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Uzbekistan Pharmaceuticals and Healthcare Report Q2 2010
Business Monitor International, Feb 2010, Pages: 50
Business Monitor International's Uzbekistan Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Uzbekistan's pharmaceuticals and healthcare industry.
Uzbekistan retains its position as both one of the most promising and risky pharmaceutical markets in Central and Eastern Europe (CEE) and the Commonwealth of the Independent States (CIS). BMI continues to forecast that the market will grow by a compound annual growth rate (CAGR) of 10.24% between 2009 and 2014, reaching a value of US$516mn by 2014. Some of this growth will come from increased state spending on healthcare, but BMI believe the bulk will be driven by out-of-pocket spending and the growing economy, as BMI remains highly sceptical of the effectiveness and consistency of state programmes in the sector. Indeed, it is important to note that predicted growth rates are very much a product of growth from a low base, with per-capita spending levels at a mere US$11.51 in 2009. For now, the country’s risk levels remain unacceptably high for most potential foreign investors in the pharmaceutical sector. The market lacks transparency and the authoritarian government is publicly committed to import substitution. The latter trend has led the dominant state holding, Uzpharmsanoat, to pursue foreign partnerships as well as a widely publicised green-field project by Singapore’s Beacons Pharmaceuticals. Sources point to the country’s relatively low labour costs compared with neighbouring Kazakhstan and similar unofficial ‘costs’ of doing business. However, Kazakhstan and Russia offer a greater degree of political stability and lower levels of political risk as well as better infrastructure. Uzbekistan’s sheer poverty and potential for violent instability when the current president leaves the scene are major disincentives.
The country’s 2010 budget foresees GDP growth of 8.3% in local currency terms, with UZS1.7trn (US$1.06bn) or 2.8% of the overall budget directed to healthcare, a 30% year-on-year (y-o-y) increase over 2009. The president has decreed that maternal health is to be a focus of the 2010 State Programme. In late October 2009, Abdulla Oripov, the deputy prime minister responsible for overseeing the telecommunications sector, had healthcare, social security and education added to his responsibilities Meanwhile, in November, Health Minister Adham Ikromov told a local newspaper that the country has a ‘world-class’ healthcare system, citing ‘large-scale reforms’ and the opening of mother-child screening centres across the country. Few outside of government believe such rhetoric, but there is evidence at least of sustained investment in the country’s ageing healthcare sector.
In the production sector, the government’s focus is to see local production by foreign and local players. In addition to the US$10mn plant by Beacons and a joint-venture between Uzpharmsanoat and a Hungarian investor to build a vaccine plant, privately-owned local player Jurabek Laboratories announced it will build a new line for infusion solutions for both domestic sale and export with the aid of a US$5mn loan from the European Bank of Reconstruction and Development (EBRD). Cleary, there is scope for investment and a fast-growing marketplace for virtually any product. At the same time, with Uzbekistan finishing 19th out of 20 countries in this quarter’s Business Environment Ratings, it is difficult to overstate the challenges presented to outside investors.
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