PDF hosted at the Radboud Repository of the Radboud University Nijmegen The following full text is a publisher's version. For additional information about this publication click this link. http://hdl.handle.net/2066/32054 Please be advised that this information was generated on 2021-10-02 and may be subject to change. THE CONTINUOUS RELEVANCE OF THE NATION- STATE THE POLITICAL ECONOMY OF THE PHARMACEUTICAL INDUSTRY IN EGYPT De voortdurende relevantie van de natie-staat De politieke economie van de farmaceutische industrie in Egypte Een wetenschappelijke proeve op het gebied van de Sociale wetenschappen Proefschrift ter verkrijging van de graad van doctor aan de Radboud Universiteit Nijmegen op gezag van de rector magnificus prof. mr. S.C.J.J Kortmann, volgens besluit van het College van Decanen in het openbaar te verdedigen op maandag 14 januari 2008 om 13.30 uur precies door Arsalan Alshinawi geboren op 02 oktober 1964 te Baghdad Promotor: Prof. dr. Robert H. Lieshout Copromotor: Dr. Wil Hout, International Institute of Social Studies, Den Haag Manuscriptcommissie: Prof. dr. Harry Garretsen, Universiteit van Utrecht Prof. dr. Mohamed Salih, International Institute of Social Studies, Den Haag Prof. dr. Bertjan Verbeek THE CONTINUOUS RELEVANCE OF THE NATION-STATE THE POLITICAL ECONOMY OF THE PHARMACEUTICAL INDUSTRY IN EGYPT An academic essay in Social Sciences Doctoral Thesis To obtain the degree of Doctor from Radboud University Nijmegen, on the authority of the Rector Magnificus, Prof. dr. S.C.J.J. Kortmann, according to the decision of the Council of Deans, to be defended on Monday 14 January, 2008 at 13:30 hrs By ARSALAN ALSHINAWI Born in Baghdad, on 02 October 1964 Doctoral Supervisor: Prof. Robert H. Lieshout, Radboud University Nijmegen. Co-supervisor: Dr. Wil Hout, International Institute of Social Studies, The Hague Members of the Doctoral Thesis Committee: Prof. Harry Garretsen, Utrecht University (Chair) Prof. Mohamed Salih, International Institute of Social Studies, The Hague Prof. Bertjan Verbeek, Radboud University Nijmegen. Abbreviations and Acronyms ASEAN Association des Nations du Sud-Est Asiatique (Fr.) EU European Union FDI Foreign Direct Investment GATS General Agreement on Trade in Services GATT General Agreement of Tariffs and Trade HDC Host Developing Country IMF International Monetary Fund IPRs Intellectual Property Rights IAS Islamic Arabic State LDCs Least-Developed Countries MENA Middle East and North Africa MNE Multinational Enterprise MNC Multinational Corporation (Company) NAFTA North American Free Trade Agreement NIE Newly Industrializing Countries OECD Organization for Economic Cooperation and Development R&D Research and Development SOCs State Owned Companies TRIPS Trade Related Intellectual Property Rights TRIMS Trade Related Investment Measures TNC Transnational Corporation UNCTAD United Nations Conference on Trade and Development UNCTC United Nations Centre on Transnational Corporations UNDP United Nations Development Programme UNESCAP UN Economic and Social Commission for Asia and the Pacific UNIDO United Nations Industry and Development Organisation UNTCMD UN Transnational Corporations and Management Division WB World Bank WHO World Health Organization WTO World Trade Organization WW World War ii Case Study Abbreviations and Acronyms CAPMAS Central Agency for Public Mobilization and Statistics CAPA Central Administration of Pharmaceutical Affairs CBE Central Bank of Egypt DPPC Drug Policy and Planning Centre ECES Egyptian Centre for Economic Studies ERF Economic Research Forum GAFI General Authority for Foreign Investment and Free Zones GOFI General Organization for Industrialization GACIC German-Arab Chamber of Industry and Commerce HCP Holding Company for Pharmaceuticals HDI Human Development Index IDSC Information and Decision Support Centre (Cabinet’s) IAS Islamic-Arabic State MOHP Ministry of Health and Population MPE Ministry of Public Enterprise NODCAR National Organization for Drug Control and Research ODP Open Door Policy OTC Over The Counter PEO Public Enterprise Office S&T Science and Technology SOE State Owned Enterprise iii Contents THE ISSUE, SCOPE AND METHOD: AN INTERPRETATIVE OVERVIEW IPE debate: The TNCs-HDCs interaction.……………………..................................... 2 Principal problematique………… …………………………………………………… 6 Key theoretical claim and central thesis…………..……………………………........... 10 Specific objective and analytical framework...…..…………………………………… 11 Research strategy…...………………………………………………………...………. 16 Organization of the dissertation………………………………………………………. 17 PART I TNC-RELATED VARIABLE 1. Technology transfer: The TNCs-HDCs interface 1.1 TNCs and technology……………………………………………...…………….. 18 1.2 Technology transfer…………………………………………………................... 21 1.3 The difference in objectives…………………….……………………………….. 26 1.4 Concluding notes………………………………………………………………… 31 PART 11 STATE-RELATED VARIABLE 2. State-withering perspectives 2.1 The loss of the relevance of the state: Systemic-economistic analyses…........... 32 2.1.1 Liberal-pluralism.................................................................…………………… 34 2.1.2 Dependency and world system ………….......................................................... 37 2.1.3 Globalization thesis …………………………………………………………… 41 2.2 Theoretical and methodological faults of state-withering perspectives ………. 48 2.3 Concluding notes ………………….…………………………………………... 61 3. State-maintaining perspectives 3.1 The continuous relevance of the state: Politicist-statist analyses........................ 64 3.2 Neo-Weberian functionalism: The state-society configuration……………….. 71 3.3 State economic policy…..….……….……………………………………......... 77 3.4 Importance of foreign investment policy-legal system………………………... 84 3.4.1 The theory of the TNC........................................................................................ 84 3.4.2 Empirical indications………….......................................................................... 89 3.5 Concluding notes……………………………………………….……………… 91 iv PART III THE CASE STUDY 4. The case study design: The relevance in IPE 4.1 Why the pharmaceutical industry?…………………………………………….... 92 4.2 Why Egypt?……................................................................................................... 100 4.3 Relevance of the pharmaceutical industry in Egypt for the IPE debate………… 112 4.4 Concluding notes……........................................................................................... 121 5. The political economy of the host state-pharmaceutical TNCs interaction in Egypt 5.1 Main features of the ‘Islamic-Arabic’ political economy in Egypt……………. 122 5.2 The persistence of the state-society structural relations in Egypt….…………... 129 5.3 The continuous role of the government bureaucracy in the economy................. 135 5.4 The location-specific resources of the government bureaucracy in Egypt…….. 141 5.5 Results of survey……………………………………………………………….. 156 5.6 Pharmaceutical foreign investment and technology transfer in Egypt………..... 161 5.7 Concluding notes ……………………………………………………………..... 167 5.8 Tables and Charts……………………………………………………………..... 169 PART IV CONCLUSIONS 175 BIBLIOGRAPHIC LIST 183 v THE ISSUE, SCOPE AND METHOD: AN INTERPRETATIVE OVERVIEW Worldwide Foreign Direct Investment (FDI) of what has become known as Transnational Corporations (henceforth TNCs) quadrupled from US$ 2,766 billion in 1995 to US$10,129 billion in 2005 (UNCTAD, 2006). 1 In the developing countries, inflows of FDI went up from a low initial level of less than $25 billion in 1990, to US$ 100 billion in 1995 and to US$ 173 billion in 1997, and from US$ 179 billion in 1998 to US$ 238 billion in 2000, registering a tenfold increase between 1990 and 2005.2 The study of the way Host Developing Countries (henceforth HDCs), are affected by TNCs, in the debate on the relationship between politics and economics, in the pre- globalization as in the globalization scholarly era, as this dissertation notes, is evidently pervaded with recurring, persistent ideas and reports on the withering away of the host state bargaining power, capability to taken action, authority, legitimacy, capacity, economic policy autonomy and economic sovereignty. This dissertation, which has embodied in the title its spirit and substance, takes issue with IPE-dominating, state-withering understanding. It pursues the task of showing that the political economy of the host state-TNCs relations in an industry like the pharmaceutical in a developing country like Egypt, as a single-country case study, is deviant from the widely-held view of state-withering in IPE scholarship.3 It seeks to address the research- guiding Question of whether there is in some developing countries or regions, in the explanatory relevance or significance of the state or government in the international system, a perceptible continuation.4 Its aim is to acquire valid insights that serve to generate useful hypotheses on a core concern of theories of economic development, IR and IPE, on the position of the nation-state as the foremost political unit, or the central 1 These organizations are, at times synonymously and interchangeably, referred to as international, multinational, transnational or global corporation, enterprise, firm, or company. The present analysis adheres to the UNCTAD term of TNCs, except to preserve the original form of denotation. UNCTAD has since 1993 been serving as the centre within the UN Secretariat for matters related to TNCs and FDI. UNCTAD’s work is mainly carried out through intergovernmental