Investment in the Health sector

Health is one of the important pillars for human life which is inherent as part of the element of welfare which is the ideal of the Indonesian state. Being one of the basic needs for human life, the health sector in every country continues to be improved as an element of development succession. In Indonesia alone the health sector faces major challenges in providing adequate health facilities for Indonesia's 270 million people (BPS, 2020). The large number of population brings major challenges to meet the needs of health services in all regions of Indonesia. In addition to the element of health workers that must be met, the need for medical devices is homework that must be completed through the synergy of various sectors such as the health sector, the industrial sector, and the trade sector.

The need for medical devices during the Covid-19 pandemic has increased, not only in Indonesia but in all countries in the world. However, based on data from the Government Goods/Services Procurement Policy Agency (LKPP) in 2021, the value of ordering domestic medical devices is only IDR 2.9 trillion. This amount is far less than the value of imported medical device orders which reached 12.5 trillion rupiahs, more than four times the domestic medical device orders. The government continues to try to reduce the gap in ordering medical devices. The dependence of a vital sector on imported products is certainly a big risk for a country.

The Indonesian government through the Ministry of Industry implements a policy of import substitution of medical devices. These efforts are carried out by increasing domestic medical device production capacity, including opening up investment opportunities for the medical device sector. Until 2021 there are 79 types of medical devices that are considered capable of being substitutes for imported products out of a total of 358 types produced domestically. In the 2015-2035 National Industrial Development Plan, Indonesia seeks to increase the capability of the local industry from the production of low-tech medical devices such as disposable and consumables products to the production of medium-tech medical devices such as radiology units.

In the pre-pandemic era, the medical device market in Indonesia grew by 12 percent per year (Ministry of Health 2018). This is in line with the increasing need for health services to fulfill the National Health Insurance (JKN) program. After the Covid-19 pandemic which started to spread in 2020, the need for medical devices in all lines of health services continued to increase. The Ministry of Industry said that in 2021 the potential for the domestic medical device market reached a value of 607 trillion rupiah. There is a huge opportunity to optimize especially medical device products with a Domestic Component Level (TKDN) above 40 percent which must be purchased in the state budget expenditure and are prohibited from being imported. Moreover, the health budget in the 2022 State Budget holds a portion of 9.4 percent of the total government expenditure of IDR 2,708.7 trillion. In line with the government's efforts to encourage substitution of imported medical device products and the large market opportunity, investment in the medical device industry in Indonesia is becoming an attractive matter at this time.