Sustainable Production Precision Surgical Instruments
Sustainable Production Precision Surgical Instruments
Business Model Description
Investment in scaling up or establishing B2C or B2B surgical instrument manufacturing units to reduce Pakistan's import dependence by ensuring availability of affordable, quality equipment in the local market. Examples of companies active in this space are:
Surgicon Pvt. Ltd. (Surgicon), is a manufacturer of surgical instruments and accessories. It has a customer base comprising private hospitals and clinics in the UK, USA and Germany and has established a new facility in Pakistan in 2017. The company has a workforce consisting of 700 employees and 300 contractors. Surgicon reported revenue of more than USD 7 million. (9)
Alispo International, established in 2003, has more than 20 years of experience in manufacturing, and packaging 1800 surgical, 700 dental, 200 veterinary, and 600 surgical forceps in controlled and certified facilities. (10)
Expected Impact
Increase in the penetration of healthcare delivery by improving domestic manufacturing, distribution and export of precision surgical instruments.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Pakistan: Punjab
Sector Classification
Health Care
Demand for more hospitals, medical services and medical instruments has increased post-COVID-19, recent floods and due to the availability of health cards making hospital visits, and demand for treatments more frequent. There is a need to address demand but at affordable prices. Pakistan has a huge Current Account Deficit (CAD) and manufacturing of surgical instruments that records an annual export of USD 307 Million can significantly contribute to reducing CAD. (1)
Policy priority
Pakistan Strategic Trade Policy Framework (STPF) 2020-2025 is a comprehensive document that narrows down sectors for trade and manufacturing. Medical devices and surgical instruments are one of these priorities. The framework suggests a technological upgradation in surgical instruments as an intervention to enhance exports. (2)
Gender inequalities and marginalization issues
The COVID-19 pandemic has exposed vulnerable populations who have disproportionately suffered the impact of the pandemic. Women's and girls’ health has been severely affected. Their access to essential health services, in many cases, has been cut off, and recovery efforts have been actively deprioritized. (3) Due to floods in 2022, 650,000 pregnant women faced challenges in getting access to maternal services, while nearly 4 million children lacked access to health services. (1)
Investment opportunity's introduction
There are 60 healthcare sector projects in PSDP 22 (Public Sector Development Program) to the tune of a total cost of USD 0.6 Billion. The total foreign funding share for the healthcare sector in PSDP FY22 is 4.4 percent, amounting to USD 73 million, suggesting that the healthcare sector will expand and create many opportunities for private sector investments. (4)
Key bottleneck's introduction
Financing gap has remained one of the biggest bottlenecks in the growth of this sector as public sector expenditure has not reached its optimum levels. Currently, public sector expenditure is 1.2 percent of the GDP. (2) As per estimates, with 100 percent Universal Healthcare Coverage (UHC), the gap is USD 3 Billion. (5)
Medical Technology
Development need
As healthcare distribution includes sale, purchase of pharmaceutical products and medical equipment to hospitals, pharmacies, and physicians, the need for development of surgical instrument industry’s services and products is high. This need is driven largely by rates of insurance, pharmaceutical spending, rising rate of illness especially pertaining to non-communicable and lifestyle diseases, and demographic changes. (4)
Policy priority
Pakistan STPF 2020-2025 has identified the industry need for allocating and enhancing funds for efficient operationalization of training institutes to ensure the labor force is trained in new manufacturing practices. (2)
Gender inequalities and marginalization issues
Out of 13.5 million (20%) women who are a part of Pakistan’s labor force, half of them remain unrecognized and unpaid as their work is considered significant enough to contribute to the family. (6) Furthermore, overall 44 percent of employees in the Punjab region are unregistered (7), making it difficult for women to get equal wages, better employment contracts and training opportunities.
Investment opportunity's introduction
Surgical instrument industry exports amounted to USD 307 million in FY2022 and provided employment to hundreds of thousands of skilled and semi-skilled workers in the country. Investment opportunities exist in technological upgradation in the industry for precision instruments, thereby enhancing exports to USD 564-795 Million by 2025. (4)
Key bottleneck's introduction
In Pakistan, investors face regulatory risk pertaining to compliance with regulations, lack of transparency, weak contract enforcement and difficulty in finding reliable local partners. (8)
Health Care Distributors
Pipeline Opportunity
Sustainable Production Precision Surgical Instruments
Investment in scaling up or establishing B2C or B2B surgical instrument manufacturing units to reduce Pakistan's import dependence by ensuring availability of affordable, quality equipment in the local market. Examples of companies active in this space are:
Surgicon Pvt. Ltd. (Surgicon), is a manufacturer of surgical instruments and accessories. It has a customer base comprising private hospitals and clinics in the UK, USA and Germany and has established a new facility in Pakistan in 2017. The company has a workforce consisting of 700 employees and 300 contractors. Surgicon reported revenue of more than USD 7 million. (9)
Alispo International, established in 2003, has more than 20 years of experience in manufacturing, and packaging 1800 surgical, 700 dental, 200 veterinary, and 600 surgical forceps in controlled and certified facilities. (10)
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
10% - 15%
Pakistan has a population base of 220 million and 2,000 hospitals, which offer a potential market for 17 million surgeries per year. (11)
USD 420 Million worth of exports were recorded in 2021. 15 per cent annual growth (2019-2023) is expected in the export market for surgical instruments. There is room for value addition by precision equipment. (11)
As per export potential estimations for surgical instruments, exports can grow in the range of USD 564-795 Million by 2025. (4)
Indicative Return
> 25%
As per discussions with Surgical Instrument Manufacturers who have ventured into precision instruments, the internal rate of return for such high-end facilities is between 20-25%, owing to high demand and export market access.
As per SMEDA's pre feasibility study (2022), the Internal Rate of Return (IRR) of 57 percent and a Payback period of 2.83 years.(12)
Investment Timeframe
Short Term (0–5 years)
One year is required to set up a manufacturing unit and build linkages for export, and supplier and distributor markets. In the following time period, operations are set-up and the business starts to generate revenues.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Market - Highly Regulated
Market - High Level of Competition
Impact Case
Sustainable Development Need
Non-communicable diseases (NCDs) such as heart disease, diabetes and respiratory diseases expected to comprise of 75% of all diseases by 2025. Treating such diseases will increase the cost of healthcare and require sophisticated medical equipment. (13)
Stainless steel waste post-use of surgical instruments from hospitals causes environmental pollution, but it can be recycled and repaired for reuse. There is a need to introduce good practices to reduce post-use wastage and pollution. (14)
With sustainable practices, commitment to providing affordable solutions, the investment in the business model will meet the needs of providing more jobs, improve living standards and generate exports.
Gender & Marginalisation
It is considered inappropriate for women to enter the surgical instruments sector. Social norms as well as the type of work prevent many women from accessing employment opportunities for advancement in this sector. Women are only 20% of the workforce of this sector (15)
However, there are some instances of women in senior or skilled roles in a few leading exports led manufacturing factories but there is a need to increase the participation of women at managerial positions. (15)
Expected Development Outcome
With investments from companies that create shared value, cluster development in surgical instruments can result in stabilizing and streamlining the value chain. This can be channelized by investment in infrastructure (equipment), service delivery and workforce.
Taking into account the sustainability of surgical instruments, they can be brought in for repair. This will help in increasing the revenue for units from repair work and the waste material can be reused as a raw material (aftersales services and maintenance).
A study has shown that 17 percent of the waste can be recycled and reused while the other 83 percent can be used to make sheet for new instruments; enabling the "reuse and recycle" agenda in the surgical instrument industry. (14)
Gender & Marginalisation
As the sector expands, it is expected that women will benefit from improved employment opportunities with higher-level positions and remuneration.
Primary SDGs addressed
9.2.1 Manufacturing value added as a proportion of GDP and per capita
9.3.1 Proportion of small-scale industries in total industry value added
On SDG 9, manufacturing value added (MVA) as a proportion of GDP slightly reduced to 12.23 from 13.56 percent between 2015- 20 at the national level. Though MVA declined, manufacturing employment as a proportion of total employment remain unchanged at 15% during 2015-19 at the national level. This proportion decreased by 7 percent in Balochistan from 11 to 4 percent during 2015-19. (16)
The proportion of small-scale industries in total industry value added increased to 10.50 percent in 2019-20 from 8.40 percent in 2014-15, despite the overall negative effects of COVID-19 in 2019-20. (16)
The national vision 2025 and voluntary national review, strategic trade policy framework considers increase of value-added manufacturing important for Goal 9 but do not provide a specific quantifiable target. (17)
The national vision 2025 and Strategic Trade Policy and Voluntary National Review consider increase in small scale industry proportion as an important metric of development but do not provide a specific quantifiable target. (17)
5.5.2 Proportion of women in managerial positions
The percentage of women in managerial positions has increased from 2.70 percent (2014) 4.53 percent in 2019 (16)
The National Vision 2025 by Government sets the target of increasing women labor force participation from 24to 45 percent by 2025 but does not give a specific target of increasing their presence in managerial positions. (17)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Absence of regulations may encourage malpractices such as underpayment to employees, poor working conditions, among others. Additionally, unless manufacturing units achieve economies of scale, they will not be able to compete with low-cost imported products.
Impact Risks
Impact of reuse and recycling may not be clearly seen or adopted if business model does not have a recycling unit and offers after sale services.
Gender inequality and/or marginalization risk: There is a risk of exclusion if issues that hinder women's participation in manufacturing units such as transport, safe environment and flexible contracts are not addressed.
Impact Classification
What
Affordable healthcare equipment such as precision surgical instruments reduce the cost of healthcare delivery thereby making it accessible to underserved communities
Who
The IOA impacts general public who benefit from affordable surgeries and medical procedures.
Risk
Unless manufacturing units achieve economies of scale, they will not be able to compete with low-cost imported products.
Contribution
Contribution towards increasing the 0.7% contribution to the global value chain (2009-2019).
How Much
Surgical Instruments can contribute to Pakistan’s exports, thereby reducing Current Account Deficit with an annual export of USD 307 Million.
Impact Thesis
Increase in the penetration of healthcare delivery by improving domestic manufacturing, distribution and export of precision surgical instruments.
Enabling Environment
Policy Environment
Strategic Trade Policy Framework (STPF) 2020-2025: Interventions specific for SI IOA increase in labor and enterprise productivity (planned) (7)
STPF: support to industry in technology upgradation and its relevant capacity building, reduction in cost of doing business, enhanced market access, innovation driven exports, product diversification and value addition. (7)
Financial Environment
Financial incentives: Refinance Scheme for Working Capital Financing of Small Enterprises and Low-End Medium Enterprises. A credit equal to 100 percent of the investment may be available to both Pakistani and foreign investors when the minimum investment is at least USD 175,000. (19)
Fiscal incentives: zero-rating on five major export-oriented sectors (among other goods and surgical goods), Custom duty draw back on surgical and medical devices and Repayment of custom duties and refunds of sales tax on export of medical and surgical instruments (20)
In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises (21)
Regulatory Environment
The European Union Medical Device Regulation (MDR)/Regulation (EU) 2017/745 (EU MDR) entered into force on 26th May 2021, impacting manufacturers which were previously exempt from medical device regulation. The new regulations will be fully implemented starting May 2024. (18)
Medical Devices Rules by Drug Regulatory Authority of Pakistan. the rules state the registration process of device as well as process of imports of device to Pakistan. (18)
Marketplace Participants
Private Sector
Corporates: Surgical Instrument Manufacturers based in Sialkot: Surgicon Private Limited, Alsipo and Hans surgical Investors: Evercare, IFC, Islamic Development Bank, JS Bank, Cordoba Ventures, Glowfish Capital in Heath care
Government
Ministry of Commerce, Ministry of Industries and Production, Drug Regulatory Authority of Pakistan, Ministry of National Health Services Regulation & Coordination
Multilaterals
International Labor Organization, Asian Development Bank, Japan International Coordination Agency
Non-Profit
Surgical Instrument Manufacturing Association of Pakistan (SIMAP), Chambers of Commerce and Industry in Sialkot (Major cluster of IOA) and Overseas, Federal and provincial chambers of commerce and industry.
Target Locations
Pakistan: Punjab
References
- (1) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 29 March 2023.
- (2) Delegation of the European Union to Pakistan. 2021. “European Union Encourages Pakistani SMEs to Seek Opportunities in EU Single Market.” https://www.eeas.europa.eu/delegations/pakistan/european-union-encourages-pakistani-smes-seek-opportunities-eu-single-market_en.Accessed 29 March 2023.
- (3) World Economic Forum. 2022. “Access to Healthcare: Why We Need to Prioritize Women and Girls.” https://www.weforum.org/agenda/2022/05/access-to-healthcare-prioritize-woman-and-girls/.Accessed 29 March 2023.
- (4) SIMAP (Surgical Instruments Manufacturers Association of Pakistan). https://simap.org.pk/new/.Accessed 29 March 2023.
- (5) ADB (Asian Development Bank). https://www.adb.org/sites/default/files/publication/768396/economic-corridor-development-pakistan.pdf.Accessed 29 March 2023.
- (6) UNDP (United Nations Development Programme). 2021. “Womenomics Women Empowering the Economy.” Development Advocate Pakistan, Special Edition, March 2021. https://www.undp.org/pakistan/publications/womenomics-women-powering-economy-pakistan.Accessed 29 March 2023.
- (7) ETI (The Ethical Trading Initiative). 2019. Labour standards in Pakistan’s Surgical Instruments Sector: A Synthesis Report. https://www.ethicaltrade.org/sites/default/files/shared_resources/Labour%20standards%20in%20Pakistan%E2%80%99s%20surgical%20instruments%20sector_2.pdfAccessed 29 March 2023.
- (8) Ahmed, A. 2010. “Pakistan Surgical Industry: Structure, Issues/Problems & Recommendation.” https://www.cdi.psic.gov.pk/reports/surgical/Rawalpindi%20Chamber%20Surgical%20Industry.pdf.Accessed 29 March 2023.
- (9) Surgicon. 2019. “About Us.” https://surgicon.com.pk.Accessed 29 March 2023.
- (10) Alispo International. 2023. “Surgical Instruments Manufacturer in Sialkot, Pakistan since 2003.” https://alispo.com.pk.Accessed 29 March 2023.
- (11) Pakistan Business Council. 2022. “Enhancing the Competitiveness of Pakistan’s Surgical Instruments Industry.” Surgical Industry Report 2022 Digital. https://www.pbc.org.pk/research/enhancing-the-competitiveness-of-pakistans-surgical-instruments-industry/Accessed 29 March 2023.
- (12) SMEDA. “Surgical and Medical Instruments-Prefeasibility 2023”. https://smeda.org/index.php/business-facilitation/smeda-downloads/pre-feasibility-studies/category/145-health-and-medical.Accessed 28 March 2023.
- (13) WHO (World Health Organization). “Noncommunicable Diseases.” https://www.who.int/health-topics/noncommunicable-diseases#tab=tab_1.Accessed 14 April. 2023.
- (14) ETI (The Ethical Trading Initiative). 2019. Labour standards in Pakistan’s Surgical Instruments Sector: A Synthesis Report- Impact on Health of labour.https://www.ethicaltrade.org/sites/default/files/shared_resources/Labour%20standards%20in%20Pakistan%E2%80%99s%20surgical%20instruments%20sector_2.pdfAccessed 29 March 2023.
- (15) Van Straten. B. Dankelman. J. Van der Eijk. A. and Horeman. T. (2021). “A Circular Healthcare Economy; a Feasibility Study to Reduce Surgical Stainless Steel Waste, Impact on environment” Sustainable Production and Consumption. 27. 169-175. https://doi.org/10.1016/j.spc.2020.10.030Accessed 29 March 2023.
- (16) Federal SDGs Support Unit. 2022. Pakistan’s Voluntary National Review 2022. https://www.sdgpakistan.pk/uploads/pub/VNR_2022_Pakistan_Report.pdfAccessed 29 March 2023.
- (17) Ministry of Planning Development and Reform. 2014. Pakistan 2025. https://www.pc.gov.pk/uploads/vision2025/Pakistan-Vision-2025.pdfAccessed 14 April 2023.
- (18) Ministry of National Health Services. Regulation and Coordination Drug Regulatory Authority of Pakistan. 2018. Medical Device Rules. https://www.dra.gov.pk/wp-content/uploads/2022/02/FFMedicalDevicesRules2017Notifiedon16-01-2018-1.pdfAccessed 29 March 2023.
- (19) State Bank of Pakistan. 2017. “Refinance Scheme for Working Capital Financing of Small Enterprises and Low-End Medium Enterprises.” https://www.sbp.org.pk/smefd/circulars/2017/C11-Annex.pdfAccessed 29 March 2023.
- (20) Federal Board of Revenue. Government of Pakistan. 2023. SROs (Statutory Regulatory Orders). https://www.fbr.gov.pk/ShowSROs?Department=CustomsAccessed 29 March 2023.
- (21) BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1Accessed 28 March 2023.