Jerzy Starak. Polpharma Fits Well into Kazakhstan’s Growth Strategy

Jerzy STARAK

POLPHARMA FITS WELL

INTO KAZAKHSTAN'S GROWTH STRATEGY

In 2011, the Polpharma Group – one of the leading Central and Eastern European pharmaceutical companies and manufacturers of generic drugs – decided to invest in Kazakhstan. It was to be a major investment, worth $120 million over a period of 10 years. Its object was to modernise the Chimpharm plant by replacing all existing infrastructure, upgrading processes, training staff and implementing new production technologies.

Why Kazakhstan?

Polpharma, a company based in Poland, chose eastern markets as the strategic direction of its expansion. This was a natural choice for international expansion, given the cultural and economic ties in the last half-century.

Looking at the list of major importers of goods from Poland, Kazakhstan occupies a distant 50th place. In our opinion, this is much below expectations and significant reserves exist to boost economic cooperation between our countries. We believe that Kazakhstan is the most advanced and stable economy in Central Asia and thus the perfect match for our infrastructure investment.

It is worth noting that, from a business standpoint, in comparison with other Commonwealth of Independent States (CIS) countries, Kazakhstan is a model of success, insofar as the standard of living of its citizens, prestige on the international arena and effectiveness in diffusing internal tensions are concerned. Capital investment such as ours requires a stable environment and a guarantee of investment security in the long run.

For many years, Kazakhstan's economy relied on natural resources and the mining industry. At this point, the country is focusing on the growth of technologically-advanced, knowledge-based industries, such as the pharmaceutical, biotechnology, IT and energy-of-the-future sectors. Polpharma – a pharmaceutical company – fits well into Kazakhstan's growth strategy.

New technologies – the road to success

In the pharmaceutical industry, Kazakhstan is very open to knowledge transfer, modern know-how and foreign investment.

Polpharma Group, which is capable of transferring advanced technology used in its current manufacturing processes, is an ideal partner for Kazakhstan's economy. We are a pharmaceutical company that relies on state-of-the-art drug manufacturing technologies. About half of the advanced technology is transferred from our plants in Poland, while the other half is developed on-site in Shymkent by a team of highly skilled analysts and scientists. As one of the local drug manufacturers in Kazakhstan, we have our own R&D centre, which develops pharmaceuticals from concept to production.

We are the beneficiary of a long-term contract for the supply of medicines, conditional on the marketed products being manufactured in Kazakhstan. For us, it is a natural condition: this is where we want to produce and export modern pharmaceuticals.

It is worth pointing out that our production capacity in Kazakhstan is sufficient to meet the demand for our drugs throughout Kazakhstan and the Eurasian Union. We are a highly specialised supplier of pharmaceutical products used in hospitals and intensive care units. We make sterile products – injections and infusions. Our production facility is unique in the Eurasian Union and therefore a key asset for Kazakhstan's economy.

Being aware of all this, we work intensively with Kazakhstan's economic diplomacy to achieve the country's export objectives. Our export to neighbouring countries, most importantly to Russia, has grown threefold over the last two years.

Santo medicine manufacturing factory in Shymkent city

Technologies and skills

The authorities are doing everything in their power to make the economy resilient to fluctuations on commodity markets. According to the ambitious Kazakhstan 2050 strategy, the country is to become one of the 30 most economically developed countries in the world. This vision is based on the potential of the internal market, the growing demand for high-technology goods and services produced in Europe and Poland and opportunities to expand to other markets in Central Asia.

In the pharmaceutical sector, we are witnessing an evolution of the internal market in Kazakhstan. Patients expect effective therapies based on high-quality drugs with proven efficacy. In the Shymkent plant, Polpharma Group has introduced Good Manufacturing Practices (GMPs) that meet European standards. Therefore, we are able to satisfy these expectations – and indeed the demand for our products keeps growing. SANTO member of Polpharma Group is the market leader: according to the latest official figures for 2018, it is the number one supplier of hospital and pharmacy drugs. This success can be attributed to the high quality of drugs and to the outstanding work of sales representatives.

The importance of professional skills, especially in strategic sectors such as the pharmaceutical industry, is fully appreciated in Kazakhstan today. This year's meeting of the Foreign Investor Council of President Nazarbayev will be devoted to this issue.

It is a particularly important topic, crucial, in our view, for the effective and rapid economic growth of Kazakhstan. Specialised skills required in a given sector and their constant improvement in the age of rapid technological progress are a critical source of competitive advantage.

It is worth noting that the training of employees at the plant in Shymkent was a long and difficult process that began in 2011. Today, we can say that the plant's team works in compliance with European practices and requirements. To achieve this, we had to work closely together for five years, bringing employees to our Polish plants for training and sending our specialists to the facility in Shymkent. Specialists from Poland conducted over 480 days of training sessions. We can say today that the production plant in Shymkent operates in exactly the same way as Polpharma Group's mother plant in Starogard Gdański.

We strongly support the economic diplomacy – an investor's look

Roman Vassilenko, a diplomat and Kazakhstan's deputy Foreign Minister, has recently said that the European Union (EU) is the country's largest trade partner, accounting for 49.8 percent of trade during the period of January-November 2018.

He made an appeal for closer cooperation between the Eurasian Economic Union and the EU. The long-term goal would be to create a single economic zone, stretching from the Atlantic to the Pacific in the future.

For Polpharma Group, this is an extremely interesting prospect. In our development plans, we treat Kazakhstan as a “hub" for further expansion into Asian markets. The current regulatory requirements in Kazakhstan, including registration and marketing of drugs, are modelled on European regulation. Should similar rules be adopted across Central and possibly also Eastern Asia, medicines produced in compliance with European GMP standards could potentially be marketed in countries of this region. We strongly support the economic diplomacy of Kazakhstan in this overarching endeavour.

It is also Kazakhstan's ambition to create one of the most important financial centres in the world and to achieve rapid growth in infrastructure, logistics and transport.

Investor's fate – doing business in Kazakhstan

In the World Bank's Doing Business 2017 ranking of 190 countries, Kazakhstan occupies 35th place. Poland ranks 24th.

In the case of Kazakhstan, the promotion from 49th place was made possible by significant progress in investor and investment protection, tax simplification and streamlining of procedures required to start a business.

Indeed, as an investor with eight years of experience and constant presence in Kazakhstan, we have watched the efforts of the Kazakh government to make decisions and the investment process easier. Before 2011, that is, before it became the co-owner of the largest Kazakhstan pharmaceutical company, Polpharma had a representative office in the country. This allowed us to become familiar with the market and its potential. We paid close attention to the legal system and the government's ambitions in the area of economic development.

This helped us make the decision to invest in Chimpharm, a pharmaceutical company in Shymkent, known today in Kazakhstan under the SANTO member of Polpharma Group brand.

At first, cooperation was not easy. We focused on the transfer of manufacturing technology, on changes in management systems and on the improvement of employee competences.

Our goal in Kazakhstan was to implement European standards of GMPs covering the production of advanced sterile drugs.

At this moment, we own the most modern plant producing sterile drugs in Central Asia. By the end of 2017, the value of our investments in the construction of new and modernisation of existing production facilities at the Shymkent plant amounted to approximately $80 million. Together with the value of transferred technologies and expenditure on employee training, it amounted to $120 million.

It is worth noting that the Kazakh authorities are very supportive of investors who have already made an investment. In our experience, they are eager to help and accelerate the procedures whenever it is needed. The President and his government are responsive to requests and suggestions from investors and try to find concrete solutions to avoid any delays in the investment process. We experienced this help in solving specific issues we encountered on our path.

Atmosphere of support for investors

At the beginning of 2017, Kazakhstan waived the visa requirement for citizens of EU and Organisation for Economic Co-operation and Development (OECD) countries. Furthermore, a direct air connection between Warsaw and Astana was launched at the end of 2017.

The visa waiver programme, simplified work permit application procedures and direct flights make business much easier for Polpharma employees.

From 2014, as the main shareholder of Polpharma and SANTO-Chimpharm, I became a member of the Foreign Investors Council of the President of the Republic of Kazakhstan and the Honourary Consul of Kazakhstan in Poland. As part of these functions, I undertake actions to support the economic and political ambitions of Kazakhstan on the one hand and to promote foreign – Polish – investment in Kazakhstan on the other. It is with satisfaction that we observe growing interest in trade with Kazakhstan. Approximately 190 business entities with Polish capital under various forms of ownership are currently registered in Kazakhstan; in 2004, there were 73 such entities and in 2002, only 42. Polpharma continues to be the leader among investors, but we still hope to face a worthy contender for the title of the largest Polish investor.

A new initiative of the Kazakhstan government, which will help consolidate diplomacy with investment promotion, will certainly contribute to the attainment of this goal. Like Poland, Kazakhstan has adopted the formula of economic diplomacy and we are confident that this policy will already bear fruit in 2019. We will certainly work with the Embassy of Kazakhstan and His Excellency Ambassador Margulan Baimuchan – who is particularly active in this area – to encourage Polish entrepreneurs to make significant investments in Kazakhstan. It is definitely worth it and our example proves that Kazakhstan is a safe and stable country, offering opportunities for further expansion into Central Asian markets.

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ABOUT THE AUTHOR. Jerzy Starak – President of Polpharma S.A. Supervisory Board. Graduated from Main Agricultural School in Warsaw. Undertook professional practice in Great Britain and Italy.

In 2000, he became the owner of Polpharma Group pharmaceutical plant, which is the largest pharmaceutical enterprise in the Polish market. By means of Polpharma, Starak has expanded his activities on other European and Asian markets.

In 2011, the largest Russian pharmaceutical company Akrikhin and largest Kazakh pharmaceutical producer Chimpharm became a part of Polpharma Group.

Created at : 29.03.2019, 17:25, Updated at : 29.03.2019, 17:25