Technical Assistance II

The pharmaceutical and healthcare industries are growing rapidly in Indonesia, which presents the corresponding demand for raw materials to produce these products. However, 95% of these raw materials are still imported. Although this situation hampers the development of pharmaceutical industries in Indonesia, at the same time, this also creates a promising opportunity to invest in the raw materials industries.

For that reason, the Ministry of Investment, with support from ARISE+ Indonesia, hosted an investment meeting on February 14 dedicated to the healthcare and pharmaceuticals sector, convening president directors and other senior representatives of European companies, embassies, trade and investment organisations, as well as the Ministry of Health, the Ministry of Industry, and the Ministry of National Development Planning Ministry (Bappenas).

The event aimed to present Indonesia's key investment opportunities in the pharmaceutical and healthcare sectors and foster a greater mutual understanding of how European investment can best be mobilised and leveraged to support the growth and development of Indonesia's healthcare and pharmaceuticals ecosystem.

The Deputy Minister for Investment Planning, Indra Darmawan, underscored the promising potential of investing in the healthcare and pharmaceutical industries that provides long-term growth and stability.  

"Pharmaceutical and healthcare industries are relatively stable and resilient, even during economic uncertainty due to the increasing demand," Mr Indra said.

According to Mr Indra, the realisation of Foreign Direct Investment for the chemical and pharmaceutical industry was ranked number three with a value of US$ 4.5 billion in 2022. Meanwhile, the European Union countries remained the biggest investor in the pharmaceutical industry and the 8th investor in healthcare services.

At the meeting, the Deputy Minister for Economic Affairs, the Ministry of National Development Planning (Bappenas), Amalia Adininggar Widyasanti, highlighted Indonesia's development plan direction for the next 20 years, focusing on industrial development with pharmaceutical and healthcare as the priority sectors.

Ms Amalia commended the hard work of the Ministry of Investment in implementing reforms aimed at improving the investment climate, including simplifying regulations and reducing bureaucratic hurdles, to make Indonesia a promising destination for manufacturing investment.

Ms Amalia said that with vast natural resources, a large consumer market, and a young and skilled workforce, Indonesia presents significant opportunities for investment in pharmaceutical and healthcare, including advanced chemicals, raw materials production and high-tech medical devices.

"This is the right momentum for all of us to work together to develop Indonesia's priority manufacturing sectors not only to supply the domestic market, but also to harness the untapped potentials of the global market," Ms Amalia said.

The Director of Resilience of the Pharmaceutical and Medical Devices Industry at the Ministry of Health, Roy Himawan, presented Indonesia's policies to promote the resiliency of the pharmaceutical and medical devices industries, recognising their importance for public health and economic growth.

One of the key measures is the introduction of incentives to encourage investment in research and development in the pharmaceutical and medical devices industries. These incentives aim to attract more investment into these sectors and promote the development of new and innovative products that can improve healthcare outcomes for Indonesians.

In addition to the incentives for research and development, the government has also prioritised the development of local production capacity for essential drugs and medical devices. This includes efforts to attract more foreign investment into the sector, as well as incentives for local manufacturers to upgrade their facilities and improve their production capabilities.

"With these policies in place, Indonesia is poised to become a major player in the global pharmaceutical and medical devices market while also improving access to essential medicines and medical devices for its citizens," Mr Roy said.

The representative of the Directorate of Downstream Chemical and Pharmaceutical Industries at the Ministry of Industry, Arni Yusnita, said that the global in vitro diagnostic medical devices industry is also set to grow in Indonesia, with a supportive regulatory environment and a growing demand for healthcare products and services.

"The country's large and growing population, combined with increasing awareness of healthcare and a growing middle class, are expected to drive demand for in vitro diagnostic medical devices in the coming years," Ms Arni said.

Following the presentations by the key panellists, three potential investment projects were presented, including pharmaceutical materials for paracetamol, clopidogrel and amoxicillin, the pharmaceutical salt industry and natural rubber for the medical devices industry.

During the discussion moderated by ARISE+ Indonesia's Investment Senior Expert, Daniel Nicholls, the Board Management member of the International Pharmaceutical Manufacturers Group (IPMG) and the President Director of Novartis Indonesia, Khalid Ibrahim, and the Secretary-General of Gakeslab Indonesia (Indonesian Medical Devices Association), Randy Teguh, provided their views and recommendations, followed by observations from other private sector representatives. These remarks included the importance of having robust public healthcare procurement policies that enable Indonesia's citizens to access innovative medicines and treatments, and the need for a healthcare 'taskforce' where the private sector can provide constructive inputs to the government.

The discussion contributed important insights and connections in support of the Investment Attraction Plan currently being developed by ARISE+ Indonesia to assist BKPM. The Indonesia-EU Investment Attraction Plan is adopting a targeted, strategic approach to attracting quality European investment in sectors and sub-segments of mutual interest and benefit to Indonesia and European companies that will be finalised and launched before the end of this year.

ARISE+ Indonesia's Team Leader, Alessandro Martinatto, said, "The potential for Europe's contribution to Indonesia's healthcare and pharmaceuticals ecosystem in terms of innovative, quality investment is massive. ARISE+ Indonesia's ongoing strategic work with BKPM is intended to help translate that investment potential in healthcare, pharmaceuticals and other priority sectors into concrete investment attraction activities and outcomes from which Indonesia and its people can benefit."

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