LocalInvestment&ForeignDirectInvestmentof

BangladeshinPharmaceuticalIndustry
Introduction:
To smoothlyrunthe wheelofeconomyofadeveloping countrylikeBangladesh
Foreign Direct Investment (FDI) is considered to be one of the important
determinants,whichcanhelpenhancetheeconomicgrowth.Asadevelopingcountry,
BangladeshneedsFDIforitsongoingdevelopmentprocess.Itisapotentweaponfor
developingtheeconomyandachievingthecountryssocioeconomicobjectives.The
climate for investment is determined by the interplay of a whole set of factors:
economic,social,political,technologicalandenvironmentalthathasabearingonthe
operationofbusinesses.Foreigndirectinvestment(FDI)hasthepotentialtogenerate
employment,raiseproductivity,transferskillsandtechnology,enhanceexports,and
contribute to the longterm economic development of the worlds developing
countries.Foreigndirectinvestmentplaysaveryimportantroleintheeconomyofa
leastdevelopedcountry(LDC)likeBangladesh.Thisisbecauseofthefactthatthe
investable fund is very much scarce in the country. Recently Government of
Bangladeshhasimplementedquiteanumberofstepsforattractingforeigninvestors.
Thesestepshaveresultedintoenhancementoftheforeigndirectinvestment.
This paper will mainly focus on the investment scenario especially in the
pharmaceutical industry. In this report, we will try to discuss about the local
investmentandtheforeigninvestmentthathasbeendonebybothlocalandforeign
companiesandtheprospectsandchallengesthatarebeingfacedinthisindustry.

ObjectiveoftheStudy:
Thebroadobjectiveofthisreportistostudythewholescenarioofpharmaceutical
industryanditsinvestmentconditions.
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

Thespecificornarrowobjectivesofthestudyare:

TostudyaboutthelocalInvestmentanditopportunities
Tohavealookattheexportimportscenarioandgrowthinthissectors
ToknowabouttheForeignDirectInvestmentscurrentsituation

MethodologyoftheStudy:
Wehaveusedbothprimaryandsecondaryresourceforourreport.Forthesecondary
resource,wehaveusedmainlywebbasedarticlesandjournals;andfortheprimary
resource,wedidaninterviewwithaBusinessAssociateatGlaxoSmithKlein(GSK).

InvestmentClimateofBangladesh:
BangladeshoffersanunparalleledinvestmentclimatecomparedtotheotherSouth
Asian economies. Here are eight key pointers to Bangladesh's investment climate
today:
1. Bangladesh is a largely homogeneous society with no major internal or
externaltensionsandapopulationwithgreatresilienceinthefaceofadversity
(e.g.naturalcalamities).
2. Bangladeshisaliberaldemocracy.Thepopulationofthiscountryirrespective
ofraceorreligionhasbeenlivinginharmonyandunderstandingforthousands
ofyears.
3. Thecountryhas abroadnonpartisanpoliticalsupportformarketoriented
reformandthemostinvestorfriendlyregulatoryregimeinSouthAsia.
4. Thecountryhastrainable,enthusiastic,hardworkingandlowcost(evenby
regionalstandards)laborforcesuitableforanylaborintensiveindustry.
5. Thegeographiclocationofthecountryisidealforglobaltrade,withvery
convenientaccesstointernationalseaandairroutes.
6. Bangladeshisendowedwithabundantsupplyofnaturalgas,wateranditssoil
isveryfertile.

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

7. AlthoughBengali(Bangla)istheofficiallanguage,Englishisgenerallyused
asasecondlanguage.Themajorityoftheeducatedpopulationcanread,write
andspeakinEnglish.
8. As a result of low per capita GDP, present domestic consumption is not
significant.However,itshouldalwaysbeconsideredthatthereexistsamiddle
classpopulationwithover10%ofthepopulation.Aseconomicgrowthpicks
up,thepurchasingpowerwillalsogrowsubstantially.
Bangladeshi products enjoy dutyfree and quota free access to almost all the
developedcountries.Thisaccesstotheglobalmarketisfurtherhelpedbythefactthat
thepolicyregimeofBangladeshforforeigndirectinvestmentisbyfarthebestin
SouthAsia.MostBangladeshiproductsenjoycompletedutyandquotafreeaccessto
EU,Canada,AustraliaandNorway.Thoughinlimitedscale,Bangladeshproducts
alreadyfoundtheiraccess withlowerdutyinthemarketsofThailand,Indiaand
Pakistan. However, talks are underway with China, Russia, Malaysia and other
neighboringcountriesinthisregard(BangladeshBoardofInvestment).

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

OverviewofPharmaceuticalIndustry:
ThepharmaceuticalmarketinBangladeshisprettysmallcomparedtothepopulation
sizeofthecountry,mainlybecauseofthelackofspendingpowerofthepopulation.
Pharmaceuticalspendingisalsoamongstthelowestintheworldinpercapitaterms.
Healthcare expenditures consist of only 3.35% of GDP. However, increased
awareness of healthcare, increase in per capita income, emergence of private
healthcare services and the governments increased expenditure in this sector,
togetherwithotherfactors,havecausedthedemandtoriseinrecentyears.Thesector
isalsoprotectedfromexternalcompetition,asimportsarecompletelyrestrictedfor
similardrugsthataremanufacturedlocally.
Pharmaceuticalsectoristechnologicallythemostdevelopedmanufacturingindustries
inBangladeshandthethirdlargestindustryintermsofcontributiontogovernments
revenue.Theindustrycontributesabout1%ofthetotalGDP.Thereareabout250
licensedpharmaceuticalmanufacturersinthecountry;however,currentlyalittleover
100companiesareinoperation.Itishighlyconcentratedasthetop20companies
produce85%oftherevenue.AccordingtoIMS,aUSbasedmarketresearchfirm,the
retailmarketsizeisestimatedtobearoundBDT84billionason2011.
Bangladesh pharmaceutical companies focus primarily on branded generic final
formulations, mostly using imported APIs (Active Pharmaceuticals Ingredient).
Brandedgenericsareacategoryofdrugs,includingprescriptionproductsthatare
eithernoveldosageformsofoffpatentproductsproducedbyamanufacturerthatis
nottheoriginatorofthemolecule,oramoleculecopyofanoffpatentproductwitha
tradename.About85%ofthedrugssoldinBangladesharegenericsand15%are
patented drugs the structure differs significantly from the international market.
Brandedgenericdrugsrepresentabout25%onaverageofworldwidepharmaceuticals
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

sales;however,giventhepopularityinemergingmarketslikeChina,IndiaandLatin
America, branded generic drugs may well dominate the total sales within a
decade(Saad,2012).
Bangladeshmanufacturesabout450genericdrugsfor5,300registeredbrands,which
have8,300differentformsofdosagesandstrengths.Theseincludeawiderangeof
productsfromantiulcerants,flouroquinolones,antirheumaticnonsteroiddrugs,non
narcoticanalgesics,antihistamines,andoralantidiabeticdrugs.Somelargerfirms
have also started producing anticancer and antiretroviral drugs. Domestic
manufacturers account for 97% of the drug sales in the local market while the
remaining 3% are imported. This is a complete turnaround over from two/three
decadesbackwhenimportsusedtodominatethemarket.Theimporteddrugsinclude
essentiallivesavingdrugsandotherhighqualitydrugs.Theratiowillfurtherincrease
infavorofthelocalproductionassomeofthebigplayersarepoisedtomanufacture
thesehighqualitydrugsinhouseinthefuture.
According to Bangladesh Pharmaceuticals and Healthcare Report Q1 2011,
Bangladesh medicine sales reached Tk 7,000 crore in 2010. Business Monitor
Internationalinitslatestreport(Q12011)saidBangladeshhasmoveduponeplaceto
occupythe14thpositionin17regionalmarketssurveyedinBMIsPharmaceutical&
HealthcareBusinessEnvironmentRatingsfortheAsiaregion.Still,Bangladeshhasa
longwaytogo,thereportsaid.ThisadjustmentnowseesBangladeshplacedbelow
VietnamandaboveSriLanka.Bangladesh'spharmaceuticalratingis40.2outof100,
afigurethathaschangedmarginallyfromthepreviousquarterbutremainslowerthan
theregionalaverageof53.1.Globally,Bangladeshoccupies67thpositioninBMIs83
marketstrong pharmaceutical universe (Current Scenario of Bangladesh Pharma
market,2011).

AMFaruque,managingdirectorandchiefexecutiveofficerofApexPharma,finds
Bangladeshmarkettobeapotentialone.Hethinksaffordabilityandavailabilityof
medicines will help the market boom in the next few years. Faruque said Apex
Pharma, which is not a big player now, would emerge as one of the top five
companiesinfiveyears.ThepresentturnoverofthecompanyisTk60croreonly.
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

Apexiscominginabigway,saidFaruque.BillMcKean,aUKpharmacistwho
hasrecentlyjoinedApexPharmaasitschieftechnicalofficer,seesahugeprospect
andhighqualityplayersinthelocalmarket.Accordingtohim,alargepopulation
and relaxation of trade related intellectual property rights (TRIPS) for least
developedcountriesarecontributingtothemarketgrowth.

MarketSizeandGrowthofPharmaceuticalIndustry:
Asstatedearlier,thesizeoftheretailmarketreachedBDT84.0billionason2011
basedonIMSreport.Thereportfurtherstatedthat,retailsalesinthedomesticmarket
achieved23.6%growthin2011following23.8%and16.8%growthin2010and2009
respectively. High growth in the last three years (78.8% cumulative and 21.4%
CAGR)meantthattheBangladeshPharmaceuticalmarketdoubledinjustoverfour
years.TheretailmarketalsocrossedUSD1.0billioninsizein2011.Itisoneofthe
fastestgrowingsectorsinthecountrywithanannualaveragegrowthrateof17.2%
overthelastfiveyearsand13.1%overthelastdecade.
However,consideringthatIMSdoesnotincluderuralmarketintheirsurvey,the
actualsizeofthemarketwillvaryslightly(5%10%).Itisestimatedthattheretail
market represents 90% of the total market; in that respect the total market size
(includingtheruralmarket)isexpectedtobeoverBDT90.0billionatpresent.(Saad,
2012)
Year
2011
2010
2009
2008
2007
2006
2005

Size(BDT)
84.0
68.0
54.9
47.0
44.0
38.0
36.5

Growth
23.6%
23.8%
16.8%
6.9%
15.8%
4.1%
17.5%

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

2004
2003
2002
2001

31.1
28.6
27.0
24.5

8.6%
5.9%
10.2%

Table1:RetailMarketSizeandGrowth(Source:SquarePharmaceuticalsAnnualReports&IMSReport)

Intheabovetable,wecanseethatthegrowthofthepharmaceuticalindustryhasbeen
growingremarkablyfrom10.2%23.6%.Eventhoughitistinymarket,itiswell
developedthananyothermarketsinBangladeshwithwelldevelopedmachineries.
HealthIndicators
2009
LifeExpectancy
68.3
Government % in total 31.7%

2008
68
31.4%

2005
66.9
34.9%

2000
64.7
39.0%

healthexp.
Healthexp.as%ofGDP 3.35%
Health exp. per capital 18.4

3.32%
16.5

3.21%
12.1

2.82%
9.1

(CurrentUS$)
Median Age (2011 23.3

estimate)
PovertyLevel

NA

40.0%

48.9%

31.5%

Table2:SelectedHealthIndicatorsforBangladesh(Source:WorldBank)

In the above table we can come up with this conclusion that with the help of
pharmaceuticalindustryandinnovationinmedicineworld,developingcountrylike
Bangladeshisdoingagreatjobinthehealthsector.Thehealthindicatorsareshowing
improvementofhealthsectorwiththehelpofPharmaceuticalIndustry.
Region
USA
World
UK
Japan
Afghanistan
Nigeria
Nepal
Thailand
India
SriLanka
Bangladesh
Pakistan

2009
16.21%
10.03%
9.34%
8.35%
7.36%
5.82%
5.81%
4.31%
4.17%
3.96%
3.35%
2.62%

2005
14.72%
9.73%
8.25%
8.16%
8.76%
6.60%
5.91%
3.55%
4.03%
4.04%
3.21%
2.78%

2000
13.41%
9.23%
7.04%
7.69%
8.29%
4.56%
5.06%
3.40%
4.61%
3.72%
2.82%
3.02%

Table3:Healthcareexpenditureas%ofGDP(Source:WorldBank)

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

Several drivers are working behind this growing market share in pharmaceutical
industry.

OneofthemajordriversisGradualDemographicshift,whichhasimproved

theLifeexpectancy,whichhighlightstheincreasedhealthconsciousness.
Thebasewasalsolowashealthcareexpenditurewaslessthan3%ofGDPin
2000withtotalpharmaceuticalsectorsizeofBDT24.5billiononlyinthat

year(Saad,2012).
Newhospitalsarebeingbuiltandthereforemedicalcoverageofpopulation

hasincreased.
Privatehealthcareservicehasincreased.
Incomebasehasalsoincreasedandpeoplearemoreconcernedabouttheir
healthnowthanbefore.

LocalInvestmentinPharmaceuticalSector:
In Bangladesh there are a number of national investors interested in building up
pharmaceuticalmanufacturing.Manyoftheexistingpharmaceuticalcorporationslike
Square Pharmaceuticals and Beximco Pharmaceuticals belong to the large
conglomerates, which have proven the commercial opportunities to invest in this
industry.InBangladeshwheninvestinginmanufacturingplantstheequityrateused
by Bangladeshi investors is particularly higher than the usual equity rate in
transnationalpharmaceuticalcompanies.

MajorLocalInvestorsinthePharmaceuticalSector:

BasedontheIMSreportforthefourthquarter2011,SquarePharmaceuticals(DSE:
SQURPHARMA)holdsthetopmarketshareintheretailmarket18.7%,followedby
Incepta Pharmaceuticals (INCEPTA) 9.3%, Beximco Pharmaceuticals (DSE:
BXPHARMA) 8.8%, Opsonin Pharma (OPSONIN) 5.1% and Renata (DSE:
RENATA)4.9%.Thetopfivecompaniesheld46.8%marketsharein2011,slightly
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

morethantheir46.2%marketholdingin2010indicatingcumulativerevenuegrowth
inexcessofthesectorgrowth.Amongthetopfive,threearelistedinDSESquare,
BeximcoandRenata.
Listofthemajorplayerswithmarketshareisgivenbelow:
Company

MarketShare
2011
18.7%
9.3%
8.8%
5.1%
4.9%
4.7%
4.3%
4.2%
4.1%

SquarePharmaceuticals
InceptaPharmaceuticals
BeximcoPharmaceuticals
OpsoninPharma
Renata
EskayefBangladesh
ACI
AcmePharmaceuticals
Aristopharma

2010
19.2%
9.0%
8.4%
4.9%
4.8%
4.9%
4.2%
4.5%
4.0%

Table4:MajorMarketPlayersinPharmaceuticalIndustry(Source:WorldBank)

PerformanceoflocallistedCompanies
AmongthelistedcompaniesprevailinginpharmaceuticalssectorofBangladesh,only
BXPHARMA and IBNSINA reports standalone statements while the other four
reports consolidated numbers. For SQURPHARMA and RENATA, the
pharmaceuticalbusinessgeneratesbulkoftheconsolidatedrevenue(80%and94%
respectively for the two companies) while for ACI and GLAXOSMITH the
proportionismuchlower(about50%).Amongthesixcompanies,SQURPHARMA,
BXPHARMA and RENATA present investors with prospective investment
opportunities.ForIBNSINAthemarketcapitalizationisverysmallforinvestment.A
pictureofcomparisonamongthelistedpharmaceuticalscompaniesisgivenbelow:
DSETicker

Market
Price(BDT)

Market
CAP(BDTm)

Profitin2011 P/E
(BDTm)

SQUPHARMA
BXPHARMA

268.7
93.9

71161.1
23641.0

3565.4
1198.4

20.0x
19.7x

RENATA

981.2

28710.9

1066.7

26.0x

ACI

247.8

4885.3

238.1

20.5x

GLAXOSMITH 605.2

7290.5

282.1

25.8x

IBNSINA

1765.1

70.8

24.8x

135.5

MCAPweightedP/E21.2x
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

Table5:MarketpriceandmarketcapitalizationgivenasonMay10,2012(Source:DSEWebsiteandBRACEPL
Research)

IfwehavealookatthetableabovewecanseethesectorP/Eratio(comprisingof
thesesixcompaniesonly)standsat21.2xwhereduetothemarketweightofthetop
two, the P/E ratio is heavily tilted towards Square Pharmaceuticals (20.0x) and
Beximco Pharmaceuticals (19.7x). And among these companies Renata has the
highestP/Eratioof26.0x,whichdemonstratetheirgrowthopportunityinnearfuture.
Growthatparwiththeentiremarketmeantthattherecumulativeholdingdidnot
changefrom2010level.However,themarketshareshiftedamongthetopplayers.
SQURPHARMAlost0.5%marketshareinthelastyear(from19.2%in2010)while
thenextfourcompaniesgained1.1%marketshareinthesameperiod.Growthin
local sales of these four companies INCEPTA, BXPHARMA, OPSONIN and
RENATAwas28.5%in2011,increasingtheirmarketsharefrom27.0%in2010to
28.1%in2011.Thefollowingchartshowsthegrowthrateforthetopcompanies:

20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%

2011
2010

Figure1:MarketGrowthofPharmaceuticalIndustry(Source:IMSReport)

Ifwegofurtherdownthelistoftoppharmaceuticalcompanies,thetop15companies
held77.7%marketsharein2011(whichremainedunchangedfrom2010level)and
top20companiesheld84.9%marketsharein2011(slightlyhigherthan84.6%in
2010). It can be easily seen from the numbers that theconcentration of sales is
centered among the top players, in particular, the local manufacturers. Local
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

10

manufacturers dominate the industry, enjoying about 90% market share while
multinationalsholdlittleover10%marketshare.

Marketshare:

Figure2:MarketShareofPharmaceuticalIndustry(Source:IMSReport)

DevelopmentinFormulationsMarket:
Formulations represent the mainstream business in pharmaceuticals industry of
Bangladesh. Presently,themarketconsistsofapproximately8000genericproducts
and 258 firms with manufacturing capability, along with some imported patented
products(Shawon,2011).
Presently,theformulationsmarketisshiftinggraduallyfromacutecaretochronic
care.ManyoftheprevioushighgrowthBrandedgenericproductsareexperiencing
lowergrowth,andpricebasedcompetitionisgettingintenseovertime.
Regionally, pharmaceutical business is experiencing higher growth in areas like
Chittagong and Rajshahi. Whereas Dhaka region had a growth of 18% in 2010,
Chittagong andRajshahi showedagrowthof24%and 33%respectively.Dueto
higher direct sales and aggressive marketing strategy pursued by companies,
wholesalersroleisonthedecline.In2008,theircontributionstoodabout20.73%;by
2010,ithasfallento16.19%(Source:IMS).
Atendencytowardproducingrawmaterialslocallyhasbeenseenasfirmsarenow
manufacturingeverythingfrompelletstofreezedriedinjectionstoIVaminoacids.
Alongside,entryoflocalfirmsintohighendproductsegment(Insulin,Anticancer
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

11

etc.)isalsonoticeable. Intheinsulinmarket,SquarePharmaceuticalshasalready
madeitsentry,providingat22%lowerpricethanimportedones.NovoNordisk,the
largestproducerofinsulin(80%oflocalmarket),hasestablisheda5millionvials
insulinplantthatis tobeoperationalfromOctober2011.Intheanticancerfield,
BeaconPharma,Orion,Squarepharmaceuticals,Renataetc.severalfirmshavemade
entry.
FirmshasbeenestablishingcGMPcompliantplants,andsomehasalreadyachieved
accreditationsfromUK,USA,Australiaetc.countries whichsuggestastronger
international presence in upcoming future. Among the top firms, Beximco
PharmaceuticalsLtd.hasalreadymadeanagreementwithAdamisPharmaceuticalsof
USAtointroducefourdrugsintheUSmarketoverwithin2013(Shawon,2011).

LocalInvestmentOpportunitiesinPharmaceuticalSector:
InBangladesh,theindustryhasbeenexperiencingagoodgrowthoverthelastfew
years. The growth is attributable to rising population with increasing healthcare
expenditure per capita. Being part of health care sector, domestic market size of
pharmaceuticalshasadirectrelationshipwitheconomicvariables,suchaspopulation
growth, healthcare expenditure, income level etc. Noticeably, the increase in
healthcareexpenditureisduetohigherlevelofprivatespending,demonstratingrising
health awareness among the people. As demographic variables improve overthe
coming years, the industry is expected to continue its growth at least up to the
implementationofTRIPS[2016expected].However,thegrowthisnotexpectedtobe
uniformacrossthemarketduetodifferencesamongthesegments.
Intherecentbudget,Pharmaceuticalsindustryhasseensomepositivemoves,which
areexpectedtocontributetothegrowthopportunitiesinpharmaceuticalsector:

WithdrawalofVAT(15%)andImportduty(5%)fromleucocytefilterimport

bypharmaceuticalcompanies.
Withdrawalofsupplementaryduty(20%)andreductionofimportduty(12%
from 25%) for Cartridge/ Membrane filters import by pharmaceutical
companies.

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

12

Reducedduty(3%from12%)forsandwichpanelimportbypharmaceutical

companies.
Reduceddutyforimportofcertainpharmaceuticalsrawmaterials(5%from

12%).
ExtendingeligibilityfortaxholidayfromJune2011toJune2013.

Thedeclaredmoveswillmostlikelyresultinfollowingchanges

Reduceddutywilllowerproductcostforcertainproductclasses(Anticancer
drugs,Analgesics,Antipyretics,andInjectable)providingpotentialsforlocal

pharmaceuticalsmanufacturers.
In addition, completion of the API Park within 201112 would provide
pharmaceuticalindustryacheapersourceofAPI,improvingcostefficiency.
Meanwhile, tax holiday would help reduce eligible producers (API and
Finishedformulation)taxobligationsandachievebetterreturn.ActiveFine
Ltdwillbeoneofthemajorbeneficiariesfromtheinclusionofthissector
undertaxholiday.

The APIindustryisstillatitsinfancyandsignificantgrowthopportunityexistsfor
thecompanies.Inlocalmarket,thereisalargegapbetweenlocaldemandandlocal
supply,as80%oftotaldemandisyetfulfilledfromimportedAPIs.However,the
governmenthasplannedtosetupanAPIparktofacilitatetheproductionofseveral
APIsforthelocalmanufacturers.Thevalueadditionforthebackwardlinkagewillnot
be much as the country will again need to import the basic chemicals for
manufacturingAPIs.ItisestimatedthatcostofAPIswilldecreasebyabout20%if
theAPIParkisestablished.
In formulations,severalchangingtrendsareobserved. Pricebasedcompetitionis
increasingwithinthelocalmarket.Newinvestmentsarealsotakingplace.Firmsare
enteringintopreviouslyunchartedterritorieslikeinsulin,Anticanceretc.products,and
almostallthefirmsareincreasingproductlineseachyear.Thusgrowthislikelyto
continueforthecomingfuture.

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

13

ExportandImportofPharmaceuticalIndustry:
TheexportmarketofBangladeshhasshownsignificantgrowthovertheyears.Since
2004,Exportshaveincreasedmultifold,withexportdestinationsrisingfrom37in
2004to84in2011.
TheoverallexportearningsfrompharmaceuticalsreachedatUSD46.0billioninthe
yearof2011,recordingagrowthof16.1%overUSD39.6billionincalendaryear
2010.Exportearningsin2012wereUSD10.9billion,5.7%upfromthesameperiod
previousyear.Thetablepresentedbelowisshowingthequarterwiseexportearnings
forthelastthreeyearswhilethechartbelowshowsthetotalexportoverthelasteight
fiscalyears(Saad,2012).
Q1
Q2
Q3
Q4
Total

2011
10.4
12.4
12.3
10.9
46.0

2010
9.4
8.7
10.1
11.4
39.6

2009
8.8
8.5
10.2
12.7
40.1

Table6:PharmaExport(USDm)(Source:ExportPromotionBureau)

Figure3:PharmaceuticalExportandGrowth(Source:BangladeshBankandExportPromotionBureau)

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

14

FromthisgraphwecanseethatpharmaceuticalexportfromBangladeshrecorded
25.5%growthannuallyoverthelastsevenyears.However,thegrowthwasnotsteady
across all the years in fact in FY2009 pharmaceutical export dropped 1.8%
following the global financial crisis. In FY2011 also, the growth was only 1.0%
becauseofsovereigndebtcrisisinEurope.Apartfromthesetwoyearswheretrade
sloweddownsignificantlyworldwide,pharmaceuticalexportwasrobustinallother
years.
Finishedformulationsorfinishedpharmaceuticalproductshaveaglobalmarketwith
varyingrulesandregulations.Intermsofregulatorystructure,overseasmarketscan
becategorizedinthreeways.
Firstoneisthe HighlyRegulatedMarkets likeUSA,UK,etc.,thatrequirevarious
certificationslikeUSEDA,UKMCAetc.andneedhugeinvestmentinfacilitiesand
documentation.
SecondoneistheModeratelyRegulatedMarketslikeRussia,Singapore,etc.,which
usuallyaskforBioavailability,Bioequivalence,ClinicalTrials,etc.
Third category is the Less Regulated Markets like Myanmar, Sri Lanka, Nepal,
Kenya,Yemen,etc.
Bangladesh has already entered less regulated markets and entry in moderately
regulated markets is already taking place. To continue future growth in exports,
Bangladeshwillhavetoenterthehighlyregulatedmarketssoon.Inthisregard,some
of the major companies have already made million dollar investment in their
manufacturing and R&D facilities, and are going for certification in the highly
regulatedmarkets(Shawon,2011).OverallPharmaceuticalstradeinformationof
Bangladeshispresentedinappendix.
Weexpecttheexportgrowthtopickupfrom2012onwardsgiventhattheworldtrade
islikelytorecoverfromthesovereigndebtcrisis.However,thegrowthrateislikely
to peakfour/fiveyears from now. Mostofthetop pharmaceutical companies are
gearingupfortheexportmarketasmostofthemhavebeenestablishingGMP(Good
ManufacturingPractice)complianceplants.Someofthetopcompanieshavealready
receivedUKMHRACertificate(SquarePharmaceuticalsbeingthefirstcompanyto
dosoin2007)whilemostofthemarewaitingforUSFDAapproval.Apartfrom
Local Investment and Foreign Direct Investment of Bangladesh in
Pharmaceutical Industry

15

thesetwomajorGMPcertificates,mostofthetopcompanieshavealreadyreceived
GMP clearance from a number of countries, including Turkey, Yemen, Kenya,
Congo, Uganda, Sudan, Ethiopia, etc. Once the growth in the domestic market
becomessteady,companiesarelikelytofocusheavilyintheexportmarket.Earlier,
weforecasteddomesticmarkettogrowataround15%annuallyoverthenextfive
years.Topcompaniescaneasilyachievemorethan15%growthbyattaininghigher
export sales. Going beyond 2016, export is likely to be the major driver behind
companystoplinegrowth(Saad,2012).
The pharmaceutical companies are presently on the verge of entering highly
controlledmarketssuchasAustralia,USA,EUandGCCcountries,andhavealready
acquiredauthorizationfromUSFDA,UKMHRA,GCCandTGA.Apartfromexports,
thereisaprodigiousopportunityforcontractmanufacturingaswellascompulsory
licensingwithintheLDCsoftheAsiaPacificaswellasAfricaregions.
ThepharmaceuticalmarketofBangladeshisgrowingataquickpaceandcertainly
has a bright future. As per the latest report of Business Monitor International,
Bangladeshhastakenastepaheadtooccupythe14thplacein17regionalmarketsas
perthesurveyofBMIsPharmaceutical&HealthcareBusinessEnvironmentratings
forAsia.Bangladeshhasalongwaytogo,eventhoughthereisasignificantscopein
pharmaceuticalmanufacturingandinternationalmarketing.
ThepharmaceuticalsectorofBangladeshasanopportunitytoinstituteitselfasahigh
volumeexportorientedindustrythatissimilartotheRMGsector(Rahman2012).

ForeignDirectInvestmentinBangladesh:
Foreigndirectinvestment(FDI)isadirectinvestmentintoproductionorbusinessina
countrybyanindividualorcompanyinanothercountry,eitherbybuyingacompany
in the target country or by expanding operations of an existing business in that
country.Foreigndirectinvestmentisincontrasttoportfolioinvestment,whichisa
passive investment in the securities of another country such as stocks and bonds
(Foreigndirectinvestment).

Local Investment and Foreign Direct Investment of Bangladesh in

Pharmaceutical Industry

16

Bangladeshisintheprocessoftransitionfromapredominantlyagriculturaleconomy
toamoderneconomytherehasbeenaconsiderablechangeinglobalflowsoftrade
andfinanceincludingasurgeinFDI.Despitebeingarecentphenomenon,several
underlying factors have contributed to increasing the FDI inflow in Bangladesh.
These are trade and exchange rate liberalization, current account convertibility,
emphasisonaprivatesectorleddevelopment,liberalizationoftheinvestmentregime,
openingupofinfrastructureandservicestotheprivatesectorbothdomesticand
foreign, and above all, the growing interest of foreign investors in energy and
telecommunicationsectors.
Itisarguedthatmoreopentradepoliciesareassociatedwiththepresenceofforeign
firmsandeconomywidetechnologicalandproductivitygainsindevelopingcountries
likeBangladesh.Theprivatesectorisenvisagedtoplayanincreasinglyactiverole
withpublicsectordevelopmentprogrammers concentratingonbasicinfrastructure
and humanresource development.Inrecognition oftheprivate sectors abilityto
contributetowardsachievementofthegoalofsocioeconomicimprovementofits
people,thegovernmenthasrecentlyimplementedpolicyreformstocreateamore
openandcompetitiveclimateforbothforeignandlocalinvestment(Billah,2012).

ForeignDirectInvestmentinPharmaceuticalIndustryofBangladesh:

The pharmaceutical sector of Bangladesh is highly developed and significantly

contributestotheoveralleconomyofthecountry.Followingtheannouncementofthe
1982DrugControlOrdinance,therewasanaccelerationofthisdevelopmentsector.
The expert knowledge combined with the pioneering conceptual skills played an
importantroleintheoveralldevelopmentofthesector.

PotentialinthePharmaceuticalIndustry:
BangladeshasaPotentialDestinationforFDI:
TheIndustrialPolicy1991anditsrecentlyannouncedamendments,theassociated
reforms in trade policies and fiscal and taxation policies now augur well for
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17

investmentbytheforeignnationalsandcompaniesandalsononresidentBangladeshi
nationals.Noapprovalisrequiredforanyinvestmentbytheforeigninvestorsinany
sectorsoftheeconomyexceptforafewareas(strategicones),whicharestillreserved
for public investment only. The foreign investment (promotion &protection) Act,
1980 guarantees protection to foreign investment against nationalization and also
guaranteesequitabletreatment.BangladeshisasignatoryofMultilateralInvestment
GuaranteeAgency(MIGA)oftheWorldBankgroup,OverseasPrivateInvestment
Corporation(OPIC)andInternationalCenterforSettlementofInvestmentDisputes
(ISCID)andthereforeguaranteesinvestorsprotectionagainstpoliticalandotherrisks.
FollowingfacilitiesarealsoavailableforforeignersandnonresidentBangladeshis
(ForeignDirectInvestmentinBangladesh,2011).

Table7:Marketshareofforeigncompaniesin2004(Source:AristoPharmaceuticalsLimited)

Intheabovetable,wecanseethatfiveforeigncompanieswereinthetoplistinthe
pharmaceutical industry in 2004 but in todays world, the local companies like
Beximco,SquarePharmaceuticaletc.areontopofthelistandtheyareengagedin
export/importmostlythanFDI.InBangladesh,theamountofFDIinvestmenthas
beenreducedsince20042005butthissectorhasgoodpotentialofattractingnewFDI
investmentsbutthissectorisnowengagedinexportingmoreandtheyhaveastrong
growthinthissectorasmentionedearlier.

ReasonsforthediscontinuationofFDIinPharmaceuticalIndustry:
1. MostofthecompaniesthatareengagedinFDI,mainlyinvestinGarment
Industryastheyhaveattractedthehighestnumberofjointventuresand100%
Local Investment and Foreign Direct Investment of Bangladesh in
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18

foreignownership.ThentheforeigninvestorsfavoredTelecommunications,
Cement, Hotels, and Restaurants industry, as they need help from foreign
countries like Infrastructures, Technology etc. whereas, Pharmaceutical
industrydidnothaveFDIafter20042005.
2. Therearesomanylocalcompaniescompetingintheindustry,andtogether
theyhaveapprox.77.1%marketshareofthetotalindustry.Besides,even
though it is a tiny industry butit is one ofthe most developed industries
currentlyBangladeshhas.ThatisoneofthereasonsforreductionofFDIin
theindustry.
3. Thepharmaceuticalcompaniesaremoreindulgedinexportimport,ratherthan
having new FDI in Bangladesh. The export value of pharmaceuticals is
growingatareasonablerateeveryyear.Exportsincreasedfrom$8.2million
in2004to$28.3millionin2007andpostedfurthergainslastyear.Export
destinationsarealsoincreasinginnumber.
4. Agoodnumberoflocalpharmaceuticalcompanies havewonaccreditation
from the overseas regulatory authorities including some of those in the
developed countries. EMEA (Austria) and the Therapeutic Goods
Administration(TGAAustralia)haveaccreditedtwosuchlocalcompanies.
Theaccreditationfacilitatestheirentryintothelucrativemarketasreputed
players.Bangladesh'snationaldrugpolicyrequiresstrictstandardscompliance
fromthepharmaceuticalmanufacturers.
5. Bangladeshi pharmaceutical industries are expanding their exportable items.
The country is now exporting a reasonably wide range of pharmaceutical
products covering therapeutic classes and dosage forms like tablets, capsules,
and syrups. Bangladesh also exports some high-tech specialized products like,
HFA,

inhalers,

suppositories,

hormones,

steroids,

oncology,

immunosuppressant products, nasal sprays, injectible and IV infusions. The

sector stands on a sound footing due to the growing demand of medicines for
the country's 150 million people. The industry, producing quality medicines at
an affordable price for millions of people, has made Bangladesh almost selfreliant in pharmaceutical products. It meets the major part of local demand for
medicines.

Local Investment and Foreign Direct Investment of Bangladesh in

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Thus,thesearereasonsforthediscontinuationofFDIinPharmaceuticalindustryof
Bangladesh. However, it is not creating any hampers to the industry; rather it is
makingitmorestrongindustrywiththehelpofTRIPS.
Drugexportscansubstantiallyincreaseifthepharmaceuticalsectorofourcountryis
allowed to invest in overseas markets, as per the Bangladesh Association of
PharmaceuticalsIndustry(BAPI).
Through investment in foreign countries, the local companies can begin joint
ventures,makeprocurementsorevenestablishitsownsubsidiary,allowinginstant
diffusiontooverseasmarkets,asoutlinedbytheBAPIorganizedseminar.
BAPI advisor Nazmul Hasan stated in his welcome address at the seminar on
SaturdaynamedPharmaVision2015:Thecountryspharmaceuticalindustryhas
thepotentialtobeoneofthelargestexportsectorsofBangladesh,ifthebarriersare
removed.
Asperhisspeech,thedrugproducersofBangladesharefacingproblemsregarding
productregistrationaswellaspromotioninforeignmarkets.
Hasan,thetopofficialofBeximcoPharmaceuticals,stated:Weareprobablythe
onlyindustryinthiscountry,whichisfacingobstaclestoexport.
Outofthe$808billionglobalpharmaceuticalmarketin2009,Bangladeshcouldonly
grabasliceof$47million.

Constraints and opportunities that TRIPS patent rules present for

Bangladesh:
The Fourth World Trade Organization (WTO) Ministerial Conference 2001 adopted a
declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS). This
has provided the minimum standards for the protection of intellectual property,
including patents for pharmaceuticals. Although TRIPS increases the level of
protection for patent holders of pharmaceutical sector for their investment, it is
evading the people's access to medicine. The implementation of TRIPS is expected to
have a further upward effect on drug prices due to increased investment in research
and development (R&D), commercialization of drugs' expenditure etc.
Local Investment and Foreign Direct Investment of Bangladesh in
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TRIPS can affect the access to medicine in multiple ways. The most expected affect is
direct because of increased prices of all types of medicines. There are basically two
types of patent rights:

Those that protect methods of manufacture (process patent) and

Those that protect pharmaceutical products (product patent).

In both cases, pharmaceutical firms are bound to pay a heavy portion to the patentholders when TRIPS will be fully implemented. As a result, their production cost will
rise and they try to recover their increased production cost only through increasing the
prices of medicines.
The present R&D infrastructure and the technology of Bangladesh pharmaceutical
industry isnot developed like developed countries. Moreover, the opportunities and
the availability of fund for research are also insufficient. There is little possibility that
fund and opportunities for research as well as infrastructural developments will come
up to the world standard by January 2016. The present situation is not suitable for
Bangladesh to implement the TRIPS. This will put a barrier to its economic and
industrial development. Moreover, the generic pharmaceutical producers of
Bangladesh will be prohibited from producing generic medicines. That is likely to
lead to an adverse impact on the country's pharmaceutical sector. This may lead to
shutting down of its 60-70% pharmaceutical companies. As a consequence, the price
of medicines will increase and it will be difficult for the country's 76.5 per cent of the
population to have access to the medicines(Pavel, 2012).
While the better products resulting from innovation are clearly a benefit for society
but at some point investment in innovation will not be as socially valuable as other
investment. At some level of patent protection investment in innovation will become
excessive and it is difficult to know how much innovation is excessive. Thats why
while high level of intellectual property protection may encourage innovation at first
instance; the protection granted to an innovator will act as a barrier to those seeking to
develop innovations which build on his/ her innovations as well as encouraging
wasteful investment in the development of substitute technology by those who try to
compete with innovator. So this is a possible constraint of TRIPS for Bangladesh.
So there are likely to be few benefits and significant cost of putting TRIPS for
pharmaceuticals products in advance of the 2016 deadline. The local industry will be
Local Investment and Foreign Direct Investment of Bangladesh in
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21

precluded from importing generic drugs and materials for drugs, which are the subject
of patent in Bangladesh. Here licensing agreement can be negotiated with proprietary
drug manufactures for permission of continuous drug importation but our local
industry does not have the technical capacity to use a compulsory license to produce a
generic drug from scratch. Compulsory licensing will be beneficial only if a cheap
source of foreign supply can be found.

Presented below is a table of strategic issues affecting prospects of domestic

pharmaceuticals industry prior to 2016:
Issue

Trips Challenge

Possible solution

Stability of the
supply
of
therapeutic
ingredients to BD
pharmaceutical
industry

WTO member with 1. WTO adopts

strong
generic
amendment or
industry that supply
agreed
BD must give full
understanding
patent protection by
of TRIPS to
2005reducing
permit export
availability
and
of therapeutic
increasing price of
ingredients to
therapeutic ingredients
BD to promote
to BD industry
health without
consent
of
patent owner.

Matters related to
solutions
1. Stability
of
supply depends
on
less
restriction on
ability
of
existing
supplier state to
grant
compulsory
license
to
export to BD
and
low
compulsory
license fee.

2. Develop BDs
capacity
to
produce
2. Need
therapeutic
investments as
ingredients
well
as
Local Investment and Foreign Direct Investment of Bangladesh in
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22

through local
and
foreign
investment.

technical
support.

Demand
for Patent
protection
generic
required in export
pharmaceutical
market
products produced
Developing
by BD
countries and
transition
economies
(2005)

Export to (a) non Low

demand
WTO
members resulting
from
that do not grant weak public and
patent protection private spending
or (b) members and
keep
that do not grant discounting
by
patent protection patent holders may
for
relevant reduce
export
products or have market potential.
LDCs (2016) issued compulsory
license to import
from BD.
So the extension to 2016 of the deadline for LDCs to grant patent protection for
pharmaceutical products and the impending requirements for developing countries to
grant protection by 2005 opens a limited and uncertain window of opportunity for the
domestic pharmaceutical industry in BD (Vanduzer, 2003).

Conclusion:
The pharmaceutical industry of BD is complex indeed. The technologies leading to
drug discovery and development are at the limits of human knowledge. The huge size
of companies and the complexities of their process and technologies present many
organizational and management challenge. But excellence in managing all these
challenges is a necessary condition for BD to survive in pharmaceutical industry.
Despite of these challenges BD pharmaceutical industry is growing at an expected
rate with the development of health care infrastructure and increase of health
awareness and the purchasing capacity of people. The per capita consumption rate of
medicine in BD is one of the lowest in the world (Habib & Alam, 2011). But still
pharmaceutical industry is considered as a key contributor toward economic
development because of its potential and current contribution. Healthy growth is
likely to encourage pharmaceutical company to introduce new drugs and new
researches products while maintain a healthy competition in area of essential drugs.

Local Investment and Foreign Direct Investment of Bangladesh in

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23

Bibliography
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Bangladesh: Towards A National Strategy. Retrieved August 6, 2013,
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National Strategy: http://cpd.org.bd/pub_attach/OP24.pdf
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Pharmaceutical Industry

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Foreign direct investment. (n.d.). Retrieved August 1, 2013, from

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Appendix:

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Pharmaceutical Industry

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Figure1:PharmaceuticalExport/Imports(Source:WorldTradeOrganization)

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27