Local pharmaceutical companies happy with AFTA

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.