Import-dependent developing countries suffered tremendously during the COVID-19 pandemic because of the inability to secure international supplies of vaccines. The importance of diversifying production is now acknowledged both nationally and internationally. The paper critically reviews the initiatives underway to develop the vaccine and pharmaceutical industries with special reference to African countries which have been among the worst affected during the pandemic.
Despite intense deliberations and negotiations in different international forums, attempts to remove intellectual property barriers to facilitate the manufacturing of medical products in developing countries have not yet succeeded. While these efforts need to continue, it is also essential for developing countries to take proactive steps for developing manufacturing capacities. The elimination of IP barriers does not automatically lead to the creation of such capacities. The abolition of product patent protection in India and Bangladesh, for example, has contributed to the development of pharmaceutical industries in these countries. In both the countries specific steps were taken before the abolition which empowered the local firms to take advantage of an environment free of patent restrictions.
Notable progress has been made in creating capacities for vaccine manufacturing in Africa. But despite a long history of vaccine and pharmaceutical manufacturing and in spite of some incentives that have been put in place to support the industry in several African countries, the overall impact has been disappointing in the past. But the post COVID-19 environment is quite different from the past. It is important to understand the constraints under which the African countries operate and also appreciate the changes in the environment that have emerged for sustainable development of the industry.
A major reason for the less-than-satisfactory performance has been pessimism and negativism about the prospects for sustainable local production. Citing unfavourable circumstances, doubts are expressed about the ability of these countries to manufacture quality drugs at competitive prices. What is highlighted is the contradiction between local production and access to medicines. Rather than the more difficult task of developing their own industry, the African countries found it convenient to buy medical products from cheaper sources such as China and India or to rely on donated products sourced from such countries. Despite the talk about promoting local production, polices remained piecemeal and an effective strategy to overcome initial difficulties has been absent. Influential international organizations such as the World Bank highlighted the inefficiencies associated with government intervention and advised a strategy of relying on market forces, de-regulation and import liberalization. But this too did not improve the situation.
In all the countries where modern industries have developed, the government has played a coordinating and leading role in developing the industry. In Africa too governments need to intervene actively recognising the complementariness between government intervention and market forces and the private sector.
The environment is much more congenial for the development of the industry. There is greater political will and international support for the development of the industry. A number of initiatives have been taken for technology transfer and technology development. Financial commitments have also been made.
However, the difficulty local manufacturers face in competing against imports is also a critical constraint in Africa. Even when technology and funds are available, private firms are unlikely to undertake the nature and scale of investments necessary investments without the assurance of the market. But the problem has not received the attention it deserves.
All late industrializing countries which have developed new industries have invariably protected local firms in some form or the other against import competition. However, foreign firms practically face a free trade regime in Africa in medical products. Protection is opposed on the grounds that prices will be higher due to higher costs of production (and supplies may be deficient.) These are legitimate concerns, but they are not insurmountable. The problem is overemphasized. Some market studies including some simulation and modelling studies suggest that protection does not necessarily lead to higher prices.
Protection eliminates international competition but not internal competition. The objective of protection is not to create inefficient industries. It is supposed to give local firms the time and the opportunity to upgrade their knowledge to be competitive and to withstand foreign competition in the future. The presumption should not be that local production is necessarily not viable. A strategy of providing necessary technological and financial support to local firms, generating a degree of competition in the local industry together with some protective measures to assure the required market can create the environment necessary for the development of the local industry.
But if even temporary higher prices that may happen in some cases are not acceptable, if protection is opposed apprehending that prices will be higher, then given the uncertain market prospects, the necessary investments may not take place and hence import dependence may continue. Higher prices may not be desirable. But is the situation witnessed during the COVID-19 pandemic when Africa was unable to get supplies from international sources any better?
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