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Indonesia drugmakers say more foreign investment will cut forex exposure
February 12, 2016 / 10:02 AM / in 2 years

Indonesia drugmakers say more foreign investment will cut forex exposure

JAKARTA, Feb 12 (Reuters) - Indonesia’s move to free up foreign investment in the pharmaceutical raw materials sector is expected to reduce the exposure of its biggest drug makers to volatile swings in the rupiah currency, company executives said on Friday.

President Joko Widodo’s administration has loosened foreign investment restrictions to boost the economy, allowing foreigners to own 100 percent of a medicine raw material maker, as opposed to 85 percent earlier.

Three of the biggest pharmaceutical companies in Indonesia - PT Kalbe Farma Tbk, PT Kimia Farma Tbk and PT Indofarma Tbk - now import most of their raw materials. Kimia Farma and Indofarma are state-controlled.

“If the raw materials are manufactured locally, the transactions would be in rupiah. That means our exposure to forex will be reduced,” Vidjongtius, a director at Kalbe Farma, told Reuters by telephone.

Indonesia’s rupiah was Asia’s second-worst performing emerging market currency last year, falling around 10 percent against the U.S. dollar.

Shares of Kalbe Farma, Kimia Farma and Indofarma fell on Friday, however, partly due to profit-taking, traders said. The stocks had surged in previous weeks on speculation of the easing and a potential merger in the state-controlled drugs sector, they added.

“In Indonesia currently there’s a lack of a basic chemical industry that supports the development of raw materials. We got complacent because it’s easier to import,” said Yasser Arafat, corporate secretary at Indofarma. “But better late than never.” (Reporting by Fransiska Nangoy and Eveline Danubrata; Additional reporting by Cindy Silviana)

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