Main Problem for Indonesian Industry: Heavy Reliance on Imported Raw Materials, Up to 90% for Pharmaceuticals

The national industry’s dependence on imported raw materials remains a significant challenge for the government. One of the most vulnerable sectors is the pharmaceutical industry, as the vast majority of its raw materials still originate from overseas. Deputy Minister of Industry Faisol Riza stated that strengthening national industry is not enough by merely increasing production capacity. According to him, the government must also reinforce the upstream industry to make the supply chain more self-sufficient. “Generally speaking, today the export value of the non-oil and gas processing industry is only around twenty-one per cent, while the value of the non-oil and gas processing industry in the domestic market is around seventy-eight point thirty-nine per cent. So, in this case, the fulfilment of the domestic market is quite helpful, Chairman,” Faisol said during a working meeting with Commission VII of the Indonesian House of Representatives on Tuesday (14/7/2026). The domestic market is indeed still the main pillar of the national industry. However, behind this lies a high dependence on imported raw materials, which has the potential to reduce the competitiveness of domestic industry. The government is now beginning to map out the sectors that need to be prioritised in the import substitution programme. “Nevertheless, we also need to delve into this in some detail because products in the domestic market still contain many raw materials that require industrial activities of a substitution nature. We take, for example, the pharmaceutical industry, where 90 per cent of the raw materials are still imported. 90 per cent are still imported,” he stressed. This challenge must be addressed immediately so that Indonesia does not continue to rely on foreign supplies. The government is also observing the increasing competitiveness of neighbouring countries that are aggressively developing their manufacturing industries. “This is an extraordinary challenge for domestic industry. And of course, we also need to look at other industries one by one to solve the problems we must overcome so that we can face what was mentioned earlier, Vietnam and the Philippines, for example, whose export values have increased exponentially,” he said. Improving industrial competitiveness remains a focus so that national products can compete in both the domestic and export markets without burdening the public. “However, for domestic industrial fulfilment, we are also continuing to encourage continuous production cost efficiency by the industry so that the circulating prices do not cause price increases that burden consumers,” Faisol stated.