Departing pharmaceutical companies
French pharmaceutical giant Sanofi, reportedly, would soon wind up its Bangladesh operations. It has already informed the state-owned Bangladesh Chemical Industries Corporation (BCIC) about its decision. The BCIC owns nearly 20 per cent stakes in the company. In total, the government owns more than 45 per cent shares of the company.
Sanofi is the second multinational pharmaceutical company to convey the decision on leaving Bangladesh within the last 15 months. Another global pharmaceutical behemoth GlaxoSmithKline has already closed its operations in the country as it found the market here 'not sustainable'.
There should be no reason for taking the departure of the two leading MNCs from the country lightly. Rather the policymakers do have ample reasons to be alarmed, for such departure has all the potential of creating a negative impression on the minds of prospective foreign investors.
There is no denying that the departure of foreign pharmaceutical companies would virtually have no impact on the local market as the domestic pharmaceutical companies are now meeting more than 95 per cent of the home demand for drugs and medicines.
Following the adoption of the Drug Policy of 1982, a good number of international drug manufacturers had gradually left the country because of restrictions of various types. Only a few are still operating.
What has prompted GSK and Sanofi to leave Bangladesh remains more or less unexplained. The companies have been earning handsome profits over the years. The GSK, which is listed on the Dhaka bourse, declared 530 per cent dividend in 2018. The non-listed Sanofi earned a profit of Tk 102 per share (face value Tk 10 each) in 2017. Both the companies have very high net asset value per share.
In fact, if seen from the business perspective, there is no plausible reason for these two companies to leave Bangladesh. Yet they are leaving. That is very much troubling.
To most foreign investors, profit earning is one thing and ease of doing business is another. If the second one gets tougher by the day, they do not bother to sacrifice the first one.
Bangladesh offers one of the most liberal policies to foreign investors. But the situation on the ground, in some cases, does not match with what is offered on paper. In its ' Doing Business' report, the World Bank regularly mentions the hurdles that an investor/entrepreneur faces while doing business in Bangladesh.
The foreign direct investment (FDI) flow into Bangladesh has not been remarkable barring the last calendar year. The takeover of the Dhaka Tobacco by the Japan Tobacco Company (JTI) at a cost of over 1.5 billion dollar was one of the major single foreign investments in this country since independence.
In terms of registration with the relevant government authority, the prospect of Bangladesh attracting FDI would appear very bright, but only a few of the registered ones finally moves in.
What remains more important in the case of FDI is the flow of funds into sectors that help generate employment and export revenues for the country. Investment in infrastructures does also make notable contribution since the country lacks the same.
It is important to note here that prospective foreign investors tend to take into cognizance the experience of the companies, both local and foreign, operating in Bangladesh. They attach more importance to the experience gained by the foreign investors.
In addition to gathering information about procedural matters, law and order situation, cost of land, availability of utility services etc., in potential investment destinations, the prospective investors attach special importance to regulatory environment. Regulators at times make life difficult for companies, both local and foreign. Local businesses, on occasions, use connections, political or otherwise, or employ other convenient methods to deal with 'tough' regulators. But foreign companies, particularly the MNCs, consciously avoid those options for obvious reasons.
The ongoing row between the Bangladesh Telecom Regulatory Commission (BTRC) and two leading mobile phone operators---Grameenphone and Robi---over alleged non-payment of a substantial volume of arrear dues (more than Tk 134 billion) by the latter to the former is a case in point.
The telecom operators have disputed the BTRC claim and found the BTRC's financial claim unrealistic and non-transparent. They have sought discussions and, if necessary, arbitration to settle the dispute. But the BTRC while sticking to its claim has served show-cause notices recently on the former seeking to know why their licences would not be revoked for non-compliance. A newspaper report has also revealed that the BTRC might seek the option of appointing 'administrators' in both GP and Robi, which, if happens, would be an unprecedented move.
It would not be out of place to note here that the government fetches a huge amount of tax revenues from GP, a listed company. The truth is that a large part of the government's corporate tax and VAT revenues comes from the MNCs like the GP.
The government does need revenue for bankrolling its development as well as revenue budgets. It would not be, however, wise to press too hard the sources that provide the most part of the revenue.
This could backfire and send wrong messages to existing as well as prospective foreign investors.