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Saturday, 25 March 2017 00:01 - - {{hitsCtrl.values.hits}}
By Uditha Jayasinghe
Local pharmaceutical companies are about to get a windfall after the Government this week decided to draft policy to grant extensive tax concessions for the sector and establish a dedicated mega biomedical zone to fast-track the sector’s expansion.
The details of the plans were listed out in a Cabinet paper presented by Prime Minister Ranil Wickremesinghe this week, which was approved.
Under the proposals approved by Cabinet the Health Ministry will gazette a list of plants, machinery, equipment, packaging and raw materials used by the pharmaceutical industry. Once the Gazette has been published the Finance Ministry has been instructed to waive taxes on the imports listed in the document by the Healthy Ministry.
The Finance Ministry has been requested to provide a bond facility during the construction or expansion period of a manufacturing plant to order necessary material on a tax-free basis. Once construction is completed the taxes will be re-imposed.
Waiving off all broader taxes applicable on the import of raw material and packing by local companies was also proposed.
The Prime Minister also recommended fast-tracking the establishment of a mega biomedical zone to facilitate the expansion of the domestic pharmaceutical manufacturing industry. The Megapolis and Western Development Ministry will be instructed in this regard, the Cabinet paper said.
The Cabinet paper noted Sri Lanka’s pharmaceutical manufacturing industry is worth around $ 610 million but only contributes about 15% of the country’s total requirement. Over the last decade the global pharmaceutical industry, by contrast, has grown from $ 607 billion in 2005 to over $ 1 trillion a decade later, posting growth of 5.8% per annum.
In addition, it is expected that the global industry will reach $ 1.4 trillion by 2020 and Sri Lanka will increase in demand as well.
“Sri Lanka has the opportunity to become less reliant on imported pharmaceuticals by developing the local pharmaceutical manufacturing industry through expanding the capacity of existing manufacturing plants and value addition. It has huge potential to attract more foreign direct investment to establish new pharmaceutical manufacturing plants on the basis of Public-Private-Partnerships or joint ventures enabling to provide 80% of the total pharmaceutical requirements locally. It would also create more employment,” the Cabinet paper said.
However, the industry also faces many problems, the Cabinet paper acknowledged, including high taxes on imports of raw material, packaging, plants and machinery. These constraints need to be resolved to encourage local and foreign companies to enter the industry. Since much of the materials used by the pharmaceutical industry are used by other sectors there is also the need to give different HS codes to imports specific to the pharmaceutical industry, the Cabinet paper said.
