Policy Space for Building Production Capabilities in the Pharmaceuticals Sector in Low- and Middle-Income Countries: Evidence from Bangladesh

Abstract Over the past four decades Bangladesh has built enough domestic productive capacity in the pharmaceuticals and related industries to generate manufacturing capacity and employment to provide access to medicines in the country and to become a modest exporter of medicines as well. This paper traces the role played by government policy in fostering Bangladesh’s burgeoning pharmaceuticals sector and then examines the extent to which such policies would have been permissible under World Trade Organization (WTO) rules and the rules of recent trade and investment treaties. Bangladesh has not had to adhere to such rules given its status as a Least Developed Country (LDC) but will face those rules as it may graduate from LDC status in the coming years. We find that a significant amount of Bangladesh’s policies would not have been permitted under the WTO, and even more policy space would be constrained under other regional and bilateral trade and investment treaties. These findings reveal that Bangladesh will face a series of challenges as it graduates from LDC status in its efforts to build its domestic pharmaceutical industry moving forward. Our findings also pinpoint challenges for current WTO and other trade and investment treaty members who now seek to build domestic productive capacity in this sector in the wake of the COVID-19 pandemic.