Commercial & Industrial Property News Update

Indonesia - Strong Purchasing Power Draws New USD 21 million Investment


October 15, 2012

Merck Sharp and Dohme (MSD) has announced the opening of a new USD 21 million factory in Indonesia to cater to the Indonesian and other Asian markets.


US pharmaceutical giant MSD has looked to the East for a panacea to the stifling business environment back home. Lured by the strong purchasing power of Indonesia and nearby Asian countries, the drug company has opened a second factory in Pandaan in Pasuran, East Java at a cost of USD 21 million.

Patrick Bergstedt, MSD president for Asia Pacific said last Tuesday, "The crises in Europe have not affected the Asian market significantly, especially in Indonesia, where purchasing power and medicine consumption continue to increase."

MSD produces a range of medical drugs and products, including the Dr Scholl's foot care product line, the allergy medicine Claritin and the laxative MiraLAX, all of which are popular in the US.

The company's new factory occupies a commercial plot measuring approximately 4,900 sq m and is located about 50 km southeast of the provincial capital of Surabaya. It produces packaging for various medicines used to treat diabetes, hypertension, infections and cardiovascular and respiratory problems.

MSD said that the new production plant is a supplement to its existing factory in the area, which was built in 1975 on a 3,350 sq m plot for USD 6 million.

Remarking on Pandaan's strategic geographical location as a launching point into the Asian market, MSD's senior vice president for operations, John Markels, said, "Now that we have the new factory, we will be able to meet the growing demands for medicine from the international market."

Approximately 75% of the firm's output from its Pandaan facilities are exported to other markets, with the remaining 25% sold in the country.

Consumption of pharmaceutical products is slated in rise in Indonesia, which currently has, according to the Health Ministry, 208 pharmaceutical companies, 33 of which are foreign firms.

The Ministry said that the country's pharmacy market has per annum growth of between 12% to 14%.

"There are also increases in the overall population and in the number of elderly. This has contributed to the surge in medicine consumption," said Maura Linda Sitanggang, director general of pharmacy and medical equipment services.

Additionally, the proposed introduction of a National Social Security System (SJSN) in 2012 would further boost pharmaceutical consumption, as SJSN would make health insurance available to all eligible Indonesians.


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