Investment Potential in the Pharmaceutical Raw Material Industry in Indonesia


The coronavirus disease 2019 or more commonly known as COVID-19 has brought our attention to sectors in Indonesia that until recently, we thought were doing fine. Seeing how hard it is for Indonesia to cope with the pandemic has shown us that Indonesia is still left behind in terms of healthcare. This situation, although somewhat bleak, was able to shed light on a sector that is really important to a country. Many countries have started to invest more in health related research and procure vitamins, supplements, and immune-boosting drugs. Therefore, if you are looking to invest in Indonesia, one of the most potential investment sectors is in the pharmaceutical raw material industry.

Indonesia’s pharmaceutical industry is a promising sector for investment

Based on a report by Indonesia’s Drug and Food Supervisory Body (BPOM), we know that currently there are approximately 208 pharmaceutical industries in Indonesia. Specifically, 4 state-owned corporations, 35 multinational corporations, and 169 Indonesian national private corporations. The Indonesian Ministry of Health has reported that as of 2021 there are 241 industries that manufacture drugs, 17 pharmaceutical raw drugs industries, 132 traditional medicine industries, and 18 natural product extract industries

Seeing that most of those corporations are focused on the formulation or manufacturing of drugs, it must be understood that it causes a high demand for imported pharmaceutical raw material. Indonesia is still very much dependent on imported pharmaceutical raw material. At the ASEAN level, for example, the Indonesian pharmaceutical market reaches 27% of the total ASEAN pharmaceutical market. Thus, it can be concluded that there is great potential to invest in pharmaceutical raw material in Indonesia.

The structure of the Indonesian pharmaceutical industry is not yet optimal (limited formulations).

As previously mentioned, a majority of the raw materials used in the pharmaceutical industry in Indonesia are imported. Indonesia’s dependence on imported raw materials makes the Indonesian pharmaceutical industry vulnerable, especially with the weakening of the rupiah which will increase production costs.

In the antibiotic market, other than amoxicillin, ampicillin, tetracycline, chloramphenicol, and erythromycin in Indonesia shows the largest value. Cephalosporin antibiotics are included in it, which means that the need for cephalosporins is very high in Indonesia, so it is necessary to develop the cephalosporin raw material industry and fulfil the supply of the cephalosporin market in Indonesia.

The balance between imports and exports is only possible if a country also exports local raw materials. However, Indonesia’s import rate is still much higher than its export rate. This imbalance causes a halt in the development of pharmaceutical industries in Indonesia. At the same time, this situation creates a bigger opportunity for investors to create projects for pharmaceutical materials in Indonesia.

A transformation needs to happen to the national pharmaceutical industry in Indonesia. It should not only focus on the formulation of drugs, but also focus on research, development, and manufacture so that Indonesia can independently produce its own drugs.

Accelerated Licensing

To further facilitate the development of pharmaceutical industries in Indonesia, the Indonesian government has prepared a roadmap. This roadmap includes procedures, as well as product development targets and timelines. 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.

In an effort to help Indonesia tackle the COVID-19 pandemic, Ministry of Investment/BKPM Chairman, Bahlil Lahadalia and former Minister of Health, Agus Terawan Putranto have agreed to accelerate the licensing process for medical equipment providers. The license can now be acquired within 24 hours just by accessing the BPKM’s Online Single Submission (OSS) and optimizing monitoring through the BKPM Investment Control and Command Center (Pusat Kopi BKPM).

The Indonesian government will also give a fiscal and non-fiscal incentive to Indonesia’s future investors. Future investors will also receive 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.

In conclusion, the pharmaceutical raw material industries in Indonesia have promising potential. Let’s be a part of Indonesia’s growth by investing in pharmaceutical raw material industries in Indonesia.