Making Medicines in Kenya, Tanzania, and Uganda in the AIDS Era

Abstract

Can foreign aid help the development of local industrial production in poor countries? Studies offer a range of reasons why foreign aid is doomed to fail. Anthropologists highlight the exploitative nature of foreign assistance, while economists emphasize the incompetence of international programs. This paper offers a sociological analysis that identifies specific conditions under which foreign aid can lead to the development and upgrading of local manufacturing. Based on a systematic comparison of local pharmaceutical companies in Kenya, Tanzania, and Uganda, I show that foreign aid contributed to the development and upgrading of a local pharmaceutical industry when it provided three resources in particular: markets, monitoring, and mentoring. When donors were willing to procure local drugs, they created markets, which gave local entrepreneurs an incentive to produce the kinds of drugs donors would buy. When donors enforced exacting standards as a condition to access those markets, they gave local producers an incentive to improve the quality of their products. Finally, when donors provided guidance, it enabled local producers to meet the higher quality standards. Foreign aid has structural limits, however, and it is vulnerable to local conditions; state capacity, in particular, is an important constraint on aid's effectiveness.