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Uzbekistan Pharmaceuticals and Healthcare Report Q1 2011
Business Monitor International, Nov 2010, Pages: 52
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 pharmaceutical market remains positive – we expect the market to see a fiveyear compound annual growth rate (CAGR) of 8.36% in US dollar terms between 2009 and 2014, reaching a total value of UZS891.4bn (US$474mn) by the end of the forecast period. According to BMI’s economic forecast, the economy is expected to grow at a steady 8% rate to the end of the decade as energy and mining projects come online and as recent foreign direct investment (FDI) deals are agreed, such as the cooperation deal between Uzbekneftegaz and China's Alcatel-Lucent Shanghai Bell. Transit fees from the new Trans- Eurasian Pipeline will also boost the country’s growth.
Uzbekistan’s pharmaceutical industry has enormous growth potential. Expenditure per capita on medicines was tiny in 2009, at just US$11.3, but the economy and population are growing. However, investors face huge challenges. In recent months – according to media accounts – a court judgment nationalised the Tashkent factory of Russian dairy giant Wimm-Bill-Dann. The Russian company had invested substantially in the once bankrupt facility in recent years, which is now reportedly shuttered for its alleged failure to abide by investment commitments. The company has vowed to pursue the case in the higher courts. We believe that the seizure of a factory belonging to a Russian blue-chip company is a deeply worrying development and reflects the challenges facing even the savviest investors. We also expect the situation to deteriorate as factions jockey for position in anticipation of the eventual departure of President Islam Karimov from the scene. We continue to view Uzbekistan as one of the most challenging places to do business in Central or Eastern Europe (CEE), as reflected in our Business Environment Ratings (BER) for Q111.
Investors seeking a manufacturing presence have generally pursued joint venture (JV) deals with domestic manufacturing holding Uzpharmsanoat, which accounts for 90% of production, in order to provide a measure of protection to their investments. For now, the government is committed to attracting outside investment, even as it pursues an explicit import-substitution policy. In a recent speech, President Karimov identified pharmaceuticals as a key sector in the government’s industrial development programme for 2011 to 2015 – a programme with a total stated budget of US$40bn. This should ensure continued funding and keep senior officials from meddling in any foreign-owned projects, at least for now.
The latest JV deal was announced in October, and involves German investment in a new plant to produce a variety of generic products in the Tashkent region – UzGerMed Pharm. Meanwhile, the largest deal in the pipeline is a Good Manufacturing Practice (GMP)-compliant vaccines factory being built with the participation of Hungary’s Omninvest, announced at the beginning of 2010. In July, local media reported that Korean Trust Investment Trading was building a US$4mn pharmaceutical packaging factory as part of a 50-50 joint venture with Uzpharmsanoat, due to open by the end of 2010 in the Navoi Free Industrial-Economic Zone (NFIEZ). Japan’s Overseas Medical Equipment Technical Assistance (OMETA) is reportedly eyeing the same region to develop medical equipment production. These companies see the country’s almost untapped market potential. It is up to the regime to prove, contrary to recent trends, that it will respect property rights and guarantee that investments representing millions of dollars in FDI will not be squandered.
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