As the fourth most populous country in the world, Indonesia healthcare system faces growing rates of heart disease, diabetes and other non-communicable diseases. It also has the highest rate of malnutrition (40%) among children in the ASEAN region, as cited in the 2019 UNICEF report.
Indonesia has allocated US$3.5 billion of its 2021 budget to fund its universal healthcare coverage, depicting the government’s urgency to strengthen the Indonesian healthcare market. Indonesia’s universal health coverage started a short 6 years ago and is known as BPJS locally. It is the world’s largest universal health insurance program that covers over 200 million people, and is in need of some serious improvement.
BPJS which covers medical services ranging from simple dental check-ups to more serious procedures has made healthcare services more accessible to its citizens, thus increasing its demand and general awareness of caring for one’s health condition. However, the shortage of doctors and hospital beds remain one of the biggest challenges – there are 0.4 doctors and 1.17 beds per 1,000 inhabitants, the lowest rate in ASEAN. This poses a problem for healthcare accessibility in the country.
But, given the rising demand for healthcare services and the recent deregulation around the healthcare sector, this opens an opportune moment for foreign investors to fill this shortfall.
To solve this complication, in March 2021, the Indonesian government lifted limitations on foreign investment in healthcare-related sectors through its Positive Investment List.
Here are some of the important changes that were introduced.
|Business Activity||Negative Investment List||Positive Investment List|
|Pharmaceutical Manufacturing||85% maximum foreign ownership||Open for 100% foreign ownership|
|Pharmaceutical Wholesaler||Closed for foreign ownership||Open for 100% foreign ownership|
|Raw Pharmaceutical Wholesaler||Closed for foreign ownership||Open for 100% foreign ownership|
|Hospitals||67% foreign ownership (70% for ASEAN investors)||Open for 100% foreign ownership, but subject to minimum number of 200 beds|
|Medical Devices Distributor||Maximum 49% foreign ownership||Open for 100% foreign ownership|
|Medical Devices Testing||Maximum 67% foreign ownership||Open for 100% foreign ownership|
Although the recent regulation did not specifically mention digital healthcare, it is worth noting its growth, as it increases healthcare accessibility, hence, paving the way for many business lines in the sector to grow.
According to Australia-based AsiaLink Business, digital healthcare revenues in Indonesia are expected to reach $973 million by 2023 at a Compound annual growth rate (CAGR) of 60%. The rapid growth of digital healthcare platforms seems reasonable given Indonesia’s high internet penetration rate of 64.8%. It is expected to reach 89.3% by 2025, with over 200 million users.
Also, some industry players are confident of this projection as health-consciousness among Indonesians is on the rise. According to a report by Food Industry Asia, approximately 99% of Indonesians show interest in improving their diets and approximately 89% are happy for products to be reformulated.
Given its current conditions, digital health platforms appear to be the most practical and innovative solution to increasing Indonesia’s universal healthcare program, in terms of accessibility.
The spectrum of digital services in the field of healthcare is vast. Hence, it has been classified into three major segments, according to the market research conducted by KEN Research:
1. E-Pharmacy Market: In 2020, e-Pharmacy players made up 3% of Indonesia’s pharmaceutical sector, the total revenue of the sector was at US$6 billion. The sector is projected to grow 10% this year. E-pharmacies could play a bigger part as social distancing has forced many consumers to adopt and become accustomed to its services.
2. Online Consultation and Appointment Booking Market: By March 2020, digital healthcare providers have witnessed more than 61 million patients visit their website for virtual medical assistance. According to research by McKinsey and Company, around 44% of people who dropped their in-person routine appointments were looking forward to online consultation and 24% received appropriate care.
3. Healthcare IT Solutions Market: A rapid growth of Indonesia’s digital health ecosystem opens the opportunity for software developers to tap into this emerging sector. According to Ken Research, Indonesia’s hospitals, clinics and pharmacies are becoming the end users for healthcare management systems (HMS), Medical practice management software (PMS), as well as electronic medical records (EMR) to provide their own digital health solutions.
It is quite evident from the growth in these 3 segments that Indonesia is witnessing a shift from traditional to online health services. International businesses entering the market can contribute towards its growth in the future.
With colossal market potential, numerous reforms and considerable support from the government, foreign investment in the Indonesian healthcare sector is more favorable than ever. However, breaking into a new market overseas might be intimidating. Cekindo offers a comprehensive range of solutions to ease the registration process and help you create a viable roadmap for your business.
Our experienced legal advisors will assist in all statutory and regulatory aspects of your investment. Experts at Cekindo also help in carrying out Due Diligence activities to help you assess the credibility of the company or partner you want to invest in or work with.
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