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RI needs cheaper borrowing to boost transportation sector
Indonesia 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
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span>Indonesia 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 transportation companies, which usually borrow for longer tenures than 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.
Despite the improvement, Indonesia still lagged behind its regional peers such as Vietnam and Malaysia, which ranked 39th and 41st, respectively, in the 2018 logistics performance index.
Going forward, the government would continue to place importance on developing the country’s infrastructure to support growth in real sectors, said National Development Planning Minister Bambang Brodjonegoro.
He said that infrastructure would still be a priority in the next five years, considering that, according to World Bank data, Indonesia’s infrastructure stocks (the value of infrastructure assets) still accounted for 43 percent of GDP. The figure was lower compared to other developing countries such as India and South Africa, whose infrastructure stock to GDP was 58 and 87 percent, respectively.
Bambang said the government was also looking to develop seven seaports as shipment hubs in a bid to lower logistics cost in the country, as well as to provide more direct-call shipments to the destination countries and reduce Indonesia’s reliance on Singapore as the regional shipment hub.
The seaports include Tanjung Priok in Jakarta, Tanjung Perak in East Java, Makassar in South Sulawesi, Kijing seaport in West Kalimantan, Kuala Tanjung in North Sumatra, Bitung in North Sulawesi and Sorong in West Papua.
He said only 15 percent of the country’s exports were shipped directly to the destination countries as about 85 percent went through Singapore. “We hope that if we have more direct-call [shipments] from the seven seaports, then we would not depend on Singapore,” said Bambang.
The improvement of the seven ports is expected to be able to save up to Rp 765 trillion (US$54.07 billion) in logistics costs in the next five years, increase Indonesia’s share of direct-call shipments to 70 percent and provide a foundation for the country’s ambition to be the global maritime axis, Bambang added.
He said the development of the seven hubs would take an integrated spatial approach, ensuring that the ports would be integrated with industrial zones or have easy access to the nearest industrial zones so as to ensure it would have adequate economies of scale to compete with Singapore as a regional hub in Southeast Asia.
