In search of greener pastures

After hanging fire for the past few months, the Department of Industrial Policy and Promotion (DIPP) has finally given some clarity on foreign direct investment (FDI) in the pharmaceutical sector. Quite obviously, it’s the carrot and stick approach. While the carrot is in place, (100 per cent FDI in brownfield projects remains intact) the stick is also very much in the picture.

Mindful of its critics and the approaching 16th general elections, the UPA Government was careful to build in some elbow room for the future, saying that it will invoke the non-compete clause in ‘special circumstances’ with the approval of the Foreign Investment Promotion Board (FIPB).

The wording is sure to give sleepless nights to investors as they try to second guess which segments of the industry would qualify under the ‘special circumstances’ tag. Going by past debates, the backlash has been the fiercest when the deals concerned cancer care products and vaccine manufacturing facilities. Prospective investors would be scrutinising each word of the DIPP press release for clues on the Government’s stance.

The UPA clearly wants to be remembered as an investor-friendly government. But is this pragmatic approach too little, too late? India is competing for investor attention with numerous countries and analysts fear that once growth in the US market picks up, investment will flow out of emerging markets back into the world’s largest market.

At another level, as Indian companies face pricing and regulatory pressures in the domestic market, many countries have been assiduously courting Indian pharma companies for investments. For instance, IDA Ireland, Ireland’s agency to encourage inward investment, has earmarked India as a key market in its growth strategy for 2014, positioning the country as a gateway to the EU market. In the same vein, our cover story in this issue, (‘Bahrain beckons Indian pharma’, pages 20-24) is a primer on how Bahrain’s Economic Development Board is laying out the red carpet for Indian pharma companies, vying to be the gateway to the GCC pharma market.

And Indian companies are biting the bait. Wockhardt and Ranbaxy already have operations in Ireland and were recently joined by clinical services company, Synowledge while Aurobindo Pharma has a base in Bahrain. It is ironic that while some of our policy makers remain wary of foreign investors, raising the bogey of a ‘recolonisation’, Indian companies are looking overseas like never before. Yes, concerns about being self sufficient in affordable medicines are valid but surely there is a less painful middle path? Industry (and talent) will flow and take root wherever it finds a suitable ecosystem. Patients, at least most of them in developing nations, unfortunately do not have the same choice. Wouldn’t it be a tragic travesty if policies designed to protect Indian industry actually force home-grown heroes to foreign shores?

Viveka Roychowdhury
Editor

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