AFTA may threaten local pharmaceutical industry's survival
AFTA may threaten local pharmaceutical industry's survival
JAKARTA (JP): The implementation of the ASEAN Free Trade
Agreement (AFTA) next year will threaten the existence of local
pharmaceutical firms, an industry insider said here on Monday.
J.R. Kosasih, the president of pharmaceutical distributor PT
Millennium Pharmacon International, said most local
pharmaceutical companies would be unable to survive the stiffer
competition following the implementation of AFTA.
He said the country's pharmaceutical industry was too weak to
compete with drug producers from other member states of the
Association of Southeast Asian Nations (ASEAN).
According to him, at least 140 of 180 local pharmaceutical
companies did not have adequate networks to compete with their
ASEAN competitors. This inability to compete will eventually lead
to their closure.
"These local pharmaceutical firms will be struck by the influx
of cheaper drugs from other ASEAN countries," Kosasih said during
a media conference.
ASEAN groups Malaysia, Singapore, Cambodia, Brunei, Indonesia,
Laos, Myanmar, the Philippines, Thailand and Vietnam. Under AFTA,
the flows of pharmaceutical products within the region will be
free from tariff and nontariff barriers.
The Indonesian government currently only allows the import of
drugs and their raw materials from countries in the
Pharmaceutical Inspection Cooperation, including the United
States, Australia and European countries. Limiting the import of
drugs was part of the government's efforts to protect local
pharmaceutical companies.
Kosasih said that with the implementation of AFTA, there would
be no more nontariff barriers to hamper the entry of ASEAN
pharmaceutical players into the country's promising market.
Even without AFTA, the Indonesia pharmaceutical industry has
become overcrowded, a situation that has forced many drug
companies to cut back on production, he said.
"Idle production capacity in many pharmaceutical firms is very
high, with only between 40 and 50 percent installed capacity
being used in their operations on average," Kosasih said.
With such ineffective operations, these companies will have a
difficult time surviving the increased competition that will
accompany AFTA, he said.
Aside from a low level of production efficiency, a dependence
on imported raw materials is a major hurdle for local drug
producers, Kosasih. "Around 95 percent of raw materials for drugs
are imported."
This dependence on imported materials leaves the country's
pharmaceutical industry extremely vulnerable to the depreciation
of the rupiah against the US dollar, he said.
The continued weakening of the rupiah against the greenback
recently resulted in a 20 percent increase in drug prices, he
said.
Kosasih, however, said that despite the gloomy outlook for
local pharmaceutical firms, the country's pharmaceutical market
still had a great deal of potential.
The country's pharmaceutical market stood at Rp 1.1 trillion
(about US$98.21 million) last year.
"The market will grow by 17.5 percent this year," he said.
(03)