Promising Potential in Indonesia’s Pharmaceutical and Health Industry

The pandemic, unexpectedly, has opened our eyes to the importance of medicines, medical devices, and healthcare workers. In pharmaceutical industry, the race to develop a COVID-19 vaccine has prompted countries to invest more in health research programs and procure vitamins, supplements, and immune-boosting drugs.

In Indonesia, pharmacy is a promising sector. Due to the increasing demand, the Government has included the medical device and pharmaceutical sectors as part of the priority sectors in an effort to realize the Making Indonesia 4.0 program. The Indonesian government seeks to increase the competitiveness of the medical device and pharmaceutical sectors by encouraging the implementation of technology-based digital transformation.

For example, state-owned pharmaceutical holding companies have utilized digital technology from the production process to distribution. The company uses interconnected systems to grow its network; carry out digital administrative processes; and encourage the realization of more effective and efficient performance.

Opportunity to realize the resilience

Minister of Industry Agus Gumiwang Kartasasmita said there were 220 companies in the pharmaceutical industry in Indonesia and 90 percent of them focused on the downstream sector in the production of medicines. Meanwhile, the government continues to seek to reduce imports by 35 percent until the end of 2022. The government hopes that these efforts can overcome dependence on imports of raw materials.

According to data from the Ministry of Health, until 2021, there will be 241 pharmaceutical manufacturing industries, 17 pharmaceutical raw material industries, 132 traditional medicine industries, and 18 natural product extraction industries.

The growth of medical equipment production facilities also continues to increase. 

From 2015 to 2021, the number of companies producing medical devices increased from 193

to 891 companies. Furthermore, in the last five years, the domestic medical device industry has grown by 361.66 percent or approximately 698 companies.

Indonesia exports pharmaceutical products and medical devices to several countries, namely the Netherlands, England, Poland, Nigeria, Cambodia, Vietnam, the Philippines, Myanmar, Singapore, South Korea, and the United States.

Acceleration of licensing

The government has prepared a roadmap to accelerate the development of the pharmaceutical industry, including procedures and product development targets, and timeframes.

The goal of this roadmap is the production of high-tech raw materials. Its long-term focus is to help the pharmaceutical and medical device industry become self-sufficient and meet the needs of the population while reducing dependence on imported products.

The Head of the Indonesian Investment Coordinating Board (BKPM) Bahlil Lahadalia and Minister of Health Budi Gunadi Sadikin have agreed to accelerate the granting of permits for medical equipment providers to help the country cope with the COVID-19 pandemic. The granting of business licenses for medical equipment in Indonesia can be accelerated to 1×24 hours (one day) only by accessing the Online Single Submission (OSS) system and the BKPM Investment Command and Investment Command Center.

The provider will receive a Business Identification Number (NIB), an Industrial Business Permit, and a Commercial or Operational Permit. Later, the Ministry of Health system will process their requests for Production Certificates and Distribution Permits.

Some of the products included in the accelerated service are surgical masks, Personal Protective Equipment (PPE), and hand sanitizers. BKPM predicts that medical equipment providers will take advantage of this opportunity to help prevent the spread of COVID-19.

The government will provide fiscal and non-fiscal incentives to investors who want to invest in Indonesia.

Reduction of corporate income tax (tax holiday), reduction of income tax for investment (tax allowance), super tax deduction incentives, and import duties are some of the incentives available.

Strong economic growth and significant demographics make Indonesia a suitable country for investors. Employment Creation Omnibus Law,

as part of structural regulatory reform, also improves the investment climate and ease of doing business in Indonesia. Let’s be a part of Indonesia’s growth.