Indonesia’s House of Representatives Approves Omnibus Health Bill; What Changes?
On Tuesday 11 July 2023, Indonesia’s House of Representatives (or DPR) passed the Omnibus Health bill into law. The only two political parties (both opposition parties) that voted against this bill were the Democratic Party (PD) and Prosperous Justice Party (PKS). Main reasons behind their rejection involved the rushed deliberation, and the removal of mandatory government spending on the health sector.
The reason why health is very important from an economic perspective is that health is crucial for the strength of an economy. When people are unhealthy they are simply less productive than they could or should be. In fact, McKinsey & Company noted in an article (published in July 2020) that economic historians estimate that improved health accounted for about one-third of overall gross domestic product (GDP) per capita growth of developed economies in the past century.
What exactly happens when many people are unhealthy within a national economy?
- More people will die prematurely (or will retire early due to a health issue), and therefore the working-age population decreases;
- Because of health issues more people have trouble working at full capacity. For example, they may frequently need time off for treatment or to take a rest. And if they are not distracted by managing their own conditions (because they are healthy), chances rise that they are distracted by managing the conditions of their loved ones such as spouses, parents or children;
- When households’ incomes decline because the household members are not as productive as they should be (or have died, or, retired early), then there is less money available to invest in higher education for their children (higher education tends to improve health and income);
- A strong economy means better jobs, particularly in the formal sector, which in turn allows better benefits such as health insurance and higher pay; and
- In the case of Indonesia, many unhealthy people will also increasingly burden the government’s expenditures on the national healthcare program (managed by BPJS Kesehatan), which would imply the government has to cut spending on other important matters related to social and economic development.
And therefore, in sum, healthier populations contribute to stronger local economies, and stronger local economies – in turn – contribute to healthier populations.
Another interesting phenomenon (that we have reported on in the past) is that there are many Indonesians (provided they have the financial resources) who prefer to seek medical treatment or checkups in Singapore or Malaysia where the quality of medical services and facilities outperform those available in Indonesia. In fact, on 14 June 2023 Indonesian President Joko Widodo tweeted the following:
“Almost one million Indonesians seek treatment abroad every year, which drains the country’s foreign exchange reserves by USD $11.5 billion, […]”.
Widodo released this tweet in the context of his presence at the opening of the Tzu Chi Hospital in Pantai Indah Kapuk in North Jakarta. This brand new hospital, which consists of 23 floors and has a capacity of 520 hospital beds, was developed by the Tzu Chi Foundation (one of the two largest Buddhist organizations in Taiwan, and which has a branch in Indonesia’s capital city of Jakarta).
Structural Problems in Indonesia’s Healthcare Industry
There are several structural problems in the healthcare industry of Indonesia (that partly explain why the richer segments of Indonesian society seek medical services abroad).
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This is the introduction of the article. The full article is available in our July 2023 report but can also be purchased separately. This article (an electronic one) can be ordered by sending an email to info@indonesia-investments.com or a message to +62.882.9875.1125 (including WhatsApp).
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