Indonesia – Macroeconomics and Healthcare Markets

TforG’s analysts expect the Indonesian healthcare market to be among the top 15 in the world during the period of 2015 to 2018. The reform of the Health Insurance Program, favorable government policies, a growing middle class, changing demographics, increasing chronic diseases and a fast growing private for-profit sector will drive growth in the 3 to 5 years to come.

Overall, the total Indonesian healthcare market accounted for around € 21.5 bln in 2014. Although annual growth is uneven from year to year, TforG forecasts an average yearly growth of 13 to 16 percent in the coming 3 years. The public sector is expected to increase by 10 to 15 percent yearly while the private sector is expected to increase by 15 to 20 percent.

The macroeconomic outlook is mixed. In 2005 the Indonesian government deployed the “2005-2025 Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development”.  It aims at 10 percent growth with the goal of positioning Indonesia in the top ten of largest global economies. However, analysts expect GDP to increase just below 5 percent during the next 3 years.

Indonesia’s economic environment is still facing challenges such as poor infrastructure, economic nationalism, regulatory uncertainty and corruption. Furthermore there is the slowdown of foreign investments, the disappointing shift of the industry to value added products and lower than expected tax revenues.

GDP per capita is around € 1.400, which is half of the China figure or one third of the Brazil figure. 60 percent of the population lives in poverty or in near poverty and has limited access to healthcare services. Public debt is close to 26 percent of the GDP and is expected to rise to 35 percent in the next 3 years. In 2014, Indonesian healthcare expenditures represented only 3.4 percent of its GDP.

The healthcare resources and infrastructure are not only underfinanced and underdeveloped but also structurally underutilized. The healthcare system of Indonesia scores among the lowest in Asia. Availability of care is an issue, mainly in rural areas and accessibility to medical services is limited by the low coverage levels of the health insurance programs.
The quality of care services doesn’t match middle class standards. Insurance coverage and trust levels in the healthcare system (i.e. providers) are low. Those who can afford it seek medical care abroad, mainly to Singapore and Malaysia.

From 2014 onwards, the key driver of all changes in the healthcare market became the migration to a universal health coverage program (JKN) which is intended to be completed by 2019. Government spending on healthcare will increase by close to 15 percent per year, while private spending is expected to increase at even higher levels.  The government started the construction of 150 new hospitals and clinics in 2014 and the private sector added another 30 new hospitals. In total around 30.000 hospital beds will be added by 2017.

Today the public sector consists of 810 acute hospitals, 460 non-profit private hospitals and 460 private for-profit hospitals. In order to improve quality, the government plans is to implement protocols and guidelines as well as a system of auditing and quality monitoring. The plan is to add 4 new hospitals which will obtain international accreditation and increase the share of hospitals having the national accreditation.

The Indonesian healthcare market is complex, very centralized and highly regulated. Regulatory restrictions, long approval processes, bureaucracy and corruption make operating in Indonesia challenging especially for international companies.

Concerning the MedTech market other issues arise such as: Lack of skillful users, Lack of trained engineers to maintain the systems and the discontinuity in after-sales-service by distributors. The medical equipment market in Indonesia was € 328 million in 2014.  TforG forecasts a growth of 15.5 percent until 2017.  Especially imaging equipment is expected to grow by close to 20 percent.
The medical devices and implants market of Indonesia was € 255 m in 2014.  TforG forecasts a growth of 12.5 percent until 2017.  Especially the market for orthopedic implants is expected to grow by close to 15 percent.

Both markets are highly competitive and Chinese and Korean low cost providers have made strong in-roads.  TforG estimates the size of the medical consumables markets to be about € 163 m in 2014, growing at 10 to 12 percent yearly.

Despite the economic and structural challenges, current reforms and increased demand are significant growth drivers that will result in a variety of opportunities in healthcare.

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For further information on the Indonesian healthcare system and the macroeconomic climate, please look into our Business intelligence platform or order the TforG Deep Dive report for Indonesia containing volumes of 600 surgical procedures in 10 specialisms.