Improving logistics supply chain boosts economic growth
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.
Investor Daily - Pembenahan rantai pasok logistik pacu pertumbuhan ekonomi
9 July 2024
By Ichsan Amin
Jakarta, ID – National economic growth is forecasted to reach 8% if the government focuses on the organisation of logistics and the supply chain.
The organisation of logistics aimed at reducing costs is anticipated to sustain an economic growth of 8% over the next two to three years with well-prepared and integrated planning.
Indonesian Logistics and Forwarders Association (ILFA) Chairperson Akbar Djohan said that focusing on logistics and the supply chain was not as simple as it seems. This said, the bottleneck in this sector has a significant impact on the public.
“Reducing logistics costs from and to ports can have a significant multiplier effect on the national economy. A slow distribution of goods could potentially trigger inflation. If the bottleneck in this sector can be addressed, we are optimistic that a robust logistics supply chain will sustain economic growth,” Akbar said when contacted by Investor Daily in Jakarta on Monday (8/7/2024).
Akbar affirmed that logistics could drive the economy or slow it down. “For example, when a regulation on the supply chain is revised, the flow of goods at ports could be obstructed. Essentials may be disrupted, which could lead to scarcity and an increase in prices,” he revealed.
Additionally, Akbar pointed out that issues in the supply chain, ranging from upstream to downstream, included the array of permits from 16 different ministries and institutions. This specific issue requires time to establish coordination and communication among the institutions, resulting in inefficiencies that contribute to high logistics costs.
“This has always been a problem. Our global logistics performance index can improve if we can effectively address these obstacles in the supply chain, from the moment goods leave the factories to when they are loaded onto ships,” he explained.
Issues in logistics and supply chain do not necessarily imply high costs, unlike infrastructure development that demands trillions. ALFI has previously engaged with multiple groups in the business sector, such as the Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo), discussing the necessity of a national logistics agency to address concerns related to logistics and the supply chain.
“Regulation harmonisation is required. How regulations among ministries, institutions, the central government, and regional governments can share one vision. So, a national logistics agency is needed to address concerns regarding logistics and the supply chain. I think it can be realised with this agency. We have talked with multiple parties in the business sector regarding this matter,” he added.
Logistics development strategy
President-elect Prabowo Subianto, at Qatar Economic Forum (15/5), stated that Indonesia could achieve an economic growth of 8% over the next 2-3 years.
Prabowo stated that his administration would primarily focus on ensuring food security for the populace, achieving energy resilience and independence, eliminating child hunger, and processing natural resources, which includes downstreaming and industrialisation.
Based on the data on Indonesia’s economic growth over the past few years, serious planning and effort are necessary to achieve an economic growth of 8%. The logistics sector plays a vital role in achieving this growth target, aligning with the priorities set forth by the President-elect.
Supply Chain Indonesia (SCI) CEO Setijadi is in favour of achieving the economic growth target of 8%. However, this goal necessitates integrated development planning across a variety of sectors, including the logistics sector.
“The paradigm for the construction and development of the logistics sector needs to shift from ship follows the trade to ship promotes the trade. This is particularly crucial to enhance the growth of regions that currently contribute less to the GDP,” Setijadi stated.
In the first quarter of 2024, Java had the highest contribution at 57.70%, followed by Sumatra (21.85%), Kalimantan (8.19%), Sulawesi (6.89%), Bali and Lesser Sunda Islands (2.75%), as well as Maluku and Papua (2.62%). However, the highest growth during the quarter was recorded by Maluku and Papua (12.15%) and Sulawesi (6.35%).
SCI stated that a comprehensive strategy to develop Indonesia’s logistics sectors involves five interconnecting pillars. The first pillar is the commodity supply chain that focuses on commodities, downstreaming, supply chain mapping, and integrated supply chain development.
The second pillar involves efforts to develop potential commodities in regions, increase added value, and integrate the development and the change of the logistics paradigm.
The third pillar is connectivity, which involves infrastructure development, hub and spoke organisation, end-to-end multimodal transportation development, and information technology utilisation. The fourth pillar is competence and capability, involving enhancements in human resources, processes and technologies, as well as global network development.
The last pillar is regulations and institutionality, which involves the preparation of laws on logistics as a medium-term target, the revision of Presidential Regulation Number 26 of 2012 on the Blueprint of National Logistics System Development, the establishment of a national logistics agency, and regulation harmonisation.
“We are quite optimistic about our economic growth surpassing the target if the sector focuses on these recommendations,” he added.
Logistics organisation
Indonesian National Shipowners’ Association (INSA) Chairperson Carmelita Hartoto said that the characteristics of the national logistics sector were different from other countries.
“We require multimodal connectivity. We can reflect on the LPI ranking to make more serious organisations. Moreover, the government itself is targeting logistics costs to reach 8% by 2045,” Carmelita stated.
Carmelita pointed out that these issues have not received the necessary attention. She emphasised that the organisation of logistics should be a comprehensive process, involving multiple sectors. This approach requires a focus on equity, a boost in regional trade, and enhancements in the performance of ports and airports, as well as the efficiency of port services.
“No sector can be counterproductive. Unnecessary aspects will only increase economic costs. Therefore, we have expectations from the new government to tackle any disruptions in transportation operations and ensure safety and security at sea,” she added.
