Kalbe Farma to build Indonesian facility to tackle import challenges

By Natalie MORRISON

- Last updated on GMT

Image: MattiaATH/iStock
Image: MattiaATH/iStock

Related tags: Raw materials, Indonesia

Kalbe Farma has launched construction plans for a local raw materials facility in a bid to tackle import challenges.

The Jakarta-based company this week announced its facility will be opened in West Java by 2018 and will focus on biopharmaceutical raw materials.

In a press statement, Director Vidjongtius said importing raw materials in Indonesia is a challenge, though the company did not respond to requests for comment on the issues in time for publication.

However, according to the Global Business Guide Indonesia website,​ a major weakness in the sector is the lack of locally available raw materials leaving producers battling with fluctuating global prices. An estimated 90 - 98% of pharmaceutical raw materials in Indonesia are imported, largely from China but also from the US and India.

Average drug prices in Indonesia are 25 - 30% higher than the global average, and around 35% of the total selling cost for drug companies is down to raw materials and high energy prices in Indonesia, the Global Business Guide states.

In its Q3 2015 financial report​, Kalbe referred to a "foreign currency risk"​ due to the fact it purchases raw materials and equipment from international markets in the relevant currencies (ie US dollar or the Euro).

Indo-vestments

State-owned pharmaceutical company Kimia Farma also noted in its FY15 report that reliance on importing raw materials from countries like China, India and the US coupled with the depreciation of the Indonesian Rupiah (IDR) against other currencies is adding strain to production costs.

In December, Kimia announced plans to build an IDR 110 billion [$79.4 million] raw materials factory in West Java within 2016 in partnership with South Korean firm Sungwun Pharmacopia. Like Kalbe, Kimia said the Indonesian plant is being constructed in response to the growing import challenges.

Kimia currently imports around IDR 350bn [$25.3m] worth of chemicals (the majority of its materials) annually, Rusdi Hosman told Deal Street Asia in December.

In December, Indonesia's Coordinating Economic Minister Darmin Nasution backed investment in the local pharmaceutical sector, branding the government "not smart"​ if it does not support its growth.

In this week's press statement on Kalbe, it was also noted that Indonesia's investment board Badan Koordinasi Penanaman Modal (BKPM) plans to increase foreign investment potential in local companies from the current 85% to 100%.

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