Active pharmaceutical ingredients (API) and laboratory reagents manufacturers of the country will get corporate tax holiday till 2032 along with a set of other incentives, according to a national policy on the sector.
The commerce ministry published the National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy on Sunday after getting approval of the government high-ups.
The policy comes into force immediately, the ministry said in a notification.
The government will offer the benefits to encourage local production of API, the main raw material for all types of drugs, with a view to reducing the prices of medicines and boosting export.
The aim of the policy is to reduce dependency on import of API, increase local production, diversify export and attract additional $1 billion foreign direct investment in the sector.
Currently, local industries meet 98 per cent of domestic demand for medicine, according to the preamble of the policy.
In 2017 the total turnover of the sector surpassed Tk 16,000 crore in local market, which was only Tk 170 crore in 1982 when the pharmaceutical industry in the country was at an infant stage.
In addition, Bangladesh-made medicines are being exported to over 100 countries.
Though the country’s pharmaceutical industry has grown fast, it still depends almost entirely on import for API and laboratory reagents.
Local entrepreneurs need to import more than 95 per cent of raw materials from China, Korea and India to meet the domestic demand.
The quality of imported API is not up to the satisfactory level while the government has to spend huge volume of foreign currency for import of the products.
Self-efficiency in producing quality API would help the sector sustain beyond TRIPS [Agreement on Trade-Related Aspects of Intellectual Property Rights] regime under which Bangladesh as a least developed country (LDC) is exempted from obligation of IPR issues including patent up to 2032.
As per the policy, locally registered producers of API and laboratory reagents, including joint venture companies, will get unconditional tax holiday or 100 per cent corporate tax exemption, till fiscal year 2021-2022.
The policy has set the target of achieving self-sufficiency in producing 370 important API molecules necessary for exports. In 2017 the number of locally produced API molecule and laboratory reagents stood at 41.
Tax holiday will be extended till 2032 for companies which will produce at least five API molecules every year. If a producer can manufacture at least three API molecules every year, it will get 75 per cent tax exemption till 2032.
Entrepreneurs will also enjoy exemption from paying advance income tax (AIT), value-added tax and VAT deduction at source on purchase and sales of raw materials and spare parts till 2032.
Manufacturers will also get duty-free facility in import, priority in getting land allocation at the government’s special economic zones and export processing zones.
The government will also provide 20 per cent cash incentive on export of API and laboratory reagents.
According to the policy, local manufacturers will also get support in foreign currency policy, like the duration of delayed payment for import of raw materials will be extended to 360 days from existing 180 days.
Entrepreneurs will be able to get loans from offshore funds and the tenure of term loans for factories and equipments could be 12 years instead of six years.
They will also be allowed to retain 40 per cent of their export earnings as export retention quota and will get back-to-back LC facility like in the readymade garment sector.
The policy has set the aim of reducing the raw materials import dependency to 80 per cent by 2032 from 97 per cent in 2016.
It also plans to increase export earnings from the sector to $9 lakh in 2032 from $1.5 lakh in 2016 and create 5 lakh jobs by 2032.
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