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Indonesia Pharmaceuticals and Healthcare Report Q1 2009
Business Monitor International, Feb 2009, Pages: 93
This Indonesia Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on Indonesia's pharmaceuticals and healthcare industry.
In the BMI Business Environment Rating matrix for Q109, Indonesia occupies joint 13th position out of the 15 regional markets surveyed in the Asia Pacific region, alongside Vietnam. Main drawbacks to investment in the country include corruption, low per capita spending on pharmaceuticals and a small proportion of the elderly in the country. On the other hand, annual growth of its pharmaceutical market, coupled with rising population numbers and a relatively solid political and economic base, will continue to attract multinationals willing to expose themselves to a risky operating environment.
This risky environment is illustrated by the recent introduction, following a two-year grace period, of the requirements that all foreign companies selling pharmaceuticals in the country must also have local manufacturing facilities. The government order will impact 13 international drugmakers, including
Astellas Pharma, AstraZeneca, Eli Lilly, Merck Sharp & Dohme (MSD), Novo Nordisk, Roche, Servier and Wyeth. The minister of health has reportedly proclaimed that multinationals can leave the country if they are unhappy with the changes, despite the fact that Indonesia’s legislation would be going
against the global. Still, BMI believes that the Indonesian authorities are using the threat to achieve the government’s aim of providing affordable medicine to its people, which is a strategy it has previously employed with respect to avian influenza samples.
Nevertheless, other news provides some room for optimism. In October 2008, the Indonesian industry minister was reportedly considering removing pharmaceuticals from the nationalistic ‘negative investment list’, which has to date prevented foreign entities from providing more than three quarters of
the funds invested in a pharmaceutical concern. The move would have a number of consequences. On the one hand, while local wealth will suffer through more capital leaving the country, on the other, the economy, as well as the health of the nation, would improve through increased foreign direct investment (FDI). We would also anticipate increased foreign direct investment by drugmakers, although the regulatory climate remains far from predictable, given the conflicting developments regarding the position of foreign companies in the country.
In terms of a wider operating environment, the year of 2009 will be dominated by parliamentary and presidential elections in April and July, and the impact of the global economic recession. We expect broad political stability, but on the economic front, we see real gross domestic product (GDP) growth
slowing from 6.1% in 2008 to around 5.0%. Although Indonesia should be better insulated than its regional peers due to strong domestic consumption, the fact that Indonesia's main trading partners are facing recession – coupled with sharp falls in global commodity prices – will weigh on the country’s economic performance in the coming years. Still, domestic demand forms a bigger share of GDP than in many Asian countries, and Indonesia's consumer confidence has been buoyed by falling inflation and lower fuel prices.
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