Indonesia’s healthcare: the next fast-growing industry

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The size of Indonesia’s healthcare market is expected to triple from USD 7 billion in 2014 to USD 21 billion in 2019*.

We see bright prospects for this industry led by:

1) Indonesia’s large population and growing middle-income class;

2) supportive government policies;

3) higher investment in the industry.

Indonesia: Significant potential for healthcare market growth

A favourable macroeconomic environment, a rising middle class and relatively low healthcare market penetration and spending should lead to greater demand in this sector. Indonesia has an under-served healthcare market, with low hospital bed and doctor ratios relative to the size of population. We thus see the potential for further hospital development. In addition, Indonesia’s total health expenditure remains low within Asia. Indonesia’s per capita healthcare expenditure should climb from its current low base as the country seeks to achieve universal healthcare coverage in the coming years. The government has already started to address the challenges that face the sector, such as poor infrastructure and insufficient medical staff.

Exhibit 1: Indonesia’s government budget allocation for healthcare has now reached 5% of overall spending 

Source: Nomura, “ASEAN Consumption”, as of 20 January 2017

APBNP: the revised state budget; RAPBN: the proposed state budget

Supportive government policies

National health insurance is likely to be a game changer in Indonesia’s healthcare sector. In 2014, the government launched its universal healthcare programme, known as JKN (Jaminan Kesehatan Nasional). Its deployment, via the Healthcare and Social Security Agency known as BPJS (Badan Penyelenggara Jaminan Sosial), has already improved public access to health services, which within two years has expanded to reach approximately 67.6% of the population. Although government spending accounts for only 38% of total healthcare spending, we expect it to be a major driver of the universal healthcare programme as the government seeks to achieve 100% coverage by 2019.

The government has said that it intends to increase total healthcare expenditure. This should in turn boost growth in Indonesia’s pharmaceutical market, which is already the largest among the ASEAN countries and one that is benefiting from a number of favourable policies. These include:

1) the government’s roadmap to develop pharmaceutical raw materials;

2) the 10th policy reform package, which allows foreign investors to acquire 100% ownership of pharmaceutical companies;

3) the Presidential Instruction No.6/2016 instructed many related-ministries to take measures to foster the acceleration of the development of new pharmaceutical drugs and medical devices.


This article was written by Jessica Tea and Ali Yahdin Saugi

Published on 4 April 2017

* Source: 2015 Frost and Sullivan Health Care Outlook, 2015


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