industrial policy, its spatial aspects and cluster development in ...

makers to introduce significant incentives to motivate investors to invest in this
critically important sector of the future.
Other factors that are hampering the growth of the local pharmaceutical include the
following:
• Inadequate branding: The branding should focus on product differentiation and
the quality of the drug.
• Regulatory barriers: The list of Active Pharmaceutical Ingredients (APIs) that can
be imported keeps on changing at short intervals based on the interests of the
MNC lobbies.
• Weak enforcement: Inadequacy of enforcement of counterfeit drugs is also
retarding local investment.
• Capacity & behaviour of health inspectors: The health officers do not possess the
requisite skills and knowledge of the pharmaceutical industry to conduct health
and safety inspections. Inspectors normally, use petty excuses as a way of rent
seeking. Furthermore, the industry feels that under the 18th amendment the
transferral on inspection to provincial inspectors will be disastrous as it will
increase the ‘informal’ cost of doing business significantly.
• Inconsistency in import duty: The import duty on pharmaceutical raw materials
(not manufactured locally) was to be fixed at 5 percent (as proposed in the
Federal Budget for 2005/06). However, a number of items are still assessed at
10-15 percent as the budget policies have not been fully implemented.
• Exemption from Sales tax: The sales tax on local purchases of packing material
such as cartons, leaflets, bottles, ampoules, labels, corrugated boxes, aluminium
foil, rigid PVC, gelatine capsules, and other such items is a heavy burden. This tax
is inconsistent with the government's policies to keep the prices of
pharmaceutical products affordable for patients. In keeping with such policies,
the imports of pharmaceutical raw materials, and the local purchases of such
materials, are exempted from sales tax; the pharmaceutical industry argues that
it would be logical to extend the same treatment to the packaging for
pharmaceutical products.
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