Local pharmaceutical companies happy with AFTA
Adianto P. Simamora, The Jakarta Post, Jakarta
Local drug companies are mostly upbeat in anticipation of the introduction of the ASEAN Free Trade Area (AFTA) next year as it will provide them with greater opportunities to expand their markets to neighboring countries, the Indonesian Pharmaceutical Association (GP Farmasi Indonesia) said.
"AFTA is good news for local pharmaceutical firms because it will provide them with greater access to export their products to the ASEAN member countries," Anthony Ch. Sunarjo, chairman of GP Farmasi Indonesia told The Jakarta Post.
He said Indonesian drug companies were not afraid of competing with drug producers in the neighboring countries both on the domestic and ASEAN markets because the latter was able to produce generally better quality products.
"Our drug products are the cheapest in Asia after India and China. Thus, we are certainly able to compete on the ASEAN market," he said.
He also noted that idle capacity at the country's drug plants had reached 40 percent. The country should therefore not experience any technical or logistical barriers to considerably boosting its drug production to meet new demands in the ASEAN countries.
According to him, Indonesia now has four state-owned drug companies, 119 local private drug companies and 33 foreign drug companies.
"The high number of drug companies is one of our strong points in AFTA," he said.
Under AFTA, the six founding members of the Association of Southeast Asian Nations (ASEAN) -- Indonesia, Singapore, Malaysia, Thailand, the Philippines and Brunei Darussalam -- will reduce import duties on pharmaceutical products to between zero and five percent.
While, the new ASEAN member countries of Vietnam, Laos, Cambodia and Myanmar, meanwhile, are allowed to delay opening up their markets until between 2006 and 2010.
Anthony, however, voiced worries that other ASEAN member countries would seek to bar Indonesian drug products from entering their markets by setting up various non-tariff barriers, including imposing complicated requirements for Indonesian drug producers to register their products in their respective countries.
"I believe ASEAN member countries, which remain unprepared for AFTA, will do their utmost to create various other kinds of barriers to block the entry of our drug products," he said.
According to Anthony, Indonesia's import duty on the pharmaceutical products is already below the five percent as required by AFTA.
J.R Kosasih, president director of drug distributor PT Millennium Pharmacon International, however said he was not as optimistic as Anthony, insisting that many local drug companies were still unprepared to compete during the AFTA era.
"We are far from ready for AFTA and many local firms know little about AFTA" he told The Post.
Kosasih said many local pharmaceutical firms were too weak to compete with ASEAN member countries, citing their high inefficiency.
"The fact that idle capacity in many drug firms is as high as 40 percent indicates their inefficiency," he said.
Aside from the inefficiency, Kosasih said, the high dependence of local firms on imported raw materials would also make local firms difficult to compete with the influx of cheaper drugs from ASEAN countries.
Around 90 percent of raw materials for drugs are imported, according to Kosasih.
Kosasih said with such a high imports of raw materials, which should all be bought in dollars, the local firms would find it difficult to reduce its production costs and, as such, the price of the products.
"The local firms need to improve their efficiency and productivity to survive the tighter competition," he said.