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The long-term prospects of Indonesia’s logistics sector
The logistics industry is a driving force for the national economy. Logistics transportation is one of the supports for the rise of the Indonesian economy, which is currently in a slump due to the COVID-19 pandemic.
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Waiting in line: Ships are moored at North Jakarta’s Sunda Kelapa Port to have products unloaded. Inefficiencies in Indonesia’s port queuing systems leave domestic and international shipping firms with no choice but to pay expensive docking fees due to long dwell times, which are weighing on Indonesia’s international business competitiveness. (JP/Arief Suhardiman)
T
he logistics industry is a driving force for the national economy. Logistics transportation is one of the supports for the rise of the economy, which is currently in a slump due to the COVID-19 pandemic.
Logistics relates to moving goods or services, energy, and other natural resources from the origin to the end of use, including procurement, maintenance, distribution and supply (to replace) equipment and human resources.
Through Presidential Instruction No. 5/2020 on Arrangement of the National Logistics Ecosystem, the government has developed an action plan to improve national logistics performance, improve the investment climate and increase the competitiveness of the national economy.
The national logistics system reform aims to reduce logistics costs from 24 percent to 17 percent of the Gross Domestic Product (GDP) in 2024. The government's strategic move is to increase port efficiency to reduce national logistics costs.
According to a study from the World Bank in 2014, logistics costs from sea transportation in Indonesia contribute 2 percent to 3 percent of the price of goods at the consumer level, while waiting costs at ports due to dwelling time are far greater with a contribution of 6 percent to 15 percent of the price of goods.
There have been several breakthroughs taken in the field of logistics transportation. The government has constructed 11 ferry ports from a target of 36 ports by 2024. Optimization of the maritime highway program is also continuing. Currently, 32 ships are operating, serving 32 routes and stopping at 114 ports, including those in Papua and West Papua provinces.
Air transportation infrastructure is also being improved continuously. The government has set a target to build 10 new airports serving 43 air routes by the end of 2024.
