Cambodia Pharmaceuticals and Healthcare Report Q3 2011

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Cambodia Pharmaceuticals and Healthcare Report Q3 2011

Given the low per capita spending on pharmaceuticals and widespread corruption, Cambodia will remain of marginal interest to leading foreign drugmakers in the near term. However, the need to forge new markets will gradually lead to pharmaceutical companies taking a greater interest in this South East Asian country, although much will depend on its commitment to the improvement of its intellectual property (IP) environment and political environment.

Headline Expenditure Projections

- Pharmaceuticals: KHR812.33bn (US$194mn) in 2010 to KHR894.11bn (US$217mn) in 2011; +10.1% in local currency terms and +11.7% in US dollar terms. Forecast up moderately from Q211 due to macroeconomic factors.

- Healthcare: KHR3,037bn (US$725mn) in 2010 to KHR3,295bn (US$799mn) in 2011; +8.5% in local currency terms and +10.1% in US dollar terms. Forecast up moderately from Q211 due to macroeconomic factors.

- Medical devices: KHR47.15bn (US$11mn) in 2010 to KHR51.06bn (US$12mn) in 2011; +8.3% in local currency terms and +9.9% in US dollar terms. Forecast up moderately from Q211 due to macroeconomic factors.

Business Environment Rating

In our latest quarterly Pharmaceuticals & Healthcare Business Environment Ratings (BER) for the Asia Pacific, Cambodia's score remains the same, at 31.4 out of the maximum 100. The country again ranks last of the 17 pharmaceutical markets surveyed in the region, with its situation unlikely to improve in the coming months. Key reasons for this pessimistic outlook are the low per capita spending on medicines, as well as wider structural problems hindering better economic performance and budget allocation.

Key Trends & Developments

- In March 2011, French major Sanofi-Aventis (which has recently changed its name to a simpler Sanofi) established a new subsidiary in Cambodia as part of its strategy to extend its presence in emerging markets. The subsidiary will deal in the import and distribution of over 70 pharmaceuticals and vaccines, and also participate in medical and humanitarian programmes.

Cambodia's pharmaceutical market is in early stage of development with many untapped opportunities, although many challenges remain.

We are seeing evidence that Cambodia's economic recovery remains on track and real GDP growth could soon return to long-term trend growth of around 6.0-7.0%. The government's new rice production and export policy is expected to support growth in the agricultural sector, while a positive outlook for the country's key trading partners suggests that demand for exports should remain strong. Given this background, we are confident that spending on healthcare and pharmaceuticals will continue to increase, especially as the government has a limited role in such financing.

Cambodia's long-term political outlook largely depends on the ruling Cambodian People's Party (CPP)'s ability to address widespread corruption and income inequality, which have been fuelling public dissent against the government in recent years. Meanwhile, the lack of effective opposition to challenge the CPP at elections suggests that the party will continue to dominate the political scene in Cambodia over the coming years, which will have a bearing on the private sector.

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