Revealed Comparative Advantages, Industrial Capacities, Trade and Economic Growth: Case for the Pharmaceutical Industry in COMESA

Abstract The objective of the chapter was to analyse the pharmaceutical industry of Common Market for Eastern and Southern Africa (COMESA) in relation to several metrics: Revealed Comparative Advantage (RCA), Industrial Capacity, Trade and Economic Growth. To this end, three methodologies were employed. These are Balassa Index computations, Auto Regressive Distributive Lag Model (ARDL) estimation technique and Sub-sector Industrial Capacity computations for data from 2000 to 2019. Findings indicate that there is evidence of RCA in the pharmaceutical industry for the following countries: Egypt, Tunisia, Kenya, Mauritius, Uganda, Seychelles, Zimbabwe and Zambia in the COMESA regional economy. ARDL regression results confirmed the significance of Foreign Direct Investment, Government Expenditure on Health, Out of Pocket Expenditure, Pharmaceutical Exports as well as Total Factor Productivity for the pharmaceutical industry. Delving deeper into the interplay of the main variables studied, the findings also show an interesting dynamic. Thus, RCA alone does not suffice for competitiveness. It is a necessary but not sufficient condition to spur trade and growth in COMESA since pharmaceuticals is a high-technology industry. This is confirmed by Sub-sector Industrial Capacity results, which show that value addition remains low in countries such as Kenya, Zambia and Zimbabwe. The study recommends expeditious implementation of the industrialisation strategy of the region, value addition initiatives, among others as strategic interventions to improve trade and economic growth of the pharmaceutical industry in COMESA.