Direct investment in the medical device industry of Indonesia soared nearly seven-fold to IDR 4.7 trillion (approx. USD $343 million) in 2017 (compared to the preceding year). Rising investment stems from new as well as existing local companies, foreign investors, and local-foreign joint ventures. But what is behind this growth?
Examples of recent investment in Indonesia’s medical device industry include a coronary stent manufacturing plant in Tangerang (Banten), a project worth IDR 91.5 billion (approx. USD $6.7 million), and a surgical suture factory in Cikarang (West Java) worth USD $1.2 million. In total 27 new companies entered the medical device industry of Indonesia in 2017, hence pushing the total number of companies active in this industry to 242. Together they produce 294 different medical device products.
Maura Linda Sitanggang, Director General of Pharmaceutical Services and Health Devices at Indonesia’s Health Ministry, said there are several factors that contribute to rising investment in Indonesia’s medical device industry. Firstly, through an e-catalogue the government forces the use of domestically manufactured products for a selection of medical devices. Secondly, through a Presidential Instruction (No. 6/2016) 12 ministries and institutions are assigned to focus on the development of the domestic medical device industry.
Regarding the future, Indonesia’s Health Ministry specifically wants to encourage the development of a medical device industry that manufactures products for the middle class, ‘new money’, and upper class. Currently, such premium products need to be imported from abroad. Local manufacturers now only contribute 10 percent to the total.
Meanwhile, the Health Ministry also encourages synergy between the medical device industry and research institutions as this should result in innovation.
Nila Moeloek, Indonesia’s Health Minister, said that – in order to attract more foreign investment – the Indonesian government has already opened up the medical device industry to foreign direct investment (FDI) for the full 100 percent. However, the products need to have high technology. Moreover, also the manufacturing of raw materials for medicines has been opened fully for FDI by the government.
The medical device market of Indonesia is growing at a pace of around 12 percent per year. Demand for these products is growing rapidly in line with the government’s National Health Insurance (in Indonesian: Jaminan Kesehatan Nasional, or JKN) program. By 2019 the government aims to cover 95 percent of the population through its national health insurance scheme.