Sudan and South Sudan Pharmaceuticals and Healthcare Report Q1 2013

BMI View: Sudan and South Sudan's will continue to be of least interest to foreign pharmaceutical firmsin the Middle East and North Africa region as the countries are plagued by high inflation, fiscalconstraints and underdeveloped non-oil economies. Political risk remains elevated as many disputesbetween them are still unresolved. These macroeconomic uncertainties will mean lack of focus on publichealthcare provision, which further complicates the problem that the general population are unable toafford expensive pharmaceuticals.

Headline Expenditure Projections:

Pharmaceuticals: SDG1.49bn (US$556mn) in 2011 to SDG1.93bn (US$472mn) in 2012;30.0% in local currency terms with a contraction of 15.1% in US dollar terms. Forecastunchanged from Q412.

Healthcare: SDG11.01bn (US$4.12mn) in 2011 to SDG13.44bn (US$3.29bn) in 2012; +22.0%in local currency terms and -20% in US dollar terms. Forecast down slightly from Q412's, dueto reassessment of historic values.

Risk/Reward Ratings: BMI rates Sudan as the most unattractive market in the Middle East and Africa(MEA) region, highlighted by its score of 20.8 out of 100. With the exception of a relatively largepensionable population, Sudan has a small pharmaceutical market expected to contract until the end of2013, with annual per capita spending on pharmaceutical drugs set at less than US$20. The population islargely rural and restless and, given the country's state of war and population dispersion between Sudanand South Sudan, we forecast poor population and market growth prospects. We highlight that economicand political stability are greater determinants of the country's investment attractiveness than their needfor medicines and disease profile. Currency weakness, high inflation, a restless population, politicalunrest and security issues are dragging on economic activity and making the operating environmentdifficult for local and foreign drugmakers. Sudan's fragmented regulatory framework with poorintellectual property protection and a weak pricing and reimbursement scheme, in addition to mainly outof-pocket expenditure on healthcare, means entry into the market and revenue-earning potential formultinationals will be a significant challenge.

Key Trends & Developments

In October 2012, Indian multi-specialty hospital group MIOT Hospitals' chairman, MallikaMohandas, said that it intends to build a hospital in Sudan. The Sudanese government andprivate companies have shown interest in MIOT establishing a hospital. MIOT is likely to beginthe project in 2013, building a hospital with 300 beds.

In the same month, Vimal Wakhlu, chairman and managing director for TelecommunicationConsultants India Limited, disclosed that South Sudan will soon benefit from tele-medicinesprojects funded by the Indian government underits 'Pan Africa e-Network' project.

BMI Economic View: We have downgraded our growth forecasts for Sudan's economy, and we nowexpect a steeper contraction, of 5.3%, compared to previous estimates of a 1.4% decline. This is expectedto improve to positive 2.1% growth in 2013, another downward revision from our previous estimates of3.4%, on the back of what we believe will be a slow and difficult transition into an economy which is notbased on oil.

BMI Political View: More than a year after South Sudan's secession, the agreements reached by thepresidents of the north and south in late September 2012 amount to limited progress, with the keypolitico-military issues left almost entirely unresolved. Even if a final settlement is agreed between thepolitical actors, military hawks could derail implementation.