As the fourth most populous country in the world, Indonesia offers great potential for the medical equipment and supplies market. The market shows consistent growth of 10 to 20 percent. In the last two years from 2007 to 2008, the total imports of medical equipment grew from $332 million to $369 million. The U.S. is the largest exporter of medical equipment to Indonesia accounting for over 15 percent of total imports. Import duties ranging from 0-5 percent are imposed on medical equipment and supplies. In addition, a VAT of 10 percent is imposed on all imported products. U.S. companies must appoint an agent or a distributor to register and sell their products in Indonesia.
The demand for medical equipment and supplies continues to expand to meet the needs for quality healthcare service. Despite the economic downturn and high dollar exchange rate, the market is predicted to increase 10-15 percent over the next two years.
In 2009, the Government of Indonesia (GOI) has allocated a total of $2 billion for healthcare development. Over 20% of this amount is designated for medical equipment. In addition, the Ministry of Health (MOH) will disburse over $400 million for the procurement and development of hospitals and upgrades of existing hospitals and health care centers (Puskesmas) in the 33 provinces.
Several factors that influence growth in the Indonesian market are:
• Import dependence The absence of domestic manufacturing capabilities to produce high- tech medical equipment provides a market for international suppliers.
• Increased health awareness The goal of government health programs and development is to increase awareness, willingness, and ability for Indonesians to live a healthy life. Given its large population of over 237 million people and intensive government campaigns to raise public awareness, Indonesia is one of the largest potential markets for health care.
• Regional autonomy Decentralization has empowered regional governments to manage and finance district and provincial health care facilities. Now each region has the authority to do upgrades and replacements of their medical equipment. This has created a larger market for medical equipment, but with dispersed decision making.
• Globalization and demand for state-of-the art healthcare Indonesians spend over $1 billion annually for quality healthcare overseas, mostly in Singapore, Malaysia, Thailand, and a few other countries. This demonstrates the lengths Indonesians will go to obtain quality healthcare.
In a bid to stem the flow of patients seeking medical treatment abroad, the Indonesian government continues to urge hospitals to improve their services to compete with world-class hospitals abroad.
• Communicable, non-communicable and emerging diseases The sales potential of various type of medical equipment is, to a great extent, related to the incidence of the various diseases. Circulatory diseases, infections and parasites, respiratory problems, tuberculosis, digestive systems diseases and cancer are the primary causes of death in Indonesia. These ailments, combined with population growth and aging create further demand in the market as healthcare providers invest in quality medical equipment to diagnose and prevent diseases.
• Hospital development by private sector In the private sector, hospitals continue to upgrade their facilities on a regular basis to meet the growing demand for quality healthcare. Healthcare providers show a growing interest in high technology equipment to improve the delivery and quality of their services. The government is encouraging more private sector involvement. An official ground breaking ceremony for the construction of “Medical City” took place on October 29, 2008. The cost of project was estimated at $7 million. “Medical city” is located in Cikarang, West Java, occupying 74 hectares land area, the “city” will consist of world-class healthcare facilities, research centers, medical schools, shopping center, office buildings, hotels and apartments.
• Public hospitals and health centers development In the public sector, decentralization has created a larger market for medical equipment. The regional government will continue to build and upgrade healthcare facilities, including hospitals, health centers, laboratories and quarantine facilities. In response to epidemics, newly emerging communicable diseases and other diseases, the government continues to improve health facilities and services for basic medical care, emergency care, ICU, and ICCU. In an effort to provide quality world-class healthcare, the government has allocated $43 million to construct an international wing at the existing general hospital Rumah Sakit Cipto Mangunkusumo (RSCM). The ground-breaking ceremony was held in September 2008. This facility is expected to be operational by 2010. In order to challenge the increasing needs for international-level health services, the Minister of Health encourages other general hospitals in Bali and Semarang to follow suit.
• Natural and man-made disasters Indonesia is prone to natural disasters such as earthquakes, seaquakes, volcano eruptions, as well as human-caused disasters. These disasters require major reconstruction of medical infrastructure, thus creating demand for medical devices.
By Sharon Chandra