Sri Lanka ‘domestic manufacturers’ to make drugs; fears of a canned fish repetition

ECONOMYNEXT – Sri Lanka’s cabinet of ministers had approved the setting up of domestic drug companies as joint ventures with State Pharmaceuticals Manufacturing Corporation as the consumers, the government information office said.

The proposal was made by Heath Minister Rajitha Senaratne, "to encourage investors to begin joint ventures with the State Pharmaceuticals Manufacturing Corporation to produce quality medicines at a low cost," as recommended by a committee of officials.

The statement did not say whether any special privileges will be given to these businessmen from the health budget such as guaranteed procurement by passing international tenders.

Some rent-seeking exploitative crony businesses have earlier asked for such privileges to exploit the health budget.

Special procurement by passing tenders will invariably push up costs and given extra profits to the Mercantilist ‘domestic’ producers, economic analysts say.

Once the factories have been set up, the owners of the businesses will lobby the government to continue to procure at high prices citing ‘foreign exchange shortages’, analysts fear.

Sri Lanka set up several canned fish factories under the cover of protectionist taxes, and their owners pushed for higher taxes and privileges after import proection was reduced in 2016.

A repeat of the exercise may follow with drugs, analysts with long experience with the tactics of rent-seeking businesses in Sri Lanka warn.

Hunger (food), homelessness (building materials) and sickness (pharmaceuticals) are some of the easiest areas for exploitative domestic businessmen to produce and sell at high prices under cover of import protection or other privileges. (Colombo/Nov17/2016)

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