PHARMACEUTICAL SECTOR
Compiled by Yamini Sequeira
PATH TO SELF-SUFFICIENCY
Aroshan Seresinhe evaluates opportunities in pharmaceuticals and chemicals here in Sri Lanka
Q: What role can import substitution play in reducing reliance on foreign chemicals and strengthening domestic manufacturing capacity?
A: Import substitution plays a critical role in building self-reliance and enhancing industrial resilience. However, reducing dependence on foreign chemical imports requires capital investment and technical expertise, to extract and process locally available raw materials such as graphite, ilmenite, phosphates and limestone.
Attracting foreign companies with advanced processing technologies and value addition capabilities through joint ventures could be a viable strategy.
Such partnerships could be catalysed by extending targeted incentives and feasible tax concessions, ideally in collaboration with local industry players. Joint ventures could also provide access to foreign markets and support export upscaling.
The goal should be to develop comparative advantages in select niche segments, enabling Sri Lanka to establish a strong global reputation for quality and sustainability over time.
Essentially, import substitution efforts should prioritise non-toxic and environmentally sustainable processes that align with global demand trends while ensuring cost competitiveness.
Q: What opportunities exist for local manufacturers to supply specialty chemicals to export driven industries?
A: Since local value addition is minimal, Sri Lanka imports over 70 percent of textiles for the apparel industry along with dyes and chemicals.
Against this backdrop, viable backward integration opportunities should be seized to produce yarn required for textile weaving while simultaneously setting up textile mills with foreign investments.
Bilateral agreements with the US and India to supply cotton for yarn manufacturing could serve as an additional avenue. Ideally, greater cost competitiveness is required, along with a higher percentage of value addition in high-end garment manufacturing and other niche segments.
Finishing chemicals such as flame retardants and water repellents could be produced locally in export zones by partnering with foreign companies. Ilmenite, a valuable raw material for high grade titanium dioxide used in the rubber and paint industries, presents another opportunity.
However, it is capital intensive and requires attracting foreign companies with global market access to build local expertise in ilmenite exports. Ultimately, government level intervention and a consistent policy framework are essential, to protect and attract foreign investors.
Q: What role can public-private partnerships (PPPs) play in reducing the country’s reliance on imported pharmaceuticals?
A: Currently, 85 percent of pharmaceutical requirements are imported. If PPPs were not restricted solely to the local private sector, they would enable Sri Lanka to emerge as a pharmaceutical export hub.
The existing rule that requires majority shareholding to remain with the local party – since foreign entities cannot hold a majority in drug manufacturing – deters credible foreign investors who may be unwilling to share their technology and know-how.
Therefore, regulations governing the pharmaceutical manufacturing sector must be revisited to attract superior knowhow for manufacturing advanced molecules.
Q: What opportunities do you see for innovation in generic drug production and alternative medicine?
A: As a high middle-income country, Sri Lanka has the potential to commercialise innovations in pharmaceuticals and alternative medicines.
For instance, credible global research institutes or universities involved in pharmaceutical R&D could conduct clinical trials locally, going on to manufacturing advanced molecules for export. However, a policy framework is needed to facilitate this process.
Similarly, in an unregulated space, the country’s herbal and Ayurveda sector holds a unique advantage. Some products are supported by time-tested usage and in certain cases, data backed clinical trials. This combination of traditional efficacy and emerging scientific validation can offer a competitive edge in both domestic and export markets.
An opportunity lies in the extraction of chemical substances from local medicinal herbs that are used in the pharmaceutical sector.
Q: How are pharmaceutical companies integrating digital health and AI technologies?
A: Artificial intelligence and digital platform usage is poor in Sri Lanka. Against this backdrop, relevant laws need to be revamped.
For instance, medical regulatory authorities could transform digital health by establishing a national register of patients while also streamlining pharmaceutical manufacturing processes.
Q: What are the prospects for scaling up organic agriculture and meeting global certification standards?
A: As a nation facing food security concerns and limited land mass for agricultural production, constraints exist in expanding organic food cultivation.
However, there’s an opportunity to cultivate crops such as jackfruit, breadfruit and Moringa, which are not commercially cultivated. Organic tea too can be produced using marginal tea lands.
Q: What measures are needed to reduce post-harvest waste?
A: A substantial portion of agricultural produce is wasted in the hands of unorganised private dealers. Instead, the corporate sector should enter the agri produce supply chain backed by policy consistency and multilateral or donor funded projects such as the value chain initiative by the Asian Development Bank (ADB).
Cold chain storage units are urgently required in Dambulla, Welimada, Thanamalwila and Jaffna. A pilot PPP can be commissioned using the cold room complex in Dambulla, developed under the recently opened aid programme by the Government of India.
