Indonesia Year-End Medical Device Market Update 1999

I. Indonesia’s Economy

Since late 1997, Indonesia has battled its worst economic crisis in decades, due to the sharp depreciation of the rupiah against the dollar and the collapse of Indonesia’s political structures. The collapse of the rupiah in late 1997 caused Indonesia’s GDP to contract by an estimated 13.7% in 1998. The Asian Financial Crisis ravaged economies region wide, but Indonesia was the country most severely affected. Its currency depreciated up to 95% against the U.S. dollar within six months of the economic downturn. The crisis brought the country’s economy to a near halt, caused a virtual collapse of the banking sector, pushed unemployment significantly higher and increased the number of poor. The Indonesian government initially wavered on meeting the conditions it agreed to in exchange for a $42 billion IMF assistance package, contributing to further loss in investor confidence and outflows of capital. The government also announced a bank-recapitalization program in late 1998, but by early 1999 the plan faced growing challenges over its reliance on public funds.

In light of the impact of the crisis on Indonesia, it is not surprising that the healthcare industry is facing significant challenges. Hopefully, Indonesia is now on the path to recovery, although this is not clear. Economic growth projections are between 0% and 2% for the 1999/2000 budget year, up from initial negative projections.

II. Indonesia Medical Device Market

Prior to the economic crisis, medical diagnostic equipment markets experienced double-digit growth backed by solid economic growth. This translated into rising healthcare expenditures and increasing consumer affluence, which resulted in more private healthcare treatment. The main factor for growth in the Indonesian medical market was the rapid development of Indonesia’s economy combined with the inadequacy of the health service sector. Imports account for 93% of Indonesia’s medical device market. Surgical equipment, over-the-counter test kits, medical lasers and diagnostic equipment comprise most of Indonesia’s medical imports. Domestic production is generally limited to commodity type products like disposable syringes. Post crisis, the size of Indonesia’s medical device market at the end of 1998 was estimated to be about $150 million and it is expected that this market will grow at a rate of 4% for the next few years.

III. Medical Device and Diagnostics Registration

There are two stages in the Indonesian medical device registration process. The first involves registering the distributorship and the product brand with the Ministry of Trade. A complete registration package will include the distributorship agreement and letter of appointment that should clearly state the expiration date. After this registration process is complete, the company obtains a “Special License for Medical Product Retailer” (PBAK).

Once the above process is complete, the second stage involves registering the product with the Ministry of Health. In order to complete this process, the registration document obtained from the Ministry of Trade should be included. In addition, the Certificate to Foreign Government from the FDA in the U.S. (or equivalent body in a country outside of the U.S.), the operation manual, product specification and product insert must be provided with the application. A registration number will be granted for the registered products. The lead-time is typically 3 months and this registration is renewed bi-annually.