Indonesia To Pharma: Build A Factory Or Else
5 CommentsBy Ed Silverman // November 24th, 2008 // 12:41 pm
This is an all-or-nothing proposition. Foreign drugmakers can leave Indonesia if they do not comply with new rules requiring them to have local production facilities, according to Health Minister Siti Fadilah Supari. The rules, which were introduced earlier this month, are designed to encourage foreign companies to transfer technologies to Indonesia and boost investment to create jobs.
“If they want to get licences (to sell their products) they have to invest here also, not just take advantage of the Indonesian market,” Supari told Dow Jones. “They can’t just operate like a retailer here, with an office size that’s three metres by three and make billions of rupiah. That is not fair.”
The decree, which has drawn protests from the US Chamber of Commerce, will affect 13 international drugmakers that currently sell their drugs in Indonesia but do not have production facilities here. The list includes Wyeth, Lilly, Merck, Roche, Servier, Novo Nordisk, AstraZeneca and Astellas Pharma.
Under the new rules, foreign companies have a two-year grace period to set up production facilities. Supari believes Indonesia’s market, which is worth about $2 billion a year, would persuade the companies that building production facilities is worthwhile. Those who fail to do so would be banned from selling their products or distributing them through companies that do have plants in Indonesia.
“If they want to go away, go ahead,” she says, maintaining that India and China had already enacted such requirements. There are 29 international drugmakers marketing products in Indonesia, with total market share of 25 per cent. The minister said the new rules will give ‘fair treatment’ to pharmaceutical companies that have already invested in drug production facilities in Indonesia.
The ceo of the US Chamber of Commerce, Thomas J. Donohue, last week sent a letter to President Susilo Bambang Yudhoyono, urging the president to “consider revising the decree.”
Source: The Straits Times
Salmon
This is nothing new.
Turkey had such a requirement for years as did other countries. Other countries had co-manufacturing requirements. Taiwan and the Phillipines also would constantly change the requirements for approval so the clock would run out and the process would have to be restarted while their local pharmaceutical industry could set up their own plants etc..
Salmon
Anon.
So much for free trade, and Adam Smith’s idea that different countries should focus on what they’re good at.
So US taxpayers pay for the research that the drug companies use to base new drug ideas on, then instead of manufacturing here and selling abroad, they have to be manufactured abroad to be imported back to the US, while those countries can also sell us things that we can’t manufacture like latex gloves, etc..
foln16
Mexico had this for years as well, it was called “requisito de planta” and despite NAFTA and so on it remained in place until this past August when the Mexican government finally eliminated the regulation.
Norman Siebrasse
This is also how the original English patent system worked. In the middle ages England was economically backward compared to the continent and patents were granted in order to provide an incentive to establish new industries in England. Patents were granted for manufacturing processes that were new to England and there was a typically a requirement of that the product be manufactured in England and that English workers be trained. The goal was not so much to provide an incentive for innovation, as the products were typically already known on the continent and available in England as imports, but rather to stimulate English industrial development. The goals and methods of the original English system look a lot like the Indonesian proposal. Of course times have changed, and this isn’t to say that Adam Smith and international specialization should be rejected - but it seems to me that we can’t get too indignant that Indonesia is adopting the same industrial development policies that England used when England was a developing country.
Salmon
Norman,
The history is fascinating. What I wonder is how do we as the US taxpayer do to our taxpayer investments via NIH and academic research to bring innovations to market that we as taxpayers pay for in part so as to result in a ROI and jobs.
There is already an issue for European companies who moved research to the US to take advantage of research paid for by tax dollars, yet manufacture in developing countries, and send the income from US sales back to their home countries and pay the corporate taxes there.
What do I as a taxpayer do to protect my investment and jobs for myself and my children? I already sometimes think I should encourage my children to emigrate.