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Low hanging fruits can reduce logistics costs
Tackling the many information asymmetries is our low hanging fruit in reducing our country’s logistics costs. Sure, it does not mean that we don’t need infrastructure investment.
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It’s more costly to ship oranges from Sumatra to Kalimantan than importing oranges from China, making local oranges less competitive and leading to higher imports of Chinese fruits. (Shutterstock/File)
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ogistics costs in Indonesia are significantly higher than in neighboring countries, amounting to 24 percent of gross domestic product (GDP), higher than that of Singapore (8 percent), Malaysia (13 percent), Thailand (15 percent) and even Vietnam (20.9 percent) and Cambodia (18 percent), according to the Asian Development Bank (2013-2014).
These costs affect not only the price of goods, but also our imports, and subsequently our trade balance. It’s more costly to ship oranges from Sumatra to Kalimantan than importing oranges from China, making local oranges less competitive and leading to higher imports of Chinese fruits.
It’s not easy to tackle this issue. We’re lagging behind in building our infrastructure, so our ports and roads are not up to the task of enabling a smooth flow of goods. Unfortunately, we can’t build infrastructure overnight, while with positive economic growth, trade also grows, adding more demand to our already overburdened infrastructure.
To solve this problem, we need to invest heavily in infrastructure and complete many projects in two to five years, and only then can we expect lower logistics costs and higher competitiveness.
However, a tech company’s recent experience shows that there is an easier way to at least reduce our logistics costs, and we can do that immediately. It’s our low hanging fruits.
One story can drive this point home. An employee of a technology start-up in logistics (a marketplace for trucking companies and shippers) meets a yarn producer in Jakarta that needs to ship her package to Kupang, East Nusa Tenggara. Her merchandise price for this shipment is Rp 2.5 million (US$190).
This entrepreneur shops around at various well-known logistics providers, and she gets quotations of around Rp 2.5 million for shipment. Obviously the purchaser, another micro enterprise in Kupang, can’t afford it. The shipment cost equals the merchandise price!
