Using the VC approach to influence the business environment:

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Using the VC approach to influence the business
environment

• German Mueller
• Engineering Capacity Development Program (ecbp),
  Ethiopia

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Top down and bottom up

• General International Business Climate Indices
  and Surveys are an excellent tool to address
  issues in discussion with public sectors to
  reform needs benchmarked with competitor
  countries
• There is a further need to look into sector
  specific business environment issues to create a
  fertile ground to improve systemic
  competitiveness
• Top down barrier removal in combination with
  sector based bottom up initiatives form a winning
  team

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Possible shortcomings of Business Climate surveys
/ indices

• Surveys and indices do not indicate
• (1) sector-specific bottlenecks like for
  example public tendering processes discriminating
  local products,
• (2) information about recent policy changes since
  the reports are usually published yearly,
• (3) (informal) barriers that hinder the
  successful implementation of policies and policy
  reforms - such as the lack of qualification of
  the actors who implement policies (e.g. customs
  personnel)
• (4) the actors that could initiate or support
  policy changes
• Nevertheless, these are crucial factors for
  successful change processes

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How to support overall BC measures with VC

• (1) Sector specific PPD fora to identify
  specific (sectoral) bottlenecks and verify
  problems indicated by one group of actors against
  the view of the others.
• (2) Foster information exchange about recent
  policy changes.
• (3) (Informal) barriers for implementation can be
  directly addressed by combining barrier removal
  with (sector) development measures
• On macro level branding process to support
  governance and policy efforts
• On meso level strengthen intermediate actors
  (e.g. private sector associations) to bundle
  and voice private sector needs.
• On micro level technical and managerial
  upgrading of companies through the value chain
  tool of business re-engineering ? companies
  increasingly become interesting partners for
  (inter-)national buyers and investors.
• (4) private sector can be empowered (in an
  ongoing process) to take over a new role as
  advisor, lobbyist and implementer.

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Implementation example Ethiopia in combination
with the pharmaceutical VC

• Major International Business Climate Indices
  serve as benchmark
• Different indices rank countries differently,
  based on different indicators chosen and methods
  applied
• Ethiopias main competitive disadvantages
  identified in indices are
• Health, Education and Higher Education and
  Training (WEF indices 2005)
• Market efficiency, technological readiness and
  innovation (WEF indices 2005)
• Trade ease across borders (Doing Business,
  Worldbank 2006)
• expensive 1700 US- per 20 ft container (China
  336 India 894)
• time consuming (45 days export, meanwhile
  improved to 20-24 days)
• Stakeholder workshops identified as major
  challenge export and import procedures
• a) USAID study (CLEAR), b) a detailed process
  analysis with exporting companies, shipping
  lines, customs, and ministries

Projects identified on Trade ease One Stop
Shop Capacity Development Customs, Ex and
Importers, Banks formation of a shipping council
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Pharmaceutical sector specific findings

• TRIPS - need for adjustments of regulations to
  fully use flexibilities on patent rights
• Stakeholder analysis paired with external expert
  views identified amongst others
• Duty issues on imported raw materials
• Discrimination on public tender procedures (KIT
  system)
• Capacity lack of the national Drug Administration
  and Control Authority Inspectors
• Lack of research and development capacities and
  laboratory capacities
• Good Manufacturing Practices know how and
  implementation on all levels
• Crowd investment to reach economies of scales
• Marketing capabilities

Priority issues of overall business climate as
well as sector specific bottlenecks are worked on
in a holistic approach
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Why did we choose the pharmaceutical sector?

• 6 million people die each year of HIV/AIDS,
  Tuberculosis and Malaria due to a lack of
  inexpensive high quality drugs
• Nearly 1,7 billion people could be cured
  relatively easy with existing drugs
• The 2005 implementation of the TRIPS leads to
  increasing prices and a worsening of access to
  drugs
• Patent protection for essential drugs is beyond
  reasonable levels in some LDCs reducing
  availability of essential drugs
• Quality infrastructure is incomplete
• The size of markets is not big enough to reach
  economies of scale
• The lack of qualified experts hinders the
  creation of a local production
• The approval of generic drugs in developing
  countries is often difficult
• Less than 10 of the expenses for RD are spent
  for infectious diseases that account for 90

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What is the strategy behind?

• Local production of essential drugs means to
  follow important developmental goals
• Fight against HIV/AIDS, Malaria and Tuberculosis
  through better access to essential drugs
• Aid for Trade
• Improved capacity of local industries and
  reduction of barriers to trade and supply side
  constraints
• Intellectual property rights maximised use of
  TRIPS flexibilities, as supported by G8 countries

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Derived strategic goals

• Development, production and marketing of
  inexpensive, WHO pre-qualified drugs of high
  quality against HIV/AIDS, Tuberculosis, Malaria
  and other poverty related, tropical or neglected
  diseases
• Strengthening of developing countries and
  regional organisations in the maximised use of
  TRIPS flexibilities and creation of other good
  framework conditions for local pharmaceutical
  production
• Capacity building and capacity development of
  research and development in the pharmaceutical
  sector of developing countries
• Creation of strategic alliances for these goals

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Research and development

• Situation
• There is hardly any research on new drugs in
  Eastern Africa
• Even galenic research is lacking in the region
• Action
• Support of research laboratories in Universities
  e.g. in Tanzania
• Support of pilote production facilities at a
  training center also in Tanzania
• Creation of an international network for RD in
  and for Eastern Africa
• Role of private sector
• Technology transfer from a Thai state-owned
  company in several Eastern African countries
  (Eastern Congo, Tanzania, Ethiopia)
• PPP of a German research service provider in
  Ethiopia to support a research lab
• PPP of a German Drug distributor to support a
  research lab at the University of Dar Es Salaam
  in Tanzania

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Legal framework concerning intellectual property

• Situation
• Lack of multilateral restraints provides
  excellent opportunities for LDCs to design its
  patent law in a way conducive to its local
  pharmaceutical industry
• Most LDCs patent laws in their current form
  could arguably be amended in some areas to better
  reflect the interests of generic producers of
  pharmaceuticals
• Action
• Change the patent law
• Change the international framework for patents
• Role of private sector
• Advocacy of local companies within stakeholder
  dialogues
• Advocacy of European generic producers for an
  improved framework for generic production

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Investment in the pharmaceutical sector of an LDC

• Situation
• Eastern Africa is one of the regions with the
  highest prevalence of several main diseases
• Kenya is a non LDC with an established
  pharmaceutical sector, production on the basis of
  voluntary licences or increasingly through FDI,
  all other countries are LDCs with no patenting
  obligations
• Action
• Attract investments from India and Europe
• Role of private sector
• Indian companies investing and transferring
  Know-How to Tanzania and Uganda on HIV/AIDS drugs
• British company investing in Kenya, Tanzania and
  Uganda to produce Anti Malaria drugs
• German company investing in Ethiopia to produce
  HIV/AIDS drugs

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Support in reaching certification of quality (pre
qualification of WHO)

• Situation
• Local enterprises need support to establish a
  quality management system on international level
• In Kenya, Tanzania and Ethiopia, most of the
  enterprises are already close to cGMP standard
• Action
• Provide support in establishing a QM system and
  help with certification for pre qualification
• Role of private sector
• National stakeholder meetings to advocate for a
  good quality infrastructure and quality
  orientation of the whole value chain
• Local producers need to take the last remaining
  steps
• German drug distributors (BEGECA and Action
  Medeor) support this development together with
  GTZ and German quality related institutions

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Distribution of locally produced drugs

• Situation
• National health programmes do not give preference
  to local production
• International buyers of drugs fear about bad
  quality
• Action
• Implement a preferential scheme for local
  production for tenders of national health
  programmes
• Convince the international buyers about the
  quality
• Role of private sector
• Advocacy of local producers within stakeholder
  dialogues
• Support through small drug distributors to
  convince the big buyers

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Thank you very much for your attention !