You Are Here: Aru Namgyal > The 5 Ws - Who, What, When, Where, & Why
In areas like the Himalayan mountains and the Tibetan plateau, medicinal and aromatic plants
(MAPs) are powerful drivers of economic growth. Being both appealing to global industry and
science and accessible to locals, companies, governments, development agencies, and
enterprising individuals all see opportunity to put this resource to use. Especially when the natural
products industry is going strong.
It currently is.
The natural products industry is a composite market, best described by its
components - pharmaceuticals, alternative medicine, vitamins, minerals,
supplements, functional foods, and chemicals - to name a few.
Hence, here are the numbers:
•
•
•
•
Dietary supplements:
Vitamins & minerals:
Herbal & homeopathic products:
Sports & specialty supplements:
$46 billion
$17.8 billion
$19.4 billion
$8.8 billion
And that's without the mega-sectors: pharmaceuticals, chemicals, and food ...as
you might have realized if those are the ones relevant to you.
Who's driving such growth? Consumers, investors, businesses, and policymakers, and in particular ones with interest in smart business practices, are.
Smart business practices, as used here, are research, planning, analysis, and
communication.
But when global trade connects your business to people in places in which you
don't have your bearings, how do you get smart?
You call us. Aru Namgyal gives you accessible, specialized, and reliable market
research, planning, and communications services for raw materials, for finished
natural products, and for business partnerships - connecting your global
business with the wonders of the Himalayas, and connecting your Himalayan
business with the wonders of the world.
With Aru Namgyal, you ride the growth wave.
Consulting: consulting@arunamgyal.com
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You Are Here: Aru Namgyal > The 5 Ws... > The Market for Tibetan Natural Products
Who's buying Tibetan natural products? Pharmaceutical, alternative medicine, vitamins, minerals,
and supplements, foods and drinks, chemicals, cosmetics, and wholesaling companies are.
Maybe you are too.
What are they buying?
• Raw plant material, funneled through a long chain of intermediaries, from the Tibetan
plateau down to the lowlands of China, Nepal, and India, is first. Exports of raw materials
from China accounted for 5.4% of the herbal market worldwide and were valued at
US$1,791.9 million in 2002.
• Over–the–counter Tibetan medicines, made in one of the 15 GMP-certified factories in
the Tibetan Autonomous Region or any one of their counter-parts in Qinghai, Gansu,
Sichuan, Yunnan, or elsewhere, is second. For more on this right now, see Industry of
Tibetan Medicine.
• Functional foods and drinks with Tibetan ingredients, like Rhodiola crenulata,
Cordyceps sinensis, or Saussurea medusa is third. For more on the T.A.R. medicinal plant
trade at once, see Trade of Tibetan Medicinal Plants.
Are the buyers smart? Probably so, but with the case of ingredients and products from the
Himalayas, it's hard to see how they can be: information from and about trade in the region is rare
- and credible information even rarer. As a result planning, management, and communication is
difficult.
Then, why is anyone buying?
The products are unique and their potential to be the next big thing is great. China and India
together represent more than 40% of the world's biodiversity resources, much of which is in the
Himalayan mountains and the Tibetan plateau (which lie in both countries, as well as in Bhutan,
Nepal, and Pakistan). Raw materials from the region often have unique compositions and
particular efficacy – perceived and real; finished products from the region employ these same raw
materials.
There is a certain convenience. Raw materials used in Tibetan medicine have volumes of
documentation attesting to product efficacy and safety, and detailing botanical, chemical, and
medical information. Tibetan medicine formulations, in addition, have as much or more
documentation – all easing the path for import, export, distribution, and labeling. And
manufacturers there now all now have GMP certification, guaranteeing products were made in
state-of-the-art facilities.
There's also the marketing cache.
So how can businesses get smart? By demanding more.
We are. And we're helping you. Through consulting – which itself offers you intelligence, insight,
& implementation services – through our trade network, and through our annual tradeshow we
are facilitating communication, planning, and innovation between you and your partners.
Next page: Overview of the Market for Tibetan Natural Products
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You Are Here: Aru Namgyal > The 5 Ws... > The Market for Tibetan Natural Products > Overview
People everywhere have insatiable imaginations and unstoppable drives to innovate, producing
revolutionary ideas, products, and services at every turn. The Himals are no exception. They
have produced an ethnicity of people that has summited Mount Everest more times than any
other imaginable, a medical system which has cured previously-intractable disease, and plants
with elements of both of these: strength and power.
Companies in the Himalayan region have had the determination to tap into the global market for
natural products. The primary approach they've followed is to offer their unique products at low
prices. Buyers have indeed been found. With them, local companies insulated from new
demands in the marketplace.
Yet new demands are being voiced vociferously.
The demands are for communication. Global natural products consumers want information on the
ingredients that are responsible for their controlled appetite, the decrease in their free radical
count, and their escape from heart disease. They especially want information on ingredients
sourced from high biodiversity developing region, like the Tibetan Autonomous Region (T.A.R.).
Without information to give consumers from suppliers, the businesses in the natural products
industry are at a loss. Core customers' demands for information remain unmet, engendering
mistrust and decreasing consumer loyalty. Some businesses re-target their products to new
converts – who typically don't care about anything more than the product label. Though they may
be less demanding, these new converts' purchasing habits are also notoriously fickle. Fad-based
purchasing lends to more extreme boom and bust cycles which, in turn, cause even greater
confusion among core customers. On occasions of magnificence – like when a species is
eliminated or a national industry destroyed – new converts themselves are reached by negative
press and are driven to question sourcing practices.
The net result is: it's risky to maintain opacity.
Many businesses in the natural products industry, therefore, are working towards transparency.
However, as information requires channels its for relay, mutually understandable language for its
expression, and desire for communication, these businesses are finding it rough. The difficulties –
and opportunities – are outlined in this and subsequent sections of The 5 Ws.
Next page: Trends in the Market for Tibetan Natural Products
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You Are Here: Aru Namgyal > The 5 Ws... > The Market for Tibetan Natural Products > Trends
China’s medicine industry started to use foreign investment in 1980. By the end of 1999, there
had been 646 overseas funded enterprises in the pharmaceutical making industry, of which
chemical preparations and Chinese herbal medicine and patent medicine processing industries
accounted for more than a half.
To attract greater foreign direct investment (FDI), the PRC government has been investing in
areas valued by global companies: clinical validation of herbal medicines, “modernization” of
design, production, and packaging, and standardization of herbal formulations. For example, the
government has instituted regulations governing all aspects of the production process, from
wholesaling to lab testing to production to administration of herbal medicine products, over the
past 4 years. The six-fold regulations were driven by entry into the WTO in 2000 and include the
following two, which have had, and are having, the largest impact in the plateau region:
•Good Manufacturing Practice: GMP was implemented by the State Food and Drug
Administration (SFDA) to ensure products' hygienic, consistent, and quality-controlled
production. GMP certification reportedly took compliant companies approximately 105
working days to obtain and investment of up to 20 million RMB per production line. Most
compliant companies spent between 50–60 million RMB to upgrade all lines within the past 4
years.
•Good Supply Practice: GSP is being implemented by the SFDA (also called the SDA) to
ensure hygienic and quality-controlled raw material inputs – the latter engendered largely
through implementation and enforcement of expiration dates. Certification has reportedly
taken compliant companies 110 working days to obtain with a investment of about 2 million
RMB into improved facilities.
Partly as a result, international companies have been putting money in. The following is an
abbreviated list of those with research & development partnerships in China – which though
existent prior to 2000, may well have grown in size in recent years:
•Ciba-Geigy Switzerland
•Pharma-genesis USA
•Phyto-pharmaceuticals Canada
•Rhone-Poulenc Rorer USA
•Upjohn USA
•Smith Kline Beecham UK
•Bayer Germany
Fresenius Germany
Boehringer Ingelheim Germany
Otsuka Japan
Gruenenthal Germany
Bristol-Myers Squibb USA
One World USA
Johnson & Johnson USA
Next page: Issues in the Market for Tibetan Natural Products
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You Are Here: Aru Namgyal > The 5 Ws... > The Market for Tibetan Natural Products > Issues
Despite the trends, even companies with decades of experience in China agree that most
business there is opaque. A major reason for this is fragmentation. The natural products industry,
in general, is highly decentralized, as a result of which essential marketing information is
hindered from traveling efficiently. In China, specifically, the State Administration of Traditional
Chinese Medicine states that out of 1,059 enterprises in the Traditional Chinese Medicine
industry, 1,018, or 96.13%, are small and medium sized. Of the top 10 companies, operations
were highly decentralized as of 2001. The Tibetan medicine industry is no different.
As a result of fragmentation, discrepancies between supplied and demanded product are
frequent, leading to avoidable wastage of plant materials, as found by innumerable studies
including those conducted in the Nepal and India Himals by the IDRC's Medicinal and Aromatic
Plant Program in Asia (MAPPA) and WWF. Moreover, untrained harvesters over-exploit plant
resources. For most species, according to the Jiangsu Institute of Botany, natural reserves are
exhausted within 10 to 20 years of collection. For some species, wild populations last only for
three to four years.
For the global medicine industry, the foregone value of lost drug products in 1992 alone was
US$150 million due to species extinction. For China, the estimated annual economic loss caused
by ecological imbalance and environmental pollution was 610 billion RMB in recent years alone,
according to a study by the State Environmental Protection Agency.
Still, buyers exist in the short-term and they insulate companies in source regions from need to
invest into better management, communication, training, or conservation. Without such
investment, two phenomena occur:
•Global buyers look elsewhere, sometimes shifting procurement entirely. As a result,
businesses in source regions are ostensibly exposed to greater risk than those that have
invested into training and conservation. This is illustrated by more extreme boom and bust
cycles in source regions, and, on occasion, the destruction of national industry.
•Resources are irreparably damaged - alienating people in, and the economies of, source
regions.
This brings us back to the core consumer driving growth in the natural products industry: a
"green" consumer.
Next page: People in the Market for Tibetan Natural Products
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You Are Here: Aru Namgyal > The 5 Ws... > The Market for Tibetan Natural Products > People
Consumers
Globally, and in China nationally, “green consumers” are driving consumption in the natural
products industry. For example, up to 97.7% of home improvement products buyers in
Guangzhou and Lanzhou were willing to pay a premium for environmentally-friendly products. In
the case of LOHAS (Lifestyles Of Health And Sustainability) consumers in the USA, responsible
as a group for $230 billion in annual purchasing, they'll pay up to 40% more for sustainable
products.
Along with these vehement demanders, general consumers, governments, investors, businesses
themselves, and non-governmental organizations (NGOs), – all of whom rely on the efforts of the
PRC government – are all making advances towards transparent and sustainable business
practices. As are we, Aru Namgyal.
Governments
Governments worldwide called companies’ to account when they signed the 1992 Convention on
Biological Diversity, China being one of the first ten signatories. At home, the PRC government
created environmental labels and eco-awards, such as the Nation Environmental Friendly
Enterprises, encouraging corporate environmental responsibility. Laws regarding pollution control
have been signed by the State Environmental Protection Agency (SEPA). SEPA and the National
Bureau of Statistics (NBS) have raised the bar by announcing, in 2004, the design of a “Green
GDP” accounting system which will debut in 3-5 years.
Investors
Further highlighting demands for responsible business practices, a survey by McKinsey &
Company of eight Asian nations that a lack of transparency raised the cost of capital 700 basis
points there, with additional research finding investors willing to pay a 24% premium for shares of
companies in China with high levels of corporate governance. Moreover, according to the
International Chamber of Commerce, increasing governance in corporations has already yielded
greater FDI.
Companies
Companies, seeing all of the above, have adopted voluntary environmental standards such as
ISO 14001. In China, ISO 14001 and environmental labeling has been surpassing growth
projections. In addition, buyers have begun seeking out credible and responsible suppliers, even
working with governmental and non-profit agencies on occasion. Examples are Home Depot and
the Forest Stewardship Council, Starbucks, Conservation International and USAID, and Johnson
& Johnson and the World Wildlife Fund (WWF) . Further examples from the Dow Jones
Sustainability Indexes of companies with operations and sales in China that have invested in
sustainability.
Foods & Beverages
Unilever
Asahi
Nestle
Healthcare
Novozymes
Novo Nordisk
Glaxo Smith Klein
Household & Personal Care Products
Proctor and Gamble
Weleda
Go to the Top
Non-governmental organizations
Companies have much support in China and the Himalayan region; many organizations have
been working for years to inform and otherwise advance transparency and sustainability. Below
are our top–picks, representing what we consider to be the NGOs most relevant to growth of the
Himalayan natural products industry:
World Wildlife Fund (Lhasa, Kathmandu, Thimpu, Leh)
IDRC (Medicinal and Aromatic Plants Program in Asia) (Delhi)
Conservation International (Critical Ecosystem Partnership Fund)
(Beijing)
Center for Biodiversity and Indigenous Knowledge (Kunming)
Sustainable Use /
Conservation
ICIMOD
Foundation for Revitalization of Local Health Traditions (Bangalore)
World Conservation Union (Kathmandu, Beijing)
Pragya (Leh, Kaza & Keylong, Joshinath, Gangtok & Tawang,
Gurgaon)
TRAFFIC (Hong Kong)
Food and Agriculture Organization of the United Nations (FAO)
(Beijing)
Rainforest Alliance (New York / Gao Yao, Guangdong)
China SRI (Beijing)
Association for Sustainable & Responsible Investment in Asia (ASrIA)
(Hong Kong)
CSR Asia (Hong Kong)
China Project Development Facility (Chengdu)
New Ventures (Chengdu)
China Consumers' Association (CCA) (Beijing)
Go to the Top
Corporate
Governance
CSR / SRI
PRC government
Finally, the PRC government is publicizing these issues and promoting improvement throughout
many aspects of production. Policy measures include lower tax rates for technologically
advanced ventures and for those whose ingredients are in the “State Protection Chinese
Medicine” list, among other things. Additionally, the government has created subsidies for
medicinal plant cultivation and stated preference for the “sustainable use of medicine resources”.
While all of these efforts have lent admirably to increased communicability, communication itself
is still an issue. Opportunities for Himalayan businesses to meet potential business partners and
investors, dialogue and analysis to plan business strategies, and motivation for cross-cultural
business, scientific, and environmental understanding are all limited.
That's why we're here.
Aru Namgyal
We offer the info: specialized market research in English, Chinese, and Tibetan. We offer the
channel: the MAP Tibet trade network. We offer the venue: the annual Whole Himalayas Expo.
For more information, visit What We Offer in The Aru Namgyal Solution section.
Go to the Top
Next page: Events for Market for Tibetan Natural Products.
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You Are Here: Aru Namgyal > The 5 Ws... > The Industry of Tibetan Medicine
The natural products industry is a composite market comprised of numerous sectors, including pick your term - natural, alternative, and/or traditional medicines. In the Tibetan Autonomous
Region (T.A.R.), the largest developed industry within natural products, is Tibetan medicine, an
industry whose companies trade both raw medicinal materials and finished medicine products.
Consequently, it is the subject of this section.
But first, a disclaimer: the Chinese section of the Tibetan plateau is contained in the T.A.R.,
Qinghai, Gansu, Sichuan, and Yunnan. Tibetan medicine is commercially produced and widely
used in all five provinces. While some of the discussion is applicable to the entire industry, the
discussion below does not assume itself studied except in the case of the T.A.R. The T.A.R. is
unique in that it is the largest, least accessible, and most sparsely populated region of all of the
five.
Now then, who's selling? According to PRC publications, the T.A.R. has more than 500 industrial
enterprises and it's industrial output was 1.8 billion RMB in 2000. According to our own research,
there are ten pharmaceutical companies, a minimum of six functional foods and teas companies,
and innumerable incense companies (more of which are appearing on weekly, due to the 2002
SARS–driven sales boom) which employ Tibetan medicinal plants as a key ingredient. Finally,
there are fifteen GMP-certified Tibetan medicine manufacturers. At the end of 2000, they had
annual revenues of 191.62 million RMB, up 3.57% from 1999. The same year's reported annual
profits were 59.22 million RMB.
What are they selling?
• Raw plant material, funneled through a long chain of intermediaries, from the Tibetan
plateau down to the lowlands of China, Nepal, and India
• Over–the–counter Tibetan medicines, made in one of the 15 GMP-certified factories in
the Tibetan Autonomous Region or any one of its counter–parts in Qinghai, Gansu,
Sichuan, Yunnan, or elsewhere
Functional foods and drinks with Tibetan ingredients, are also a major market; these
manufacturers are mostly situated in provinces other than the T.A.R. though some may have
offices in Lhasa city. Consequently, they are not presented here, though they are referred to,
particularly in the next section, the Trade of Tibetan Medicinal Plants.
Where are they selling?
While they primarily serve local and national markets, international opportunities are sought. The
following figures on Tibetan medicine exports are offered by China's Facts & Figures, 2002.
Export Value of Tibetan Medicine, T.A.R., 1990-2000
Year
US$ Value (2002 Prices)
1990
1,290,000
1995
150,000
1997
1,840,000
1998
40,000
1999
1,620,000
2000
1,780,000
Next page: Overview of the Industry of Tibetan Medicine
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You Are Here: Aru Namgyal > The 5 Ws... > The Industry of Tibetan Medicine > Overview
China joined the World Trade Organization (WTO) in 2002 at which point transparency became a
necessity. Environmental laws and regulations, trade laws and regulations, environmental
standards and other technical standards as well as protective measures on human, plant, and
animal health and sustainability are all required to be disclosed.
To this end, the government has been priming the natural products industry for international
competitiveness through such transparency–enhancing mechanisms as Good Manufacturing
Practice (GMP), Good Supply Practice (GSP), and Good Agriculture Practice. GMP has been in
full effect in the T.A.R. since 2004 and GSP is currently in the works. Further development
initiatives in the natural products industry, and in the T.A.R. in Tibetan medicine specifically, have
highlighted sustainability issues, raising awareness to a high degree among the general
population of consumers and patients.
According to research by ASrIA, public awareness of environmental issues has been growing
steadily in China as a whole, with many cities having replaced plastic bag usage with that of
paper or more environmental friendly materials. Lhasa is no exception to this, having just last
year (2004) outlawed the use of plastic bags in many stores, markets, and stalls. China's 2002
National Report on Sustainable Development corroborates the growing awareness of
sustainability issues, having found demands for sustainability increasing across the population,
generally, and government agencies, specifically.
With these various factors in mind, the PRC government, which considers Tibetan medicine a
“pillar industry” for the region, has been promoting Tibetan medicine and incentivizing certain
business strategies. For instance:
•Subsidies have been made available for manufacturers cultivating, or planning to cultivate,
medicinal plants
•The Committee on Science and Technology of the T.A.R. has been standardizing herbal
formulations and publicizing its research.
•Tibetan medicines and medicinal materials are being promoted by most, if not all, Ministry of
Commerce (MOFCOM) offices in the T.A.R.
Companies are responding to these developments, particularly in the ways of
transparency and support for environmental and social issues. The largest and
most successful Tibetan medicine manufacturer, for example, not only donates to
orphanages and elderly homes, but has trained and employed a large number of
debilitated people in its Kongbo location. (Kongbo is an area southeast of Lhasa.
The prefectural seat is Nyingtri.) This same firm established an experimental
training farm in 2004, pictured in the side bar on the page entitled Get in on the
Action. Another top manufacturer is trying out contract farming, guaranteeing
participating farmers revenue equivalent to that which they would have earned if
they'd grown non-experimental cash crops even in the events of bad or failed
harvest.
Much is still missing, such as information itself – especially as concerns the adoption of new
technological processes in the industrial production of traditional medicines and the size, vigor,
and usage rate of wild medicinal plant resources – strategic planning, channels for managing the
trade, and venues for communication with core constituents – but that's why we're here: we give
you the information, the insight, and the ability to implement solutions; we give you the channel to
manage your trade network; we give you the venue to communicate. For more on our services,
see What We Offer in The Aru Namgyal Solution section.
Next page: Trends in the Industry of Tibetan Medicine
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You Are Here: Aru Namgyal > The 5 Ws... > The Industry of Tibetan Medicine > Trends
Due in large part to the implementation of Good Manufacturing Practice, efficiencies of scale are
projected to kick in. Along with the facts that consumers are willing to pay higher prices for quality
traditional medicine products, particularly for those with well-known brand names, and being that
traditional medicines' average net margin of 9.5% is 2 percentage points higher than that of
western medicines, strong, sustained growth is projected.
Furthermore, Chinese consumers began to learn about Tibetan medicine five years ago, with a
major increase in awareness occurring two years ago. The Cheezheng Group, which designed a
unique marketing campaign involving on–site Tibetan performers and an MC, must be given
credit for this, though growth in worldwide interest in Tibetan medicine certainly played no small
part. Consumers in non-Tibetan parts of China, being new to Tibetan medicine, value branding.
As such, Cheezheng has been topping the charts in over-the-counter (OTC) Tibetan medicine
retail sales.
Surveyed manufacturers presently sell in the T.A.R., Beijing, Shandong, Guangdong, Shanxi,
Hunan, and Chengdu. Aside from Cheezheng, companies' greatest brand recognition is within
the T.A.R. While in other markets firms use TV, radio, print, & outdoor advertisements to establish
an identity, in the T.A.R. public relations is much more important. Public relations, as used here,
signifies relationship development with hospitals and clinics, as well as direct interaction with
individuals, etc. Expenditures by Tibetan medicine manufacturers on marketing is growing, with
all surveyed companies having plans explicit market expansion plans for 2005.
Being that the medicine is from the Tibetan plateau, Chinese consumers
assume it is “more authentic” and has higher quality raw materials than,
say, Traditional Chinese Medicine. As such, there is also a large market for
unprocessed Tibetan medicinal materials. The processed products are
considered uniquely efficacious, “pure”, and absent side effects. Purchases
are made, in the way of most herbal medicines, to self-treat ailments and
chronic ones in particular. Moreover, as China's population, on the whole,
becomes older and richer, health and well–being are increasingly sought in
the marketplace and processed and unprocessed Tibetan medicine
products are often given as gifts symbolic of health and well–being.
Therefore, there is much opportunity for the Tibetan medicine industry.
However, growing awareness of consumer power, of sustainability, of long–term planning, and
environmental management are slowly changing demands upon business, akin to that which is
happening on the global scale. The differences between global and domestic trends are that firms
in China, and especially in the remote T.A.R. are new to a consumer–driven marketplace. As
such, they are only slowly responding to consumer – and global partner – demands.
Next page: Issues in the Industry of Tibetan Medicine
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You Are Here: Aru Namgyal > The 5 Ws... > The Industry of Tibetan Medicine > Issues
Companies in the T.A.R. lack deliberateness. Much of sourcing, for example, is conducted
without contracts or purchase orders, that is without any communication at all between buyer and
seller prior to the time of sale. Companies get required materials through the random arrival of
sellers on the factory doorstep. While this system may work at present, it will likely not scale.
Without getting into that, it is firstly not a system that inspires confidence in consumers, especially
ones who read about under–supply of key medicinal plants in government–approved newspapers
and/or worry about the decrease of plant varieties being used in compound formulations.
Furthermore, Tibetan medicines are derived through logic and rules of a fully
functioning system often at odds with western science. The industrialization
process has fundamentally altered many facets of this system, including
methods of plant collection, medicine production, drug distribution, and even
doctor–patient interaction. However, analysis as to how and how much
industrialization has affected efficacy or the sustainability of resources has
not followed.
Disillusionment has resulted among core consumer segments, as has confusion among doctors,
patients, and factory managers themselves, as discovered during first–hand interviews. The chief
among their concerns are:
•Production methodologies which now grind and mix large volumes by machine, as
opposed to doctors themselves hand–processing small quantities at the time of collection
•Harvesting processes which now rely on untrained hired hands to identify, assess quality,
and collect, as opposed to trained doctors doing this work first–hand
•The use of fewer ingredients in compound formulations mostly as a result of new
regulations, market–based prices, and decreased availability which have all increased the
cost of, or access to, inputs
Companies have not researched any of these factors' impact on efficacy; without having done so,
they are unable to convince these consumers of the integrity of their products – or of their
companies. Therefore, the most loyal and ubiquitous consumers of Tibetan medicine on the
globe, doctors, hospital patients, and even factory managers, are slowly losing confidence.
Furthermore, lack of confidence in the quality and sustainability of untrained harvesters’
materials, has caused a parallel estrangement of business partners. Consequently, firms seem to
be losing an edge for lack of communication on these issues.
Hence, what is required to build stronger global partnerships – as outlined in the Market for
Tibetan Natural Products section – is also required for stronger retail sales: research, planning,
and communication. And those are our specialties: research, planning, and management, the
channel for managing your trade network, and the venue for communication and networking. For
more information, visit What We Offer in The Aru Namgyal Solution section.
Next page: People in the Industry of Tibetan Medicine
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You Are Here: Aru Namgyal > The 5 Ws... > The Industry of Tibetan Medicine > People
Consumers
Globally, and in China nationally, “green consumers” are driving consumption in the natural
products industry. For Tibetan medicine, ninety percent of those interviewed purchased based on
effectiveness, convenience, and quality. Convenience, in this case, refers to Tibetan medicine's
purported lack of side–effects. These consumers are conscious of a link between environmental
conditions and both efficacy and quality, as well as its potential to affect also convenience. They
would like to firms to take greater responsibility for environmental impact and would like greater
transparency.
End consumers of Tibetan medicine are similar to the core customers in the global natural
products industry: they generally have a higher income bracket, an interest in travel, outdoor
activities, and sports, have a strong concern for health and well–being, and are between the ages
of 30 to 50. We know this from first-hand research conducted over four months in 2004 in both
Beijing and Lhasa. Customers we surveyed expressed concern for the lack of standardization in
the Tibetan medicine market, the lack of communication on new drug developments, and
perceived inadequacy of environmental resource management.
The government, businesses, non–governmental organizations (NGOs), and investors all agree.
As do we.
PRC government
There are approximately eleven government agencies in the T.A.R. involved in management,
promotion, and sustainable development of Tibetan medicine. These include:
Government Agencies
State Administration of Industry & Commerce (Chinese)
State Food and Drug Administration
Ministry of Agriculture (Chinese)
Department of Science & Technology
Department of Health (Chinese)
Tibet Development Fund
Companies
Companies, in response to government incentives and regulations, have begun to experiment
with medicinal plant cultivation, contract farming, and corporate philanthropy – including donating
medicines to counties on a regular basis. Most Tibetan medicine manufacturers do work with
local NGOs, and in at least one case with the PRC government´s Tibet Development Fund.
Tibetan Medicine Industry, T.A.R.
Region
Lhasa
Company Name
Tibetan Medicine Factory of the Tibetan Autonomous Region
Tibet Shiong Ba Lha Chu Holy Water Tibetan Medicine Factory
Traditional Tibetan Medical Pharmaceutical Factory of Tibet Medical College
Tibet Tibetan Medicine Company Limited (Chinese)
Tibet Nuodikang Tibetan Medicine Company Limited
Lhoka
Tibet Shannan Yongbulakang Tradition Pharmaceutical Factory
Tibet Shannan Jinzhu Tibetan Medicine Factory
Tibet Nyalam Tibetan Medicine Factory
Tibet Shigatse Tianzhi Pharmaceutical Factory
Tibet Nagchu Prefecture Tibetan Medicine Factory
Tibet Changdu Coslight Limin Pharmaceutical Factory Co. Ltd.
Tibetan Pharmaceutical Factory Of Chamdo Hospital Of Traditional Tibetan
Medicine
Tibet Chamdo Riton Tibetan Medicine Factory
Tibet Cheezheng Tibetan Medicine Factory
Tibet Nyingtri Prefecture Tibetan Medicine Factory
Nyalam
Shigatse
Nagchu
Chamdo
Kongbo
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Non-governmental organizations
The T.A.R. is the recipient of large amounts of foreign aid. Key areas targeted by international aid
include sustainable development, healthcare, and conservation. Organizations involved with
Tibetan medicine are primarily in healthcare and economic development while those involved with
conservation and sustainable use are concerned with the trade of medicinal plants. Below is our
short–list.
Poverty Alleviation /
Economic Development
PSTTM
Bridge Fund
Tibet Poverty Alleviation Fund
Trace Foundation
Mountain Institute
Healthcare /
Medical Education
Swiss Red Cross(Swiss German)
Terma Foundation
KunDe Foundation
Association for International Solidarity in Asia
one H.E.A.R.T.
Rokpa International
Himalayan Amchi Association, Nepal
Nomad RSI, India
International Trust for Traditional Medicine, India
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Investors
An important strategy for the regional government and business is foreign direct investment
(FDI). Total FDI in 2000 was US $160 million in the T.A.R., involving investment into 125
enterprises, loans to seven projects, and financial support of forty-nine programs. Main investor
countries were the United States, Japan, Germany, Hong Kong, Malaysia, Nepal, and Macao. Of
these, the first four have sustainability indexes and active SRI groups. Furthermore, in recent
years, small Tibet-focused social capital organizations have appeared in these same countries.
While interest in FDI – both giving and receiving it – has increased in recent years, and measures
have been taken to raise communication, accessibility is still limited. Opportunities for Himalayan
businesses to meet potential business partners and investors, dialogue and analysis to plan
business strategies, and motivation for cross-cultural business, scientific, and environmental
understanding are all limited.
Again, that's why we're here.
Aru Namgyal
We give you the information, the analysis, and the managerial capability. We give you the
channel for communication with your partners, suppliers, your stakeholders, and your consumers.
We give you the annual venue to meet your existing and potential partners and investors and
grow your business into a smart, strong, and powerful one. For more information, visit What We
Offer in The Aru Namgyal Solution section.
Go to the Top
Next page: Events for the Industry of Tibetan Medicine
Consulting: consulting@arunamgyal.com
Tradeshow: expo@arunamgyal.com
Trade Network: trade@arunamgyal.com
General Inquiry: tellmesomething@arunamgyal.com
©Copyright 2005 Aru Namgyal
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You Are Here: Aru Namgyal > The 5 Ws... > The Trade of Tibetan Medicinal Plants
The herbal medicine industry in China was worth more than $1 billion by the end of the 1990s. By
1999, the figure may have been as high as $5 billion.
National exports of medicinal and aromatic plants (MAPs) were valued at $478 million in the first
11 months of 2001, with growth expected of up to about US$580 million – that is, up to 3 percent
– according to China Business Magazine. The magazine attributed 81.7 percent of national MAP
exports to western Sichuan and Gansu – significant portions of which are ethnically Tibetan and
employ Tibetan medicine as the primary source of healthcare. Europe and United States are the
largest consumers of herbal medicines, responsible for 41% and 22% of global annual
consumption respectively.
Who’s buying?
• International natural products manufacturers, through a long chain of intermediaries,
from the Tibetan plateau down to the lowlands of China, Nepal, and India
• Domestic natural products manufacturers and wholesalers, including the 15 GMP–
certified factories in the Tibetan Autonomous Region and their counter–parts in other
provinces
• End consumers who shop in ubiquitous medicinal materials markets which are found in
most, if not all, cities of China
Who’s selling?
• Domestic wholesalers and natural products manufacturers, including manufacturers of
over–the–counter Tibetan medicines, functional foods and drinks, incense, and more
• Middlemen, including doctors of Tibetan medicine in county hospitals and village clinics, as
well as businessmen from many provinces of western China
• Harvesters, themselves, who, seeking income to supplement their careers as doctors,
tourist guides, farmers, or herders, for example, engage in the trade for however long it is
lucrative and convenient
The natural products industry markets is a composite market comprised of foods, drinks,
vitamins, minerals, and supplements, alternative medicines, pharmaceuticals, cosmetics,
chemicals, and more. Please see Market for Tibetan Natural Products for more. Tibetan medicine
is the largest full–fledged industry in the Tibetan Autonomous Region (T.A.R.) which relies on the
trade of medicinal plants.
Next page: Overview of the Trade of Tibetan Medicinal Plants
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You Are Here: Aru Namgyal > The 5 Ws... > The Trade of Tibetan Medicinal Plants > Overview
How do buyers get their materials? Harvesters and middlemen often take the initiative. When
harvesters initiate the process, they often take on the role of middlemen, too, buying their
neighbors’ stock, transporting the whole lot to the nearest town, and selling to
other middlemen, factories, or retailers, cut, cleaned, dried, or wet, etc., as called
for by product. If middlemen are the initiators, harvesters verbally negotiate a deal
before setting off for the mountains; middlemen amass volume, transport, and sell.
Buyers – wholesalers, manufacturers, and, occasionally retailers, – sometimes
initiate the transaction. Larger local companies either await their few regular
traders and negotiate formal written purchase orders, or informally send word,
including to the Nepalese border from where most low–altitude Indian plants are
transported, for materials to be sent or contracts to be made. Smaller buyers place
verbal orders, but the occasion of their order–placement is rare.
Once materials have been centrally gathered, they are mostly sold to irregular
customers, but also occasionally to regular ones with whom standing contracts
exist. Materials are sent from the plateau mostly overland to the next major trading
center. The trade is mostly from west to east, with Indian plants being imported,
and Tibetan and/or Chinese plants exported from Sichuan or Gansu, or eastern
provinces like Guangdong.
Raw material exports from China, as a whole, accounted for only 5.4% of the worldwide herbal
market. When China and India account for 40% of the world's total biodiversity reserves, why is
this? It seems the primarily due to the opacity of the trade, which results, internationally, in a
hesitancy to invest in partnerships.
First and foremost among global buyers' concerns are variable quality, reliability of supply, and
sustainability. Adding to their worries, a study done by the Jiangsu Institute of Botany states that
over-exploitation is a problem common to medicinal plants in China. For most species, the natural
reserves are exhausted within 10 to 20 years of collection. For some species the supplies from
the wild last only for three or four years, after which, commercial production is no longer possible.
The FAO further concludes that most commercially used high altitude Himalayan plants are
unnecessarily pressured by unskillful harvesting. As such, foreign direct investment (FDI) in MAPderived sectors have been limited.
The PRC government has publicized a number of key issues, including medicinal plant
cultivation, sustainability, and sustainable development, and while awareness and concern have
indeed become widespread, trade practices have yet to improve. Reasons for this are firstly, the
newness of a market–driven economy and a resulting incomprehension of market demands and
slowness to react. Secondly, capacity to engender transparency and raise confidence across
buyer and supplier networks is low. That is, of course, Aru Namgyal’s reason for being.
We offer specialized services to bridge the needs of global buyers and with the abilities of rural
suppliers. We do this through research, analysis, and project management in our consulting
division, planning, exchange, training, and promotion in the MAP Tibet trade network, and the
relationship–building, communication, and networking at the premiere annual tradeshow for
Himalayan natural products. For more, see What We Offer in The Aru Namgyal Solution section.
Next page: Trends in the Trade of Tibetan Medicinal Plants
Consulting: consulting@arunamgyal.com
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You Are Here: Aru Namgyal > The 5 Ws... > The Trade of Tibetan Medicinal Plants > Trends
The past decade was witness to the birth of a full–fledged industry of Tibetan medicine – which is
now internationally competitive – and the functional foods and nutraceuticals industries relying
specifically on medicinal plants from the Tibetan plateau as key ingredients. Consequently,
consumption of medicinal plants from the plateau has greatly increased.
Wild-crafting (sourcing plants from the wild) is the norm, with only trial cultivation taking place at
present. While wild–crafting generates seasonal employment in many regions, economic returns
for harvesters are not high. Of them, the returns for plants flowing into the non-Tibetan medicine
channel are generally higher and the job generally requires less skills, knowledge, and
experience. These two factors combined make the latter channel a more attractive one in
suppliers' minds. There have been few attempts to regulate the trade, though for certain highly
threatened plants, select local governments have illegalized collection.
Medicinal plants are harvested from all ecosystems across Tibet – from its
lower altitude subtropical forested valleys to its highest mountain slopes. Many
commercially significant medicinal plants are collected from alpine
ecosystems, from altitudes ranging between 4,000–6,000 meters above sea
level. These areas often have poor soil and low regenerative capacity – giving
roost to some of the world’s most hardy and powerful plants. Many high
altitude plants have not been deeply evaluated for medicinal, nutritional, or
commercial potential, but are affected by the over–harvesting of those – like
Saussurea medusa or Rhodiola crenulata – that have. Consequently,
management of these resources is critical, both for future and present–day
economic growth.
Due to government education campaigns, there is widespread awareness of environmental
issues across the PRC, and plateau region is no exception. While businesses see a need for
environmental management, they do not yet see the business case clearly, and even less so as
distance from harvesting locations increases. As such, the Critical Ecosystem Partnership Fund,
which promotes conservation in the mountains of Southwest China that rise up into the Tibetan
plateau, notes, “[to date], few Chinese private businesses… have the capacity to deal with
environmental issues… [G]aps in current investment are in conservation capacity at the
grassroots level and in nature reserves; coordination of conservation activities by different
stakeholders; and shared knowledge”.
The major reason for business’ slow reaction is insulation from marketplace developments; this
insulation is quickly diminishing and as it does, the demands for greater responsibility and
transparency have begun to take shape. Thus, the market for environmental services and
management has arisen in China and is growing at 10% per annum, faster than in other
developing nations.
Next page: Issues in the Trade of Tibetan Medicinal Plants
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You Are Here: Aru Namgyal > The 5 Ws... > The Trade of Tibetan Medicinal Plants > Issues
For the most part, environmental conditions across the plateau are good, as estimated by
numerous government surveys, including one by the US Embassy in Beijing. The most pressing
issue is desertification caused by over–grazing by livestock. Solutions for desertification generally
suggest alternate income sources for herders, one of which has been the cultivation of medicinal
plants. It has been pointed out in those same surveys that were this suggestion to be followed, it
would be problematic in that medicinal plants are a commodity whose value is derived primarily
from the plants’ scarcity. If cultivation were to occur, therefore, returns for the farmer would be
quite low.
In fact, at present, for wild–crafting, the returns are already low for most plants. The following
table of per annum earnings for individual harvesters, based on first–hand research, is not
authoritative, but is indicative of the low economic value of MAPs and the supplementary nature
of harvesting.
Plant Name
Latin
Aconitum tanguticum
Lagotis yunnanensis
Gymnadenia orchidis
Saussurea medusa
Chrysosplenium carnosum
Corydalis hendersonii
Rhodiola crenulata
Tibetan
(phonetic spelling)
Bongkar
Honglen
Wanglak
Kangla Metok
Yakyima
Rekon Tsimar
Solo Marpo
Earnings
RMB /
Year
1,750
750
300
150
131
38
14
As earnings are low, and the job both temporary and part–time, most workers are unskilled. Plant
identification is unscientific - both in terms of Tibetan medicine and botany, - with entirely different
species sometimes being harvested in confusion. As such, discrepancies between plants that are
required by buyers and those that are supplied often come to pass, especially in the Tibetan
medicine raw material sales channel, resulting in unnecessary destruction and wastage.
Simultaneously, market liberalization has created greater competition among businesses, which
has created pressure upon them for greater efficiency. As such, harvester training is beginning to
seem necessary. Necessity has been underscored by increasing environmental awareness on
the part of consumers and other key parties. As such, momentum towards formalization of the
MAP trade is gathering.
The biggest step towards this end is Good Supply Practice (GSP), which was introduced in Lhasa
in late 2004 and is expected to take full effect within the next 2 to 3 years. The State Food and
Drug Administration (SFDA) will dispense licenses for the purchase and sale of all kinds of
materia medica, including plants, dispense certifications for storage facilities, and require
expiration dates to be publicized and enforced. GSP will not improve harvesting techniques,
however, or resource management.
Next page: People in the Trade of Tibetan Medicinal Plants
Consulting: consulting@arunamgyal.com
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Trade Network: trade@arunamgyal.com
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You Are Here: Aru Namgyal > The 5 Ws... > The Trade of Tibetan Medicinal Plants > People
Consumers of Tibetan medicinal plants are global natural products manufacturers, domestic
natural products manufacturers (who are also botanical wholesalers), and end consumers. The
fist two have been described in the previous sections, so this section will be much briefer.
End consumers are primarily Chinese, though Tibetans, other minorities, and foreign nationals
also occasionally purchase Tibetan medicinal plants for personal use. Chinese consumers,
however, account for easily 90–95% of direct purchases, if not more, and are generally middle–
income earners, progressive in character: that is, they are interested in spirituality, well–being,
and health, as well as in the environment and pollution control.
Awareness of environmental issues has been created by the PRC government, and non–
governmental organizations (NGOs). As a result of these groups’ work and demands, businesses
in the region have begun to create environmental and sustainability strategies. We are here to
enable these various groups reach their common goals.
PRC government
The government in the T.A.R. has enacted environmental protection legislation, in line with
national developments, since the 1980s, establishing 13 national and regional nature
reservations, covering a total area of 326 thousand square kilometers. The T.A.R. also plans to
establish a method of integrating environmental and economic policies and decisions, according
to the China Council for International Cooperation on Environment and Development. It also
states that environmental impact assessments are to be undertaken at early stages of policy
development. The following are the main government agencies in the T.A.R. which govern natural
resource use:
Government Agencies
State Environmental Protection Administration
State Administration of Forestry (Chinese)
Ministry of Land and Resources
Ministry of Agriculture (Chinese)
It is the goal of these agencies (and the recommendation of outside governments and analysts)
to promote environmentally-sustainable development over the long–term.
Non-governmental organizations
The T.A.R. is the recipient of voluminous foreign aid. Up to 1997, the total foreign aid received by
the region was $72.0574 million. The following agencies advance conservation, sustainability,
and/or income generation through trade of medicinal plants:
Sustainability /
Conservation
PSTTM
World Wildlife Fund
Earth Island Institute / Tibetan Plateau Project
Wildlife Conservation Society
Income Generation
Bridge Fund
Project for the Blind
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Companies
Companies participate in regular meetings on plant sustainability and endangerment, including
the first–of–its–kind 2000 meeting on endangered species in Tibetan medicine, jointly–organized
by government and NGO agencies. As such, they have begun experimenting with sustainability
solutions, such as cultivating plants. Most manufacturers cooperate with local NGOs and/or
government agencies to plan and execute these, and related, programs. For more on companies,
see People in the Industry of Tibetan Medicine
Aru Namgyal
We give you the information, the analysis, and the managerial capability. We give you the
channel for communication with your partners, suppliers, your stakeholders, and your consumers.
We give you the annual venue to meet your existing and potential partners and investors and
grow your business into a smart, strong, and powerful one. For more information, visit What We
Offer in The Aru Namgyal Solution section.