October 26, 2011

Cambodia Pharmaceuticals and Healthcare Report Q4 2011


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Cambodia Pharmaceuticals and Healthcare Report Q4 2011

Cambodia will continue to remain unattractive to foreign pharmaceutical investors given its widespread corruption and low per-capita healthcare and pharmaceutical expenditure. Over the longterm, we expect pharmaceutical companies to take a greater interest in the country as they look for highgrowth frontier markets. However, this decision still depends on whether the government actively tries to improve its political situation and regulatory regime.

Headline Expenditure Projections

.. Pharmaceuticals: KHR812.33bn (US$194mn) in 2010 to KHR894.03bn (US$217mn) in 2011; +10.1% in local currency terms and +11.6% in US dollar terms. Forecast unchanged from Q311.

.. Healthcare: KHR3,036bn (US$725mn) in 2010 to KHR3,295bn (US$798mn) in 2011; +8.5% in local currency terms and +10.1% in US dollar terms. Forecast down slightly from Q311 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 +9.8% in US dollar terms. Forecast unchanged from Q311,

Business Environment Rating

Cambodia continues to rank last of the 18 pharmaceutical markets surveyed in the region with a significantly lower than region's average score (53) of 31.4 out of the maximum 100. We believe it will remain one of the least attractive markets in the region, primarily due to low per-capita expenditure on healthcare, widespread corruption and the lack of a structured regulatory process.

Key Trends & Developments

.. In September 2011, Cambodia started a pilot project to contain the spread of malaria via text messaging and web-based technology. The project cut down the amount of time needed to report such epidemiological data to the district health level.

.. In the same month, India-based Himalaya Drug partnered with Thailand-based Berli Juncker to set up a plant in the country. Through the free trade agreement among South East Asian countries, its products will also be exported to Cambodia, Indonesia, the Philippines, Malaysia and Singapore.

Economic View

Visitor arrivals to Cambodia surged by 19.0% year-on-year (y-o-y) in May 2011, indicating that the government's full-year target of 2.8mn visitors remains on track. We remain optimistic that visitor arrivals should continue to increase over the coming months. Government initiatives to attract more visitors to Cambodia are proving to be effective and cooling tensions at the Thai border also suggest that cross-border tourism between the two countries should continue to recover.

Political View

The issue of forced land acquisitions by urban elites from rural dwellers will continue to undermine Cambodia's risk profile for the foreseeable future, and could lead to a further deterioration in relations with external donors. However, the backlash against land seizures does not seem to be a regime-threatening phenomenon, and Cambodia will continue to receive strong support from China.

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