Indonesia: Investment-Friendly Healthcare Landscape

14 Oct 2021   |  Indonesia

With the launch of Indonesia's Omnibus Law that mainly regulates job creation in March, the archipelago's government aims to boost foreign investments to several vital sectors deemed necessary as the country's backbone.

With the launch of Indonesia's Omnibus Law that mainly regulates job creation in March, the archipelago's government aims to boost foreign investments to several vital sectors deemed necessary as the country's backbone.

The relaxation of several regulations in the healthcare industry is one of the most highlighted in the Omnibus Law, as the sector was previously heavily regulated and posed numerous restrictions on foreign investments. For example, Indonesian hospitals are subject to a maximum of 67 percent to 70 percent of foreign ownerships depending on their origins of countries. The Omnibus Law added a clause of opening opportunities for foreign investors to own the country's hospitals that possess at least 200 beds, allowing for growth in the number of hospital beds per person that now stands on a mere 1.2 beds per population.

Additionally, Indonesia now allows for more foreign investments in the pharmaceutical manufacturing sector, from the previously 85 percent maximum of ownership to opening for 100 percent ownership

The rise of risk management healthcare


The relaxation for the healthcare industry in Indonesia also brings forth growth for other healthcare-related markets. As businesses receive room for the more significant rise from the release of the Omnibus Law, employers are required to provide a new unemployment insurance regime under the social security program. The decision to provide better risk management policies in healthcare for employees is forecasted to affect risk management companies positively. Today, the Indonesian government aims to cover 40 percent of the country's residents, specifically those more vulnerable to volatility, with government-sponsored subsidies insurance packages. The already-running programs such as Jaminan Kesehatan Nasional (JKN) and accommodative approaches of the country's social security institution, BPJS, play a critical role in achieving the target.

The risk management healthcare industry in Indonesia is fragmented, with dominating regional players divided into several functions. By providers, there are public and private players offering different kinds of insurances. By term, some are keener on providing short term, while others, long time. Furthermore, insurance companies are divided into individual health insurance products and group health insurance products by product type.

Over the years, healthcare risk management has shown a solid positive CAGR of 7.7 percent. The robust growth is due to the government's active measures on implementing a nationwide health insurance scheme that requires multilayered risk mitigation for each citizen. The Omnibus Law will significantly affect the growth and cushion the potential damages and risks posed to employees throughout the industries. Moreover, the COVID-19 pandemic in 2020 has emphasized the importance of health insurance as the financing for the prevalent needs of obtaining healthcare services. Indonesian citizens are becoming more aware of the importance of risk assessment in healthcare to help ease vulnerable times, as the country experienced shortages and a lack of healthcare services supply during the pandemic.

The Indonesian healthcare system is rapidly evolving, racing to cater to the needs of the populated residents in the archipelago. With responsive and investment-friendly public measures, Indonesia's healthcare system is looking into dynamic activities to push core businesses and the healthcare risk management industry to realize its potential.

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