Minutes of meeting PPMA & Governor SBP


OCTOBER 15, 2020 –  ZOOM


1.            Deputy Governor SBP Mr. M Jamil.

2.            Director Exchange Policy SBP Mr. Arshad Mehmood Bhatty.

3.            Director Re-finance Scheme Mr. Samer Hassnain.

4.            Chairman PPMA Mr. Tauqeer Ul Haq.

5.            Sr. Vice Chairman PPMA Mr. Arshad Mehmood.

6.            Vice Chairman PPMA Mr. Khalid Misbah Ur Rehman.

7.            Former Chairman PPMA Mr. Zahid Saeed.

8.            Former Chairman PPMA Dr. Shaiekh Kaiser Waheed.

9.            Ex-Officio Member PPMA Mr. M Zaka Ur Rehman.

Chairman PPMA introduced all participants and extended his gratitude to Governor SBP for this important meeting. He further briefed about the introduction of PPMA & an overview of the Pharmaceutical industry. He said that Pakistan (National) Pharma Industries is enjoying a 70% overall share out of the overall PKR 400 Billion value market. It’s one of the industries which is continuously growing in terms of quality standards and providing quality medicines to alleviate the cause of suffering due to different diseases. It was also added that Pakistan Pharmaceutical Industry is playing a vital role in improving patient’s quality of life. He said after gaining a 70% market share, our next step is to improve export business for our country through the support of the Government of Pakistan. It was highlighted that currently, Pakistan Pharmaceutical industry has 300 million USD export, however, this industry possesses huge potential to enhance export by upto 100-200 million USD in the next 4-5 years. He said that the Pharmaceutical export business is quite different vs other industries because unlike other industries, each product of the Pharma industry needs to be pass-through the regulatory process first before it approves for export which takes 3-4 years. PPMA seeks the following support from SBP to extend the export of Pharmaceutical products:

1. Under the Remittance & Export Commission Brokerage & Discount, Pharmaceutical Industry can maintain only 15% in $ account. It was clarified that we are facing tough competition from neighboring countries like India & Bangladesh and we have to meet marketing expenses, distributors & sales team expenses in the export market we operate in. So it’s imperative to provide a further increase of the $ allowance to 30% to enable us for remitting commissions to distributors, salaries for sales & marketing and meeting other necessary expenses. It was added that this decision will be seen as a 1st step to enhance the Pharmaceutical export business in other countries.

2. State Bank of Pakistan has introduced TERF (Temporary Economic Refinance Facility) in March 2020 which will continue till 31st March 2021. Under the scheme 5% is the markup with the grace period of 2 years. To cater to the need for up-gradation to the latest plant equipment, we request that the grace period should be extended by further 2 years and the markup should be fixed 3% per annum instead of 5%.

3. Under the SBP policy of LTFF (Long Term Finance Facility) markup is 5% with 2 years grace period with conditional 50% export or sale of minimum $ 5million. It’s unlikely that in the Pharmaceutical business 50% of the sale to be part of export mainly due to a lot of regulatory requirements. Especially for newcomers, it’s next to impossible. It was requested that this condition should be waived off.

4. Under the scheme of EFS (Export Refinance Scheme Part II), SBP provides short-term facilities in condition to 50% growth over last year’s export. He said that for the Pharmaceutical business 50% growth is unlikely. So we request the condition in this context may be reviewed with minimum same export number over last year to avail short term facility of SBP.

5. Mr. Chairman paid special thanks to Deputy Governor SBP and added that, refinance scheme for salaries helped a lot during COVID-19. He said that the Pharma industry of Pakistan worked hard during the pandemic of COVID-19 to make sure 100% availability of all essential medicine for our patients despite facing a very hard time, as all hospitals/clinics were closed and we were unable to generate sales. A sales decline of 30% to 50% has been observed, he added. However, by this facility given by SBP, it not only helped the industry to sustain but also to maintain our employees. He requested that a running-finance facility on the same term of 3% should be continued for the next 2 years due to the long-term implication of the COVID-19 pandemic, enabling the Pharma industry to operate smoothly.

6. Ex-Officio Member CEC Mr. Mian Muhammad Zaka Ur Rehman emphasized the continuation of running the finance facility based on actual export sales over last year.

7. Sr. Vice Chairman PPMA Mr. Arshad Mehmood said to meet the tough challenges of the neighboring country, manufacturing local APIs should be encouraged. In this context, he said some of the financers from UAE and China are offering 2% or lesser interest rates on financing. He stressed the need for a reduced finance rate through SBP for the benefit of the Pharma Industry in developing local manufacturing of APIs for the sake of a better economy as well as eliminating dependency. Besides that, such funding should also have Islamic terms and conditions.

8. Former Chairman Dr. Shaiekh Kaiser Waheed added that to convert conventional units into state-of-the-art plants in line with GMP, to encourage our export and welcoming new players in the field, loan facility on special rate should be introduced with quality grace period as all of this is linked with the enhancement of Pharma export business.

9. Governor SBP mentioned that the TERF scheme has already been addressed in the case of plant expansion. So it’s suggested that manufacturers should avail that facility for the expansion of their plants and turning into modern plants.

10. Referring to Islamic fundings, Governor SBP mentioned that different versions of Islamic schemes are available in banks and can be availed by the industry on a need basis.

11. Referring to the LTFF scheme, Governor SBP said that though it’s difficult for Pharmaceutical Companies to meet 50% sales over the last years, 5 million $ is viable for the eligibility of export. Besides TERF scheme is available for long-term finance. 3% running finance for export can be availed through the Refinance scheme on concessional rates only. For local requirement commercial option is the only choice, he added.

12. Addressing the above 4 points by Chairman PPMA related to Refinance Scheme, Governor SBP invited Executive Director SBP, Mr. Samer Hassnain.

13. Mr. Samer Hassnain said that the TERF scheme validity date extension beyond 31st March 2021 is not possible as it is a temporary scheme and supposed to be closed in the decided time frame. However, if any LC opened before 31st March 2021, it shall be eligible for this scheme.

14. The 5% is the maximum rate to be offered in the TERF scheme. It’s not only 10 years facility but at the same time, it’s a fixed rate facility which is beneficial for the industry.

15. Talking about LTFF, he said that for big transactions, banks always keep their margin on the low side, like 1 % or 1.5%.

16. In the EFS scheme, the requirement is assumed to be 2 % by consumers which is 1% for 6 months. However, if the same loan is recycled for the next six months then 1% is supposed to be charged for the 6 months. He added that due to COVID-19, SBP has reduced it by 1 to 1.5%. The same can be checked through a circular of SBP. Under this, it’s effectively at 1.5%.

17. Dr. Shaiekh Kaiser Waheed requested the nomination of one focal person to resolve the concerns if any, related to the above discussion being a highly technical matter. The same agreed by Governor SBP and ensured full support.

18. About the 1st point of the discussion above related to Remittance & Export Commission Brokerage & Discount, Pharmaceutical Industry maintenance of only 15% in $ account, Governor SBP suggested one-time registration of Distributor with SBP. SBP will send advice to the subordinate bank to send remittance through Pakistani bank so Companies won’t need to pay from 15%. He added all other industries are restricted to 10% only. However, only the Pharma Industry is allowed for 15%. But SBP will consider to further increase the limit.

19. Chairman PPMA requested for an email containing all details regarding one-time registration with SBP for onward sharing with PPMA members. Same honored by Governor SBP.

In the end, Chairman PPMA paid the vote of thanks. Governor SBP also extended his good wishes for Pakistan Pharma Industry with better and fruitful results in terms of pharma exports.