December 5, 2005

Growth in Indonesia's drugs sector will be hampered in the coming year by higher production costs and the increasing need to comply with international Good Manufacturing Practice (GMP) standards, according to industry observers.

Since October, production costs in Indonesia have risen 10%, driven by a 126% hike in fuel prices. Meanwhile, an increase in the regional minimum wage and fluctuations in the local currency are also impacting drugmakers. The value of the Indonesian Rupiah has a direct influence on Indonesia's pharmaceuticals sector, as roughly 95% of raw materials are imported.

Furthermore, Indonesian drug producers are now obliged to upgrade their facilities in line with GMP guidelines in order to compete globally. Although this restructuring will hit market growth in the short term, industry sources insist that the long-term impact will be positive.

Indonesia's drug market is worth around IDR22trn (US$2.2bn) and has been growing at an average rate of 12% in recent years. However, pharmaceutical association GP Farmasi expects sales growth of just 5% this year, with sluggish performance continuing into 2006.