Reducing logistics costs amid global challenges
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 - Menurunkan biaya logistik di tengah tantangan global
29 July 2024
By Heru Febrianto
Jakarta, ID – The government's efforts to reduce logistics costs to 8% of the gross domestic product (GDP) face several challenges. Among them are global supply chain trends, especially the ASEAN single market, which has the potential to pose new risks to the national logistics system.
Transportation Minister Budi Karya Sumadi stated that, to promote more efficient and competitive economic growth, the government targets a reduction in logistics costs from 14.29% to 8% of the gross domestic product (GDP).
This was conveyed by the Minister during his speech at the One-Day National Seminar themed 'Improving Logistics Performance in Indonesia: Reflection, Challenges, and Opportunities of the National Logistics System' at Institut Teknologi Bandung (ITB).
"The logistics development strategy for 2024-2045 involves several aspects, namely digital transformation of logistics services, reduction of transportation costs, optimisation of sea toll utilisation, strengthening connectivity, and improving inter-regional accessibility. These efforts aim to reduce logistics costs from 14.29% to 8% of the GDP," Budi Karya said in his press release as quoted on Sunday (28/07/2024).
The minister added that the Indonesian government continues to strive to lower national logistics costs through the development of comprehensive strategies. Indonesia's Logistics Performance Index (LPI) score trends have generally shown positive growth, even starting to catch up with the LPI ranking of the Philippines.
"Transportation logistics efficiency is always the number one concern for logistics players. Therefore, strengthening the national logistics system is necessary to achieve the Golden Indonesia 2045, by reducing logistics costs and addressing various recent challenges," he explained.
He elaborated that the spirit of logistics efficiency and effectiveness aligns with government policies that regulate strengthening and structuring through the National Logistics Ecosystem (NLE), in accordance with Presidential Instruction Number 5 of 2020 on the Structuring of the National Logistics Ecosystem.
The NLE, implemented in several ports and airports, contributes to time and cost efficiency of services. Currently, 264 ports have implemented Inaportnet, with 46 ports integrated with the NLE, and six airports have applied the Integrated Physical Checkpoint (TPFT).
"To support the implementation of the NLE, the Transportation Ministry continues to encourage service improvements through digitalisation, particularly related to ship, goods, and passenger services," explained the minister.
However, according to Budi Karya, all stakeholders must not become complacent with the current situation. All parties must continue to innovate and adapt to global developments and new challenges, and collaborate in the spirit of Indonesia Incorporated.
"A joint commitment is needed between logistics service providers and users, collaboration and synergy among ministries and agencies, the central and regional governments, as well as the private sector to achieve national logistics system efficiency. I invite all parties to actively participate and provide the best contribution in realising a more advanced and prosperous Indonesia by improving national logistics performance," concluded the minister.
He appreciates ITB for taking the initiative to organise this seminar. According to the minister, the seminar held not only serves as a forum for discussion and exchange of ideas but also as a concrete step in efforts to improve national logistics performance.
On this occasion, Chairperson of the Centre for Logistics and Regional Development Studies (SAT-Logwil) Yeremias Ndoen stated that this seminar invites all stakeholders to engage in dialogue to find solutions. It is an effort to seek joint solutions.
According to him, various changes in global supply chain situations and trends have occurred, especially related to the ASEAN single market. This, he said, has the potential to present new challenges and risks to the national logistics system.
"Certainly, this one-day seminar will discuss developments since the issuance of Presidential Regulation Number 26 of 2012 regarding the Blueprint for National Logistics System Development up to the present, where various changes in global supply chain situations and trends have occurred," said Yeremias.
Furthermore, he emphasised that Indonesia, as an archipelagic country with more than 17,000 islands, faces unique logistics challenges affecting its economic growth and development.
"We know that the government has made numerous efforts, but Indonesia's logistics condition has not seen significant improvement. Indonesia's Logistics Performance Index (LPI) dropped from rank 46 in 2018 to rank 63 out of 139 in 2023," said Yeremias.
Therefore, despite various shortcomings in the methodology and data calculation of the LPI, Indonesia's ranking position indicates that there are still many issues and potential improvements for the logistics system in Indonesia.
"This potential for improvement can emerge in terms of regulation, institution, infrastructure development, operational strategy, financing, and human resources development in the logistics sector," he said.
