Investing in Medical Device Manufacturing: A Guide for Turkish Investors

Turkey’s well-established medical device manufacturing industry has a unique opportunity to expand its reach into Indonesia. Nonetheless, Indonesia is also growing this specific sector to meet the widespread demand throughout the country. 

With its big population and growing healthcare needs, Indonesia presents a lucrative market for Turkish investors. This move can lead to many possibilities, from collaborating in the growing market to starting a new business entity to explore more opportunities. 

The Growing Medical Device Manufacturing Industry in Indonesia

Significant progress has been made in the Indonesian healthcare system in recent years. Enhanced government funding has laid a strong foundation for its growth. The medical device industry has gained increasing importance as the country seeks to upgrade its healthcare facilities.

Alongside the pharmaceutical sector, the thriving medical device industry saw a substantial boost in demand for pharmaceutical products and medical devices to manage and fight the coronavirus (COVID-19) during the pandemic.

In 2021, Indonesia’s medical device industry experienced an annual revenue growth of 8.3%, recovering from a 10.3% decline in 2020 due to shortages caused by the pandemic.

Indonesia’s Appeal for Turkish Medical Device Manufacturing

Several factors make Indonesia’s medical device sector attractive to Turkish investors. These include the country’s growing population, increasing healthcare expenditure, and the government’s efforts to improve healthcare infrastructure.

Big Population

Indonesia has a large population, driving significant demand for medical device manufacturing nationwide. The sheer number of potential consumers ensures a steady market for medical device products.

Advanced Hospital System in Major Cities

Indonesia’s major cities have a well-developed hospital system that offers superior health services. These advanced healthcare facilities increase the need for high-quality medical devices, presenting opportunities for investors to tap into the medical device manufacturing business.

Infrastructure and Human Resource

The country offers adequate infrastructure and skilled human resources for industrial development, which creates a conducive environment for establishing and expanding medical device manufacturing facilities.

Market Openness

Indonesia’s openness to foreign export markets, especially in Asia, Africa, and the Middle East, offers investors a strategic advantage. This openness facilitates the export and import of medical devices, enhancing business growth.

Meeting International Standard

There is strong encouragement for developing medical device standards at the global level. This focus on meeting international standards ensures that products manufactured in Indonesia are competitive worldwide.

High Dependence on Import

The high dependence on imports for medical devices presents a significant opportunity for local production. Turkish investors can capitalize on this by setting up manufacturing units to reduce import dependency.

Supportive Regulatory Environment

Intergovernmental cooperation in harmonization frameworks creates a supportive regulatory environment, making it easier for investors to comply with international regulations. This simplifies operations and fosters a more investor-friendly environment.

Developing the medical device manufacturing industry in Indonesia involves many essential factors that contribute to a comprehensive growth strategy. This research outlines the characteristics and patterns suitable for advancing the medical device sector in Indonesia, ensuring a well-rounded and sustainable development approach.

Where are Most Medical Devices Manufactured?

Indonesia is making strides in the medical device manufacturing industry. A recent business forum in Turkey connected Indonesian and Turkish companies to boost international partnerships. Two agreements were signed:

• PT Haloni Jane Tbk and ERK Medikal will distribute latex gloves (potential value: $9 million).
• PT Atra Widiya Agung and Uzman Sterilization System will collaborate on container sterilization systems (value: $1.5 million over 4 years).

While Indonesia is a player in the global market, discussions are ongoing to pinpoint where most medical devices are currently manufactured. A separate forum brought together key Indonesian industry figures to showcase their advancements in this growing sector.

How to Manufacture Medical Equipment?

With promising prospects for the medical device industry, Turkish investors have two main options for manufacturing in Indonesia.

Establish a Local Subsidiary

Foreign investors must establish a PMA Company (Perusahaan Penanaman Modal Asing) by Law No. 25 of 2007 on Investment to invest in Indonesia. This company is a limited liability entity with legal status, allowing it to engage in various commercial and business activities as permitted by Indonesian regulations.

Establish a Representative Office (RO)

An RO is a licensed office established by a foreign company in Indonesia. Its limited activities include market feasibility studies and acting as a liaison office to connect the foreign company’s headquarters with local parties in Indonesia.

Generally, an RO is restricted from conducting business activities such as signing contracts, issuing invoices, and receiving payments. There are various types of ROs, each with specific permitted activities. 

The Public Works RO is an exception as it can engage in income-generating activities like construction services. In certain limited situations, establishing a branch may also be possible.

Key Considerations for Turkish Investors

The medical device manufacturing industry in Indonesia is confronted with a wide array of complex challenges that demand careful consideration. These challenges encompass various aspects and require a strategic approach for effective resolution. 

Long Licensing Chain

Obtaining the necessary licenses can be lengthy, taking up to 24 to 36 months from construction to operation.

Tight Price Competition

There is fierce competition in pricing, particularly with high-quality imported products from Europe, the USA, and Japan being preferred. Chinese and Korean products offer reasonable quality at lower prices and pose significant competition.

Compliance with Local Content Regulations

Companies must comply with local content (TKDN) regulations, which can be challenging. As of April 2023, only 14.37% of medical device products listed in the government’s e-catalog had TKDN certificates above 50%.

High Dependence on Imports

Approximately 70% of medical products used in health facilities are imported due to urgent medical needs and the lack of domestic production capabilities.

Sourcing Raw Materials

Obtaining raw materials of medical-grade quality is difficult, as Indonesia needs to produce specific necessary components domestically.

Encouragement for Domestic Production

The government has encouraged domestic production through policies like Inpres No. 6 of 2016, aiming to produce at least 25% of medical products domestically by 2030.

Establish Your Medical Device Manufacturing in Indonesia with InCorp

If you aim to penetrate the medical device industry in Indonesia, InCorp is your one-stop shop for setting up a successful manufacturing operation. InCorp empowers you with the following:

• Manufacturing Establishment: We guide you through the process, from permit acquisition and licensing to facility setup and compliance.
• Medical Device Registration: Our team ensures your device meets all Indonesian requirements for market entry.
• Investor KITAS: We simplify obtaining the necessary work visas for your foreign personnel.

Unlock the full potential of Indonesia’s medical device market with our expert guidance tailored for Turkish investors. Fill out the form below to establish a successful manufacturing operation and deliver innovative healthcare solutions.