMEWORK GUIDANCE.’’). One of the relevant goals regarding health is goal #3: ’’Ensure healthy lives and promote well-being for all at all ages’’(‘’Goal 3.’’). Therefore, companies which will invest in the Colombian health sector should take in mind the sustainable development goals due in 2030. Seen from a different perspective, the SDGs could also provide a new business industry within the health, life and science sector related to sustainability, circular economy etcetera (European Union External Action)

7.4. Geographic distance Physically, both countries, the Netherland and Colombia, are located on different continents. Technically, both countries are close. In terms of communication, knowledge sharing and the exchange of other information, both countries’ communication distance is magnificent. Physical distance between both capitals is 8,850km, which either can be reach through one of the three possible ways of transport: air, sea and (partly) road. Transportation of medical devices, technological innovations or any other equipment could be transported via the Rotterdam harbour, connecting with Colombian harbours of Cartagena and Barranquilla for instance (LP).

In terms of airfreight, KLM Cargo flies to major cities of Colombia: Bogota, Cali, Medellin, Cartagena, and Barranquilla(‘’AIR FRANCE KLM MARTIN AIR CARGO.’’) KLM will provide 4 cargo flights on a weekly basis*. KLM offers predetermined airfreight solutions to pharmaceutical companies (‘’Pharmaceutical Logistics’’). The disadvantage of this solution includes that KLM Cargo only offers the pharma transport solution if it flies to Cali and Bogota. Taking into account the Dutch companies developing medical devices, KLM also provides a transportation plan for ‘high-tech’ goods (‘’High-Tech’’).

Countries The Netherlands Colombia Distance Dutch Spanish Common land - - borders Time zones -7 UTC +2 UTC

Climate Sea Climate Sea and Tropical climate* Landlockness Centralized geographical location, Access to two oceans, central great accessibility through air, sea geographical location in the and roads. Americas. Sea and air traffic best accessible considerations. Transportation The Netherlands provides one of the Updating to 4G roads. best infrastructure portfolios’ in the Harbours in Pacific and Atlantic world: roads, rails and waterways. oceans Port of Rotterdam 13 international airports in the Schiphol international Airport major cities**

Figure 13 - Geographical distances between the Netherlands and Colombia

*(Meteo-Julianadorp) ** (‘’Colombia Airport: International Airports in Colombia.’’)

When exporting health-related materials to Colombia, companies should consider the multiple possibilities to transport their products.

7.5. Economic Distance What economic factors do relate to the Colombian Health industry? Bogota is the main healthcare hub in Colombia. The capital has 21% of all affiliates and hospital beds of the country, and it hosts 20% of all health providers. Pharmaceutical market to grow with about 7.3% and will reach a USD 7.1 billion valuation in 2020.

The total per capita health care expenditure in 2016 7.2% of Colombia’s GDP. 2016’s GDP was US$280.1 billion, which results in a total health care expenditure of US$20.17 billion. Per capita, according to OECD, the total expenditure per capita in Colombia was US$856 in 2015. Whereas in the Netherlands this same expenditure was US$5,386, a difference of 652%!

Figure 14 - Health expenditures as a share of GDP, 2016. Provided by the OECD.

One explanation could be the fact that the cost of living in Colombia is significantly lower. According to Numbeo.com, the average monthly net salary is 85.5% lower in Colombia.

(Numbeo)

If taking into account the difference in cost of living, buying power, GDP, inflation and CPI; trading with Colombian health institutions or businesses in the health sector could come with financial obstacles as Dutch companies initially would ask a high price in Colombian terms.

Countries The Netherlands Colombia (2017) Differences: NL vs (2017) COL (%) Per capita 49,559 USD* 6,377 USD 777% income GDP 846 billion USD* 314 billion USD 269% Unemployment 4.9% 9.4% -4.5% rate Inflation 4.6% 3.3% 1.3% Policy Interest 0.0% 4.75% -4.75% rate Trade Balance 65.7 billion USD* -6.2 billion USD 1,060% CPI 104.62 142.27 (https://tradingecono (https://tradingeconomics. mics.com/netherlands com/colombia/consumer-p /consumer-price-index rice-index-cpi) -cpi) Sources https://www.focus-eco https://www.focus-econom nomics.com/countries ics.com/countries/netherla /colombia nds

Figure 15 - Economic Distances between the Netherlands and Colombia

*) Currency exchange numbers on October 3rd, 2018 1.50PM.

8. Business Model Canvas

8.1. Introduction In this section, the business model canvas provides information on strategic management. The description of the business with these nine factors are to be seen as building blocks for its activities. This business model canvas is established for a business in the health, life and science sector.

Figure 16 - Business Model Canvas of the Colombian Health, life and sciences sector

To conclude, the position of the eHealth, Medical devices and hospital buildings can be affected by the consumers power. The rivalry among competitors and substitute goods and services are high and many industries are involved. In the eHealth industry cost are very high, mainly because of the sales & marketing, maintenance and it-cost. This refers that the eHealth sector in Colombia relies on knowledge and technology from other countries like the Netherlands. The

42 customer relationship is an important and may affects many industries, as many companies work for the same industries, increasing the rivalry amongst companies.

9. SWOT Analysis

9.1. Introduction In this section, a SWOT Analysis is discussed. SWOT stands for strengths, weaknesses, opportunities and threats. In order to be able for Dutch companies to implement their knowledge and skills into the Colombian market, it is important to define what the Dutch strengths are, followed by the weaknesses of the Colombian health, life and science sector. This will eventually display a gap where the lack in Colombia may be fulfilled with Dutch competences. Opportunities will show, nevertheless potential threats need to be examined too, for Dutch companies to see the risk within the sector. This SWOT Analysis, based on the health, life and science sector generates the best preview of the Dutch and Colombian position within this sector. A division of the SWOT has been made: 1. Strengths: the Dutch sector on health, life and science 2. Weaknesses: the Colombian sector on health, life and science 3. Opportunities and threats: the gap between the strengths and weaknesses in which business opportunities and threats are recognized. Following this guideline, the most credible and trustworthy preview for Dutch companies is established.

9.2. Strengths of the Dutch sector on health, life and science The Netherlands itself has a very strong position within the health, life and science sector. Throughout the years, the Netherlands has developed itself into one of the strongest and most concentrated life science clusters in the world. Partly due to the remarkable invention’s centuries ago, and partly due to the present developments. According to the Life Science & Health magazine of Invest in Holland, (InvestinHolland) Dutch companies were involved in 17 major biotech deals in the last three years. This shows credibility and strength on the Dutch health science sector. Standing for collaboration, cooperation and coalition building are considered to

43 be one of the strengths of the Dutch health sciences sector, and what is also separating them from other countries. In addition, gaining the number one spot of the annual Euro Health Consumer Index in the last three years in a row has been deemed important for the Dutch position in the sector.

A report published by the Health Consumer Powerhouse in 2017, (Björnberg, Arne) showed that the Netherlands and its health science and care system is an exception and has barely any weaknesses. The author of this report, Professor Arne Björnberg wrote: “The Netherlands is the only country which has consistently been among the top three in the total ranking of any European Index the Health Consumer Powerhouse (HCP) has published since 2005”, again substantiating the strong position of the Netherlands in this sector.

9.2.1. Subsectors in the Netherlands Reviewing the subsectors within the sector, eHealth, medical devices and hospital building, more strengths will appear. This, while the Dutch government is claiming to be extremely supportive and encouraging to expand eHealth using certain action such as the support for innovators via online platforms and to simplify the digital data sharing (Ministerie van Algemene Zaken). In addition, the World Health Organization (WHO) also stresses the importance of eHealth and the relationship of the contribution towards UN millennium development goal number 17: partnerships for the goals (‘’Global Partnerships – United Nations Sustainable Development.’’).

Furthermore, reviewing the medical devices in the Netherlands, the Dutch are a major hub in the European MedTech Market, even though their medical device industry seems to be relatively small (approximately 4% of the European market and only 1% of the global market). Small yet very advanced is considered to be strong and this high level of advancement is necessary due to the high amount of aging people within the Netherlands, which is going faster than the world average. Therefore, medical devices such as pacemakers or other surgical

44 instruments are implemented regularly and making experts expect the Dutch MedTech market to grow rapidly in the upcoming years and to become even more important in the global market. In the figure, the medical technology market share of 2016 in billions is displayed. It shows the small yet important position of the Netherlands on the European level, which contributes towards the global position (‘’Netherlands – Overview of Medical Device Industry and Healthcare Stats.’’). The last subsector includes hospital building. With 114 hospital locations and 6 children hospitals, is it possible to reach, in 99% of the cases a hospital by car within 30 minutes. However, besides these hospitals there are also the so-called “buitenpoliklinieken” which are often found in large suburbs of big cities, decreasing the time to reach a hospital even more. Due to the fact that the Netherlands is relatively small, does not have any real remote areas and has perfect infrastructure, accessibility to hospitals are simple. This is not the case in many other countries, not even in Europe. The maps below, display the Dutch accessibility to hospitals within minutes and the European average distance in kilometres to an Emergency Medical Service (EMS) (Rondas, Nils)

. Figure 18 – Travel time to the nearest hospital in the Netherlands

Figure 19 - Travel time to the nearest hospital in (west/central) Europe

9.3. Weaknesses the Colombian sector on health, life and science

Even though Colombia has a progressive position in Latin America, it has been deemed important for this SWOT Analysis to review their weaknesses in order to find the gap between the Netherlands and Colombia.

According to field research done by the Colombian students, one of Colombia’s weaknesses is their infrastructure, contradicting with this being one of the Netherlands’ strengths. While having many medical centres, hospitals and clinics, there are multiple of these facilities in Colombia which needs to be restructured, in order to cover infrastructure risks. On top of that, there is a lack of technical security here. In fact, according to an article published by the newspaper “El Tiempo”, 344 of these buildings do not count with any type of technical security at all. This is an incredible amount which is not contributing to safety. Next to that, the largest problem is considered to be the fact that the improvements to these buildings are still unfinished even though they were given an additional time lapse of approximately four years.

Another weakness of Colombia within the health, life and science sector is again one of the Netherlands’ largest strengths, the eHealth sector. However, the problem is defined slight differently, as there is no lack of eHealth, but there is actually a high penetration of digital

46 platforms and devices. Yet, the people do not know about the start-ups helped and promoted by the Colombian government. Meaning that, a large amount of the population is ignoring the existence of platforms that were mainly made to help them as users of the health service. Nevertheless, this may be part of an opportunity as well.

9.4. Opportunities After reviewing the strengths of the Netherlands and the weaknesses of Colombia within the health, life and science sector it is vital for this research to find the gap between the two entities in order to find and create opportunities. In this section of the SWOT Analysis firstly the opportunities are examined followed by the threats that come with it.

In Colombia, an upcoming trend called “Medical Tourism” is reinforcing Colombian medicine’s reputation internally and externally. It consists out of foreigners coming to Colombia for medical and/or health purposes. These include medical procedures and listening to several medical opinions about diverse diagnosis. The word “tourism” covers the involvement of the real-estate industry. They are collaborating with the health industry in order to create and offer lodging centres especially for people with medical tourism purposes. This idea is already practiced in Bogota, named the Alenta Medical Care Project. As mentioned before, the medical tourism sector is extremely growing, and this is partly due to a significant share of people from the Dutch Caribbean. Therefore, the Netherlands has interest in the growth and quality of this sector, creating opportunities for Dutch companies (Marktverkenning).

Examining opportunities in the field of eHealth, Dutch companies might be able to contribute in letting Colombian citizens making use of the existing platforms regarding eHealth. As discussed before, there is a high level of penetration on eHealth platforms. Nevertheless, this promotion and rewarding by the Colombian government has been practiced through projects and contests for companies. This has led to the winners of these contests receiving funding from the government in order to initiate their operations. For example, the company 1DOC3 has developed an application and a web page where people can ask questions regarding medical issues, receiving a professional response. Knowing the fact that in the health sector there are many alternatives to apply ICT’s, this is an industry that offers a wide variety of opportunities for companies that want to dabble in the market and are still having advantages for newcomers. As the Netherlands is very advanced in the eHealth sector and is having two University IT institutes

47 who are rapidly developing and inventing tools to improve eHealth, Dutch companies might be able to fill the gap between eHealth and its use in Colombia. Making people aware and ready to use and implement eHealth through certain tools which may already exist in the Netherlands could be effective and entering this market may be attractive due to the fact that there are not many other competitors.

9.5. Threats Despite multiple opportunities within the sector of life, science and health, there are surely threats which might occur and need to be considered. One of these threats is that Colombia is in a high percentage dependent from imports of different devices and products needed to provide medical services, creating strict entities that regulate the entrance of those products. For instance, medical devices have to be registered with Invima (Food and Medicine Surveillance National Institute) through a rigorous process that classifies the devices between four different categories (Class I, Class IIa, Class IIb, and Class III). This sanitary process is mandatory, and according to Colombian field research, these processes sometimes become a threat for companies who want to export to Colombia. This because, if the devices or products do not comply with those regulations, the entity has the right to forbid the product in the market. Here, external companies coming out of the Netherlands might face some difficulties (‘’Inicio’’).

Additionally, since Colombia depends on the imports of medical devices, there are multiple countries that already have a role in this market; for example, the United States of America. They are having an approximate market share of 31.8%, in exporting electromedical instruments, electrodiagnostic apparatus, diagnostic reagents, and medical supplies like orthopaedic and fracture articles and prosthesis. Following countries with a large share are China, Germany, Ireland and Switzerland. For this reason, the entrance for newcomers in the medical devices market is quite challenging and implies surpassing its high competition and maturity.

10. TOWS Analysis

10.1. Introduction This section includes a TOWS Analysis, which is variant of the previous SWOT Analysis. Where in the SWOT the emphasis is more on the internal environment, the TOWS focus more on the external environment. When creating the TOWS Strategic Alternatives Matrix, external opportunities are compared with internal strengths, searching for strategies that use strengths to maximize opportunities. Based on the SWOT, some strategies are provided. These strategies are assigned as ‘’S3-O2’’ for example. Every strategy shortly describes an advice on how to carry out that particular strategy. A TOWs Matrix is displayed on the next page, providing an overview on the developed strategies and will help Dutch companies to find a suitable strategy when entering the Colombian market.

As in-depth research in other sections revealed that corruption is a threat and new health institutes seeking medical devices an opportunity, are these added in the TOW Matrix while not being included in the SWOT Analysis. Nevertheless, both are important to bear in mind when developing a strategy.

10.2. TOWS Matrix

Strengths (Dutch) Weaknesses (Colombian) S1: Strong life science cluster W1: Infrastructure

S2: Collaboration, cooperation W2: Lack of technical security and coalition building W3: unknown existence S3: #1 of the Euro Health Consumer of eHealth Index W4: Corruption S4: exceptional health science and care system W5: Failing EPS system S5: Government supports eHealth

Opportunities S1&3-O1: Use Dutch knowledge to O1-W3: Dutch companies seize the Medical Tourism seizing fruitful eHealth market O1: Medical Tourism in Colombia S5-O2: Dutch support O1.1: Alenta Medical Care (financially/informative) to tackle O2-W1: Co-development in Project financial situation better health infrastructure.

O2: Financial situation health S1&2-O3: Export of medical devices to O-W2: More inclusive technical sector Colombia Colombia securities for all opportunities

O3: New health institutes seeking medical devices

(marktverkenning) Threats S1&3-T1,4&5: Dutch consultancy on W4-T2: how to solve corruption, EPS system, T1: dependency on imports of lean process of import of medical medical devices. devices.

T2: Invima registration of T3-S1&3: the Netherlands as the best medical devices in health sector providing better quality products/services. T3: current presence of other countries (US, China, Germany)

T4: Corruption T5: Failing EPS system

Figure 20 - TOWS strategy matrix

11. Competitor Analysis

11.1. Introduction In this sector, a competitor analysis is established with the use of Porter’s five forces. This, while in this model multiple factors are involved and considered; suppliers, new entrants, rivalry, substitutes and buying power. It will create the necessary and concise overview of the competition in the Dutch health sector.

Figure 21 - the 5 forces by Porter

11.2. Competitive rivalry The Netherlands is consistently ranked in the top three of the worldwide health science ranking. In addition, The Netherlands wins 3 out of the 6 index and seems not to have many soft spots when it comes to healthcare system. According to Task Force Health care (2018), the availability of high medical devices in Colombia is a key interest for the Dutch companies. Within the healthcare industry in the Netherlands there is an intense rivalry, especially between insurance companies and pharmaceutical companies. Amongst hospitals the competitive mind set is less intense resulting in more and more hospitals merging in the Netherlands. As discussed in the SWOT Analysis strengths part, there is an hospital within 30 minutes reach. That’s why these ‘neighbour’ hospitals create coalitions. In this way they will share their patients, and more important, their specialists. However, there are independent medical care centres who don’t accept insurance as a billing service to pay for the treatment they offer. Some of those independent medical care centres provide service faster than the average hospital in the Netherlands can provide you. On the other hand, those independent medical care centres are expensive and not everyone can pay their treatment.

11.3. Threats of new entrants A growing aspect in Colombia is the treatments market. As stated by the Task force Health care (2018), it emphasizes that the Colombians choose for sustainable, modern and Innovative solutions. Private clinics have a majority of 83% within the Colombian market. The use of eHealth technology and knowledge has become feasible in many fields. The Colombian market is using eHealth tools to examine challenges and new trends. For instance, a community for patients with chronic of mentally diseases. Furthermore, sharing knowledge and discussing issues related to their sickness. also, patient data protection and medical information in order to governance and adapt more strict policies. On the other hand, web-based tools to report cancer symptoms and to alarm doctors and patients to potential sickness. Furthermore, with the gained knowledge and experience it will result in coordinated interventions, optimize care and help for patients and to improve their quality of treatments and life. Once this is achieved in one Colombian area, it should be implemented through all the regions in Colombia (Based on the eHealth-based tools).

11.4. Threat of substitution Colombia have a direct access to a large and dynamic emerging market. Furthermore, Colombia is rated as third most popular country within Latin America. According to Invest in Bogota (2018), Colombia is one of the largest, most dynamic markets in Latin America. As stated by Invest in Bogota (2018), companies based in Colombia are operating according to the Free Trade Agreements (FTAs), which access the International market of more than US$43 trillion and 1.570 Billion inhabitants. The Colombian Medical devices market relies mainly on International imports. According to BMI Research (n.d.), domestic production of medical devices is focused at the low technology and knowledge of the market. The United States imports the largest part of the Colombian market, accounting for 31.8% of all medical equipment imports, followed by China (13.3%), Germany (8.4%), Ireland (4.8%) and Switzerland (4.5%). A growing aspect in Colombia is the Biopharmaceuticals market. In addition, it is biotechnology produced with medical drugs and proteins. According to BioProcess Online (2016), the Biopharmaceuticals market mainly uses therapeutic methods which are produced by native sources. Also, an important treatment method is the home and natural treatments with local products and which are made by local citizens. Colombia has private and a public healthcare system. Resulting that private healthcare clinics provide services in most large and medium-sized cities.

11.5. Buying power According to International Living (n.d.), Colombia has an excellent healthcare system, with many outstanding hospitals and clinics all over the country. As stated by to International Living (n.d.), in Colombia private clinics and hospitals decide they are on consultation and treatment prices. In addition, patients do not have any influence on prices or treatment, they are obliged to pay or to follow the instructed treatments. The consistency of medical care in Colombia is outstanding. According to International Living (n.d.), Colombia is ranked at number 22 in the healthcare system of 191 countries. On top of this, in Latin America’s top 43 hospitals, 22 of those hospitals are based in Colombia. In theory it means that almost half of the outstanding hospitals are located in Colombia.

According to International Living (n.d.), Colombia has a public health insurance has a three-tiered system, where their offer to Colombian citizens incentives. Furthermore, Colombia has a private and public insurance plans. In terms of the public plan, it is officially called the EPS; Entidades Promotoras de Salud. In Colombia, every citizen must have basic public

53 healthcare insurance. In addition, if someone would like to have premium insurance that is also possible. According to International Living (‘’Healthcare in Colombia: Low Cost and High Quality.’’), the Colombian healthcare system operates in a similar way as in the Netherlands. Insures have to be treated by contracted hospitals and clinics.

11.6. Supplier power The quality health services are holding back the process in Colombia. According to World Health Organization (n.d.), the process of improving health care in Colombia is hold back by income levels, inaccurate diagnosis, medication errors, inappropriate or unnecessary treatment, inadequate or unsafe clinical facilities or practices. Reviewing other Latin American countries, Colombia is considered to be relatively easy and fast to enter the market. In terms of medical equipment, Colombia imports more than 50% from the Netherlands. Overall, Colombia has unique services and many substitutes products for the Latin American Market (TFHC).

It is important to analyse the potential opportunities for Dutch companies in the Colombian market. The Netherlands is internationally known for his outstanding knowledge and technology in health science. Nowadays, the Colombians are using eHealth tools to examine challenges and new trends. for instance, a community for patients with chronic of mentally-ill diseases. also, patient data protection and medical information in order to govern and adapt more strict policies. The Netherlands is known for outstanding Knowledge and Technology in the healthcare industry. furthermore, the Colombian healthcare market relies mostly on imports. This may be an opportunity for Dutch companies to adapt into the Colombian Healthcare.

In Colombia, the bargaining power of consumers is low because there are many consumers on the market and the power of the industry is high. Therefore, is it necessary for the Netherlands to take advantage of it in a good way to obtain benefits and profits on the Colombian market. On the other hand, Supplier are free to set the prices they prefer and especially if there is no substitute product or service. In comparison to the Netherlands where the government has set prices for Healthcare services or products.

For both Colombia and the Netherlands, the barrier of new entrants is very low, because it is not easy to compete on the Colombian. Mainly because the costs are very high and because of the name and experience the have in the industry. There are many substitute products for

Healthcare industry in Colombia. However, there are many companies who sell of offer a similar product. It is determined that companies cannot change their prices, since there are more options to choose from and they might even give lower prices.

11.7. Conclusion To conclude, the Colombian healthcare infrastructure is present in urban areas. Furthermore, some areas need modernization and expansion. Colombia spends 6.8% of their gross domestic product on healthcare. Research has shown that the best approach for Dutch companies to enter the Colombian healthcare market is through local partners, for instance: Colombian local companies and distributors. The Colombian domestic healthcare market is reliant on imports. However, access to the Colombian market is not very easy to enter for newcomers. Whereas, the market is mature and competitive with many foreign companies. It must be noticeable that the Colombian healthcare market can be often challenging and may have barrier to enter.

12. Market Analysis and Trends

12.1. Introduction The Colombian government is the biggest driver of the growth of the pharmaceutical and healthcare industry of Colombia. In fact, the government provides great support to the Colombian healthcare system. In 2008 Colombia allocated 7.3% of its GDP 13.9% of their public expenditure to healthcare.

According to the Economist Intelligence Unit and World Competitiveness yearbook 2009, the governmental provided 85.8% of the public expenditure on health in 2008 and according to the World Health Organization (2011) the Colombian government provided 83% of the total expenditures to the healthcare sector that year.

The tables above give an indication of the total expenditure to the healthcare sector. Ending in 2015 the total expenditure on health was growing at an average annual rate of 9,95%.

The government and the FARC in November 16’ signed a peace agreement (Acuerdo de paz) in order to create new opportunities to improve the living standard of rural populations. Starting with provide/improve basic services as healthcare.

12.2. Medical Tourism Medical tourism in Colombia has been rising in recent years. In 2014 the foreigners visiting Colombia for medical reasons spent an estimated amount of total $216m in 2014. That amount is 61% more than the year before. In 2013 the amount spend for medical reasons by foreigners was $134m. furthermore, the health tourists to Colombia grew even more in 2015 by 6,4%. 60% of the tourism took place in Bogota and 30% in Medellin.

Medical tourism in Colombia is supported by their connections for treating international patients. According to the BBC world there are over 600 flights per week connected to North, Central and South America, and Europe. With an estimated amount of 30% of those flights directly connected to the big airports connected to cities like Medellín, Cali, Barranquilla, Cartagena and Bucaramanga which include important medical centers. “Colombia is only 3 hours away by plane from Miami and less than 6 hours from New York, Washington, Houston, Sao Paulo, Mexico and Buenos Aires” (BBC World)

Next to a strategic position the price of treatment is more affordable. Medical procedures executed in Colombia cost between 10 and 35 percent of the prices in the United States. Please have a look at the following table to see an example of the differences in costs for procedures in both countries. The following table indicates the procedure for a kidney transplant. As we can see the prices differ in large extent from each other. Therefore, it is needless to say that the Colombian treatment would be a better choice looking at the quality and the price of the procedure. The procedures in the table are just an indication of the enormous differs in price between the two countries.

According to MedicalTourismIndex.com Colombia has around 50 000 medical tourists a year. Most of those medical tourists are from the US already. What seems most logical looking at the geographical position of the US to Canada. However, a surprising fact is that the large amount of the 50 000 people visiting Colombia because of the healthcare market is from Dutch origin. Apparently, the Colombian healthcare sector is especially attractive to the Netherlands because a large part of the medical tourists that visited Colombia for medical reasons in 2016 was from the Caribbean parts from the kingdom. Aruba, Curacao and Sint Maarten have similar agreements with healthcare institutions in Colombia. The Netherlands therefore has a huge interest in growth and quality in the sector and is continuing to maintain the alliance with Colombia. (Marktverkenning)

According to McKinsey Colombia will be the market leader in medical tourism by 2032 with estimated revenues of at least 6 billion dollars.

12.3. Trends

- Because of disappointing oil revenues, it could occur that the government will invest less in the healthcare market than expected for the following years. - life expectancy risen from 69 years to 74 years and infant mortality decreased from 21 deaths per 1000 births to 14 deaths per 1000 births. - The Ministry of Health and Social Protection (Ministerio de Salud y Protección Social, MinSalud) is determined to tighten costs of drugs and products. - Concentration is taking place in the health sector and the smaller and less efficient insurers are being absorbed by stronger competitors. - in 2010, between 6 and 7 million Americans received treatment abroad and between 15 and 17 million are expected to do the same by 2020 according to Deloitte Development. - Since the US-Colombia trade promotion agreement with the united states 96% of the medical equipment exports to Colombia received duty free treatment.

- The U.S imports make up the largest share of the Colombian market, accounting for 31.8% of all medical equipment imports. Although China’s market share is quickly increasing. - FTA (Free Trade Agreement) with the EU - Upcoming tenders in Bogota for five hospital projects: two new hospitals will be created and the other 3 will undergo major upgrades adding 1272 beds and almost 670 000 square feet of Colombian health system infrastructure. - Some of the country’s largest end-users of medical devices do import equipment and supplies directly. - Over occupation in hospitals in Colombia is starting to take place.

13. Sub-sector analysis

13.1 Introduction The Health, life and science sector includes the sub-sectors of eHealth, medical devices and hospital building. In this section these sub-sectors are analysed, setting the scene for the status in both the Netherlands and Colombia. It will provide a clearer overview for companies of the country’s situation in the specific sub-sector and makes it easier to find the gap for investment.

13.2. eHealth analysis

13.2.1. eHealth in general In order to be able to analyse the gap between the development and implementation of eHealth in both the Netherlands and Colombia, it is vital to, at first, understand the characteristics and aspects which include eHealth. In general, the definition of eHealth is ‘the use of information and communication technologies, mainly Internet technology, to support or improve health and healthcare’ (RVZ, 2002; Krijgsman et al., 2013). eHealth is something of the future and is developing rapidly. More and more countries are delving into the meaning and benefits eHealth could bring for a them. It could, for example, create better collaboration with other countries as eHealth stands amongst other for the support of online platforms the simplification of digital data sharing.

13.2.2. eHealth in the Netherlands Due to the fact that the Netherlands is a country where people are nowadays living longer on average and suffer more often from chronic illnesses, the Dutch healthcare system is facing a number of challenges. Due to these challenges, the Netherlands has developed themselves into a country with a leading position in the use and development of eHealth, as discussed in the

SWOT-Analysis. This position has been obtained through, amongst others, the two University IT institutes of Enschede and Nijmegen (Twente University and Radboud University). In addition, the Radboudumc Nijmegen is practicing a large amount of substantive research in healthcare. Many large Dutch companies are involved in the development of eHealth, such as Parkin-sonet, The Rockstart Digital Health Accelerator and the Radboud Reshape Innovation Center. (Healthvalley)

Due to the challenges the Netherlands will face in the upcoming decades, they have an encouraging attitude towards eHealth. As statistics show, the amount of elderly people in the Netherlands is rising significantly, followed up by an increasement of the demand and costs for healthcare. As this enlargement will develop rapidly, a shortage on the labour market might occur in the upcoming years. In order to overcome this shortage, the Dutch government and its ministers are promoting the benefits of eHealth and the possibilities of making use of it. The report of consumer eHealth by the Raad voor de Volksgezondheid & Zorg cites that “The Minister of Health, Welfare and Sport views eHealth as a means of reinforcing self-management and for this reason has set concrete objectives to promote the use of eHealth (TK, parliamentary paper/Kamerstuk II, 33750-XVI-28).”

13.2.3. eHealth in Colombia In Colombia, the situation around eHealth is clearly different than in the Netherlands. As mentioned before in the SWOT Analysis, eHealth is considered one of Colombia’s weaknesses in the health, life and science sector. This, while people do not have knowledge on eHealth. They know it exists, and that is about it. The high penetration of digital platforms and devices is not yet useful due to people not making use of it, and more important, do not know how to use it and see the benefits of it. nevertheless, according to an article published in the Journal of Medical Research, the potential of eHealth is to improve life expectancy, literacy, education and the standard of living. Currently, mostly start-ups, helped and promoted by the Colombian government are deep involved in the eHealth process. Time and effort need to be put in the people becoming more informed on eHealth in order to develop and let it be advantageous (‘’Poverty, human development, and the role of eHealth’’).

“Poverty, human development, and the role of eHealth” Journal of medical Internet research vol. 9,4 e34. 22 Oct. 2007, doi:10.2196/jmir.9.4.e34

13.2.4. eHealth and the sustainable development goals Besides the need for development and implementation of eHealth within the Dutch healthcare sector, the World Health Organization (WHO) has also stressed the significant relationship between eHealth and the UN development goal number 17: partnership for the goals (‘’Global Partnerships – United Nationas Sustainable Development.’’).

According to the website of the World Health Organization, on 28 September 2018 an important partnership has been agreed on between the WHO and PATH, a global health organization which claims to be “a global team of innovators working to accelerate health equity, so all people and communities can thrive” (PATH). The official WHO-website cites that: “The WHO-PATH partnership on Innovation and Global Digital Health aims to identify and deliver the next wave of innovations and digital solutions that are critical to improving health systems, health outcomes, and health equity” (‘’WHO and PATH Patner to Globalize Digital Health.’’). The aim is to revolutionize digital health all over the globe, as a preparation for the future global health challenges. The main focus will lay on the health-related Sustainable Development Goals while the improvement of global health coverage will also play a significant role. As mentioned before, the aim of the partnership is to innovate and create digital solutions. Path’s website reveals a number of fields of interest (‘’Old Problem, New Partnership, Exciting Future.’’): 1. Improved primary care design 2. Development of interoperable information systems 3. Targeted applications of artificial intelligence 4. Gene editing technology

13.3. Medical devices analysis Medical devices are used in medical diagnoses and treatments (Ministerie van Algemene Zaken.). According to the World Health Organization (2018), the definition of health technology, as the application of organized knowledge and skills in the form of medicines, medical devices, vaccines, procedures and systems developed to solve a health problem and improve quality of life. Nowadays, there are more than 10.000 types of medical devices available on the Dutch and Columbian market. The availability of medical equipment depends on local, regional and national scale. As stated by World Health Organization (2018), there are requirements and factors to be considered where the medical devices can be the best used. The Netherlands and Columbia

62 rely on the knowledge and use of medical devices, in order to achieve universal health coverage, respond to health emergencies, and keep populations safe.

13.3.1. Medical devices in the Netherlands The Dutch medical devices industry is a major market for the European medical device industry. According to Emergo by UL (2018), the Dutch medical devices market valued at $3.4 Billion in 2014. The Netherlands has a population of 17 million citizens and with a yearly healthcare expenditure $97 billion. The Dutch medical devices are attractive to importers worldwide, mainly because the knowledge and technology on the Dutch market.

Even though the innovative knowledge and the devices on the Dutch healthcare market, face problems and difficulties. Due to the challenges on the Dutch healthcare market, buyers are fascinated by the technologies that treat The Dutch aging population and conserve costs. Nevertheless, consumers value the Dutch innovative medical devices and technology. Furthermore, buyers value the homecare products, orthopaedic and implantable products, and diabetes care. There is also enormous interest in medical software and e-health products on the Dutch market.

Due to the challenges on the Dutch market, they are face competition on the medical devices market. However, numerous of the medical device businesses have their headquarters in the Netherlands. Even though, the Netherlands has a great geographic position, they still need a well-planned strategy to be successful in Colombia.

The Dutch medical devices industry is comparatively small nut advanced in comparison to other European countries. According to Emergo by UL (2018), Dutch manufacturers compete with European and global manufacturers both at home and abroad. Core medical devices indicate the technologies that are significantly measured as important or necessary for a preventive, diagnostic, treatment or procedures who are conveyed in most healthcare facilities.

Core medical devices

1. Dental Imaging 6. Tread Mill 2. Endoscopy 7. Ultrasound 3. Lab Equipment 8. Vital Sign Monitoring 4. Mammography 9. X-R 5. MRI Figure 22 - the core medical devices conveyed in most healthcare facilities

13.3.2. Medical devices in Colombia In Colombia, medicines are extremely cheap comparing to the Netherlands. According to research from the Colombian students, there are two companies having an enormous share of the market in medical devices. These two companies are ABBOTT and World Medical Devices (WMD). Both have their own characteristics:

Abbott Abbott Laboratories is an American healthcare company founded by Wallace Calvin Abbott. It was initially established to formulate known drugs, but it eventually grew to also sell research-based drugs, medical devices, diagnostics, and nutritional products. There is a division of 6 different categories when reviewing their products: cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicines. Abbott is known worldwide which can be a disadvantage for Dutch companies. Simply because it is a company that has created a status and also has created confidence between consumers. On the other hand, an advantage could be that Dutch companies can introduce a price difference. Being a new company in the market can give us a margin to use in the prices.

World Medical Devices (WMD) This is a private company with huge experience in high tech medical devices commercialization in the Colombian market, having products for:

● Interventional cardiology ● Neuro interventionism ● Interventional radiology ● RX Protection

● Embolectomy ● Removal of electrodes

Being a Colombian company can be both an advantage and a disadvantage here. This, while Colombian consumers might find Dutch companies interesting due to the fact the Netherlands has a notorious position in the health sector. Nevertheless, it could be a disadvantage in the sense of prejudgements by Colombians consumers that Dutch companies are overpriced.

13.3.3. Medical devices and the sustainable development goals In order to able to analyse the importance and essentially of medical devices, it is vital to understand the importance of safe and effective medical devices. According to the World Health Organization (2018), they are important for the achievement of health-related development goals, including the Millennium Development Goals upon proper manufacturing, regulation, planning, assessment, acquisition, management. Also, the use of medical devices which are of good quality, safe and compatible with the settings in which they are used are vital.

The first point is that countries trust on the use of medical devices to achieve health coverage and keep populations safe. In addition, the World Health Organization mentioned goals and recommendations on medical devices, which are:

Goals Objectives of the Forum

To define methods of increasing and measuring access to essential and priority medical devices under Universal Health Coverage in compliance with the Sustainable Development Goals

To share country evidence of best practices in regulating, assessment and management of medical devices

Increasing access to To demonstrate development and use of innovative appropriate medical devices affordable technologies to respond to global health priorities

To share WHO tools and guidelines on medical devices for better implementation

Figure 23 - WHO mentioned goals on medical devices

Sources: (Adventech)

13.4. Hospital building analysis

13.4.1. Hospital building in general The ‘marktverkenning life sciences & health sector Colombia 2016’ report already provides a list of the major architects and construction companies which are related to hospital building in Colombia (Marktverkenning Annex V, page 72). Marktverkenning also elaborate that regulations regarding hospital building plans have to be approved by the municipality’s curator or planning department.

13.4.2. Hospital building in the Netherlands As discussed in the SWOT Analysis, there are 114 hospital locations and six children hospitals, which are almost always (99%) reachable within 30 minutes. This, while there are no real remote areas in the Netherlands as there are in Colombia. In addition, the so-called “buitenpoliklinieken” are there as well, often in large suburbs decreasing the traveling time even more. In figure number 19, the travel time is displayed both in the Netherlands and the rest of Europe. Furthermore, the hospital buildings itself in the Netherlands are mostly well maintained and do not lack of equipment nor bad infrastructure, making each building accessible as possible.

13.4.3. Hospital building in Colombia In 2016, the marktverkenning report provided an overview of hospital buildings being built or adjusted/improved in 2015. According to El Tiempo on January 5th, 2018, 607 buildings intended for hospital use were determined as hazardous. As the Colombian field research showed, there are three essential companies which are Arquitectos e Ingenieros Asociados (AIA), Zinerco and Constructora Conconreto. These are all three large companies in Colombia, contributing to the construction of hospital building and infrastructure. Nevertheless, as mentioned in the SWOT Analysis many of these facilities in Colombia need to be restructured, in order to cover infrastructure risks.

66 which needs to be restructured, in order to cover infrastructure risks. On top of that, there is a lack of technical security here. In fact, according to an article published by the newspaper “El Tiempo”, 344 of these buildings do not count with any type of technical security at all. This is an incredible amount which is not contributing to safety. Next to that, the largest problem is considered to be the fact that the improvements to these buildings are still unfinished even though they were given an additional time lapse of approximately four years.

13.4.4. Sustainable ability by Edge certification Another factor which may be vital for Dutch companies to have knowledge on, is the Edge certification. This, while sustainability is an important and returning term throughout the research and is blending in deeper and deeper. Edge could provide an opportunity for both the Colombian hospitals and Dutch investors. Edge stands for ‘Excellence in Design for Greater Efficiencies,’ and is an initiative from the IFC, International Finance Corporation. Edge’s aim is stated on their website and is as follows: ‘’The aim is to engineer a facility that provides the highest standards of healthcare without wasting resources. That is why for hospitals in emerging markets, EDGE is a wise decision to make.’’ (edgebuildings.com). With focus on Colombia, CAMACOL, ‘Congreso Colombiano de la Construccion,’ is the exclusive provider of edge certificates (‘’Camacol’’).

13.4.5. ACHC accreditation

Besides Edge, ACHC is an important accreditation ACHC is short for Accreditation Commission for Health Care. This commission operates mostly in the US, but also in Europe, the Middle-East and Canada. However, the ACHC is internationally recognized (‘’ACHC International Home’’). Accreditation is a continuous review of health institutions, such as hospital buildings, in order to achieve previous set standards and requirements. Every three years a review will be conducted (ACHC About Accreditation). The accreditation results in the following ‘advantages’:

1. Commitment to quality 3. Distinction between competitor 2. Continuous improvement In addition, it takes six steps in order to complete and hopefully receive the accreditation. These steps are displayed in the figure (ACHC Accreditation process):

14. STPD Analysis

14.1. Introduction While the previous part explained a subsector analysis, this section will provide an STPD analysis. Where STPD stands for segmentation, targeting, positioning and differentiation, each term has its characteristics. Segmentation includes the process of dividing a market up into distinct groups of buyers and in the part of targeting each segment’s attractiveness is evaluated. The positioning phase includes the way a product is defined by consumers on important attributes. The last part of the analysis, differentiation, is where competitive advantage arises which is gained by for example providing greater customer value. The displayed STPD analysis is from the Colombian health, life and science market as this is the target place for Dutch companies (Sargam)

14.2. Consumer market segmentation A market can be segmented by using different variables (Kotler, page 223). These are: 1. Geographic segmentation 2. Demographic segmentation 3. Psychographic segmentation 4. Behavioural segmentation As the aim of this report is to research the health, life and sciences sector of Colombia, another suitable consumer-market segmentation is a demographic segmentation, mainly based on age and life-cycle.

As of October 22 2018, Colombia has a population of 49,589,130 people (‘’Colombia Population (LIVE).’’). The different in age of this population is shown in figure 25. The majority of the population exists of people aged 15-29. In fact, Colombia has a very low median age: 30 years. Currently, Colombians aged between 15-29 years old represent 24.9% of the population. Colombians aged 1-14 represent 23.1%. The Dutch Health, life and sciences sector, could anticipate on these age range of the Colombian population, depending on its demand (The World Factbook: COLOMBIA).

In September 2018, Colombia has a total population of 49,468,825. Distributed as shown in figure 25. The age structure can be segmented as follows (‘’Population Pyramids of the World from 1950 to 2100.’’).

Ages % Accumulated % 0 – 14 23.1 23.1

15 – 24.9 48.0 29 30 – 22.5 70.5 44 45 – 17.5 88.0 59 60 – 9.2 97.2 74 75 – 2.5 99.7 89 89+ 0.3

Figure 26 - The Colombian population segmented in 6 groups

Figure 26 shows that almost 50% of the population is 29 years old or younger. Based on these numbers, companies which have plans to invest in the Colombian health, science and life sector can further determine their target market strategy. Different ages require different kind of healthcare, different kind of knowledge and lifestyles significantly differs from each age. However, a combination of segments in the health sector would be relevant as, for example, the group aged from 30-44 have different needs, but some of those needs would correspond with the segment of the aged 45-59.

Companies who are planning to enter the Colombian health, life and science market, should consider the following requirements for effective segmentation (Kotler, Philip; page 232): Market segments must be measurable, accessible, substantial, differentiable and

70 actionable. In order to identify a smaller segment in either the B2C or B2B market, multiple segmentation variables should be combined. Besides, it depends on

14.2.1. Segmenting business markets Dutch health institutions or businesses that are focussing on the B2B market could use the same variables as used in the segmentation of consumer markets. However, B2B segmentation depends on the sector in which a particular business operates in. The 3 sub-sectors and its potential segments in this report are: 1. E-health 1. Technological development sector 2. Hospital building 1. Geographical location 2. Major cities 3. Minor cities 4. Rural areas 5. Private or Public sector 2. Medical devices 1. Technological development sector

14.3. Targeting Targeting the right segment depends on what field of business the Dutch company operates in. As mentioned in the introduction part, targeting includes the evaluation of each segment’s attractiveness, here relating to the health, life and science sector, where eHealth, medical devices and hospital building are sub-sectors. Finally, an advice will be outlined regarding what to target. eHealth Dutch companies operating within the eHealth sector should target: 1. Healthcare management 2. Education sector 3. ICT

The healthcare management and education sector are important to target. Same for the ICT sector as this will distribute the eHealth. Especially the eHealth sector is closely related to the sustainable development goal number 17, partnership for the goals. Another plan interrelated with eHealth and sustainable development goal number 17 is ‘Plan Nacional de TIC 2008-2019’. According to RVO’s marktverkenning 2016 is this a plan which should contribute to the ICT development in Colombia and should it bring the country in the top 3 of the most developed countries within this field. As Dutch companies are rapidly developing within this sector, they have a big chance to contribute to this Plan Nacional.

Hospital building Dutch companies operating within the hospital building sector should target: 1. Contractors 2. Architects 3. Edge Contractors and architects involved in designing and building hospitals are listed in the RVO’s marktverkenning 2016, as the research team had no sufficient sources to research an updated version. Edge, on the other hand, could play a significant role in the contribution to reach the Sustainable Developments Goals from the United Nations. Edge is a certification provider for (hospital) buildings. Edge sets requirements to decrease water and energy consumption and achieve CO2 reduction (edgebuildings.com)

Medical devices Dutch companies operating within the medical devices sector should target the relatively simple products. Large medical devices are more often imported from countries such as the United States, China and Germany. The Netherlands had in 2014 a market share of 1,1%, according to RVO’s marktverkenning 2016. However, this may have been increased. Unfortunately, there was no update source to confirm this growth yet.

15. Five-year Forecast of the Health, Life and Sciences Sector in Colombia

15.1. Introduction Based on the conducted research and extensive analyses, it is possible to create a five-year forecast of the health, life and science sector. Even though, it is a rapidly developing sector and expectations will contribute towards the Dutch companies going on the trade mission to Colombia. A forecast could provide more certainty and a clearer insight on how their actions will have effect on the marketplace.

Dutch companies are able to invest in three subsectors within the health, life and sciences sector. Due to each sub sector having its own specific characteristics, discussed in the subsector analysis, it is important to realize they will all need a suitable and unique approach. As the multiple frameworks have contributed towards the understanding of the situation on the Colombian market and to find a possible gap. A gap arose in the SWOT analysis, which was further discussed in the TOWS analysis, when comparing the Dutch strengths with the Colombian weaknesses. Nevertheless, it is still a cluster of all frameworks together which allows to create a forecast. In addition, the increase in the purchasing power of Colombian consumers, can influence the forecast. Same counts for the relationship with the sustainable development goals as these goals are becoming more and more important for companies to bear in mind when doing business.

15.2. Forecast This report has led to the belief that in the upcoming five years, many positive developments will occur. As discussed in the market analysis and trends section, the Colombian government is the biggest driver of the pharmaceutical and healthcare industry of Colombia. An important trend to keep an eye on is the one of medical tourism, as this has multiple factors that could lead to a positive development in the upcoming years. Not only the strategic position but also the affordable price of treatment are vital.

The willingness and strengths of Dutch companies are definitely contributing to a positive forecast, with the Netherlands having one of the best health sectors in the world. However, not everything may be positive, and difficulties will be faced in terms of for example corruption and

73 the financial crisis where the government takes a lot of money, resulting in a financial crisis in the sector. These difficulties are not that influencing that it will be impossible for Dutch companies to establish themselves successfully in the health, life and science sector in Colombia. According to the conducted research, it has been deemed important to see a forecast realistic yet optimistic and to put a lot of effort and focus on the sustainable development goals when entering the market. Importantly, the SDGs will be taken into account. The UN as well as the Pacific Alliance are determined to achieve the SDGs in 2030. With a #1 health, life and science sector in Colombia, the country should be determined to reach their Sustainable Development Goals to maintain the most competitive player in the Latin American region.

16. Conclusion and Recommendations

Colombia is #1 in the Health, life and sciences sector in Latin America. In order to sustain their ranking, the country has close ties with multilateral organizations like the United Nations, European Union and Asia. As a developing country, Colombia’s GDP is obviously significantly lower than the Dutch. However, over the past years, health spending per capita has risen, simultaneously as the population grew as well.

It’s important to highlight the differences regarding business and private culture. The companies joining the trade mission organized by the RVO should take this into account. Whereas the Dutch are mostly straight forward, direct and stick to time and their agenda; the Colombians are more emotional based. Creating lasting and healthy relationships is an important part of closing a business deal.

Currently, however, a ‘health crisis’ is occurring in Colombia. Like in the Netherlands, the Colombian hospitals and clinics struggle financially to maintain practices. Besides, pharmaceutical companies experience a financial crisis too. This crisis is due to multiple factors. First, their EPS system, the insurances paying the insured one’s, is failing. Secondly, still, corruption plays a significant role in this crisis. Significant amounts of money are vanished in the private health sector of Colombia. Even though it was considered that the private sector would create opportunities, the public sector seems more interesting to apply the ideas of the government.

Focusing on the Netherlands, the country has been rewarded multiple acknowledgments to determine the Netherlands holding one of the best health sectors in the world.

The three health sub-sectors discussed in this report were eHealth, Hospital building and Medical devices. The Netherlands already has possession of 50% of the eHealth sector in Colombia. This, while the Netherlands has a leading position due to amongst others its digital platforms. Colombia’s hospital building infrastructure quality is not as good as the Dutch. In other words, in 2018, more than 600 buildings intended for medical use were considered hazardous. However, taking into account the SDGs, organizations like Edge strives for continuous development of such infrastructure within Colombia too. Medical devices are always imported into Colombia. When imported, the devices are controlled and tested by hospitals, before using them with patients.

With a vision on the future, the Sustainable Development Goals by the United Nations are taken into account seriously by Colombia. Not only by themselves, but also with collaboration of the UN and the Pacific Alliance, Colombia strives to achieve the goals by 2030. The most important goals regarding Colombia’s health sector are goal #3: health care and well-being, and #17 partnership in the goals.

Looking at the trends affecting the market, besides the others, medical tourism is a very important one to bear in mind as it is rapidly developing, and Colombia is already receiving many tourists with a medical travel purpose.

Reviewing the 5-year forecast, it can be stated that it is mostly positive due to the Netherlands having a lot to offer and Colombia becoming more and more open. It is got easier for Dutch companies to enter the Colombian market and especially in the health, life and science sector. The Netherlands leading position and status will also impress the Colombians, resulting in Colombian companies willing to work together with Dutch companies.

It is recommended for Dutch companies to invest in the Colombian health, life and science sector while there are a lot of opportunities in Colombia and the Netherlands a lot has to offer. Moreover, entering the Colombian health, life and science sector, Dutch companies should take into account the SDGs. As stated with the 5-year forecast, 2023 is in five years, and the Colombians are keen on sustainability, innovation and modernization. This all point out the opportunities for the upcoming, at least, 5 years.

Even though this report gives the reader a detailed idea on how the health sector in Colombia was, is, and going to look like, the most important factor after acknowledging this report is to see Colombia yourself. Let this report be a basis on what you will experience and gain on information in Colombia and be the pioneer on this trade mission by setting up fruitful business activities in Colombia.

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89 https://www.minsalud.gov.co/English/Paginas/Ministry.aspx ← ministry of health! https://www.minsalud.gov.co/Ministerio/Institucional/Paginas/institucional-objetivos-funciones.as px ← objectives and functions of the ministry of health. https://www.reuters.com/article/colombia-budget/colombia-government-proposes-78-4-billion-bu dget-for-2018-idUSL1N1KJ17R ← budget of 2018. Maybe find something on government spending on health, life and sciences. https://www.cnbc.com/2018/07/27/reuters-america-colombias-government-proposes-89-point-7- bln-budget-for-2019.html ← proposed government budget 2019! Government proposed budget of 2019: http://www.cadtm.org/El-presupuesto-del-2019-en-Colombia-consolida-la-desigualdad-y-las-mult iples → Salud y proteccion social is de health sector en social protection.

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