Summary

The population of Indonesia in 2017 is estimated to reach 262 million, which placed Indonesia
at number 4 in population among the 193 nations of the world.

In 2017, World Bank estimates show that Indonesia will have 14.4 million people aged 65 years
and above. The elderly population is expected to grow over 40% by 2025, which will make
Indonesia one of Asia’s fastest aging countries. This will have an enormous impact on an
economic and societal level, particularly in the healthcare sector. The most common diseases in
Indonesia’s elderly are hypertension, arthritis, stroke, oral health problems, chronic pulmonary
diseases, and diabetes. As per a report released by the World Health Organization (WHO),
stroke, ischemic heart disease, and diabetes are the top killers in Indonesia.

As the fourth most populous country in the world, Indonesia offers great potential for the
medical equipment and supplies market. This sector continues to present excellent opportunities
for U.S. companies. Indonesia depends on imported medical equipment and supplies to meet
local demand. The total value of imported medical equipment grew from US $726 million in
2015 to US $1,035 million in 2016 and is estimated to reach US $2,030 million in 2018.

Almost 95% of Indonesia’s medical equipment and devices are imported, with most being
sophisticated medical and surgical instruments and infrastructure like medical lasers and
diagnostic equipment. In the past, domestic production focused mainly on the manufacture of
basic items like surgical gloves, bandages, orthopaedic aids, and hospital furniture. But since
2016, local companies began producing other medical equipment, such as sphygmomanometer,
stethoscopes, urine catheter, infant incubator, nebulizer, O2 concentrator, dental chair, EKG,
fetal Doppler, syringe pump, infusion pump, operating lamp, medical dressings (i.e. operating
gown, bed sheets), rapid tests (i.e. HIV, Hepatitis, pregnancy to name a few), blood-grouping
reagents, and first-aid boxes & kits.

In their article “Indonesia continues to be one of the more attractive markets in ASEAN for
foreign healthcare companies,” Frost & Sullivan revealed the medical devices market is
forecasted to grow 12.5% yearly from 2013 to 2018, and should cross US $1 billion in 2018
with growing business in surgical equipment, diagnostics and medical imaging equipment.

Healthcare is a priority in Indonesia’s national development agenda. Increases in public

awareness in healthcare and social conditions and the expansion of public and private hospitals
have led to increased demand for more sophisticated and modern medical equipment and
supplies. The central and regional governments continue to build and upgrade healthcare
facilities. They are planning to equip community health centers with inpatient facilities and
improve their quality of services throughout 34 provinces. The government continues to
encourage private sector involvement in developing hospitals.

The number of hospitals and clinics in Indonesia continues to experience significant growth
despite the economic slowdown which has seen consumer spending in other areas begin to
slide. According to the Directorate General of Health Services, Indonesia Ministry of Health, in
2016, Indonesia has a total of 2,601 hospitals--988 privately managed and 1,613 managed by
the public sector. Those hospitals offer 256,426 hospital beds, or 1.12 beds per thousand
populations. This rate is very low by world standards. Indonesia still lags far behind its ASEAN
neighbors; Singapore, Thailand, Vietnam, and Malaysia average more than 2.0 hospital beds per
thousand. Conservative estimates suggest that Indonesia needs an additional 500,000 hospital
beds to catch up to regional averages. Indonesia as a whole lacks a robust healthcare
infrastructure and qualified staff, particularly in rural areas.

Key private hospitals in Indonesia are dominated by five (5) major groups: Siloam Hospital
Group (which is part of Lippo Group), Hermina Hospital Group, Rumah Sakit Mitra (Mitra
Group), Awal Bros Hospital Group, and Sari Asih Group. Besides these, Ramsay Sime Darby,
Omni, Pondok Indah, and Mayapada hospitals are amongst the top 10 private participants.

As the largest hospital operator in Indonesia, plans to reduce Siloam Hospital Group has
adopted the most aggressive stance having announced an IDR1.6 trillion (USD76 million) and
intends to grow its total number of hospitals from 17 in 2014 to 50 by 2017. Siloam is planning
to open hospitals at Banjarmasin (South Kalimantan), Manado (North Sulawesi), Palangkaraya
(Central Kalimantan), Belitung, and Lubuk Linggau (West Sumatera).

Indonesia began implementing its Universal Health Coverage (UHC) Plan in 2014, locally known
as National Health Assurance Scheme (JKN), with the goal of universal coverage of the
country’s population by 2019. A report shows that as of April 2016, 164 million Indonesians
were covered under JKN (approximately 65%). This program will grow demand for advanced
healthcare equipment and medical devices. U.S. manufacturers of medical devices should take
advantage of this growing market.

Market Entry

Prior to entering the Indonesian healthcare market, U.S. companies must either establish a
foreign investment company in the form of a PT (limited liability company) or appoint a
trustworthy local agent and/or distributor. It is mandatory to have an agent and/or distributor in
order to serve the Indonesian market. Local agents and/or distributors handle registration for
the products and play an important role in developing the market and providing after-sales
services. Attending conferences and events is a good strategy for meeting equipment importers,
agents, and distributors.

U.S. companies are recommended to have a solid due diligence process in place and to consult
with the U.S. Commercial Service prior to signing up agents and distributors. U.S. companies
must visit the Indonesian market in order to properly choose an appropriate agent or distributor
from Indonesia’s vibrant and experienced international business sector. Appointment of a
representative requires care, since it is difficult to terminate a bad relationship. Qualified
representatives will not take U.S. principals seriously unless they make a commitment to
visiting the market on a regular basis. Patience, persistence and presence are three key factors
for success in Indonesia.

Current Trends

Indonesia is an attractive market for the health sector, as its total expenditure continues to
grow at a CAGR of 14.7% and estimates to reach USD35 billion in 2017. The implementation of
the JKN creates huge demand for advanced medical and surgical equipment like X-Ray
machines, CT scanners, MRI machines, defibrillators, gamma knives for incision-free surgeries,
as well as different types of drugs related to the expected increase in the prevalence of diabetes
and cardiovascular diseases. Profitable submarkets in dental equipment include devices for
scaling and polishing, for bleaching, and for orthodontics. As for laboratory equipment,
sustainable opportunities are related to tests kits for hepatitis and infectious diseases, and for
instruments related to clinical chemistry, haematology, and immunology.

Main Competitors

The market for medical equipment and supplies is highly competitive. The U.S. is one of the
leading suppliers with shares over 10% of this market in 2016. Other countries competing for
market share in the medical equipment and supplies include China, Germany, Japan, Korea, and
the Netherlands. Companies from China and Korea provide the greatest challenge to U.S. firms
as they offer low- priced equipment. Therefore, while quality and after-sales service are
essential elements, it is also important to price products competitively.

Current Demand

With the implementation of JKN, Indonesia will see a robust increase in the demand for medical
devices and pharmaceutical products. Surgical equipment and diagnostic imaging equipment
have the largest market shares and provide huge opportunities for U.S. companies. In addition,
U.S. companies could also consider being active in Indonesia’s markets for health infrastructure
and household medical devices.

Registration Process
U.S. companies must be prepared to operate in an often-uncertain regulatory environment.
Product registration can be lengthy, and new and changing requirements can hamper market
entry, such as labeling and local content requirements. A strong local distributor or partner is
critical to help navigate the product registration process and stay abreast of changing
regulations.

The Indonesian Ministry of Health (MoH) controls the process of registering medical devices and
household health supplies in Indonesia. In general, products that are FDA-approved and sold in
the U.S. will be approved to enter the market in Indonesia.

Medical equipment importers must submit a registration application to the Ministry of Health –
Directorate General of Pharmacy and Medical Devices Services, which includes all of the
following documents that the U.S. companies should supply:

 Letter of Authorization (LoA) issued by the manufacturer, legalized by the Indonesian

Embassy and a notary public in the U.S. and valid for at least five (5) years.
 Certificate of Free Sale from the authorized institution.
 Certificate of CE for ‘CE’ mark products or Certificate of ISO for ‘ISO’ mark products,
if any
 Product Information
 Formula/component/raw materials
 Brief manufacturing process flow chart
 Finished product specifications
 Safety and Efficacy Data
 Manual Book (instruction for use), which will be translated into the Indonesian
language

Reimbursement

The Indonesia Ministry of Health (MoH) is responsible for all procedures related to
reimbursement. Thus, those covered by some form of public healthcare insurance can access
healthcare services without financial trouble. In fact, public sector hospitals and other public
healthcare facilities provide services either at a subsidized rate or free of charge.

Private and other public healthcare schemes reimburse hospitals on a fee-for-service basis.
Negotiations between the insurance provider and healthcare service provider play a great role in
determining the degree of reimbursement. Insurance providers reimburse the cost of hospital
drugs of their members, only if drugs prescribed are listed in the insurer’s forms. Various public
and private health insurance schemes use forms of their own. All these forms are in line with
the National List of Essential Medicine (NLEM).

Under JKN, all existing insurance schemes will be merged. The biggest challenge in the path of
JKN is the gap between the healthcare benefits covered by the plan and the actual healthcare
services available in the country.

Private insurance providers cover both inpatient and outpatient service. High-income and upper-
middle-income groups are the largest buyers of private insurance. Many International health
insurance companies are present in Indonesia, including leading players such as Prudential,
Manulife, Allianz, AXA, and AIA.

In Indonesia, healthcare insurance programs rarely reimburse all medical expenses and often
require a high level of co-payments.

Barriers

There are no restrictions on imports of medical equipment; however, imports of used equipment
are prohibited. Indonesian import duties for medical equipment can go up to 30 %. Electro-
medical and other technical equipment have a tariff of 5%, while medical supplies and plastics
are subject to a higher rate (20-30%). In addition, all imported medical equipment is subject to
a value-added tax of 10%.
Although Indonesia shows good prospects for the healthcare medical devices market, there are
challenges that go together with doing business in Indonesia, namely:

1. Corruption and bureaucratic inefficiency are an indisputable presence in the Indonesian

market. U.S. companies should be patient and ready to face these challenges.

2. The pricing of the products might also be a challenge for U.S. companies. The Indonesian
medical industry has preference for high-quality products from the U.S. Europe, and Japan. The
pricing of the product is important, considering the current USD exchange rate, which slightly
unfavorable compared to other currencies.

3. Some regulations regarding medical devices might create a challenge for U.S. companies, for
example the mandatory registration of medical devices at the Ministry of Health (MoH) before
clearance through Indonesian Customs. This process can be lengthy and can only be conducted
by local distributors.

Procurement and Tenders

In 2014, the Ministry of Health implemented an online purchasing system for medical devices
that currently lists over 7,500 types of medical devices across 23 categories, along with
distribution costs in an e-catalogue. The e-procurement system allows local medical facilities to
purchase devices without a tender, and aims to create transparency and simplify transactions.
For U.S. companies, the portal is a means to fast-track exports and bypass red tape. However,
to be listed in the e-catalogue, companies have to follow to price caps imposed by the
government, which can directly impact profit margins. As private hospitals have access to the
catalogue, they now have an upper hand in negotiating prices, which once again affecting the
bottom line. Given this we continue to recommend that U.S. companies work with local
distributors to best navigate the market.

All public tenders are published, but there are often listed specifications that require the
knowledge and support of a local company to maximize the chances of success in a given
procurement process. In order to apply for public tenders, a company must register at the
government’s Procurement Portal INAPROC (https://inaproc.lkpp.go.id/v3/daftar_lpse) to be
eligible to submit applications for any ongoing selection procedures.

For tender offers, local distributors and/or agents need to comply with Indonesian
standardization procedures, as applicable. Government procurements have a preference for
products with local content, to encourage domestic sourcing.

Indonesian Procurement

Indonesian Language website: https://inaproc.lkpp.go.id/v3/daftar_lpse

Healthcare Procurement

Indonesian Language website: http://www.lpse.depkes.go.id/eproc4

Trade Events

Name of Event: Hospital Expo 2017, Jakarta

Date: October 18-21, 2017

Website: http://www.hospital-expo.com/

Indonesian International Hospital, Medical, Pharmaceutical, Clinical, Laboratories Equipment and

Medicine Exhibition

Name of Event: IndoMedicare Expo 2017

Date: November 28-30, 2017

Website: https://kristamedia.com/
International Exhibition on Medical, Dental & Hospital Equipments, Medicine, Health Care,
Supplies & Services

Name of Event: CPhI South East Asia 2018

Date: March 27-29, 2018

Website: http://www.cphi.com/sea/

International fair of the pharmaceutical industry. The show is co-located with ICSE, InnoPack, P-
MEC and Hi South East Asia, all aspects of pharma are united in one location at CPhI South East
Asia.

Name of Event: Hospital Expo 2018, Jakarta

Date: October 2018 (date to be confirmed)

Website: http://www.hospital-expo.com/

Indonesian International Hospital, Medical, Pharmaceutical, Clinical, Laboratories Equipment and

Medicine Exhibition

FAQs

How many classes of medical devices in Indonesia?

Medical devices are classified into four (4) classes based on the risk level in case of
malfunction / failure/ misuse, namely: Class I (A)-Low Risk / In case of malfunction or misuse
the device would not cause serious harm; Class II-A (B) and Class II-B (C)-Moderate Risk / In
case of failure or misuse the device can give significant impact on the health of patients, but not
a serious accident; and Class III (D)-High Risk / The failure or misuse of these devices can
result in serious implications for the patients or nurses/operators.

What is the timeline for Indonesia’s medical device registration process?

Depending on the class and subject to timely submission of all required documentation, Product
Registration can take between 45 days to more than 6 months, if the Ministry of Health finds
the documents submitted were incomplete.

How much is the registration fee for a medical device in Indonesia?

Official guidance on fees for the processing of a Class I (A) is USD115 (IDR1,500,000). Class II-
A (B) and II-B (C) is USD230 (IDR3,000,000). Class III (D) is processed for a fee of USD340
(IDR5,000,000).

Who can distribute medical devices and supplies in Indonesia?

Importing medical device and supplies can only be conducted by local companies that already
have a Distributor License (Indonesian acronym: Ijin Penyalur Alat Kesehatan / IPAK) for the
imported products. A Distributor License is issued by the MoH. Once the distributor license is
obtained, it valid indefinitely, subject to a MoH audit every five years. Imported products must
have only one legal importer and distributor in Indonesia.

Can a foreign hospital invest in Indonesian hospitals?

Other than maternity hospitals, foreign investors can hold up to 67% of shares in specialist
hospitals. Please refer to the Presidential Regulation No. 44 Year 2016 regarding Negative
Investment List (Indonesian acronym: Daftar Negatif Investasi / DNI).

Can a foreign hospital provide services in Indonesia? (e.g. advising Indonesian

hospitals on efficient operations or patient experience, telemedicine for patients)

Foreign investors may build a whole new hospital or operate an existing local hospital jointly
with a local investor. Foreign personnel in hospitals are limited to consultants’ roles and they do
not give direct medical services. A recommendation from the Ministry of Health would be
necessary for them to do so.

Is telemedicine currently being used?

There has been an effort to adopt and implement the use of telemedicine. It is considered very
important for the future of the country, taking into account the naturally widespread distribution
of population in Indonesia with its over 17,500 islands. Telemedicine would greatly reduce the
need for experts, both local and from overseas, to travel to Indonesia’s rural areas and islands.
Several attempts have been made to provide foreign medical expert assistance to Indonesian
medical personnel, but they were unsuccessful, mostly because of the extremely high costs
incurred in the application of such technology. The monetary and economic crisis has played a
leading role in delaying the use of telemedicine. Another technology, radio-based telemedicine,
has also been developed. This method offers low-cost applicative technology in remote places
where medical expert assistance is needed. Related pilot studies have been conducted in the
eastern part of Indonesia. However, this method can only be applied to intercountry situations
and therefore would not have any effect on foreign trade. Frost & Sullivan reported that to
address the increasing concern of maternal mortality in Indonesia, Philips is running a pilot-
project, Mobile Obstetrical Monitoring, in collaboration with local hospital group Bundamedik,
the city government of Padang, and the Ministry of Health (MoH). This project will remotely
monitor pregnant women for early high risk identification using a new tele-health solution.

U.S. Commercial Service Contact Information

Name: Pepsi Maryarini

Position: Commercial Specialist

Email: Pepsi.Maryarini@trade.gov

Phone: (62-21) 5262850

Available Market Research and Best Prospects

Due to the increase in the number of hospitals specializing in cancer, cardiology, etc., and the
increase of non-communicable diseases, the most valuable business opportunities in the medical
devices market are in surgical equipment and diagnostics imaging.

 Surgical equipment, like surgical sterilizers, blood pressure monitors, endoscopy

apparatus, dialysis apparatus, transfusion apparatus, anesthetic apparatus &
instruments.
 Diagnostic imaging equipment, like Ultrasound, CT and MRI scanners, X-rays,
Medical X-ray films).

Market Size