BMI View: Bangladesh ' s pharmaceutical and healthcare sector growth will continue to stand on robust long-term fundamentals, including population growth, rising inc omes, urbanisation and economic expansion. Moreover, the country ' s efforts to increase drug manufacturing capacity both for domestic supply and drug exports will be sustained in the years ahead. This favourable outlook is reflected in UK-drugmaker GlaxoSmithKline expected strategies to strengthen its presence in the country. However, current political tensions in Bangladesh are set to weigh on the country ' s full potential, increasing economic risks and business environment uncertainty over the coming quarters.
Headline Expenditure Projections
Pharmaceuticals: BDT154.24bn (USD1.99bn) in 2014 to BDT171.31bn (USD2.17bn) in 2015; +11.07% in local currency terms and +9.03% in US dollar terms. Forecast in line with last quarter.
Healthcare: BDT437.55bn (USD5.64bn) in 2014 to BDT492.57bn (USD6.24bn) in 2015; +12.6% in local currency terms and +10.5% in US dollar terms. Forecast revised upwards from last quarter.
Risk/Reward Index: In Q315, we have downgraded Bangladesh RRI score to 41.8 (out of 100) from 43.0 in the last quarter, based on lower market value growth indices. However, Bangladesh retains its ranking position in our RRI matrix, standing as the 15th most attractive market to pharmaceutical investors out of 19 markets in the Asia Pacific region. Bangladesh's score is driven by a large pharmaceutical market (market expenditure score of 10.0 out of 20) and rapid drug market expansion (sector value growth score of 8.4 out of 12), but dragged down by low levels of drug spending per capita (spending per capita score of 1.2 out of 12) and limited intellectual property protection (patent respect score of 1.4 out of 7).
Key Trends And Developments
Bangladesh currently exports drugs to 107 countries, including Germany, the US, France, Italy, the UK, Canada, the Netherlands and Denmark, according to Bangladesh's Commerce Minister Tofail Ahmed. The government has taken various pragmatic steps to turn the growing pharmaceutical sector into a major export-earning sector, said Ahmed (reports Dhaka Tribune). Although the country has a BDT90bn (USD1.17bn) pharmaceutical market, 90% of the raw materials are imported, which highlights Bangladesh's need to develop a stronger raw materials manufacturing base over the near term in order to prevent imports price risks.
UK-based drugmaker GlaxoSmithKline is keen to strengthen its presence in Bangladesh to ensure improved and wider access to healthcare for the country's population, according to company vice-president Ramil Burden. The company is currently reviewing its long-term strategy and its manufacturing strategy in Bangladesh. GlaxoSmithKline has a 30% market share in the respiratory disease-related drugs segment and 3% in the overall pharmaceutical market in Bangladesh (The Daily Star).
The Bangladesh Demographic and Health Survey (BDHS) 2014 revealed that the Bangladeshi health sector is unlikely to meet the desired health, population and nutrition segment targets by 2016. Only eight out of the 18 indicators show significant progress and two others are on track. The remaining eight indicators, which include total fertility rate, contraceptive prevalence rate, antenatal care coverage, postnatal care within 48 hours, and neonatal mortality rate, need attention. The Health Minister Mohammad Nasim noted that the unwillingness of health staff and doctors to serve in rural areas is a major reason for failure to ensure proper health services (Dhaka Tribune).
Least developed country member states, including Bangladesh, proposed extending the deadline for protecting and enforcing pharmaceutical patents and clinical data at the World Trade Organization (WTO) intellectual property council meeting. It is unlikely that the other WTO member countries will agree to the proposal for an open-ended transition period for full implementation of the TRIPS Agreement, but another finite deadline extension is likely. The continually updated extensions highlight the difficult path between protecting intellectual property and preserving access to medicines. Ultimately, other free trade agreements may make TRIPS redundant before the issue is resolved.
BMI Economic View: We have downgraded Bangladesh's real GDP growth forecast for FY2014/15 (July-June) to 5.6% (versus 6.0% previously) as the political and social unrest, which began in early January, is disrupting business operations in the country and will weigh heavily on investment and exports.
BMI Political View: The opposition Bangladesh Nationalist Party (BNP)'s sudden boycott of mayoral elections in North and South Dhaka and Chittagong on late April 2015 will worsen the country's ongoing political crisis, posing downside risks to economic activity. A military coup is unlikely, unless the state nears collapse.