APAC continues to be the global outperformer in our proprietary Pharmaceuticals & HealthcareBusiness EnvironmentRatings (BERs), which assesses countries according to their attractiveness tomultinational drugmakers. Region's score increased from 52.3 out of 100 in Q410 to 53.1 in Q111 – arise of 1.54%. Ratings rises were also seen in MiddleEast and Africa (+0.97%), the Americas (+0.86%)and Western Europe (+0.24%). Several downwards revisions in pharmaceutical market growth ratesresulted in Central and Eastern Europe (CEE)'s score decreasing by 2.22%. The global average increasedby just 0.02% to 51.4.In the BMI BER matrix for Q111, Indonesia is in 12th place of the 17 regional markets surveyed in the APAC region.
The country’s pharmaceutical rating stands at 47.4. The main drawbacks toinvestment in Indonesia include corruption, intellectual property issues, low per-capita spending onpharmaceuticals and a small proportion of the elderly in the country.Indonesia enjoys a fairly robust legislative framework for dealing with Intellectual Property Rights (IPR)issues, but the weakness of the court system means enforcement is often lacking. A signatory to theWorld Trade Organization’s (WTO)'s Agreement on Trade-Related Aspects of Intellectual PropertyRights (TRIPs), the government is attempting to reform the IPR regime with new laws.
This has led to animprovement in patent protection – extending the term of protection from 14 to 20 years – and theintroduction of the reversal of the burden of proof onto the defendant in intellectual infringement cases.Yet, while the Indonesian government has steadily improved the regulatory and legal framework for theprotection of IPR, enforcement remains weak. In 2009, Indonesia's positioned worsened from ‘PriorityWatch List’ (in the US government’s 2007 assessment of the country’s protection of Intellectual PropertyRights) to a Priority Black List. The IPRI survey ranked Indonesia 108th out of 125 countries for IPRprotection.
Corruption is pervasive, afflicting many private and public institutions. The World Bank estimates thatcorruption can add up to 20% to the cost of doing business in Indonesia. The entire judicial system isaffected, with police and judges alleged to regularly supplement incomes with bribes and commissions.On the other hand, factors such as the annual growth of Indonesia’s pharmaceutical market, coupled withrising population numbers and a relatively solid political and economic base are expected to encouragemultinationals to invest in the country, despite its risky operating environment.
Indonesia's real GDPgrowth reached 6.2% y-o-y in Q210, accelerating from the 5.7% registered in the preceding quarter andtaking H110 growth to a robust 6.0%. Given the strong H110 figure, we highlight upside risks to our5.2% real GDP forecast for 2010.
