On Social Development and Economic Growth: Pharmaceutical Manufacturing in Kenya, Uganda and Tanzania

During colonialism and into independence, the pharmaceutical markets in Kenya, Tanzania and Uganda have been dominated by Western multinational companies (MNCs). Today, in contrast, Indian pharmaceutical companies that manufacture generic versions of drugs control a large share of the market in all three countries. Indian generics directly contribute to social development in these three countries by making access to low-cost, high-quality medicines possible. But what impact does the availability of affordable Indian medicines have on economic development, particularly industrial upgrading? The literature on development has often expected tension between the goal of social development and the goal of economic growth because scholars assume that the efficient provision of affordable social services would have to come at the expense of local industry. Based on extensive interviews in Kenya, Uganda and Tanzania, I this paper I show that, under certain conditions, this is not necessarily the case. I find that three conditions are particularly essential for imports to contribute to local production: (1) that the ‘social development’ market – the one nowadays often funded by the Global Fund to Fight AIDS, Tuberculosis and Malaria and by the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) – does not a-priori exclude local manufacturers, (2) that the drugs purchased are effectively monitored, and (3) that local manufacturers can gain access to technological know-how even when this technology is not easily provided by the market.  All three countries show that it is only the presence of these conditions that allow for industrial upgrading to follow social development but a comparison between Tanzania, Kenya and Uganda is particularly useful because companies in these countries had access to technology through different means and different degrees of government support.