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Indonesia Pharmaceuticals and Healthcare Report Q4 2009
Business Monitor International, Aug 2009, Pages: 91
This Indonesia Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Indonesia's pharmaceuticals and healthcare industry
In this Business Environment Rating matrix for Q409, Indonesia once again occupies 12th position, out of the 15 regional markets surveyed in the Asia Pacific region. The country’s pharmaceutical rating is lower than in the previous quarter, with most other markets being downgraded due to the current economic challenges. Main drawbacks to investment in Indonesia include political instability, corruption, low per-capita spending on pharmaceuticals – which is further hampered by rising costs of drugs – and a small proportion of elderly people in the country. On the other hand, annual growth of its pharmaceutical market, coupled with rising population numbers and a relatively promising economic base, will continue to attract multinationals willing to expose themselves to a risky operating environment.
By 2013, the market should reach a value of IDR39,749bn (US$4.60bn), up from IDR26,393bn (US$2.79bn) in 2008. The figures represent a compound annual growth rate (CAGR) of 8.53% in local currency terms, although the forecasts are at risk from economic and regulatory factors. Given the lack of a reimbursement scheme, local population will continue to rely on cheaper, mostly domestically-produced generics. Consequently, copy drugs’ total market share is expected to increase from 21.7% in 2008 to 25.5% in 2013, at the expense of their patented counterparts. This situation will be compounded by the possible closure of some multinational sale offices currently operating in Indonesia, due to the requirement that foreign companies either invest locally or leave.
However, as most active pharmaceutical ingredients (APIs) are imported, the effects of weaker local currency and the rising costs of raw materials are passed onto the consumer. Therefore, pharmaceutical volumes will remain vulnerable to currency fluctuations and the purchasing power of the local population. On a positive note, exports – driven by Good Manufacturing Practice (GMP) certification gained by some local manufacturers over the past months – should continue to increase steadily, mirroring the trend over recent years.
Despite the significant problems affecting the pharmaceutical sector, it is hoped that opportunities to precipitate the growth of Indonesia’s drug industry will be provided by the Association of Southeast Asian Nations (ASEAN) free trade agreement (FTA), which is due to be fully implemented in 2011, when the 10% tariff on pharmaceuticals entering Indonesia will be reduced to zero. China is due to complete an FTA with the ASEAN by 2010, representing new business opportunities as well as threats to Indonesia’s drugmakers. An FTA between ASEAN countries and Australia and New Zealand was signed in February 2009, while a deal with India is also being implemented, having been approved by the Indian cabinet in July 2009. An agreement with Japan is already in force, implementing a lower 5% tariff for medicines.
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