Indonesia pushes to spur domestic health industry
FROM bumping up local content in manufacturing to threatening to stop imports of personal protective equipment (PPE), the Indonesian government is pushing hard to produce medical supplies domestically and cut the exorbitant cost of imports from its Covid-19 budget.
Speaking at a webinar on August 30, Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan called for more incentives to be given to import-substitution industries in the health sector. Imports of medical supplies take up a big chunk of the Covid-19 response budget.
“If it’s necessary, we are going to impose tariffs on imported [medical equipment] products that we already produce domestically,” said the senior minister, suggesting this would incentivise new investments for local producers.
He also revealed plans to increase the local content (TKDN) requirement for pharmaceutical products to 55 per cent and prioritise locally sourced products in the state’s procurement drive for medical supplies, to ensure that more is being manufactured domestically.
“So there will be no more people coming up to me to say: ‘Sir, there’s some cheap PPE from abroad’ – we’ll only use local,” he exclaimed.
Luhut has been among the few officials who regularly call out the country’s reliance on imported PPE and other supplies such as active pharmaceutical ingredients (API), which continues to grow every year.
He believes Indonesia has enough wherewithal to produce more medical equipment, given the threefold increase in local businesses that manufacture such equipment.
In June, the health ministry said it would swap out 6.5 trillion rupiah ($455 million) of imported health equipment with locally made versions.
Also that month, President Joko “Jokowi” Widodo said that Indonesian manufacturers were able to collectively produce 17 million units of PPE per month, more than three times as much as the domestic demand. Last year, he set out to have the country produce 70 per cent of its medical supplies domestically.
According to data from the National Public Procurement Agency (LKPP) as of June, Indonesia purchased imported medical equipment totalling 12.5 trillion rupiah compared to domestically producing equipment totalling 2.9 trillion rupiah.
According to several estimates, including from the trade ministry, Indonesia could export surplus PPE to the tune of $4.5 billion, assuming that coveralls cost $9.25, surgical gowns are $2.85 and face masks are 22 cents apiece.
Another estimate, from the industry ministry, insists that local PPE producers can provide a total of 648 million coveralls every year, which far exceeds the annual domestic consumption of 11.3 million pieces.
Many countries, including Indonesia, demand continuous supply of protective gear to fight the pandemic, which has infected 217.4 million people worldwide and more than four million people at home.
Health minister Budi Gunadi Sadikin said it was a good opportunity for local PPE producers to “aggressively build up their capacity to produce health equipment locally”.
According to him, the nation’s health sector spending has surpassed 490 trillion rupiah a year, accounting for individual spending and that of state-owned enterprises (SOE), regional and central government, as well as the private sector.
“The lion’s share goes toward health services that doctors offer and health equipment,” he added.
Meanwhile, Laksono Trisnantoro, a special adviser to the health minister, said Indonesia’s local content requirements for industry have had a modest impact throughout the pandemic.
Out of the 871 health equipment manufacturers that have flourished over the past year in this space, less than four per cent have fulfilled the current 25-40 per cent TKDN requirements, he said.
Even so, some experts believe the government was still not doing enough to help spur growth in the domestic sector.
“The government is too late in incentivising local manufacturers to produce medical equipment; we are way behind our neighbours like Vietnam,” said Hasbullah Thabrany, the head of the Indonesian Health Economics Association (InaHEA), on August 30.
Hasbullah told the Jakarta Post that the state should also let private sector players – not just SOEs – participate in the local production of medical equipment.
This incentivisation is required considering that only 11.4 per cent of health equipment is locally manufactured.
Indonesian Medical Equipment Manufacturers Association (Aspaki) executive director Ahyahuddin Sodri told the Jakarta Post on August 30: “Of course, the [suggestion to put off tariffs on imported medical products] can help local manufacturers.
“However, a much wider set of policies, like securing raw materials or special budget allocation for locally produced products, is needed.”