Pharmaceutical production is a driver of economic growth and scientific research in many countries around the world with millions of people employed in the industry globally.
But is this the case in Kazakhstan and Central Asia in general? At first glance, the share of pharmaceutical production in Kazakhstan’s GDP seems insignificant (0.1%) compared to other industrial sectors. However, if you look at the entire pharmaceutical market (2.2 billion USD in 2023), this is almost 1% of GDP. So, is there potential for growth through import substitution and increased exports?
In Uzbekistan, the share of pharmaceutical products and preparations in GDP is also below one percent (0.6%), and here the pharmaceutical market is higher, at 1.6% of GDP.
But what unites these two markets, which account for the dominant pharmaceutical production in Central Asia?
Decline in production, growth of the market and GDP
Both countries have experienced a decline or slowdown in pharmaceutical production and exports over the past three years. This is despite the average annual GDP growth rate in Kazakhstan and Uzbekistan over the last three years being 14% in tenge and 13% in soms, respectively. The manufacturing sector also grew by an average of +9% in Kazakhstan and +7% in Uzbekistan.
The pharmaceutical market and hospital sales themselves show annual growth of 10% in Kazakhstan and 4% in Uzbekistan. But only pharmaceutical production and exports are declining: -13% and -34% per year on average since 2021 in Kazakhstan, and 0.3% and -2% in Uzbekistan, despite growing pharmaceutical sectors and economies in general. It can be assumed that there was not enough raw material for production. Or local manufacturers preferred to import finished products.
Central Asia has no domestic production of raw materials or pharmaceutical substances, just like the rest of the CIS (in Russia, less than 20% is covered by domestic raw materials). Our main suppliers of substances are China and India. Both leading Central Asian countries (90% of the region’s pharmaceutical production) maintain roughly the same purchasing volumes over the past three years, despite growing domestic markets. And the total amount of substance purchases in all of Central Asia averages just under 100 million USD per year. Not a small amount, right?
Economic and political challenges
Although there are over 200 countries in the world, the production of pharmaceutical substances is mainly concentrated in two — China and India (67% of all global production). These countries dominate the market due to their colossal industrial base, low costs, and significant government support. The COVID-19 pandemic and the war between Russia and Ukraine have already led to significant changes in the global pharmaceutical market, showing how critically important it is to have domestic production of substances.
The queue for raw materials is only growing longer, and global supply chains have become drastically more complex, leading to nearly universal price increases. Like oil, pharmaceutical substances will always be in demand, especially during global crises. However, unlike mineral resources, the price of molecules is less subject to sharp fluctuations, making them a strategically important asset. Having domestic production of substances allows countries not only to ensure a stable supply to the domestic market but also to strengthen their economic and political independence.
There is already a market of buyers (and not only in Central Asia), there is expertise in Kazakhstan in complying with Good Manufacturing Practices (all pharmaceutical production in Kazakhstan is certified according to international standards), and there is understanding from the state. The industry’s skepticism about the possibility of such production in the country is known. About 15 years ago, there was similar skepticism toward pharmaceutical production itself, which ultimately succeeded.
The most important thing is the desire and will to act.
To be continued.
Mukhtar Ramazanov
Expert on the pharmaceutical market
of Central Asia and Mongolia
