Boston, MA -- (SBWIRE) -- 01/07/2014 -- Local newspaper The Jakarta Post recently reported that Indonesia plans to reduce the foreign ownership cap in various sectors, such as pharmaceuticals, ecotourism and telecommunication in order to boost foreign direct investment (FDI) in the country. It is unknown if and when these changes, which have been mooted for a while, will be implemented. In the meantime, foreign interest will continue to be impacted by high inflation, which will remain a key factor in negating any gains in companies' revenues, as expressed in US dollars.
Headline Expenditure Projections
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- Pharmaceuticals: IDR58,553bn (US$6.24bn) in 2012 to IDR63,806bn (US$6.08bn) in 2013; +9.0% growth in local currency terms and -2.6% in US dollar terms. Local currency forecast broadly unchanged in relation to the previous quarter, but US dollar forecast significantly lowered on account of updated exchange rate considerations.
- Healthcare: IDR224,118bn (US$23.83bn) in 2012 to IDR248,477bn (US$23.66bn) in 2013; +10.9% growth in local currency terms and -0.9% in US dollar terms. Local currency forecast unchanged in relation to the previous quarter, but US dollar forecast significantly lowered on account of updated exchange rate considerations.
Risk/Reward Rating: In our latest proprietary Pharmaceutical Risk/Reward Rating (RRR) ratings, Indonesia remains ranked in the middle of 19 Asia Pacific markets. Though its Rewards are considered to be above than the regional average, Indonesia's Risks profile is considerably more unfavourable, which will continue to detract foreign players from investing in the country's pharmaceutical market.
Key Trends And Developments
- Many pharmaceutical companies in Indonesia registered a year-on-year (y-o-y) decline in their profit margins in Q3 2013, due to the country's weak currency. The Indonesian rupiah's exchange rate played a major role in the companies' lacklustre performances, as the country's pharmaceutical industry imports 90-96% of its raw materials, according to Dorodjatun Sanusi, the executive director of the Indonesian Pharmaceutical Association. Kalbe Pharma, Kimia Farma and Darya-Varia Laboratoria (DVLA), among others, were negatively impacted by the currency weakness.
- In October 2013, the Organization of Islamic Cooperation (OIC) member countries agreed upon Indonesia's proposal for the country to become the vaccines production and supply hub. Indonesia manufactures and supplies more pre-qualified vaccines than other member states, according to the Indonesian health minister Nafsiah Mboi. Taking the lead in vaccine production, Indonesia will assist OIC members in producing vaccines with the aid of its state-owned pharmaceutical company Biofarma and also initiate research for a new vaccine, including research on a human papilloma virus (HPV) vaccine to prevent cervical cancer.
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