Proposed API Park needs immediate implementation

Shahiduzzaman Khan
Unwarranted delay in setting up the proposed Active Pharmaceutical Ingredient (API) Park is holding back private sector investment for manufacturing raw materials. The previous BNP-led 4-party alliance government took the initiative of creating an API Park to facilitate the growth of the industry and provide backward linkage. After a long dilly-dallying process, the proposal got its nod from the Executive Committee of the National Economic Council (ECNEC) during the caretaker government regime. Nobody knows as yet when the work on the proposed park will start.

Earlier, drug manufacturers signed a deal with the government to set up a Tk 4.5 billion pharmaceutical park to boost exports and cut dependence on imported raw materials. The Bangladesh Small and Cottage Industries Corporation (BSCIC) signed a memorandum of understanding with the Bangladesh Association of Pharmaceutical Industries (BAPI), comprising at least 50 drug companies to build the park in Munshiganj. The will produce active pharmaceutical ingredients, or raw materials, for more than 160 drug plants in the country.

Bangladesh’s Tk 50-billion pharmaceutical sector mostly depends on imported raw materials to produce drugs for the local and international markets. The factories import nearly 90 per cent of their raw materials from India, China and some European countries. At the API park, research and development facilities are scheduled to be established. The BSCIC will develop the 300-acre park at Gazaria, Munshiganj some 37 kilometres southeast of Dhaka. The park is expected to draw Tk 20 billion investment and create more than 20,000 high-paid jobs.

The park is also set to increase the country’s competitive advantages in drug exports, making Bangladeshi drugs cheaper than its competitors. Under a World Trade Organisation (WTO) agreement, Bangladesh has been allowed to export patented drugs to its fellow least developed countries (LDC) until 2016. But so far the country exploited a fraction of the opportunities despite being the only LDC country to have huge drug manufacturing facilities. The WTO deal could not be exploited due to lack of API manufacturing facilities. If the park is set up, it will fill that gap within a short period of time. The state-of-the-art API park will have a central effluent treatment plant, a waste dumping ground and incinerator. Entrepreneurs will get plots inside the park to set up small power plants.

Recent reports of export targets by pharmaceutical giants in Bangladesh suggest bright prospects of the industry in terms of exports. Beximco Pharmaceuticals Limited hopes to capture 1.0 per cent of the Arab countries’ pharmaceutical market, which is worth around $4.0 billion. Added to that, four top companies are aiming for exports worth $10 million next year through contract manufacturing only. Square Pharmaceuticals Limited has completed manufacturing contracts valued at $1.5 million with two British companies recently. Incepta Pharmaceuticals Limited, the country’s third largest pharmaceuticals company has signed a contract with Bano Pharmaceutical, an Austrian company, which would transfer its production site to a newly built Incepta factory very soon.

Statistics shows that the pharmaceutical exports from Bangladesh were growing steadily. The sector grew from exporting $8.2 million in 2003-04 to $28.3 million in 2006-07. Thus, the industry has quadrupled in value per cent during the period. It has also expanded its export base from 51 countries to 61. Local companies are exporting a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms. Besides regular brands, it is also exporting high-tech specialised products like inhalers, suppositories, nasal sprays, injectables and infusions. Apart from overseas retail customers, the country is supplying to world-renowned hospitals and institutions.

After initial success, the local pharmaceutical companies took the initiative to explore some of the more-regulated markets like Russia, Ukraine, Georgia and Singapore. Success in registering and marketing their products in these countries was a major breakthrough for Bangladesh pharmaceutical industries. This is a testimony not only to the product quality, but also to capabilities to meet stringent regulatory requirements. The pharmaceutical industry in Bangladesh is currently valued at $650 million with an annual growth rate of 12 per cent. It is primarily a generic industry producing around 8,000 different brands which can cater to 97 per cent of the domestic demand.

At present, there are 240 registered pharmaceutical manufacturers in Bangladesh out of which 168 are operational. The industry is one of the highest contributors to the national exchequer and it is the largest white collar intensive employment sector of the country. The market share of the local companies is around 80 per cent.

Among the least developed countries (LDCs), Bangladesh is the only country which has a very strong manufacturing base in pharmaceuticals. The 50 LDC countries represent a large market for pharmaceutical products with a total population of over 700 million and with an increasing demand for quality healthcare. Moreover, in cases of national emergency, a country can scrap patent rules for a certain period. But it will be unfeasible to go for production and then treat the ill. Thus, they will need to import them and Bangladesh should be ready to export as it is allowed to produce such drugs.

According to the export-policy of the government, there are limits to sending product samples abroad. For a country with such enormous export potentials, experts see these limits as unjustified. There are even limits on imports of raw materials which are a major hindrance as raw materials are mostly imported. Import limits were set nine years ago. If such limits remain, the production schedules of the companies are set to be affected and they will not be able to export or hold on to any advantages they might have.

A committee in its proposal to the Ministry of Commerce submitted a nine-point proposal to help export growth. The proposals included a 10 per cent cash subsidy for the export-oriented pharmaceutical factories and relaxation of the stringent foreign exchange expenditure policy for the pharmaceutical industry. The committees recommended a ceiling of such expenditure at US$50,000 per year for a new company. It also recommended sending pharmaceutical samples to overseas market at 10 percent of each consignment of the export.

Bangladesh Small and Cottage Industries Corporation (BSCIC) has been assigned to set up the proposed API park. The project is scheduled to be completed by 2011 if the work starts right now. After completion of infrastructure development, a total of 40 industrial plots will be allocated to individual companies.

A total of 30 drug companies have already applied for plots at the API park. They have the money ready to establish the plant. The companies will start producing APIs within six months after the government hands over the plots to them. It is really impossible to be competitive in the international medicine market if a company doesn’t produce its own raw materials. Bangladeshi companies have to invest in a big way in API if they want to have a big slice of the export pie.

As far as mobilisation of resources for the project is concerned, the government is considering a private-public partnership programme. It is most likely that the pharmaceutical companies would render financial contributions to the implementation of the project. There are slim chances for foreign direct investment in the project due to the ongoing global recession.

All concerned do need to develop an effective partnership to get the API park project implemented within the shortest possible time to help the country avail itself of the opportunity offered through the exemption of patent regulations under TRIPS. In addition to getting all the production facilities beefed up, the local pharmaceutical industry should intensify their efforts for finding newer markets, particularly in Africa that has the largest number of the LDCs with inadequate drug manufacturing facilities.

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