Rising Rupee hutrs exports- Pharma ( case -I)

The weakening dollar has taken a serious toll on India's pharmaceutical exports, which generate revenues estimated at around Rs20,000 crore and have been a key source of foreign exchange for the country.
Pharma exports have seen a drop of 20% in value during the April-June quarter with total exports, at Rs5,054 crore, not only missing the 14% growth that the industry had expected, but falling well below the year-ago period's Rs6,069 crore in export revenues. The quarter marked the first time in five years that pharmaceutical export revenues have declined. With the rupee, which has appreciated by 12% in the last six months, staying strong, India is likely to miss its export target for the year by more than 25%, predicts industry lobby, Pharmaceuticals Export Promotion Council, or Pharmexcil.

It's time for the industry as well as government to devise some mechanism to help exporters balance the revenue loss. It could be either an interest subsidy or an aid to explore non-conventional markets for encouraging non-dollar currency exports though it might not work in long run. Cipla Ltd, the largest drug exporter from India, says its export revenue in the first six months have shown a 10-11% decline due to a weak dollar.

Shifting the focus to other markets will not be of much help to these companies as majority of the export markets still trade in dollar terms. Though cost savings on imports and foreign spend would help balance the cost, a 12% rupee appreciation will remain an impact on their topline.
India's domestic pharmaceuticals market, valued at $8.16 billion (Rs37,528 crore then) in 2006-07 by sales, grew at an annual rate of 12.4% in the past five years even as exports grew at a higher rate of 20% to reach $6.15 billion. While the domestic market is expected to scale up to $14.5 billion by 2011-12 at an annual growth rate of 16%, exports were projected to increase much faster, at 35%, and reach $25 billion in the same period. That would have meant exports contributed some 63% to the sector, up from 43% in 2006-07, according to a previous projection by Pharmexcil.

The rupee-dollar equation is now expected to impact the industry beyond exports. Indian drug makers are anticipating potentially huge opportunities for their generics business outside the country as patents are set to expire on at least half a dozen blockbuster drugs by 2012. But they are unlikely to meet their revenue targets, despite massive capacities being built both in India and abroad, in part because of the appreciating rupee.

Malaysia- Truly Racist

For a country that abhors public protests and suppresses them with strict rules against illegal assembly, Malaysia has had two big demonstrations in Kuala Lumpur just this month. Two large street rallies within a month by Indian ethnic group may be a sign that the 50-year-old code defining the rules of engagement between the state and the minority ethnic groups.

The biggest source of discontent is “race” since the minority Chinese and Indian communities are disenchanted with economic policies that favor heavily to the majority Malays.

Free-trade talks with the U.S. and Australia have been delayed and the ones with New Zealand have had to be suspended primarily because Malaysia's policy of discouraging non-Malays “including foreigners” from bidding on government tenders is unacceptable to these countries. The same issue might also jeopardize a free-trade deal between the Association of Southeast Asian Nations of which Malaysia is a member and the European Union.

When non malay ethnic groups protested against the preferential treatment for Malays in every walk of life they were brutally harassed & supressed. Malaysia must give give equal rights and equal opportunity to all her citizens irrespective of their race. Unless that happens Malaysia must be isolated from all the global forum including trade and investment. As of now it seems “Malaysia is not truly Asia but truly racist”.

FIIs may face tougher entry norms

The finance ministry of Govt of India, wants to restrict investments by foreign institutional investors (FIIs) from countries whose market regulatory structure is not compliant with principles laid down by the International Organisation of Security Commissions (IOSCO).

Drawing from the Ashok Lahiri committee recommendations, the ministry, which had earlier asked Sebi to prepare a negative list of tax havens, has asked the regulator to prepare a list of non-IOSCO jurisdictions. This move by the ministry may lead to a blueprint for FII investments in the country. Sources said it was important to ensure that an entity investing in India was regulated by a credible regulator back home, which followed internationally-accepted principles of due diligence. A country becomes a tax haven only because of a favourable double taxation avoidance agreement with India. A tax haven can lose its status with changes in the tax treaty.

While a country which is not a tax haven may not necessarily have a robust security markets regulatory structure in conformity with global best practices, a tax haven, in some cases, could follow global best practices in its security market regulations.

The Spain-headquartered IOSCO is the international standard-setter for securities markets with its norms applicable in more than 90% of world’s securities markets. All IOSCO members have to sign a memorandum of understanding, follow the principles endorsed by the body and facilitate exchange of information among the international community of securities regulators.

The organisation follows a comprehensive methodology which enables an objective assessment of the level of implementation of the IOSCO principles in the jurisdictions of its members and the development of practical action plans to correct identified deficiencies.

The body aims at facilitating cross-border co-operation, reducing global systemic risk, protecting investors and ensuring fair and efficient securities markets. It has 109 ordinary members, 11 associate members and 63 affiliate members.

Incidentally, market regulators in some popular tax havens including Mauritius, Cyprus and British Virgin Islands have MoUs with IOSCO. The majority of the foreign investment into the securities market in India comes from Mauritius because of the existence of a favourable tax treaty between the two countries. While Sebi is an associate member, Forwards Markets Commission of Mauritius is an ordinary member of IOSCO which was set up in 1983.

TOI