The political fallout of the vaccine endgame: State self-sufficiency

The political fallout of the vaccine endgame: State self-sufficiency

  • 2021 will be dominated by the roll-out of Covid-19 vaccines, and the political fallout thereof
  • Relatively slow progress in Europe risks weakening the EU’s credibility, in contrast to the post-Brexit UK
  • India’s ban on vaccine exports to meet domestic needs will lead many EMs develop their own vaccine manufacturing

Covid-19 and the political response to it defined markets in 2020. In 2021, the focus will shift to the global roll-out of Covid vaccines, and the political fallout of the rollout, with attended consequences for markets, is only beginning and will be felt across emerging as well as developed markets.

2021 was supposed to be easy. We would all get the jab and then slowly go back to our normal lives. But, as always, the reality is going to be much more complex. Not only does vaccine colonialism mean that rich countries will recover much faster than poorer ones, but this is also the first time that we have attempted to stop the spread of a truly global pandemic through vaccinations alone, after public health measures have failed:[1] there is still no AIDS vaccine, and SARS was stopped through public health measures alone before vaccine candidates were ready for testing. The closest we have had to the present situation was the much less serious H1N1, or swine flu, epidemic of 2009, where vaccination did play a role in halting the spread of the disease. With the rollout underway, these political consequences, some of which I’ve previously highlighted as risks, are beginning to emerge in Europe, India and the developing world more broadly.

Europe: Who is to blame?

Whether you break down the data by person or by number of jabs administered, it is clear that six countries currently lead the pack in vaccine administration: the US, the UK, China, Russia, Israel and the UAE.[2] Anger that no EU members are on this list is palpable. While other EU members could legally have followed the UK’s lead and procured for themselves, political concerns and the experience during H1N1 of vaccine manufacturers playing EU member states against one another led the remaining EU members to band together to buy as a bloc. Complex decision making about financing, purchasing and medical approval have all slowed the EU’s process and, indeed, the EU rejected the opportunity to purchase additional doses of the German-developed Pfizer-BioNTech vaccine last summer. Pfizer and BioNTech are now trying to find ways to further increase production to provide more vaccine to Europe. Although the EU is negotiating to double its supply of the vaccine, Germany and Denmark have now gone ahead and directly contracted for additional doses.

This is a crucial opportunity for the EU to show its value post-Brexit. If the EU is perceived to fail in delivering vaccinations, especially in comparison to illiberal rivals like Russia and China, it will continue to lose credibility to impose the rule of law on its emerging markets members (Hungary and Poland are, unsurprisingly, among the nations that are most critical of EU vaccination delays) and on the wider European sphere of influence. Meanwhile, Eurosceptics will point to the UK’s vaccination success as evidence of success to be had outside of the European project and a reason not to trust the European Commission to lead the EU’s post-Covid recovery plans.

For Europe’s credibility, the vaccine battle is a fight that it needs to win. If the EU can get the vaccination programme back on track, it will help to build the case for European solutions to future problems, but failure will weaken the European project further.

India: Possession is nine-tenths of the law

While the EU allows doses of Pfizer-BioNTech manufactured at Puurs in Belgium to cross the English Channel to fulfil the UK’s pre-purchase order despite worry about shortages in the EU, India is taking no such risk. Although our data shows that the Indian government has pre-purchased 800mn vaccine courses, enough to inoculate almost 60% of its population, the CEO of the Serum Institute of India (SII), the world’s largest vaccine manufacturer by volume, has recently indicated that the government has banned vaccine exports and private market domestic sales for several months and that SII has agreed to provide 100mn doses to the government at a “special price”.

This is particularly important for two reasons.

  1. COVAX, the global initiative to provide vaccines to the developing world, is one of SII’s biggest customers. With SII delaying exports, vaccine doses will only begin to arrive in much of the developing world in Q2. While COVAX deals guaranteed access to vaccine doses in the first wave of production, India will go first.

  2. Although India’s Bharat Biotech has developed a homegrown Covid vaccine, SII’s production is all foreign vaccines, mostly Oxford-AstraZeneca. I’ve previously highlighted the advantages that emerging markets get from domestically manufacturing a vaccine even if they did not develop it. India is now reaping that benefit, and we can expect Indonesia and Vietnam, which are also planning to manufacture, to do the same. The WHO could provide additional transparency by making readily available data on which countries have vaccine production capacity and vaccine management agencies meeting WHO standards.

Everybody wants some: The vaccine opportunity to build soft power in the developing world

Against this backdrop, and with future pandemics a real risk, governments across the emerging world will look to develop their own domestic manufacturing capability. Helping them to do this will be an opportunity for pharma firms, for direct investors and for governments seeking to develop their soft power in the emerging world.

I’ve written previously that the Trump administration’s success in acquiring vaccine doses far in excess of what the US requires creates a unique international aid opportunity for the US, and the UK and Canada, the two other large pre-purchasers, are in a similar position, albeit at a smaller scale. While taking a handout from the US, the UK or Canada will help to address Covid today, it does not build resilience tomorrow, and it reinforces vaccine colonialism: the idea that vaccines will flow first to the developed countries and only to most developing countries after the developing world has met its needs.

As China, Russia and India show, the antidote to vaccine colonialism is domestic manufacturing. Domestic manufacturing capability means that a developing country will be at the front of its own line, not at the back of the rich world’s line. The Oxford-AstraZeneca vaccine, for example, is based on a standard process, and a UK government looking to enhance its standing globally post-Brexit could benefit tremendously by supporting developing countries to prepare to manufacture Oxford-AstraZeneca and other future vaccines based on the same process.

I hope that the UK government does this, but the reality is that China, Russia and India are probably most likely to take this route, further enhancing their reputations at the expense of that of the West. This could take the form of state aid, investment by state companies or, especially in the case of India, encouraging India’s vaccine behemoths to open branches in other emerging markets.

For investors, the opportunity is likely to be on side of the emerging market developing its domestic vaccine manufacturing capability. Private pharma companies and healthcare groups will benefit if they can position themselves as the natural recipients of foreign support to develop vaccine manufacturing.

[1] While there are obviously a few notable exceptions where public health measures alone have contained the disease, most notably in China, Taiwan and New Zealand, there are also plenty of places, like Japan, Israel and Australia, where public health measures seemed to be working before the virus reasserted itself.

[2] Data on vaccinations administered is from Bloomberg’s Vaccine Tracker.


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