Simanjuntak said foreign investment in Indonesia's pharmaceutical industry always involves large investments because these companies are focused on the long-term picture and therefore need to spend heavily on manufacturing facilities and need to build distribution channels and networks because medicines cannot just simply be sold to the consumer. It often involves products that require doctors' recipe and sales staff that know the ins and outs of the product.

The American Chamber of Commerce in Indonesia (AmCham Indonesia), recently published a report in which it mentioned that IPMG members - including Novartis, Merck, Bayer, Boehringer Ingelheim, and Pfizer - have invested more than USD $1 billion in Indonesia's pharmaceutical industry over the past few years, particularity for the construction of factories and clinical research.

For example, German multinational chemical and pharmaceutical company Bayar recently invested €8.1 million in the expansion of its factory in Cimanggis (West Java). This factory produces multivitamins and medicines. About 75 percent of the factory's output will be exported to 26 countries.

Meanwhile, US pharmaceutical company Merck started to invest - in 2015 - in further expansion of its Indonesia-based unit's production capacity. By 2018 Merck's production capacity in Indonesia should have doubled to 2 billion units (capsules, tablets, liquid medicines, etc).

Although Indonesia's investment climate poses challenges, the pharmaceutical industry is regarded to contain lucrative opportunities because the Indonesian government is eager to turn its ambitious universal healthcare scheme (in Indonesian: Jaminan Kesehatan Nasional, or JKN) into a success. JKN was implemented by the social security agency Badan Penyelenggara Jaminan Sosial Kesehatan (BPJS) in early 2014 and aims to provide all 255 million Indonesian citizens with access to a wide range of health services by the year 2019. JKN will also cover foreigners who work in Indonesia for at least six months. The total number of clients under the national health insurance program are expected to rise from 162 million in 2015 to 186 million in 2016.

However, this program has met several problems. Earlier this year we reported about the growing mismatch between claims paid and premiums received by BPJS. This growing deficit undermines the financial sustainability of the whole program.

Read more: Indonesia's National Health Insurance Program: Rising Financial Mismatch

Because Indonesia's pharmaceutical industry is highly dependent on imports of raw materials, the government is eager to attract more investment in this industry (around 90 percent of medicines' raw materials, approximately IDR 7 trillion or approx. USD $526 million, is estimated to be imported this year). Therefore, earlier this year, the government widened room for foreign ownership in pharmaceutical factories that produce raw materials for medicines from 85 percent to full 100 percent foreign ownership.

Poll Indonesia Investments:

Will Indonesia's universal healthcare program (JKN) be a full success by 2019?

Voting possible:  -


  • I don't know (35.6%)
  • No, it won't (35.6%)
  • Yes, it will (28.9%)

Total amount of votes: 45

Problems related to Indonesia's pharmaceutical industry

  • The number of Indonesians making use of healthcare services provided by the universal healthcare program exceeds the number of people paying their monthly premiums (causing a growing deficit)
  • A large number of healthy Indonesian workers in the private sector do not participate in the universal healthcare program
  • In the more remote areas in Indonesia the quality and quantity of infrastructure is weak, implying part of the population does not have good access to healthcare services
  • Indonesia's pharmaceutical industry is highly dependent on imports of raw materials. This implies financial troubles in times of severe rupiah depreciation
  • Indonesia has one of the lowest total expenditures on health among ASEAN countries, averaged at a mere 2.6-2.7 percent of GDP

Opportunities in Indonesia's pharmaceutical industry

Indonesia is the world’s fourth-most populous nation. Development of public healthcare in combination with an expanding middle class (amid the nation's solid economic growth) should imply that Indonesia’s pharmaceutical sector contains ample potential for further growth. According to the World Health Organization (WHO), Indonesia’s per capita healthcare spending rose from USD $61 in 2008 to USD $108 in 2012. This is a significant jump but it remains well below per capita spending in other ASEAN members such as the Philippines (USD $119), Thailand (USD $215) and Malaysia (USD $410). Research conducted by Frost & Sullivan shows that Indonesia’s healthcare market could more than double between 2012 and 2018, supported by higher demand for medicines to treat lifestyle-related diseases (for example diabetes and cardiovascular illnesses) triggered by increasing urbanization and rising consumption (of unhealthy food products).

Sales in Indonesia's Pharmaceutical Industry 2011 - 2016:

Year        Sales
(in IDR trillion)
2011         43.2    12%
2012         47.7    10%
2013         53.8    13%
2014         56.0     8%
2015         62.0    10%
2016         71.1¹    13%

¹ forecast
Source: Bisnis Indonesia