An opportunity that can improve the Indonesian economy by the incoming new vaccine brand in Indonesia.
Source: Pan American Health Organization (PAHO)
Of the approximately 2.2 billion doses of Covid-19 vaccines that have been injected in the world, only 0.4 % are distributed in developing countries. The vaccine distribution gap has an impact on the percentage of Covid-19 vaccination in the world. Southeast Asia, as a region inhabited by developing countries, certainly has a fairly low percentage of vaccinations. Only 8.91% of Southeast Asians get the vaccine. This figure is still a long way from the WHO target of expecting at least 10% to have been vaccinated in September and 30% in December this year.
Indonesia, as the largest country in Southeast Asia, had received 51.278.367 doses of the Covid-19 vaccine. With a population of 271 million more people, the percentage of vaccine recipients is only 18.7% dose per 100 people. However, Indonesia is optimistic that the distribution of the Covid-19 vaccine will run smoothly even if it takes a long time. This presents an opportunity for Covid-19 vaccine manufacturers to be able to enter the Indonesian market to help the number of covid-19 vaccine distributions rise. There are pros and cons that appear in this Covid-19 vaccine. But, do not focus on the cons side. Based on the Covid-19 Vaccine Acceptance Survey conducted by World Health Organization (WHO) in November 2020, 74% of Indonesians are open to this vaccination program.
The most dangerous thing about this virus is not only about the massive spread that makes the medical personnel overwhelmed. Also, economists around the world are overwhelmed to improve the world economy. One way to improve the world economy due to this pandemic is vaccination. Before vaccination, there are certainly a series of stages before a vaccine is declared viable for public consumption.
According to the Centers for Disease Control and Prevention (CDC), there are six stages to making a vaccine, namely: Exploration stage; Preclinical stage; Clinical development; Regulatory review and approval; Manufacturing; and Quality control. These six stages are certainly not passed with a short time. The Covid19 virus took approximately one year in its creation. Then, how is Indonesia’s economic condition related to vaccine distribution? Is there any effect? and how much does it affect?
Indonesia’s Economic Condition Before Vaccines are Distributed
The Covid-19 started to emerge in early 2020 and the first case in Indonesia was detected in March 2020. This condition caused the crisis to happen in Indonesia. During the first quarter of 2020, many companies were facing lots of problems such as massive unemployment and production results dropping. However, Indonesia has never imposed a full-scale lockdown, and Indonesia’s economy has shrunk for the first time in two decades, while the last annual GDP fell 13.1% amid the Asia Financial Crisis that happened in 1998, according to data from the Organization for Economic Cooperation and Development.
However, the condition of Indonesia’s economy slowly recovered by the second semester of 2020 aided by the gradual re-opening of several business sectors due to the enactment of the transition phase of large-scale social restriction. But the recovery didn’t seem equal to one sector and another. The business with intensive contacts with the customers including transport, hospitality, wholesale, manufacturing, and many more hit a different story while recovering. Sectors that are more exposed to foreign demand are mostly partially protected by recoil in trade and some commodity prices (Worldbank, 2020).
Based on Worldbank (2020), before the COVID-19 vaccination program, the report recommends that Indonesia focus on securing and accelerating the recovery by:
- Put forward the public health sector to ensure that the economy can move towards the reopening by reinforcing the tracing and contact tracing and arranging to widely administer an effective and safe vaccine once it is approved
- Maintaining support for impacted and vulnerable homes and businesses, as well as consistently monitoring and improving program effectiveness
- Developing a set of well-prioritized tax and spending measures to aid in the funding of the crisis response, reduce financing needs, and increase fiscal space
- Advancing structural reforms to enhance investment, productivity, and human capital, as well as Indonesia’s economic potential.
Furthermore, the GDP of Indonesia is expected to continue growing 5% annually in 2021 and 2022. Due to the policy assistance, gradual reopening, and favorable global conditions, the economy has been slowly recovering since mid-2020. This expected growth is projected to grow better with the contributing factors such as the distribution of the Covid-19 vaccine that has already been distributed in the early of 2021.
Indonesia’s economic Condition After the Vaccine is Distributed
The first Covid-19 vaccine that was received by the public in Indonesia was made by Sinovac in December 2020, after a major efficacy test with the volunteers in the third quarter of 2020. The vaccine distribution would be divided into several timelines based on the urgencies of the sectors in society. By July 2021, there are 5 brands of vaccines that are already used in Indonesia including Sinovac, Sinopharm, Novavax, PT BioFarma, and AstraZeneca, and 2 upcoming vaccine brands that would be distributed in Indonesia in a couple of months which are Pfizer-BioNTech and Moderna.
Talking about the economic condition in Indonesia after the vaccine distribution, Indonesia’s economic recovery has been slow until the first quarter of 2021, while leading indicators point to a stronger bounce in the second quarter. According to Worldbank (2021), Indonesia has the difference between real GDP and the trend before the crisis which narrowed from -7.5% to -7.1% between Q2 and Q4 2020 compared to from -13.6% to -5.1% among G20 peers. However, Indonesia is still vulnerable to fresh waves of the disease brought on by more transmissible strains, as seen in other nations, as well as increased movement and viral transmission during celebrations.
This condition is shown by the surge of the positivity rates in June-July 2021 that is 4 times higher than the previous highest positivity rates in January 2021. Despite a robust reaction to the crisis, monetary policy had to find a difficult balance between controlling external financing demands and supporting the recovery. Furthermore, if the vaccination deployment reaches a critical mass of the population in the fourth quarter of 2021, growth might increase to 5.0% in 2022.
Based on the Worldbank (2021), the suitable recommendation for the improvement of the Indonesian economy after the distribution of the COVID-19 vaccine are:
- To get ahead in the struggle against diseases, accelerate vaccine deployment and improve testing, tracing, and isolation, and many other non-pharmaceutical measures such as suitable mobility limitations.
- To promote the real sector, maintain an accommodative monetary policy position, and stimulate private credit.
- Maintain fiscal support in the short term while ensuring fiscal sustainability in the medium run.
Potential Increase in Indonesia’s Economic if Many Brands of Vaccines are Entered
The government began its Covid-19 Vaccination Program on January 13, 2021. It is split into four phases with healthcare workers receiving the first batch of vaccines, followed by public servants and then other members of the public. The government aims to inoculate a total of 181,554,465 people by early 2022. As of July 12, 2021, as many as 36,368,191 Indonesians have received their first vaccinations and 15,036,468 people have received their second vaccination.
Indonesia has used 5 vaccine brands and is preparing the 2 upcoming brands to be used. Sinovac produced by Sinovac Biotech, Oxford-AstraZeneca produced by SK Bio, Sinopharm produced by China National Pharmaceutical Group, Merah Putih produced by Bio Farma (Indonesian pharmaceutical company), Moderna produced by a company from the United States, Novavax produced by Novavax (United States pharmaceutical company), and Pfizer-BioNTech produced by Pfizer (United States pharmaceutical company).
To date, there are three programs of Covid-19 vaccination in Indonesia. First, government programs. Second, the Gotong Royong program. Third, a self-vaccination program. Government vaccination programs and Gotong Royong vaccinations are free. Meanwhile, the self-vaccination program is paid with costs approximately IDR 879.140. Although the price of self-vaccination in Indonesia is the most expensive compared to other countries, but the enthusiasm of the self-vaccination is huge.
Aside from the price, the brands of vaccines used in these three programs are different. The brands of vaccines used in government programs are Sinovac, AstraZeneca, Pfizer, and Novavax. The brands of vaccines used in the Gotong Royong program are Sinopharm, Moderna, and Merah Putih. Meanwhile, the brand of vaccine used in self-program is Sinopharm. In addition to reducing the number of Covid-19 patients, in fact, this vaccination program is also useful to improve Indonesia’s economy that had been deteriorated.
On the first vaccination day in Indonesia (13/01), IDR against USD strengthened by 70 points or 0.5% at a value of IDR 14,060 per USD, compared to the previous close of IDR 14,130 per USD. Jokowi, Indonesia’s President is optimistic that the vaccination program will boost economic recovery. Vaccines will help increase public confidence in the handling of Covid-19 and increase the consumer confidence index so that consumption and investment rate can increase.
This proves that vaccination has a positive impact on Indonesia’s economy. Indonesia, the fourth most populous country in the world, needs a lot of vaccine supply. The vaccination process in Indonesia will take a long time if it only relies on the 7 brands of vaccines mentioned earlier. Therefore, Indonesia is still open to Covid-19 vaccine production companies who want to enter their products into the Indonesian market. However, entering the vaccine market in Indonesia is certainly not easy. The pharmaceutical company should conduct an in-depth survey. Therefore, local consultants needed to help the pharmaceutical company conduct surveys while guiding the company successfully into the Indonesian market.
Enter Indonesia’s Vaccine Industry With BRIGHT Indonesia
Indonesia’s economic recovery has been gradual until the first quarter of 2021, while preliminary evidence points to a stronger resurgence in the second quarter. The distribution of the Covid-19 vaccine is still running to help reduce the surge of the pandemic in Indonesia. To boost higher productivity in business, encouraging growth, trade, and investment would assist to improve the economic growth across the board.
BRIGHT Indonesia would help foreign vaccine distribution to enter the Indonesian market through our services such as Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Registering and establishing client companies in Indonesia. Help client companies obtain the work and stay permit for your foreign employee in the Indonesian office: expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), and limited stay permit (KITAS).
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
For more information, email firstname.lastname@example.org.
This article is written by Galih Akmal Latif and Sintya Nur Muftiana