Dedicated pharma zone should focus on FDIs: Expert

• Hemas CEO says dedicated zone a positive but calls for Govt. support to identify competitive advantage and attract FDIs
• Concerned that otherwise it risks failure, as SL lacks economies of scale needed to be globally competitive 

Sri Lanka should look to attract foreign investors for its newly-approved dedicated investment zone for pharmaceuticals in Hambantota or risk it becoming an unsuccessful attempt at import substitution, a top expert said recently. 

Hemas Holdings PLC Group CEO Kasturi Wilson, speaking at the Daily FT-Colombo University MBA Alumni Association organised Budget 2021 Forum, pointed out that even though many countries in the world were intent on increasing their self-sufficiency in pharmaceuticals, Sri Lanka would need to be more pragmatic as it lacked the internal economic scale needed to establish a supply chain for high quality raw materials, funding for costly research and development and other expertise needed for large-scale drug manufacturing. 

“The dedicated zone is good but it’s not enough. We have to attract investment aimed at exports. For this we need foreign investors and we need to figure out how to attract them. Global drug manufacturing requires economies of scale and that is very hard to duplicate in a country as small as Sri Lanka. However, if we identify these problems we can find solutions. Countries such as Taiwan and Israel were very good at identifying select items and targeting them for exports. 

.In the post-COVID-19 environment companies are looking at minimising disruptions to supply chains and we can see if we can offer them such incentives but for just local supply it will not work.”  

She also said Hemas would “actively look at expanding” given the incentives provided in Budget 2021 but conceded corporates needed the right legal and regulatory frameworks and may not be sorely swayed by tax incentives.

“We also have to think about the scale you can enter at and how we can meet international levels of competitiveness. COVID-19 taught us there is space for everyone to play and conglomerates will play their role, even to support SMEs to scale up. We can align portfolios and see how we can make work in ways that will be impactful and relevant for Sri Lanka.”

Earlier this month Cabinet approved a special 200-acre investment zone for pharmaceutical manufacturing within the Arabokka estate in Hambantota, which will be open to 20 local companies.  The move came after the Presidential Task Force for Economic Revival and Eradication of Poverty headed by Presidential sibling Basil Rajapaksa identified the pharmaceutical manufacturing industry as a sector that could attract Foreign Direct Investments (FDI) as well as retain precious foreign exchange.   

The special pharmaceutical manufacturing zone with modern facilities will be set up within an extent of 400 acres of the Arabokka estate in Hambantota. Cabinet has also declared it as a strategic development project, paving the way for the Government to provide additional relief and encouragement for investors to step forward and invest in this pharmaceutical manufacturing zone.  

In the second phase, a further 20 pharmaceutical manufacturing companies within 200 more acres will be set up. 

The Board of Investment (BOI) will furnish necessary infrastructure facilities to the zone.