Indonesia - Healthcare Industry Potential

Indonesia’s healthcare industry is a lucrative investment opportunity for foreign investors as the growth of its middle-class and the introduction of universal healthcare has driven demand in almost all aspects of the industry from hospitals to pharmaceuticals to medical devices.

The government, in its attempt to open the sector more to foreign investors, made amendments to the country’s Negative Investment List (NIL) in 2017 that gave foreign investors a larger stake in certain sub-sectors of Indonesia’s health industry, such as in hospitals, specialized clinics, and medical equipment.

Furthermore, by improving the country’s healthcare infrastructure, the government hopes this will encourage Indonesians who seek medical treatment abroad to spend domestically. More than 1.2 million Indonesians spend more than US$2 billion annually on healthcare overseas, mainly in neighboring Singapore and Malaysia.

Universal healthcare in Indonesia - Indonesia introduced its universal healthcare program, the JKN, in 2014, which has since grown into the world’s largest, covering over 200 million people.

The program is run by the Social Security Administrator for Health (BPJS) agency, and every citizen as well as expats working in the country are mandated to join the program. All companies in the country are responsible for registering their employees and paying a percentage of their premiums.

Those registered with the BPJS program are eligible to receive free health services ranging from simple dental check-ups to serious procedures, such as organ transplant.

In the private sector, the employer must pay four percent and the employee the remaining one percent. For civil servants, the government contributes three percent while the employee contributes two percent.

In addition to the employee, the premium also covers their spouse and up to three dependent children up to the age of 21. Starting from June 2020, the government has been doubling premiums for the program, hoping this can reduce the program’s deficit which reached US$2.3 billion in 2019.

Private health insurance - Roughly 20 million Indonesians are covered by private health insurance, although this is dwarfed by the number covered by the JKN program. Additionally, as businesses in the country are obligated to enroll their employees in the program, many have chosen not to participate in private health insurance schemes.

The ranks of those that can afford private insurance are increasing, as the middle and affluent-class demand faster and quality service. Private insurers will play an important role as an add-on to public coverage as the JKN, although providing a free service, will only pay up to the patient limit.

Market for hospitals and healthcare facilities - Indonesia has 2,925 hospitals providing just over 318,000 beds, or 1.17 beds per thousand population – the lowest rate in ASEAN.

Some 63 percent of the country’s hospitals are privately managed, and the low number of hospital beds reflects the growing opportunity for foreign investors to fill the shortfall. There is an increasing demand for new hospitals in second-tier cities such as Surabaya and Bandung as more of the population engage with the universal healthcare program.

There are currently more than 26,000 healthcare facilities where patients can get medical treatment under the JKN program. This includes over 2,000 hospitals, 9,000 community health centers and private clinics, over 1,100 dentist clinics, and 1,000 opticians.

The government has allowed foreign investors to have 67 percent ownership in private hospitals and 70 percent ownership for investors from ASEAN. This is also the case for private health clinics, although foreign investors are limited to specialized medical services and not basic medical clinic services.

The main challenges for hospital operators will be recruiting doctors (the country only has 0.4 doctors per 1,000 population) in addition to choosing the right location to build the hospitals. The opportunity lies in second tier cities as bed occupancy is still low and thus there is potential for growth. Furthermore, second tier cities offer lower property prices and hence profitability is usually higher than in first tier areas such as Jakarta.

Investors should closely work with reputable medical schools and vocational schools and provide access to high-quality equipment and training. Hospitals are also advised to allow specialists to work in other practices/hospitals, enabling them to expand their skillset and experience.

Telemedicine investment outlook - The integration of information and communication technology (ICT) into healthcare will also accelerate reforms in Indonesia’s healthcare sector. The use of healthcare apps, for instance, could transform the way hospitals and doctors store their records, collect, and share patient data.

The coronavirus pandemic has accelerated the growth of digital healthcare and will become the new norm in the region post-COVID-19. Local healthcare app, Alodokter, recorded more than 30 million active users since March 2020 (one and a half times higher than pre-COVID-19 traffic). Another telemedicine app, Halodoc, as well as ride-haling giant, GoJek, partnered with the Ministry of Health to provide COVID-19 diagnostics in remote areas.

In a country that has only 0.4 doctors per 1,000 population, in addition to geography of over 17,000 islands, telemedicine makes healthcare accessible to the furthest regions and helps mitigate pressure on the existing healthcare system.

Market Value - Indonesia’s medical device industry is worth an estimated US$4.5 billion in 2019 with the majority (US$2.8 billion) coming from imported products.

Imported products are largely sophisticated medical instruments, such as diagnostic tools and medical lasers. By contrast, exports of medical devices reached less than US$267 million in 2019, dominated by low added-value products, such as masks, surgical gloves, and hospital furniture.

Foreign investors are limited to 49 percent ownership and must apply for a special license from the Ministry of Health (MoH) to supply high-tech medical equipment sector. For the majority of low-tech medical equipment, the MoH will only issue a license on a case by case basis.

Demand for medical devices will be driven by the expansion of private and government hospitals and clinics as well as improvements on existing facilities. Another factor behind this expected demand is the rise of non-communicable diseases and the diagnosing of which require advanced and high-tech equipment.

Indonesia Growing Renminbi Usage

China’s currency, the renminbi (RMB), has gradually penetrated Indonesia. It is reported that currently around 10 percent of Indonesia’s global trade uses the RMB. In 2018, the value of clearing RMB reached 201.2 billion RMB, or about 63 percent of the entire Indonesian market. Bank of China ranked first in Indonesia’s market share in clearing value.

Largest Trading Partner - The Society for Worldwide Interbank Financial Telecommunication (SWIFT) also found that in 2017 215 billion RMB was circulating in Indonesia. The growing internationalization of the RMB is, among other factors, helped by the expanding economic ties between Jakarta and Beijing. At the moment, China is Indonesia's largest trading partner, with trade two time that of Indonesia and the United States. A large amount of investments from China have also made their way to the archipelago, in particular with the implementation of the Belt and Road Initiative (BRI). 

RMB Based Insurance - Chinese companies in Indonesia have also begun to use RMB. For example, PT China Life Insurance Indonesia (CLII) launched the first individual multipurpose life insurance product in RMB, known as CLII Privilege Insurance Plan, in the Indonesian life insurance market. CLII stated that the move was part of the strategy of its parent company, China Life Insurance Group, to support the RMB internationalization process.

A number of Chinese banks, such as Bank of China and Industrial and Commercial Bank of China (ICBC), have also established branches in Indonesia. These banks help widen the use of the RMB in Indonesia through mechanisms such as RMB cross border trade settlements, RMB prefix remittances, and RMB domestic and cross border fund transfers. In addition, the banks also offer various banking products and services to corporations, small and medium enterprises, and individuals through 19 branches in Indonesia.

Bank Partnership - In addition, the Chinese banks have also partnered with local banks to help RMB internationalization in Indonesia. For instance, the ICBC has collaborated with Bank Mandiri to provide banking products and services related to RMB transactions. As a result of the collaboration, in early 2018 RMB transactions facilitated by Bank Mandiri Group totaled around 507 items worth 601 million RMB.

The widening use of RMB in Indonesia cannot be separated from the Bilateral Currency Swap Agreement (BCSA), signed by Bank Indonesia with the Bank of China in 2018. The deal was worth 200 billion RMB, $30 billion at the time, doubling the previous threshold of 100 billion RMB. The agreement was signed to enable trade transactions using both countries’ currencies, which can shorten and simplify business transactions compared to using international trade currencies or hard currencies such as the U.S. dollar, where each country needs to exchange their currencies to dollars first.

Opportunity in the RMB - the use of the RMB as a currency in international trade transactions has a number of advantages for Indonesia. One of them is that the RMB is more stable compared to the U.S. dollar, which easily fluctuates against other countries’ currencies. Thus, in terms of transaction costs, China’s currency is cheaper and safer. Not only that, the use of RMB can also reduce risk.

Another reason why the use of Chinese currency will increase in Indonesia is because Jakarta sees China as one of the countries with the greatest capital adequacy in the world. Indonesia needs foreign capital and can certainly take advantage of these opportunities by opening the door wider for the RMB.

Homework to do - The growing flow of capital from China should not make Indonesia allow Beijing to dictate terms. China must continue to follow the rules of the game set by Indonesia. This is to make sure that the widening use of the RMB does not only benefit China, but both parties.

Moreover, Indonesia also needs to encourage relevant actors to begin opening up for the use of the RMB in their operations. As reported, the most crucial obstacle for the widening use of the RMB comes from business actors, who have no confidence yet to use the currency in business transactions. It is crucial on the part of Indonesia to change the mindset of businesspeople in both countries so that the RMB can be used more widely.

Who Is Kadar Shaikh

An Indian businessman who recovered from coronavirus has converted his office into an 85-bed facility to provide free treatment for the poor. The coronavirus epidemic is still raging in the world's second-most populous nation, with the number of infections passing 1.5 million on Wednesday (Jul 29), and almost 35,000 deaths.

With public hospitals struggling to cope, Kadar Shaikh spent 20 days in a private clinic last month in the western city of Surat - and was horrified by the bill.

"The cost of treatment at a private hospital was huge. How could poor people afford such treatment? So I decided to do something and contribute in the fight against the deadly virus."

Once back on his feet, Shaikh secured approval from local authorities to convert his 2,800-square-metre office premises. The government provides and pays for the staff, medical equipment and medicine, while Shaikh bought the beds and bears the cost of bed linen and electricity.

Anyone can be admitted, he said, regardless of "caste, creed or religion".

Sun Life Focus On Asia

A push to sell insurance products through digital channels and an uptick in demand post-pandemic will lead to Asia accounting for 25% of Sun Life’s income in the coming five to six years.

It’s not a high jump for the region to make, considering it currently contributes 18% to the life insurer’s income. However, it will soon become an even bigger presence in the Sun Life portfolio considering the company has now ramp up its digital capabilities across Asian markets, which will help to combat the slowdown in physical sales via agents during coronavirus lockdowns.

Sun Life also plans to bolster its digital capabilities in the region by taking advantage of the growing awareness around life and health insurance products in the region. Insurance companies on the continent rely heavily on agents, though regulators are encouraging firms to make use of digital tools in the midst of the pandemic.

The life insurer is active in seven markets in Asia, including China, Hong Kong, India, and the Philippines. The low penetration rate of insurance combined with developing economies makes the region a promising market for insurers. Insurance premiums as a percentage of GDP in emerging Asia-Pacific markets was 3.89% on average last year, compared to 11.43% in the US and 10.30% in Britain.

In the meantime, the pandemic has helped boost awareness about the importance of insurance in Asia. The awareness will stay (and) the economic side of the crisis will resolve itself. In fact, Sun Life has already been seeing a rebound in sales in China and Hong Kong.

In Q1 2020, Sun Life’s underlying profit from Asia increased by 27%. The life insurer reports Q2 results on August 06.

Toxic Employee Always Win

Toxic people wreak havoc on workplaces. They start drama. They distract others. They place blame on others. They act selfishly, instead of for the team. And they disturb workplace productivity with gossip, negativity and/or bullying. They somehow stick around. Despite their toxic behavior, many of these people even manage to work their way to the tops of their companies.

Toxic employees somehow get promotions, even when the rest of the workplace wholeheartedly believes that they’re not so deserving. 

They show confidence - Toxic people know how to play the game. They know that confidence is key, and so they fake it until they make it. Of course, this isn’t necessarily a bad thing to do - but toxic people can put on masks that deceive others.

They’re dirty competitors - Toxic people like to compete. They want to win, and they can become obsessed with being “the best.” So they brag about themselves and belittle others. And while their toxic behavior may be obvious to some people in the office, their boastfulness may get them seen by others. Of course, there’s a fine line between being proud of your work and touting your earned successes, and making yourself seem better by putting down others and throwing others under the bus.

They manipulate their way up - Toxic people know how to manipulate. They’ll place blame on others where it’s not warranted. They’ll lie to managers about their experiences and skills. They’ll embellish their successes to the nth degree. They’ll do whatever it takes to make it to the top, even if that means forgoing their dignity en route there.

They’re likable, even if they’re not suitable - A toxic employee might be the socialite of the office, always planning happy hours and getting everyone together. Perhaps they even get many people to love being around them because they’re simply fun. That may be why people automatically think to recommend them for a promotion or advocate for them when there’s room for advancement. But, while the extraverted chatter who wanders from department to department talking to everyone about the weekend might be a likable person, they can also be hugely distracting. This type of behavior is deceptively toxic; it’s not conducive to a productive workplace.

They start drama in other’s careers - Toxic people are notorious for starting drama — and they even do this in other people’s careers. They know that, if they can get rid of their competition, they have a better chance of succeeding. So they’ll spread rumors, gossip and create unbearable drama in the workplace to make their competitors look like bad suitors for the promotion.

They’re painfully negative - Toxic people have a tendency to be negative. They may be negative about their jobs or salaries, or they may complain so much about needing more money to support their family or pay off their loans. Perhaps a pushover-type manager will be sick of hearing it and switch this toxic employee into a new position to keep the peace. Of course, this doesn’t always happen. And, typically, negativity won’t get you ahead in the workplace (it’ll likely do quite the opposite). But a manager who is dealing with bigger issues might promote a toxic employee just to appease and pacify.

They’re a workplace martyr - A toxic employee might spend a lot of time telling everyone willing to listen just how much and how hard they work, even through their burnout. They’ll be sure to be the first one at the office and the last to leave, and they’ll create extra work and stress for themselves out of thin air. They’ll never take time off, and work-life balance isn’t even a term in their vocabulary.

Of course, forward-thinking managers know that a burnt-out employee will not make a successful leader, but a misguided manager might feel for a workplace martyr and give them the promotion for which this toxic employee is basically begging.

Insurance & Investment

There have been instances where investors are seen buying insurance policies to meet their financial goals. However, mixing the two - investment and insurance - can have adverse effects on the portfolio of an investor.

Starting with mutual funds, stocks to debt instruments, gold and silver, commercial papers, etc., there are various types of investment instruments that investors can opt for. Investing your money somewhere means you expect your money to grow over time and meet the desired goal.

However, there have been instances where investors are seen buying insurance policies to meet their financial goals. It is so because sometimes people find it easy and convenient to just opt for one product. For instance, an insurance policy with investment elements in it that takes care of both insurance and investment.

Even though it might seem convenient, experts suggest, investment and insurance should not be mixed. Both investment and insurance serve different purposes for the investor. For instance, an insurance product is only meant to protect the policyholder and his/her family against unforeseen circumstances, whereas an investment instrument such as mutual funds, stocks helps the policyholder grow or create wealth to meet their goals.

According to experts, mixing the two – investment and insurance – can have adverse effects on the portfolio of an investor. For instance, if an investor mixes his/her insurance and investment needs, it could result in lower returns on his/her investments along with inadequate life insurance cover. Hence, doing so could defeat the main purpose of life insurance which is extremely necessary given the current times.

If the mix of insurance and investment is not dealt with, it could result in poor returns. The invested amount could fetch higher returns if invested in proper instruments.

Experts say, one thing investors should be clear about is – life insurance is not an investment option. No investment in an insurance product will fetch the investor propper returns on the amount invested. Hence, if you are planning to invest in a life insurance cover, opt for term insurance. They come at a lower premium with higher sum assured. Additionally, while choosing the sum insured, consider taking into account the economy and inflation.

Term & Critical Illness - Covid-19 Pandemic

The increase in sales of term plans witnessed by the Indian life insurance industry can be attributed largely to the spread of the novel coronavirus. To further boost their healthcare shield against any serious illness, policyholders have been buying critical illness riders along with term plans in the last few months.

Sales of term plans had increased by around 30-40% in the first quarter of the current financial year compared to last year. Sales of critical illness riders have also seen a surge of around 10-20% in the last few months. Queries on critical illness covers have gone up, too, since April. The key reasons for buying the term plan is the fear of ongoing pandemic and increased awareness of insurance.

Term plans are pure protection plans offered by life insurance companies. The insured gets a fixed amount on death and there are no maturity benefits if policyholders survive the policy term. Critical illness riders form the optional cover that gives claims payout on the diagnoses of a disease. Typically, critical illness riders include diseases such as cancer, paralysis, heart attack, lung diseases, among others. Under the critical illness rider, on diagnosis of an acute illness, the policyholder is provided with a lump sum benefit by insurance companies.

Policyholders should take a careful look at the diseases mentioned that it covers, at what stage insurers will pay the money and the premiums. Unlike term plans where premiums are fixed, in critical illness cover it can change after every three years. So, one has to take care of this issue while buying the critical illness cover.

Jouska & Stock Goreng Pisang

The Financial Services Authority (OJK) has instructed financial advisory company PT Jouska Financial Indonesia to cease operations over allegations of illegal stock brokerage and investment mismanagement.

The OJK’s Investment Alert Task Force also shut down PT Mahesa Strategis Indonesia and PT Amarta Investa Indonesia, which are alleged to have provided investment management services and financial advice without proper licenses. It has also blocked all three companies’ websites, applications and social media accounts through the Communications and Information Ministry.

The decision was made after the task force summoned and questioned Jouska CEO and founder Aakar Abyasa Fidzuno following complaints on social media from its clients. The task force revealed that Jouska received a license as an education-services company through the Online Single Submission (OSS).

Low Quality Stock  - The case was uncovered when several clients and former clients of Jouska, which claims to be an independent financial advisory company and which gained its popularity among young investors via social media, took to Twitter, saying Jouska’s decision to invest their funds in low quality stocks had resulted in a slump in their portfolio values by more than 70 percent.

A former client also uploaded an offering letter and a contract he received from the company when using its services in 2018 and 2019.

The offering letter stated that aside from educating the client and helping them to pick the right investment instrument based on their profile, Jouska would have the right to manage the client’s funds, as well as to buy and sell stocks in their portfolio. The client then entered into a fund-management contract with Amarta Investa while others said they signed a contract with Mahesa Strategis.

Jouska’s clients shared on social media their portfolio details revealing that the company invested the majority of their funds in newly listed computer hardware-trading company, PT Sentral Mitra Informatika, trading on the Indonesia Stock Exchange (IDX) under the code LUCK. Advisors at Jouska are also reported to have prevented clients from selling the shares when the prices had dropped more than 80 percent, an allegation that has neither been denied nor confirmed by the company.

Jouska, Amarta Investa and Mahesa Strategis are not registered as investment-management companies or securities companies at the OJK. Independent financial planners are not allowed to sell a financial product or investment management service to their clients.

The International Association of Registered Financial Consultants (IARFC) Indonesia has stressed that a financial advisor is prohibited from managing clients’ funds and trading stocks in their portfolios even with full discretion and consent from the clients.

“We have to be proactive so we are now establishing a task force to list those who are claiming to be a financial planner but are actually in violation of the code of ethics. We hope the people who want to use financial planners’ services will be aware of which ones are licensed and which are not,” said IARFC Indonesia chairman and president Aidil Akbar Madjid .

Similarity To Jiwasraya - The Jouska case shared a similarity with the investment mismanagement that led to a corruption case involving ailing state-owned insurer PT Asuransi Jiwasraya, as both had used other parties’ funds to invest in questionable stocks.

Jouska previously claimed in a written statement that it always informed clients of all economic, industry and corporate analyses, including the risks in every financial decision. It also denied the claims that Jouska had full access to its clients’ securities accounts and had managed their funds.

Bracelet - Ward-off Covid-19

A direct selling agent has been issued compound of RM50,000 for promoting bracelets that are claimed capable of warding off COVID-19, on a social website.

Domestic Trade and Consumer Affairs Ministry (MDTCA) enforcement director Datuk Iskandar Halim Sulaiman said the action followed an issue that went viral on Facebook regarding the promotion of a bracelet product, priced at RM580 each, which is said able to ward off the COVID-19 virus.

He said acting on a complaint, a team from the ministry questioned a woman, who is an agent of a direct selling company, for promoting the bracelet on her Facebook.

“Her action in promoting the product by giving misleading statement is an offence under Section 10 (1) (h) of the Consumer Protection Act 1999 and a maximum compound of RM 50,000 was offered to her,” he said in a statement here today.

He said legal action would be taken against the woman if she failed to pay the compound.

“MDTCA is serious in ensuring that consumers are not deceived by promotions or misleading statements on the use of a product," he said, adding that anyone selling and/or promoting any products should always comply with the rules and regulations set by the government.