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tate-run pharmaceutical company PT Kimia Farma has established a joint venture with a South Korean-affiliated company to ensure the supply of raw materials for drug production.

Kimia Farma, a publicly listed company, signed, on Tuesday, documents for the formation of PT Kimia Farma Sungwun Pharmacopia, a joint venture company with PT Sungwun Pharmacopia Indonesia, the local arm of South Korean-based Sungwun Pharmacopia Co Ltd.

The joint venture company will establish a business in the chemical industry and plan to specifically produce active pharmaceutical ingredients and high functional chemicals, according to a Kimia Farma statement posted on the website of the Indonesia Stock Exchange (IDX) on Tuesday.

Kimia Farma has injected Rp 20.63 billion (US$1.49 million) in capital into the new company. With such an investment, Kimia Farma holds 75 percent of the joint venture'€™s total shares while the remainder is held by Sungwun Pharmacopia Indonesia.

'€œThat amount of investment is 1.10 percent of our company'€™s equity,'€ wrote Kimia Farma president director Rusdi Rosman, adding that his company'€™s equity stood at Rp 1.87 trillion as of December last year.

Kimia Farma reported that its costs rose 12.15 percent year-on-year (yoy) to Rp 2.4 trillion during last year'€™s first nine months. Its sales grew 12.9 percent yoy to Rp 3.47 trillion and its net profits expanded 14.9 percent to Rp 166.8 billion.

Earlier this month, Rusdi said his company was looking to raise around Rp 1 trillion from a rights issue to build factories and boost production capacity. His company, he said, needed around Rp 3.9 trillion for capital expenditure over the next three years, and thus needed to source fresh funds.

In December, the firm announced that, in 2016, it would start constructing a Rp 100 billion raw materials plant in Cikarang, West Java.

Raw materials for drugs have become one of the chief concerns of the pharmaceutical industry.

Recently, Indonesian Pharmaceutical Association (GP Farmasi) business development committee head Vincent Harijanto said that up to 95 percent of materials for local drug production were still imported.

He urged the government to offer incentives and to widen the door for foreign investment in the country'€™s pharmaceutical industry to reduce the nation'€™s dependence on imported raw materials for medicines.

The Investment Coordinating Board (BKPM) has proposed a plan to allow foreign investors to hold more shares in pharmaceutical companies, from a maximum level of 85 percent currently to 100 percent in a bid to encourage the industry'€™s development.