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Govt to restructure logistics costs
The government is looking to restructure overall logistics costs at seaports in an attempt to improve the competitiveness of the logistics industry
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he government is looking to restructure overall logistics costs at seaports in an attempt to improve the competitiveness of the logistics industry.
The restructuring decision comes on the back of ongoing efforts to reduce dwell time that have not yielded much-desired results.
Dwell time — which indicates elapsed time from when a container arrives at a port until it leaves the port — hovered at 3.22 days at Tanjung Priok Port on Thursday, down from 3.97 days in February, according to government data.
The government has often stated that it wishes to see the dwell time fall to below three days at Tanjung Priok, which is the country’s largest and busiest seaport, and to around three days at other major ports.
“So we will check one by one [the cost components], which one can we reduce. For example, the THC [terminal handling charge]. What is it for? It’s quite pricey,” Coordinating Maritime Affairs Minister Luhut Pandjaitan told the press recently.
The THC is a fee applied from when a ship arrives at port and covers the unloading and handling of freight.
It is a combination of the container handling charge (CHC) imposed by the port operator and a surge price imposed by the shipping line, and legalized by the Transportation Ministry.
At Tanjung Priok Port, the THC stands at US$95 per 20-foot container. “Reducing the THC can boost the [cost] efficiency,” he said, adding that the government would still strive to get the dwell time under three days.
Luhut claimed that the THC made up a significant portion of the logistics cost structure at 33 percent at Tanjung Perak Port in Surabaya, East Java, and at 28 percent at Soekarno-Hatta Port in Makassar, South Sulawesi.
He, however, declined to go into details regarding the THC figure at Tanjung Priok.
Transportation Ministry sea transportation director general Antonius Tonny Budiono said the ministry would first catalog existing cost components to be able to reduce overall costs.
“This [the cost reduction] involves other stakeholders and we can’t decide it ourselves,” he said.
At present, domestic logistics costs stand at 26 percent of the gross domestic product (GDP), much higher than in other neighboring Southeast Asian countries at around 19 percent. Data from the Indonesian Logistics Association (ALI) reveals that the THC, trucking and container stacking are the top three contributors to the overall logistics costs.
The President Joko “Jokowi” Widodo’s administration has actually issued a series of policy packages aimed at reducing the dwell time and logistics costs.
However, the World Bank’s 2016 Logistics Performance Index (LPI) shows that Indonesia has slipped despite the much-hyped efforts.
Its scored 2.98 in the overall LPI in 2016, lower than 3.08 in 2014. With the lower LPI, it fell to the 63rd place from the 53rd out of 163 countries surveyed. The steepest fall was recorded in infrastructure and customs procedures.
Bani M. Mulia, managing director of sea transportation services firm PT Samudera Indonesia, said the government should not focus solely on the THC, but on the CHC as well, which accounts for $83 of the $95 THC at Tanjung Priok.
Meanwhile, logistics associations and the World Bank have urged the government to formulate a more comprehensive strategy on improving the logistics performance than merely focusing on the dwell time figure.
ALI has urged the government enforce a fairer market mechanism to bring down costs, arguing that private operators should also be given an opportunity to manage ports instead of simply assigning all ports to state port operators PT Pelabuhan Indonesia (Pelindo) I, II, III and IV.
