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Indonesia needs cheaper borrowing to improve transportation services

The development of ports and toll roads has contributed to the improvement of Indonesia’s rank in the World Bank’s  logistics performance index to 46th in 2018.

Marchio Irfan Gorbiano (The Jakarta Post)
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Jakarta
Fri, October 18, 2019

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Indonesia needs cheaper borrowing to improve transportation services State-owned port operator Pelindo I ‘s senior executives inspect the Kuala Tanjung Multipurpose Terminal (KTMT) in North Sumatra. The government plans to further expand the country’s seven major ports in the next five years to further reduce logistics costs. (The Jakarta Post/Apriadi Gunawan)

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ndonesia needs lower borrowing costs to further develop its transportation facilities and services so that the government’s goal of reducing logistics costs could be achieved, an industry representative has said.

Indonesian Chamber of Commerce and Industry (KADIN) deputy chairwoman Carmelita Hartoto said more competitive interest rates for the transportation sector, which usually borrow for longer tenures compared to other businesses, would help the transportation sector expand.

“If we can secure financing with lower rates compared to other sectors, it would be better for us,” said Carmelita in Jakarta on Wednesday. “Our lending rate is still at double digits and we hope that it can be reduced to a single digit like in other countries.”

Carmelita, who is also chairwoman of the Indonesian National Shipowners Association (INSA), said the local transportation companies would still prefer to raise funds from local banks rather than seeking foreign investments. “So, the reduction in domestic rates will be quite helpful for them,” she added.

She suggested that it would be even better if the government assigned a certain bank to exclusively provide financing for the transportation sector so that the borrowing costs could be reduced.

Improving Indonesia’s connectivity was one of the main priorities of President Joko “Jokowi” Widodo’s government. During, the first five-year term, Jokowi’s administration built a number of  new seaports, airports and toll roads.

Development of ports and toll roads has contributed to the improvement of Indonesia’s rank in the World Bank’s  logistics performance index to 46th out of 160 countries  in 2018, jumping 17 places from the 63rd rank in 2016.

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