Despite huge opportunity in the country’s healthcare business, Indonesia has found difficulties in attracting significant investment for the sector, a condition business players mainly attribute to the country’s lack of research culture and limited human resources.

The government’s decision to liberalize the pharmaceutical industry in March last year, for example, has not attracted significant foreign investment, as business players have pointed out the country’s lack of competitiveness in providing a supportive environment for research and innovation, which serve as the core of the industry.

Last year, including after the introduction of the policy, Indonesia granted Rp 14.7 trillion (US$1.1 billion) worth of principle licenses to investors in the healthcare sector, which covers pharmaceuticals, hospital and medical equipment businesses, according to data from the Investment Coordinating Board (BKPM).

The amount is lower than the Rp 23.4 trillion booked in the previous year but the investment realization rose 175 percent to Rp 4.4 trillion from the Rp 1.6 trillion booked in 2015.

BKPM deputy chairman for investment promotion Himawan Hariyoga, however, considered the investment realization figure “low.”

“One or two investors expressed concern that they couldn’t compete with imported raw materials,” he said on Wednesday in a panel discussion during the Mandiri Investment Forum 2017 held by state-owned lender Bank Mandiri.

Indonesia’s healthcare expenditures, which include pharmaceuticals, hospitals, medical insurance and medical devices, amounted to only around 2.8 percent of its gross domestic product (GDP), according to securities firm Mandiri Sekuritas, a subsidiary of Bank Mandiri.

The figure is relatively low compared to the ASEAN country average of 4.6 percent, with big opportunities remaining in the sector.

A home to over 200 pharmaceutical firms, Indonesia still imported 90 percent of its raw material in the industry.

Paracetamol, a key substance to treat pain and fever, for instance, is mostly imported from India and China.

One of many ways to reduce the dependence is by developing phytopharmaceuticals from Indonesia’s herbs, pharmaceutical company Dexa Medica chief executive officer Ferry A. Soetikno said.

He said, however, there were not many companies in Indonesia providing a supportive research environment to their employees despite the core of the business being innovation.

“Considering our biodiversity, we should use that in a way so we can use more of them in research to be eventually used by Indonesian people,” he said.

Publicly listed pharmaceutical company Kalbe Farma director Vidjongtius said what was needed to boost the growth of the healthcare sector was more expertise and experience in addition to growth in the intermediate drug substance industry.

“Money is clearly not the issue as long as you want to invest,” he said.

As the brain behind the pharmaceutical business, global research and development absorbs around $100 billion of investment annually, with half of the figure spent on clinical trials.

Despite being the largest economy in ASEAN, Indonesia is still lagging behind its regional peers in the life science industry. Malaysia, Thailand and the Philippines, for instance, conduct six to eight times more clinical trials than Indonesia.

The hospital business, meanwhile, is suffering from a lack of doctors and specialist doctors, publicly listed hospital operator PT Mitra Keluarga Karyasehat president director Rustiyan Oen said during the discussion.

“The government should build more medical schools to produce more doctors,” he said.

With a population of over 250 million people, Indonesia, this year alone, is in need of 460 more pediatricians, 355 obstetricians and gynecologists, 388 internists, 546 surgeons and 172 anesthesiologists, government data shows.

Indonesia has been seeking support from the private sector to boost investment as the country struggles for economic growth, which is targeted to reach 5.1 percent this year.

Investment growth has decelerated since the end of 2015 when the figure stood at 5.07 percent.

In his speech during Wednesday’s event, Coordinating Economic Minister Darmin Nasution tried to convince investors to work with the government’s task force to accelerate the implementation of its economic policy packages, which have been introduced over the past two years to solve problems on the ground, including those in the healthcare sector.

“If there are problems related to your investments in Indonesia, don’t hesitate to contact this task force,” he said.

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