Indonesian Medical Market
Brief by Indolink
Indonesia is the world's largest archipelago that comprises 17,000 islands and stretches 5,120 kilometers from east to west, about the same distance as from London to Moscow. Its population concentrates in the five big islands (Java, Sumatra, Kalimantan/Borneo, Sulawesi, and Papua) and few smaller islands (Bali, Lombok, Nusa Tenggara, etc.).
It is the fourth world's most populous country with population of 240 million. About half of the population lives in Java, the most populated island. The capital city, Jakarta, is the most populated city in Java Island and also in the Southeast Asian region with about 24 million residents living in Greater Jakarta (also called Jabotabek area - the area of Jakarta city and its suburbs).
During the economic crises in 1997 - 1999 Indonesia's economy dropped down seriously from a 4.7% growth rate in 1997 to 0.9% in 1999. New system of democracy has started in year 2000 and has succeeded to recover the economy. Currently Indonesia's economy grows at the rate of 4.9% (2004 est.) with a national GDP of USD 827.4 billion (2004 est.)
Medical Market Potential
With population of 240 million and growth rate at 1.45%, Indonesia remains a major market for healthcare services. The country is served with 1,234 hospitals (comprising 605 private hospitals and 629 government hospitals), 7,413 health centers (called Puskesmas, the Indonesian version of the Israeli "Kupat Holim"), 54,144 physicians and 12,000 nurses. In addition, there are 870 private laboratories which provide outpatient service.
Indonesia's healthcare market is currently valued at USD 500 million (year 2005 est.) divided into pharmaceutical market (USD 350 million) and medical equipment market (USD 150 million). It is estimated that the pharmaceutical market will grow by 18% and the medical equipment will grow by 10% in the next three years.
Indonesia depends largely on import for to provide the health services. 50 percent of the pharmaceutical market is comprised of imported products mainly from US, Germany, Switzerland and Japan.
Indonesia only produces a small number of low-tech medical items, such as surgical gloves, bandages, orthopedic aids and hospital furniture. Hence Indonesia imports over 80% of medical equipments and supplies, especially for the medium and high technology products. Major imports come from Germany, Japan, US, China and Korea. Germany holds 24% of the market share, Japan 17%, and US 12 %.
During the economic crises in 1997 - 1999, Indonesia turned to cheap products from China to replace expensive sources such as Europe and US. However, Chinese products proved to be of low quality and high-cost in maintenance. Therefore since the economic recovery in year 2002 - 2003, Indonesia has turned back to high quality suppliers from US and Europe.
Another trend is the change in market segment. Nowadays the market of medical equipments has switched from the government to the private sectors that represent 60% of the purchase. This is due to the increasing welfare level that demands higher level of healthcare services, especially in the urban areas. Indonesia's dearth of high-standard medical care has led many affluent Indonesians and expatriates to travel to nearby countries such as Singapore and Australia for healthcare treatment. To response these needs, private hospitals have begun to upgrade their facilities and services and continue to need suppliers of latest technology equipments.
Considering both trends above, it is certainly a good timing for Israeli products to enter Indonesia. The mid range and high-end levels of Israeli products can be offered as alternative to products from traditional suppliers such as Germany, US and Japan.
Market Entry to Indonesia
Indonesia's business culture is featured by putting the personal relationship first before the business - Indonesians do business with "friends". This means an intensive personal approach before talking about specific business proposals. Certainly there are also dos and don'ts in the business culture that need to know and respect. All those aspects of business approach require local knowledge and sensitivity to make the relationship succeed.
Beyond the business culture, local partner is crucial for market entry to Indonesia. This is especially true for the medical market where bureaucracy to obtain first entry licenses is time consuming and where sales is based on personal relationship with key figures in the buying hospitals. These are aspects that foreign suppliers have neither knowledge nor access. Therefore, the use of a local agent / distributor to market medical products in Indonesia is required.
Such striking differences between the Indonesian and Israeli business conducts make it particularly difficult for Israeli companies to get their foot in the door and compete without help. With our fluent knowledge of the local language and widespread connections with Indonesian businessmen, distributors, factories and institutions, Indolink is the key! Let us help you build a friendly rapport with the people, understand the culture and customs, and fit in with the local pace and codes of conduct to create the successful business relations in Indonesia.