CENTRAL Asia is an emerging market for Pakistani exports with rising demand for many medicinal and related products. Generic compounds, finished pharmaceutical items as well as medical devices and healthcare products are some of them.
Pakistan’s pharmaceutical industry has in the past decade become evenly split between local and multinational companies in terms of the market share, even though out of the total 400 manufacturing units only 25 or so are multinationals.
The products of domestic pharmaceutical companies are much cheaper than those of multinationals and this price advantage is being leveraged by some of them to export medicines to Afghanistan and other Central Asian countries.
Exports of multinationals are mostly in the area of value-added generic compounds. But local companies export a vast range of medicines used in common ailments. Quite a few of them are also engaged in exports of herbal medicinal formulas, vitality boosting compounds, beauty-enhancing lotions and creams, etc.
Kazakhstan is the largest Central Asian economy and its annual imports of pharma products stood around $800 million in 2010 which are expected to expand to $900 million this year. Out of Pakistan’s total pharma exports of $140 million in the last fiscal year not more than $8 million came from the Central Asian region. That is equal to just one per cent of the total pharma imports of Kazakhstan alone. If we also take into account pharma markets of Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, our pharma export to the Central Asia would look negligible.
In all the Central Asian states in general and Kazakhstan in particular, the pharma market is subdivided into three broad categories: pharmaceuticals, healthcare and medical devices. In addition to imports of pharmaceutical products, Kazakhstan spends hundreds of millions of dollars on imports of healthcare products and medical devices.
But the problem is that exports of our herbal compounds, categorised as healthcare product, to Kazakhstan and to most other parts of the Central Asia, are least documented and the bulk of their proceeds do not come through official channels.
Similarly, a vast range of surgical appliances, instruments, and machinery/equipment used in hospitals that we export to the Central Asia, are categorised there as imports of medical devices but on our side the same are treated as exports of surgical instruments. Some unscrupulous exporters use this for under-invoicing of exports and sometimes for total mis-declaration or even for routing export proceeds through illegal means.
But at least a part of whatever we earn through exports of “medical devices” to the Central Asian region is categorised as exports of surgical instruments and the country gets back the export proceeds, though under a different heading.
Since large parts of the Central Asia experiences extreme cold during winter, people there are always in search of tonics for beating cold. Some Chinese herbal power pills and food supplements have particularly caught their attention for the same reasons—boosting vitality and beating fatigue. One Pakistani brand of this classification, a product of a Karachi-based pharmaceutical company has become so popular there that it is sold not only at medical stores but also at grocery shops.
One of the factors that impedes export growth of pharma products in the Central Asia and elsewhere in the world is that Pakistani companies generally take local regulations of importing countries lightly. In most pharma importing countries, including those in the Central Asian region, regulating agencies require the importers to furnish full details(formula) of the products being imported along with the details of the manufacturing companies.
In many cases, Pakistani pharma exporters either refused to furnish part of the required information or got exhausted by rigorous processes involved in verification of such information in pharma importing countries. Central Asian countries were no exception.
The absence of banking facilities between Pakistan and the Central Asian nations hampers the growth of bilateral trade. Demand for Islamic banking is growing in the Central Asia. Our conventional banks with dedicated Islamic windows and Islamic banks can explore the opportunity of opening branches there.
Transporting merchandise to Central Asian states via Afghanistan poses greater risks because our land-locked neighbour is in constant state of war over past several years. And air transportation is prohibitively high.
The writer is a Lahore-based businessman with trade links in Central Asia