HEALTHCARE INVESTING IN INDONESIAN - Opportunities for Australian businesses - Asia Society
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ASIAASIA
TASKFORCE INTERIMPAPER
TASKFORCE DISCUSSION REPORT
No. 05
NOVEMBER 2020
INVESTING IN INDONESIAN
HEALTHCARE
Opportunities for Australian businesses
Asia Taskforce is an initiative of Knowledge partnersBACKGROUND
This Discussion Paper has
been prepared as part of a Key points:
series of short reports on
specific topics identified by the In this Discussion Paper we aim to:
Business Council of Australia • Draw attention to the opportunities that the Indonesian
and Asia Society Asia Taskforce Healthcare sector presents
(Taskforce) together with
Knowledge Partners PwC • Outline the role that foreign investment has played and will play
Australia and the University in funding Indonesia’s healthcare needs
of Sydney Business School, to • Identify several specific areas in healthcare where Australian
supplement the findings and companies have comparative advantages
recommendations contained
• Highlight the role that technology can play in the delivery of the
in the Interim Report. One of
Indonesian Government’s healthcare objectives
the objectives of the Taskforce
was to identify specific industry • Highlight case studies of the real-life experience of Australian
sectors and countries where companies which have successfully entered the Indonesian
Australia has a comparative healthcare market.
advantage and where there is
local demand.
The paper is intended to
contribute to a discussion
about how Australian capability
and talent can be involved in
helping Indonesia reach its
economic potential. It provides
a starting point for Australian
healthcare businesses to define
the opportunities and, perhaps
most importantly, illustrate
how organisations can navigate
the inevitable risks by bringing
the ‘Team Australia’ approach
outlined in the Interim Report
to life.
Investing in Indonesian healthcare | 2INTRODUCTION
The Indonesian economy Unsurprisingly, this translates Development Plan (Rencana
has achieved consistent to lower capacity in healthcare Pembangunan Jangka Panjang
infrastructure compared to its Nasional/RPJMN) 2020-2024.
economic growth over the ASEAN peers and neighbours, It aims to do so by improving
last two decades, and that of advanced economies. promotive and preventive efforts,
delivering better social This is reflected in a number of particularly in the areas of mother
and economic outcomes key indicators, such as hospital and child health, productive
for its large and ever- beds and doctor-to-population health, nutrition, disease control,
ratios (see Table 1). The COVID-19 community-level initiatives, health
expanding population of pandemic has put a further systems, drug and food control.5
around 270 million people. spotlight on these issues.
Either way, further increases in
Growth in GDP has hovered around Although both government private financing of both soft and
5 percent per year over the last and private sector investment hard infrastructure will be critical,
two decades making Indonesia just in healthcare has been rising, particularly as the government
the fifth Asian economy to join the Indonesia still faces a steep hike faces greater fiscal pressures
US$ 1 trillion club. PwC projects in investment to improve health managing the stabilisation and
that Indonesia will become the outcomes across the board, recovery of the economy through
world’s fourth largest economy by particularly as its population the current COVID-19 pandemic.
2050, up from 16th place in 2017, continues to grow, which will place Indonesia has lifted its previous
overtaking a number of advanced additional demands on already budget deficit-to-GDP ratio of 3%
economies including Japan, under-resourced healthcare to around 5% to accommodate an
Germany and the United Kingdom.1 systems. Growing affluence brings US$ 47 billion stimulus program
Ongoing urbanisation will support further challenges in the form for 2020, with further increases
Indonesia’s growth and economic of a growing elderly population, expected in 2021.
advancements.2 However, chronic diseases, cancer and
obesity, and higher expectations As we explore in this paper, the
improving overall health outcomes needs of Indonesia’s general
is also a prerequisite for achieving of standards of care.
population and the increasing
higher and more equal growth. Researchers at Universities demand for quality care from
Indonesia continues to grapple Indonesia (UI) estimate that the its growing upper-middle class,
with a high national prevalence additional investment in health combine to offer an attractive
of child undernutrition and infrastructure (e.g. hospitals market for both domestic and
pronounced inequalities at a and medical facilities) amounts foreign investors. This is the case
subnational level. This is linked to to between US$10.2 and now even more so for Australian
poorer educational outcomes and US$16.4 billion per year, in order firms who will enjoy greater access
in the longer term, it is correlated for Indonesia to achieve adequate and investment conditions under
with lower income levels as an capacity levels by 2030.4 This the recently ratified economic
adult. The burden of disease also represents a 20 to 30% uplift on agreement between Australia and
remains high in Indonesia, which current expenditure levels. Indonesia - the Indonesia-Australia
can impact the labour force Comprehensive Economic
As a strategy to alleviate Partnership (IA-CEPA).
through lower productivity.3 pressures on existing facilities
Indeed, healthcare is one area going forward, the Government
where Indonesia lags, with of Indonesia’s (GoI) is aiming to
relatively low levels of spending strengthen primary healthcare
on healthcare per capita. as part of its Long-Term National
Investing in Indonesian healthcare | 3Rising private healthcare
Figure 1 Healthcare spending per capita and healthcare spending
to %GDP (2017) Private healthcare already
accounts for roughly two-thirds
6,000
of healthcare expenditure in
5,109 Indonesia, and growth continues to
5,000 4,816
outstrip that of public spending.6
For example, between 2014 and
4,000 3,844
2018, the number of private
hospitals in Indonesia increased
3,000 from 1,476 to 1,830 (a 24%
increase), with investments
2,000 from a number of foreign firms
including those from Singapore,
841
1,000 the Netherlands, South Korea, and
247 253 368 the US. For the same period, the
130 133
0
Vietnam Philippines Thailand India Indonesia China Malaysia Australia OECD
number of public hospitals only
increased by 13% from 930 to
5.5% 4.4% 3.7% 3.5% 3.0% 5.2% 3.9% 9.2% 12.5%
1,047 hospitals.
Healthcare spending per capita, PPP (in USD, 2017) Healthcare spending (% GDP, 2017)
Considering Indonesia’s growing
Source: World Bank middle class, private healthcare
providers in Indonesia (both
domestic and foreign) are likely
Figure 2 Ratio of physicians and hospital beds to 1,000 population* to continue to expand their
presence in the market.
4.5
4.2
One indicator of the potential
4 3.8
3.7 3.7 opportunity posed by the
3.5 Indonesia healthcare market is
the significant resources spent
3 2.9
2.6
annually on outbound medical
2.5 tourism. As noted in a 2018
2.1
2.0 report by Oliver Wyman, lack
2 1.9
of trust in the local system and
1.5
1.5 infrastructure results in more than
1.2
1.0 600,000 people a year traveling
1 0.9
0.6
0.8 0.8 0.7 to neighbouring countries such as
0.5 0.4 Singapore for medical treatment.
The report authors estimate that
0
Indonesia Philippines Thailand Vietnam India Malaysia China OECD Australia the direct cost of such medical
Ratio of physicians to 1000 population Ratio of hospital beds to 1,000 population tourism has grown at an annual
rate of over 10% since 2006 and is
Source: World Health Organization (WHO). now nearly US$ 1.9 billion a year.
*Latest year of data available in each country for physicians and hospital beds, This suggests a key opportunity
respectively, are as follows: Indonesia (2018,2015), Philippines (2017,2011), for private investment to capture
Thailand (2018,2010), Vietnam (2016,2014), India (2018,2011), Malaysia (2018,2015), the higher end of the healthcare
China (2017,2012), OECD (2017,2013), Australia (2017,2014). market locally, particularly in light
of likely ongoing travel restrictions
imposed in response to COVID-19.
Investing in Indonesian healthcare | 4Financing gap and the As the GoI grapples with an
role of Public-Private increase in spending across
many different priority areas,
Partnerships there is considerable scope for
The growing dominance of private public-private partnerships
healthcare is a trend seen across (PPPs) to bridge the funding
many emerging countries in gap required to raise the level
South-East Asia. Although an of public care through private
increase in the availability of such sector involvement. PPPs can be
services, in and of itself, is positive, used to upgrade facilities, adding
“
the main beneficiaries are upper- much-needed capacity and
middle class Indonesians. The raising quality. PPPs need not be
majority of the population rely on restricted to infrastructure, which
typically accounts for a minority
Indonesia already faces
access to basic services provided
through public hospitals, and some share of all health spending. In large disparities in health
private providers, via the universal the drive for efficiency, many
other clinical services could be
outcomes between
health coverage scheme (known as
the BJPS). financed and managed privately, different income levels,
contributing to higher standards
Although the BJPS will likely put and the generation of savings over as well as between urban
private healthcare within the reach the long-term.9 and rural areas.”
of greater numbers of people
over time, Indonesia also needs to The government highlighted
ensure that sufficient investment PPPs in the most recent
continues to go into public services Medium-Term National
given that it already faces large Development Plan (“RPJMN
disparities in health outcomes 2020-24”) as a key procurement
between different income levels, modality to improve private
as well as between urban and participation in public social
rural areas.7 infrastructure provision, backed
up with sector-level regulations
Unequal geographic distribution and the funding of a number of
of healthcare services puts hospital PPP feasibility studies.
East Indonesia at the greatest However, further effort will be
disadvantage. For example, only required to realise a hospital
two-thirds of subdistricts in Papua PPP in Indonesia in the future, to
have a health centre, as compared overcome key uncertainties such
with all sub districts in regions as the affordability of availability
such as Bali, DI Yogyakarta, and DKI payments (from government’s
Jakarta. Only 53% of puskesmas perspective), project scope
(public community health centres) and risks with planning and
in Papua meet ‘basic amenities market alignments.
readiness’, compared to 88% of
health centres in DI Yogyakarta.8
Such disparities are also found in
health personnel resources. The
WHO has found that only 12% of
health centres in West Papua have
sufficient numbers of midwives,
compared with 93.9% in Banten.
Investing in Indonesian healthcare | 5Increasing market access
Figure 3 Growth of FDI in Indonesian healthcare
to foreign investors
$100m
Given the issues outlined above, the
GoI is acutely aware of the need to
open up the sector to foreign private
investment. A number of steps $75m
have already been pursued such as
opening up the sector to foreign
investors from ASEAN and more
recently from Australia via the ASEAN $50m
Economic Community (AEC) and
IA-CEPA agreements, respectively
(discussed further below).
$25m
Foreign direct investment in the
sector is growing quickly, and
opportunities are increasingly
being seized upon by players from $0m
Singapore, Australia and China 2013 2014 2015 2016 2017 2018 2019
(see Figures 3 and 4).
Foreign investment in greenfield Source: BKPM 2019, National Single Window for Investment
development has been limited as
it is perceived as higher risk, with
new hospitals taking up to three Figure 4 Sources of FDI into Indonesian healthcare, by country,
years for initial planning, regulatory as at 2019
and licensing procedures prior to
construction commencing.10 $250m
As such, a common entry strategy $207m
has been investments in maturing $200m
operating assets, to expand or
enhance them.
$150m
For example, in 2018 Singapore-
based private equity firm Kendall
Court took a majority stake in the
$100m
Indonesian company Mandaya
Medical International, to enable
the expansion of a large hospital $53m
$46m
$50m
in Jakarta. $31m
$19m $17m
$9m
As noted above, PPPs have the $6m
potential to be another investment $0m
Singapore Australia China British Malaysia NetherlandsSeychelles Japan
modality for foreign investors. Virgin Islands
It would presumably require
participation in the BJPS (which
Source: BKPM 2019, National Single Window for Investment
is currently optional for private
providers), thus requiring flexible
and innovative approaches
particularly with regards to
cost management and market
segmentation.11
Investing in Indonesian healthcare | 6Challenges remain 1. Development or 2. Provision of
expansion of hospitals specialized health
There are a number of factors and other healthcare services/facilities
which cumulatively hinder foreign facilities to treat non-communicable
investment. One of the main ones diseases (NCDs)
is the availability of physicians to While Indonesia is severely lacking
ensure standards can be met. in hospital capacity, Australia Through investment in hospitals,
This would be less of an issue if on the other hand has delivered Australian providers will have the
Indonesia were more open in world leading design, construction opportunity to improve disease
allowing the practice of foreign and operational management of prevention and control.
medical professionals. healthcare facilities, including
coordination of end-to-end solutions. Due in large part to the negative
The GoI has so far taken some impacts of urbanisation and
small steps to relax restrictions, The IA-CEPA allows for up to 67% lifestyle changes – and one of
with a certain number of foreign Australian ownership in hospitals, the highest smoking rates in the
specialists now allowed to practice medical and dental clinics as well world – Indonesia faces a major
on limited two-year passes. as residential and aged care with challenge to address the rapid rise
However, the pool of incoming no geographic limitation. This of NCDs such as cardiovascular,
doctors is constrained by other provides a significant advantage respiratory and digestive diseases
barriers such as language tests. over other foreign investors, who as well diabetes and cancer.
Either way, Indonesia will also need are currently limited to large Australia is a world-leader in
to address internal constraints to hospitals in eastern Indonesia preventive and protective health
local capacity development, such (excluding Makassar and Manado). policy and programs, with specific
as the adequacy of its own training Australian investors will be able expertise in areas such as diabetes
facilities. As discussed later in to invest in any location, even the prevention, smoking-related
this paper, the IA-CEPA provides main cities of Jakarta and Surabaya, illness, as well as addressing
a greater window for Australia’s and importantly will be able to scale infectious disease threats.
TVET sector to help fill this gap. up their investment over time to
meet scale requirements. Likewise, 3. Assistance with
Opportunities for the 67% restriction should not aged-care facilities and
be disadvantageous as there are treatment
Australian firms
considerable benefits and synergies Indonesia has a young population
Australia has long been a leader in from working with a competent relative to its more advanced
the global healthcare market, and local or regional healthcare neighbours, such as China, but it
is recognised for its world-class provider, as has been the case for is entering the early stages of an
healthcare system, its high-quality Ramsay and other foreign investors. aging population.13 Disability rates
healthcare education and training
At present, Ramsay Health Care for elderly people are relatively
capabilities, and for its leading role
is the only Australian healthcare high, with an increased incidence
in the research and development
company operating hospitals in of chronic diseases such as heart
of medical devices and technology.
Indonesia, where it operates three disease, strokes, hypertension
More Australian companies hospitals through a joint venture and diabetes. There is limited
though should be well positioned arrangement with the Malaysian availability of geriatric clinics
to capitalise on the growing multinational conglomerate Sime and nursing homes in Indonesia,
opportunities in the sector, while Darby Berhad. typically concentrated in larger
assisting Indonesia to develop its urban areas, and their capability
healthcare capacity. The following Ramsay will soon be joined by two to provide comprehensive nursing
areas have been identified as areas other Australian companies, Docta and geriatric medical services is
where there is good alignment and Aspen Medical, who have likewise limited.
between Australia’s comparative recently entered into a US$1 billion
advantages and Indonesia’s needs. deal with state-owned enterprise
PT Jasa Sanara to build and
operate 650 healthcare clinics and
23 hospitals in West Java.12
Investing in Indonesian healthcare | 7There is a considerable opportunity diagnostics, microbiology, and 6. Building Indonesia’s
to leverage Australian expertise in immunochemistry testing and healthcare workforce
aged care and geriatric services genetics testing.15 through training and
and to provide training for nurses exchange programs
and caregivers, in order to improve In a separate Asia Taskforce
the delivery of services across Discussion Paper “Insights, As noted, Indonesia needs to
the archipelago. Outreach and Brokering: Taking train more doctors and nurses to
Australia’s Healthcare Innovation improve ratios and quality of care.
Indonesia is also seeing the Advantage to Indonesia”, the
emergence of senior living homes, Australia-Indonesia Centre Australia is home to many of
with high-quality facilities and uses the Monash Technology the world’s leading universities
management services, proving Precinct as a case study in how in health education. It also has
that there is a relatively untapped Australia’s healthcare innovation leading vocational training
appetite for such services as precinct capabilities in healthcare programs to develop world-class
pre-existing cultural norms with technology, medical services, multi-disciplinary teams. Through
respect to aged care start to shift. healthcare and pharmaceutical the IA-CEPA there is also scope to
infrastructure can be leveraged tap into the considerable training
This presents opportunities to support Indonesia’s capacity of Australia’s vocational
for Australian companies with health‑related challenges. education and training facilities
experience in aged care to (“TAFEs”) and other registered
partner with major developers in 5. Digital health training organisations (“RTOs”)
Indonesia who are better placed to deliver accredited training for
to handle the land and property nurses, administrators and other
aspects of such ventures. One healthcare skilled and semi-skilled
Australian company which has Indonesia is considered to have personnel such as orderlies and
stepped into this space is Living the largest digital economy in nursing assistants. Accreditation
Well, which operates a number of SouthEast Asia, built on its large recognised across both countries
premium ‘club houses’ for seniors, and young population and high opens up the opportunity for
in partnership with the Indonesia penetration of smartphones and training and exchange programs
conglomerate Ciputra Property. the internet. Such a customer base in either country, and potentially
has provided fertile ground for for the supply of much needed
4. Medical technology the growth of digital healthcare aged-care and child-care workers
providers over the last 5 to in Australia.
10 years, which are helping to
overcome many of the issues in Cooperation has already begun
Australia is also a world leader traditional healthcare models in this area. The University of
in the development of health related to cost, efficiency and Tasmania have partnered with
technology and medical devices, geographic inequalities. the University Gadjah Mada to
but to date has little penetration create an 18 month joint Masters
into Indonesia’s large and rapidly There are opportunities for the of Nursing program. Eligible
expanding market for medical export and delivery of Australian students are funded by the
devices and laboratory equipment, healthcare IT solutions where Indonesian government through
which is forecast to pass US$ Australian experience aligns with the Indonesia Endowment for
1.9 billion by 2024, despite 90% Indonesia’s needs. For example, Education (Lembaga Pengelola
of devices being imported.14 the extent of Australia’s own rural Dana Pendidikan).
According to Austrade, business and remote communities has
opportunities primarily exist necessitated the development
in surgical equipment, high- of solutions like telehealth and
intensity focused ultrasound, telemedicine. Australia has also
radio immunotherapy and been developing digital systems
clinical laboratory equipment for broader applications, like
used for diagnostic tests, medical databases.
particularly for molecular
Investing in Indonesian healthcare | 8NOTES
1. PwC 2017, How will the global economic order change by 2050? Note
that in PwC’s analysis, Indonesia is projected to rank fourth place in 2050
when measured in either Purchasing Power Parity or Market Exchange
Rate terms
2. World Bank 2018, Indonesia Database for Policy and Economic Research
3. WHO 2017, The State of Health Inequality in Indonesia
4. LPEM FEB UI & JICA 2020, Estimating Social Infrastructure Needs in
Diverse and Dynamic Asia. The investment gap has been estimated
based on the cost of Indonesia expanding its stock of hospital and
medical facilities to achieve a ratio of 3.5 beds per 1,000 population, the
minimum recommended by the WHO.
5. Ministry of Health Indonesia 2020, Rencana Strategis Kementerian
Kesehatan Tahun 2020-2024
6. Ministry of Health Indonesia 2019, Indonesia Health Profile 2019
7. WHO 2017, The State of Health Inequality in Indonesia
8. Ibid. Basic amenities readiness is defined as having the basic services
required to provide medical care, such as electricity, water and
sanitation, private room, toilet, communication, computer with internet,
and transportation.
9. PwC 2017, Build and Beyond: Bridging the Gap
10. PwC 2017, Build and Beyond: Bridging the Gap
11. Private hospitals may choose whether they want to cooperate with
JKN operator (i.e. Badan Penyelenggara Jaminan Sosial Kesehatan,
BPJS Kesehatan) to be able to serve JKN market. However, in the case
of emergency, all private hospitals, regardless of the presence of such
cooperation or not, must treat BPJS patients. Once the patients are in
a stable condition, then the hospital should refer to other hospital that
cooperate with BPJS Kesehatan.
12. Australian Financial Review 2020, Aspen Medical, Docta ink $1.3bn
Indonesia healthcare deal.
13. UNFPA 2014, Indonesia on the Threshold of Population Ageing
14. Austrade 2019, Healthcare to Indonesia - Trends and Opportunities Data
from the Indonesian Health Ministry
15. ibid.
Investing in Indonesian healthcare | 9About Asia Taskforce
In October 2019, the Business Council of Australia and Asia Society Australia together with Knowledge
Partners PwC Australia and the University of Sydney Business School formed the Asia Taskforce of senior
leaders from the business, education and government sectors to examine howAustralian companies and
organisations can increase their presence and position in Asia to ensure our continued prosperity and
deliver progress for future generations.
This paper refers to Asia as the countries of South-East Asia, South Asia and North East Asia.
This Discussion Paper and other publications by the Taskforce can be found at
https://asiasociety.org/australia/asia-business-taskforce
Asia Taskforce Advisors on Indonesian Healthcare
• Jasminah Woodhouse
Advisor, Economics and Policy Advisory, PwC Indonesia
• David Ray
Advisor, PwC Indonesia
• Robert Herdiyanto
Manager, Economics and Policy Advisory,
PwC Indonesia
• Inca Camilla
Senior Associate, Economics and Policy Advisory,
PwC Indonesia
• Raihan Pradhana
Associate, Economics and Policy Advisory, PwC Indonesia
• Andrew Parker
Partner and Asia Practice Leader, PwC Australia
www.bca.com.au
www.asiasociety.org/australia
www.pwc.com.au/asia-practice
127079670
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