The weakening of the rupiah exchange rate, which has breached the\nlevel of Rp18,000 per US dollar, has the potential to pressure the\nperformance of the national pharmaceutical industry. A continued high\ndependency on imported raw materials makes the industry\u2019s production\ncosts increasingly vulnerable to exchange rate volatility.<\/p>\n
The Head of the Macroeconomics and Finance Centre at the Institute\nfor Development of Economics and Finance (Indef), M. Rizal\nTaufikurahman, stated that the rupiah\u2019s depreciation will directly\nincrease production costs for pharmaceutical companies, as most\nmedicinal raw materials, excipients, and production machinery are still\nsourced from abroad. Consequently, the impact is reflected not only in\nthe rising prices of imported raw materials but also extends to\nlogistics costs, financing, and working capital requirements.<\/p>\n
\u201cThe larger the proportion of imports within a company\u2019s cost\nstructure, the stronger the pressure on production costs,\u201d he told\nBisnis on Saturday (6\/6\/2026).<\/p>\n
This cost pressure ultimately threatens to erode industry\nprofitability. Rizal explained that pharmaceutical companies do not have\nfull flexibility to raise product selling prices to compensate for the\nsurge in production costs. This is because the domestic medicine market\nremains highly sensitive to public purchasing power. Furthermore, many\npharmaceutical products are tied to government procurement mechanisms,\nthe e-catalogue system, and the national health insurance programme,\nwhich limit the scope for price adjustments.<\/p>\n
\u201cAs a result, increases in input costs cannot always be passed\ndirectly to consumers, leading to the erosion of company margins,\u201d he\nsaid.<\/p>\n
Furthermore, Rizal assessed that a prolonged weakening of the rupiah\nalso risks hindering investment and the expansion of production capacity\nwithin the pharmaceutical industry. In conditions of volatile exchange\nrates, investors tend to be more cautious as the costs of importing\nmachinery, technology, initial raw materials, and investment financing\nbecome more expensive. This situation encourages companies to withhold\ncapital expenditure and focus more on maintaining liquidity and cash\nflow.<\/p>\n
On the other hand, Rizal believes that the rupiah\u2019s depreciation\ncould actually serve as a momentum to accelerate efforts in substituting\nimported medicinal raw materials. However, this opportunity can only be\nrealised if supported by strong and sustainable industrial policies.\nAccording to him, the development of domestic pharmaceutical raw\nmaterials requires support through research, fiscal incentives,\ncertainty of demand, and adequate production scales to be economically\ncompetitive.<\/p>\n
\u201cTherefore, import substitution cannot be driven solely by the high\ncost of imports; it must be built through consistent industrial policy,\u201d\nhe emphasised.<\/p>\n
In facing this situation in the short term, Rizal believes the\ngovernment and Bank Indonesia need to take steps to maintain exchange\nrate stability and strengthen the availability of foreign exchange\nliquidity for industry players. More affordable hedging schemes also\nneed to be expanded to help companies manage currency risks.<\/p>\n
Regarding industrial policy, the government is deemed to need an\nacceleration in the development of domestic medicinal raw material\nproduction, the promotion of downstreaming in the basic pharmaceutical\nchemical industry, and the improvement of the procurement system through\nthe e-catalogue to be more adaptive to exchange rate changes.<\/p>\n
\u201cFor the pharmaceutical sector, exchange rate stability is not just a\nbusiness issue, but also a component of national health resilience,\u201d\nRizal concluded.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/rupiah-weakness-pressures-pharmaceutical-industry-threatening-margins-and-investment-1780794186", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }