The pharmaceutical sector in South East Asian (SEA) region holds vast potential for growth and of late is making rapid progress as some of the nations in the region like Malaysia are providing encouraging policies and liberalised regulatory procedures for pharma investors and entrepreneurs. Indian companies are optimistic of the export prospects in the coming days with a uniform regulatory regime across SEA region.
However India’s presence in South East Asian region is yet to catch up compared to its success in Europe and America. Though some of country’s leading pharma giants like Dr. Reddy’s, Cipla and Ranbaxy has made a mark in the region, it is meagre compared to exports to the US and EU. As per the figures in 2011, more than 55 per cent of India’s Rs 63,000 crore exports were to the US and Europe with the US alone having 25 per cent share. The US is by far the fastest growing market for India.
In spite of close proximity and comparatively liberal regulations, India has let itself behind in sufficiently tapping the full export potentials of SEA markets. “During the CPhI SEA 2012 we have highlighted India’s production capacity and quality. The demand for traditional medicines is high in some of the SEA countries. As India is having the maximum number of USFDA approved manufacturing units and well qualified talent pool, the industry can make use of its capabilities to tap the upcoming business opportunities in the region,” opined Dr. P.V. Appaji, DG Pharmexcil.
According to latest records, Vietnam is the biggest importer of pharmaceutical products from India followed by Philippines and Myanmar. Apart from these three leading importers, there are also other countries in the region which are importing various pharma, Ayush and other related products from India.
In fact, SEA region constitutes the countries that are geographically south of China, east of India, west of New Guinea and north of Australia. The region lies on the intersection of geological plates, with heavy seismic and volcanic activity. Southeast Asia consists of two geographic regions, mainland Southeast Asia, also known as Indochina, which comprises Cambodia, Laos, Burma(Myanmar), Thailand, Vietnam and Peninsular Malaysia and Maritime Southeast Asia comprises Brunei, East Malaysia, East Timor, Indonesia, Philippines, Christmas Island, and Singapore. All of the countries excluding East Timor are members of the ASEAN (Association of South East Asian Nations).
As living standards in ASEAN countries are rapidly improving, people are becoming more health conscious and the demand for healthcare products is increasing rapidly. In Indonesia, GDP per capita has doubled in the past five years and mid-income population is expected to double to 52 million by 2015. Indonesia and Southeast Asia represents great opportunities for companies in the pharmaceutical industry.
With its fast-growing, young population and projected pharmaceutical sales in excess of $20 billion in 2014, countries in the Association of South East Asian Nations (ASEAN) represent a great opportunity for Pharma. However, with regional marketing practices, uncertain production values of locally manufactured generics and a huge diversity in healthcare delivery across the nations of varying income levels, there are also great challenges. Despite the disadvantages the multinationals face, major pharmaceutical companies are rushing into the region, focusing on revenue from new chemical entities and developing ‘branded’ generics as key investments.
The revisions to government policies, business strategies as well as shifts in consumer trends are changing market dynamics. The evolving and diverse regulatory landscapes across the region are complex and also pose unique and varied challenges. It is now crucial for the pharmaceutical industry across the entire value chain to keep abreast with the latest frameworks and initiatives led by governments and industry in the region.
Latest statistics from research shows that the industry is projected to have a combined market value of US $ 80 billion by 2017. With the ASEAN Harmonisation 2015 underway, wide spread changes and explosive growth are expected for the regional pharmaceutical industry.
“In South East Asia, Vietnam, Myanmar and Philippines are emerging as leading importers of pharma products from India. One or two months back we had sent our delegation to SEA region. Overall response is good but we could not make much progress with Indonesia. Every country in the region has a different set of regulatory process, so it becomes difficult for the Indian exporters to comply with them. Hopefully we are expecting a uniform regulatory regime very soon and this would definitely help Indian exporters to explore more from the region,” said Dr. P.V. Appaji.
Though Indian exports to South East Asia are lesser when compared to US and EU, it is slowly picking up. As more and more SEA countries are opening up their markets for Indian entrepreneurs to set up manufacturing units, the scope for improving exports is huge.
For instance Malaysia is fast emerging as a major manufacturing hub for Indian pharmaceutical companies, especially for exports to South-East Asian countries. Malaysia is seen as a cost-competitive country. It is luring Indian companies with a 10-year tax holiday, duty exemptions, customised incentives for large investments, access to ASEAN markets through free-trade agreements and no restrictions on equity. Such incentives, and the reliable infrastructure there, have encouraged Indian drug makers to make the move, at a time when emerging markets hold the promise of growth. Ranbaxy, Cipla, Dr Reddy’s Labs, Biocon and Strides Arcolab have already started operations there, while others may follow soon.
Indian pharma exports to Malaysia for the year 2010-11 was to the tune of Rs.116.95 crores. As Malaysia is emerging as world’s leading producer of medical disposable products and fast developing as a major manufacturer of hospital equipment, diagnostics and laboratory fittings, it offers many more opportunities for the Indian players in the coming days.
Currently Malaysian pharma market pegged at around $3 billion is growing at 10-12 per cent annually. Investments from Indian pharma and biotech companies in Malaysia are estimated to be over $1 billion. There are over 100 Indian companies, including 61 Indian joint ventures, operating in Malaysia. On the other hand Malaysian investment in India is estimated to be $ 7.8 billion.
The role of promontory events like CPhI and other global forums play a significant role in pushing the growth of pharma sector across the globe. The upcoming CPhI Southeast Asian Pharmaceutical Summit 2013 in Jakarta is one of the best platforms for Indian companies and entrepreneurs to explore and analyse the available opportunities for doing business with the SEA nations.
In fact global forums like CPhIs bring together key policy- makers, industry leaders and business decision makers. The summit is dedicated to give the latest market insights, in-depth dialogues from global and local practitioners, and exceptional networking opportunities through a programme of high-level participants.
When asked about Pharmexcil’s participation in the upcoming CPhI SEA 2013, Dr. Appaji replied that they had already participated in one event during April 2012 and as this event is falling under the same financial year, they have dropped the plan and are focusing on the upcoming IPHEX 2013 event in Mumbai.
Indian cos in Malaysia
Ranbaxy, one of the early entrants in Malaysia with a drug manufacturing facility through subsidiary Ranbaxy Malaysia Sdn Bhd, is now working on a second unit. The company recently announced approval for setting up its second plant in the country with an investment of $40 million (Rs 220 crore).
Biocon and Strides Arcolabs have also announced investment plans in Malaysia in the past six months. Biocon is setting up its first overseas facility in Malaysia, while Strides entered into an agreement with Bio-XCell of Malaysia in 2011 to build a facility to manufacture biopharmaceuticals and sterile injectibles. Biocon claims that its proposed facility in Malaysia will be Asia’s largest integrated insulin production unit.