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Published: 05 August 2018

Withdrawal of FDI by GSK from Bangladesh

M S Siddiqui

The pharmaceutical industries are one of the most promising sectors in Bangladesh. The sector has been
flourished after The Drug (Control) Ordinance in 1982 has been promulgated by one of the Military
Dictators. Bangladesh is now exporting medicine to more than 100 countries after meeting 97 percent of
local demands.

Moreover, As LDC country Bangladesh is exempted from patent free production rights up to 2033 but the
time limit will be shortened to 2026 after graduation to developing country by 2024 for both domestic
market and limited export market.

Global data suggest Bangladesh's pharmaceutical sector can grow at 15 percent for the next five years
with its growing domestic market that can meet 98 percent of the local demand and export to 127
countries. It can further advancement in this sector.

Unfortunately despite all facilities in local and overseas market for operating in Bangladesh, the Board of
Directors of GlaxoSmithKline (GSK) has decided to withdraw from Bangladesh market by end of this
month. There is a formality of approval of decision at the annual general meeting of shareholders. They
are one of the oldest medicine companies in Bangladesh and serving this market for last for last six
decades.

In the global market the top 10 best pharmaceutical companies are: (1) Pfizer (2) Novartis (3) Hoffmann-
La Roche (4) Johnson & Johnson (5) Merck & Co (6) GlaxoSmithKline (7) Sanofi (8) Eli Lilly (9)
AstraZeneca (10) Abbott Laboratories. These ten largest companies commanded 25 percent of the global
market. But their investment for research and development (R&D) is over 50 percent.
The R& D team comprises of highly qualified and trained technical personnel continuously striving for
product and process innovation and up gradation. GSK - one of those world's leading research-based
pharmaceutical and healthcare companies and committed to improving the quality of human life by
enabling people to do more, feel better and live longer.

It is only pharmaceutical company having plant in Bangladesh out of those top 10 big companies. Other
nice companies exporting their products but don't invest in Bangladesh.

GSK, the London-based giant makes vaccine solutions for Hepatitis A and B, Cervical Cancer,
Chickenpox, Measles, Mumps and Rubella, Rotaviral diarrhoea, Pneumonia etc. Its portfolio includes
leading brands like Engerix, Rotarix, Cervarix and Synorix.

The company also manufactures antibiotics, medicines for respiratory diseases and dermatological items.
Ventolin Evohaler is a well-accepted treatment in Bangladesh. In anti-histaminic market, Piriton is still
one of the top preferences.

It said in a statement on 26 July 2018 that GSK Vaccines, which are purchased via the UN's wing for
children UNICEF and funded by Gavi, the Vaccine Alliance, will continue to be available in Bangladesh.

GSK is a public listed company since 1976 and according to the Dhaka Stock Exchange, sponsor-
directors hold 81.98 percent share of the company, institutional investors 15.93 percent, foreign investors
0.91 percent and small investors 1.18 percent.

The state-run Investment Corporation of Bangladesh owns 12 percent stake in the company, while 6
percent of the shares are held by public and different institutions.The board of Director of GSK told the
media that the market is unsustainable for them and struggling to maintain its global standard at the
factory.

But the argument of "unsustainable" market comes as a surprise as Bangladesh is known to be a perfect
market for drug sellers with its 160 million populations, increasing purchasing power, a shift of diseases
from acute to chronic and rising ageing population.

It is said that their products are (very) old and cheap. We could not fill up the portfolio gap and don't have
any drugs in the pipeline to fill up that gap. For example, he said, GSK's new shingles vaccine - a priority
product - won most of the US market share soon after its launch.

"But this vaccine is not running in Bangladesh. It's not appropriate for Bangladesh market.""We could not
introduce products which are appropriate to Bangladesh market. "It's mismatched. We could not fill up the
gap," The Chairman of Board added. They are facing difficulties in procuring raw materials.

They will complete the entire process of operations closure by December this year, but a mechanism will
remain in place until the expiry date of their last product in the market so that patients can contact them
for any adverse effects, which is a common pharmaceutical practice.
GSK announced that they will run such plant in emerging markets region as an integrated operation,
putting in place the right commercial structure in markets to deliver a sustainable growth ambition. They
decline to elaborate further on 'unsustainable' Bangladesh market and the facilities they will enjoy in other
emerging market.

The Directorate General of Drug Administration (DGDA) regulates all activities related to import and
export of raw materials, packaging materials, production, sale, pricing and licensing. But there allegation
is that the process of procuring of raw materials is very slow.

Medium and small pharmacies reported being linked with a medical doctor and thus sales are usually
skewed towards that medical professional's preferences. In the market, there is a trend of influencing
medical practitioners, wholesale and retail shops of pharmaceutical products to promote products.
Special incentives are given to the doctors. For example, the doctors are given honeymoon packages, the
cost of which is borne by the pharmaceuticals.

Some Bangladeshi firms have invested in quality raw materials, manufacturing processes and
environment, and technical know-how. One study finds that, a "perverse incentive" exists against
upgrading due to the weak regulatory structure. Firms that have invested minimally in quality continue to
sell drugs alongside those that have invested substantially.

Because of weak regulations, the consumer cannot determine quality differences and select for purchase
the superior product. As a result, firms that have invested in quality manufacturing and quality processes
are in a sense penalized.

There are constraints in marketing in overseas markets. It has considerable hazards or bureaucratic
obstacles are confronted by the pharmaceutical companies in sending samples abroad, to station or
appoint representatives in foreign countries, in sending money for the purpose and doing other
promotional activities.

The customs authority of Bangladesh imposes restrictions in sending drug samples to the importing
countries. Restrictions are being made on giving permission to send drug samples and also limiting the
quantity of samples to be sent.

TIB study revealed that allegations of transaction of taka 5 hundred to 1 million unauthorized payments in
different activities of DGDA along with renewal of drug license and providing new license, project
transfer/shifting, approval of recipe, registration of drug, sample testing and quality control and export
license and GMP certificate etc.

Ernst and Young, global research firm in a report in 2017 namely "Mitigating fraud, bribery and corruption
risks in Bangladesh" observed that "companies increasingly seeking growth opportunities in developing
countries such as Bangladesh, dealing with fraud, bribery and corruption risks is a challenge.

Some of these issues include bribing public officials, low integrity, issues related to third-party
relationships (middlemen) and a dearth of good governance. Recently, the UK Government guideline on
doing business in Bangladesh: Bangladesh trade and export guide states, "corruption affects many
aspects of daily life in Bangladesh and is often cited as a barrier to private sector development." The
guideline also mentions that one of the biggest challenges facing UK companies in Bangladesh is how to
avoid paying "speed money."

The bribery in anywhere in the world is punishable offence for UK company if it is proved any way in
UK. The problems mentioned are not so difficult for local industries but a British company cannot cope
with this situation with regulatory body and market.

The perceptions of overseas investors are very poor with investment atmosphere in Bangladesh as
different report of World Bank, Asian Development Bank, Japan International C and even Central
Intelligent agency of USA. The cost of doing business is very high in comparison with our competitors.
The annual reports of TIB on corruption index declare Bangladesh as one of the corrupt countries in the
world.

Bangladesh government may set up an independent commission to investigate the reason of withdrawal
of investment by a multinational company from Bangladesh and going to other emerging market despite
growing market and patent-free export to other market. This exist of MNC may be a bad example for
overseas investors.

The writer is a legal economist.

Email: mssiddiqui2035@gmail.com