Local production: Possibilities and realities. Presented by Padmashree Gehl Sampath, United Nations Conference on Trade and Development.

1. Local Production:
Possibilities and Realities
Padmashree Gehl Sampath
United Nations Conference on Trade and Development

2. Local Production and Work at
UNCTAD
• Several years of work on studying pharmaceutical and health
innovation in African and Asian countries
• Building on GSPoA’s mandate, UNCTAD and WHO conducted
a project for 8 years on fostering local production.
• Kaplan and Laing (2005) question the relevance of local production
• Work was set against that background to argue that:
• Even if there are short term deadweight losses from LP
• If it is sustained, there are longer term beneficial effects and welfare gains (from
competitive supply, health security and ATM perspectives)

3. Project on improving access to medical products in developing
countries through local production and related technology
transfer
Project Activities
•Mapping and landscape trends
in LP and Tot in developing
countries
•Examine in detail examples local
manufactures in developing
countries
•Conduct regional workshops
with stakeholders
•Analysis:
oPharmaceuticals
oVaccines
oDiagnostics
Reports
•Literature Review
•Mapping &
•Landscape trends in
LP and Tot
•Country case studies
•Pharmaceuticals
•Vaccines
•Diagnostics
FRAMEWORK
And
Direct Work in the
Countries

4. The Reality of Local Production
• A large number of countries have invested in supply since the
1960s.
• New set of countries and initiatives since the TRIPS Agreement
• Marked differences in the ability of countries to tackle local
production at the ground level.
• Stem from a wider variety of issues:
• Policy coherence of the initiative
• External shocks
• Internal constraints (capacity)

5. Why do countries need coherent industrial policy
to support local production?
• Local production initiative: regional, national, or from the Ministry of
Health
• But it works in light of existing capacity and external shocks:
• Financial crises
• Trade liberalization
• WTO, TRIMS and TRIPS
• External opportunities dictate how countries move:
• GVCs
• Markets/ niche areas of production
• Technological know-how
• And manufacturing capabilities matters: LP is acting in a broader
environment of severe pressure and national resilience to such
pressures.

6. Just to compare:
Productivity in Manufacturing (USA is 100)
6

7. Local production should be for
access to medicines:
• Much stronger push is required.
• Should balance two, somewhat competing interests in the pharmaceuticals sector:
• LP – in the short term => higher production costs.
• Short term trade-off – although in the interest of longer term health security, in the short term,
the health system and the consumer bears this cost.
• So the critical issue = LENGTH AND SUSTAINABILITY OF POLICY VISION, LEADING
TO SUSTAINED PRODUCTION
• Industrial policy plays a critical role in ensuring that the investments are realized upon to
make sure that the higher costs are offset in the mid- or longer term.
• Not for one or two firms, but for the entire sector.

8. So in reality:
• But its neither simple nor automatic.
• Depends on
• Greater global demand
• building capabilities
• Knowledge and learning
• Creating linkages
• Putting other ingredients for catch-up in place (especially investment and
finance)
• Is linked to immediate performance expectations:
• Explicitly supporting local firms
• Promoting technology absorption
• Increasing spillovers
• Is explicitly linked to ATM.

9. Other realities of local production
•Production patterns are changing, newer competitive threats are emerging:
•In pharmaceuticals,
•API matters, but is not all
•Value chain opportunities: diseases most locally needed, services most locally needed.
•Incremental changes to existing products
•Additional products – PPPs, national investment, governmental enterprises
•Contract manufacturing
• Similar exercise needs to be conducted in:
• Diagnostics
• Medical devices
• Blood products
• Vaccines.

10. EMBARGO
The contents of this Report
must not be quoted or
summarized in the print,
broadcast or electronic media
before 14 September 2017,
17:00 GMT

11. • Figures based on BEA data on activities of US MNCs
and their affiliates in three key markets: Brazil, India
and China.
• Results show:
• Aggressive use of patent rights to defend and increase
market power rather than innovation
• Facilitated by FTAs
• Large-scale privatization schemes of public services in
developing countries, undermining their own
positions.
• Financial shocks weaken local private sectors.
• Local production is on the whole, a trend under threat
even in established developing countries, at an
aggregate level.
• See Trade and Development Report:
TRIPS Plus: the new IPRs Effects (Chapter
VI)Patent reforms and sales growth of US MNE
affiliates & listed local companies
(median company sales per employee)
The revenge of the rentiers

12. Thank You