The domestic pharmaceutical industry is planning to establish foreign-owned factories here to produce raw materials for medication, by cooperating with drug makers from member countries of the Association of Southeast Nations (Asean).
“With the support of the government-to-government approach and by utilizing cooperation among state enterprises within Asean, we are optimistic that the country can start to establish an industrial base for raw materials,” said Anthony C. Sunarjo, chairman of pharmaceutical association GP Farmasi, on Saturday.
The association is proposing that the government lift restrictions on foreign ownership in Indonesia on raw-materials factories, in a bid to draw investment from state-owned drug makers in Asean nations.
Such cooperation could end the country’s dependence on raw materials imported mostly from China and India, Anthony said.
Local pharmaceutical firms currently receive government subsidies to purchase raw materials for generic drugs.
“Cooperation among state-owned enterprises in the region is a good solution, given the imposition of restrictions on foreign ownership in the pharmaceutical sector,” Anthony said.
Foreigners are now limited to 75 percent stakes in domestic pharmaceutical companies, compared with 100 percent before.
But through the government-to-government scheme, there will be bigger business opportunities if the construction of factories is carried out by the private sector, Anthony said.
“There is also an incentive for investors to spend money on factory construction if there is the prospect of selling raw materials in the larger Asean market, in addition to the local market,” he said.
He said many overseas pharmaceutical firms wanted to invest but canceled their plans because of government limits on foreign investment.
The association’s data show that the market value for pharmaceutical products in the Asean region this year could rise to $8 billion, from $7 billion in 2008.
Indonesia holds 34 percent of the sector’s total projected market value in the Asean region this year, followed by Thailand with 26 percent, the Philippines with 25 percent, Malaysia with 8 percent and Singapore at 7 percent.
About 40 firms from GP Farmasi’s 208 members dominate about 80 percent of the domestic market. The association has projected that the value of the domestic market would rise to Rp 28 trillion ($2.7 billion) this year from
Rp 27 trillion last year.
The government has tightened controls on the generic drug industry by requiring pharmaceutical companies to purchase all subsidized raw materials for drugs from the state - which imports the materials - if they wish to supply state-owned health centers and hospitals.
The Health Ministry said the policy was intended to stabilize prices, as the government will spend Rp 280 billion this year to subsidize raw materials.