Meiji sees RI as a potential destination for relocation
The Jakarta Post, Jakarta
Drug producer PT Meiji Indonesia recently marked its 30th year in Indonesia. The company has been a pioneer in producing antibiotics since 1974. In 2001-2002, Meiji Indonesia was among 13 pharmaceutical companies that expanded their businesses here when it invested some US$10 million to expand its facility in Pasuruan, East Java. Meiji president director Akihito Yoshioka talks with The Jakarta Post and Bisnis Indonesia on the company's performance. Here is the excerpt:
Question: How has your company managed to survive for 30 years? Answer:We stick to our principle of producing high quality products. To do so, we provide training for our employees and pay attention to their welfare.
Q: How do you see the pharmaceutical market in Indonesia? Is it still attractive given the low government budget for health and low purchasing power of the people? With a population of 220 million, the (domestic) drug market is (still) quite small with a value of $1.5 billion a year. Compared to Brazil with a population of 166 million, the pharmaceutical market reaches $7 billion a year, almost six times higher.
This is because many Indonesians do not receive proper medical services. Most Indonesians also prefer non-medical treatment such as going to a local healer or taking traditional medicine.
Our company previously participated in a government program to distribute medicine nationwide. But we were cut out of the program when the government appointed PT Indofarma and PT Kimia Farma to produce medicine for the program. Since then, we had to seek a different market.
Q: How do you see the Indonesian pharmaceutical industry ahead of the Asean Free Trade Agreement (AFTA) The prices of drugs are much lower in countries such as Thailand. It will be difficult for Indonesia because cheaper drugs from outside will be coming in. So, pharmaceutical companies must prepared, for example, by reducing production costs.
Q:What about Meiji's preparation to face AFTA
The prices of Meiji's products are quite high because of their quality. We often send (manufacturing) equipment for validation and calibration to Japan, Germany and England to maintain (product) quality.
To facilitate the production process, we need to replace this equipment. This entails a lot of expenditure. Most Indonesian companies do not do this.
But Meiji Indonesia has been exchanging several products with Meiji's unit in Thailand. So we are ready.
Q:Target export for this year?
Last year our export reached $10 million or roughly 10 percent of Indonesia's total pharmaceutical export value of $100 million. We expect to export just about the same amount this year because our main market for Betalactam and Penicillin which is Japan, has become saturated.
Other markets such as Vietnam, Laos and Cambodia seek lower quality and lower-priced drugs.
Q:What are your future Investment plans in Indonesia? Every year, we invest up to $2 million to improve our facilities. In 2001, we invested $11 million. This year we don't have plans for expansion because the market is still small. To survive, we have to export most of our products.
But we produce new products every year. We are now producing 96 items. Some 55 percent goes for export, the remainder is for the domestic market.
Q:So what is the company's commitment to investing in Indonesia? This is an important factory for Meiji Group. Meiji Group in Japan plans to relocate their factories outside Japan because of the high production cost. Indonesian and Thailand are among the options.
In the past, Meiji Group had six factories in Japan but we closed three of them.
We think that labor costs in Indonesia are still low. But the problem is low productivity. So, we need more training and education to increase productivity.
We also prefer to have fewer employees because if we have too many employees, they tend to be less productive. At present, we employ 421 people as factory workers, marketing staff and administrative staff.