Supply chain: Indonesian Chamber of Commerce & Industry predicts logistics to grow 6%
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Rantai pasokan: Kadin prediksi logistik tumbuh 6%
21 July 2023
Jakarta - The Indonesian Chamber of Commerce and Industry (Kadin) forecasts that the national logistics industry will continue to grow above 6% on an annual basis, sustained by the rapid growth of the national digital economy.
Kadin Logistics and Supply Chain Department Head Akbar Djohan said that the transportation sector and the warehousing sector grew 15.93% year-on-year (YoY) in the first quarter of 2023.
According to him, the achievement proves that the transportation sector and the warehousing sector that represent the logistics industry are sectors that have the largest growth.
Akbar explained that the transportation sector and the warehousing sector in Indonesia rapidly grew in the last 2 years, supported by the rapid development of the digital economy that includes e-commerce.
“This potential is sustained by the e-commerce market that is still growing as well as the recovery of public activities after the removal of the Covid-19 pandemic status,” he said during the press conference and the launching of Transport Logistic Southeast Asia in Jakarta on Thursday (20/7).
Besides the growth, the logistics industry in Indonesia is also facing the challenge of high logistics costs compared to other countries in Southeast Asia.
The collected data shows that Indonesia’s logistics costs reach 23% of the gross domestic product (GDP).
According to him, Indonesia’s major challenge is its weak connectivity infrastructure, which causes high logistics costs.
Hence, he reckoned that connectivity infrastructure construction in Indonesia must prioritise cost efficiency.
He said that Indonesia’s position as an archipelago was a gift and a challenge. It is related to the distribution flow of logistics that is affected by the diverse geographic conditions and environmental characteristics.
According to him, the organisation of logistics governance needs industry players and stakeholders to synergise. They include supply chain players, transportation and logistics players, as well as related ministries.
“Synergy is required, especially in boosting the simplification of the national supply chain system by digitalising services,” he stated.
Akbar continued that Kadin was also appreciating the government’s effort to develop digital services in the logistics sector with the National Logistics Ecosystem (NLE).
He added that Indonesia’s Logistics Performance Index (LPI) in 2023 that went down by 17 ranks to rank 63 was quite shocking.
The United Nations Conference on Trade and Development (UNCTAD) mentioned that Indonesia’s port performance was among the top 20 in the world.
“This result is quite shocking as the UNCTAD mentioned that one of our ports was in the global top 20. However, on the other hand, our LPI dropped by 17 ranks to number 63 in 2023,” Akbar explained.
Akbar reckoned that there were several assessment criteria for the LPI performance that are not suitable for all countries.
For example, he mentioned that the assessment on Singapore’s international shipment aspect could not be compared to Indonesia’s. Both countries have a different status on the international logistics chain.
“We cannot compare Singapore’s international shipping with Indonesia’s as Indonesia is the final destination. Meanwhile, Singapore only conducts transhipment,” he said.
Akbar reckoned that an indicator that considered Indonesia’s condition as an archipelago was required. According to him, Indonesia’s position as an archipelago is a challenge in itself to standardise logistics services.
According to him, it must be completed with a dashboard that can present the latest logistics data. Next, he stated that related stakeholders, including the World Bank, could observe the criteria quickly and accurately.
“We see that the four pillars need to be reconsidered so that there is a suitable benchmark to illustrate the concrete situation in the field,” he added.
Akbar sees that the LPI result from the World Bank is a perspective from another party on Indonesia’s logistics sector performance. According to him, all related stakeholders need to respond to the report by improving their coordination to boost logistics performance.
“The response is needed, but it is not something negative. We must observe and get around the LPI result that has six parameters,” he added.
Meanwhile, National Single Window Agency (LNSW) Head of the Finance Ministry Agus Rofiudun reckoned that the high logistics costs in Indonesia was a problem that affected all aspects from ports that are in the upstream to warehouses that are in the downstream.
Currently, logistics costs in Indonesia reach 23.5% of the national GDP, higher than Thailand with logistics costs that reach 15% of the GDP and Malaysia with logistics costs that reach 13% of the GDP.
“Meanwhile, in Asia, Indonesia’s logistics costs are much higher than Japan’s that only reach 8% of the GDP, Taiwan’s that reach 9% of the GDP, and China’s that reach 14% of the GDP,” Agus explained.
According to him, one of the factors that makes Indonesia’s logistics costs expensive is the country’s topography as an archipelago.
With that condition, he stated that the transportation of goods needed various modes of transportation, which meant loading and unloading goods between modes of transportation.
Agus mentioned that the distance of moving goods between Cikarang-Balikpapan was the same as Lisbon (Portugal)-Luxemburg as the logistics flow in Indonesia was still inefficient.
“It needs 10 days for goods to reach Balikpapan. Meanwhile, it only takes goods 2 to 3 days to reach Luxemburg,” he said.
Besides that, Agus is also highlighting the empty ships that return after delivering freight.
He said that it still often occurred when delivering freight to eastern Indonesia.
Hence, the LNSW is coordinating with the Transportation Ministry using the Inaportnet system so that the domestic manifest can be mandatory for all ships.
He said that provisions on the domestic manifest or the payload list have been set in Trade Minister Regulation No. 92/2020.
Agus added that the system that supports the domestic manifest input process has been implemented through the Indonesia National Single Window System (SINSW).
Currently, there are many players that are complying to fill the payload list with goods that they will carry.
“With the domestic manifest obligation, we can have the data of goods that can be carried from or to a region, so ships will not be empty during their return trip,” he added.
Previously, Coordinating Ministry for Economic Affairs Secretary Susiwijono Moegiarso saw that the decline in Indonesia’s LPI was triggered by the decline in the assessment indicators that needed the participation of the private sector.
The indicators include logistics service competence and quality, tracking and tracing capability, ease of shipping to Indonesia, as well as punctuality.
He is also carrying out other efforts to improve Indonesia’s LPI performance. Some of the policies are to follow up the decision from the ministerial limited coordination meeting regarding the NLE, strengthen the Port Service Standardisation policies, boost the performance of courier and mailing companies, smooth out business processes and systems that are related to prohibitions and restrictions, and implement the Commodity Balance.
