Logistics costs continue to decrease
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 - Biaya logistik terus turun
25 October 2023
By: Leonard AL Cahyoputra & Tri Murti
Jakarta - Indonesia's expensive logistics costs are just an issue created by foreign parties to control the strategic national logistics industry. The fact is that Indonesia's logistics costs are among the cheapest in ASEAN and the world, with increasingly better connectivity and integration among regions. This is also evident from the data of the National Development Planning Agency (Bappenas) which states that national logistics costs as of September 2023 have reached 14.29% of the GDP, lower than in 2020 that reached 24% of Indonesia's GDP.
Secretary General of the Association of Indonesian Express Delivery, Postal, and Logistics Services Companies (Asperindo) Trian Yuserman explained that the Indonesian logistics industry was ready to support the fast-growing industry because logistics was already strong. He added that three of the most important aspects in the logistics industry were speed, security, and accuracy. So, the entire archipelagic region of Indonesia is integrated.
"I guarantee that all regions of Indonesia are connected. There is no such term as 3T (frontier, outermost, underdeveloped) areas in logistics. Now the tracking is digital. The problem is that our logistics costs are often said to be high. The media must say that. It is a lie. Indonesia's logistics costs are the cheapest in ASEAN, Asia, and the world, because free shipping does not exist elsewhere," said Trian in a discussion titled Advancing Indonesia's Archipelagic Logistics Industry at the 2023 BNI Investor Daily Summit at Hutan Kota by Plataran, Senayan, Jakarta on Tuesday (24/10/2023).
He explained that, when talking about logistics costs, it must be mapped out first because Indonesia's territory is too large and cannot be calculated the same. For example, shipping from Sabang to Papua, in addition to land, sea, and air transportation, is sometimes carried out manually. "Do not make random comparisons. The comparison must be local Jakarta to local Singapore or local Malaysia," said Trian.
He revealed that one of the challenges in logistics services was the tariff. Currently, Asperindo is struggling to escape the pressure to realise free shipping. In fact, PP No. 1 of 2012 of the Communication and Information Minister prohibits goods from being sold below the cost of production. "Now there is the trend of free shipping. This is putting tremendous pressure on Asperindo members. Meanwhile, we are labour intensive and capital intensive. Couriers need to be paid properly," said Trian.
He appreciates the data on Indonesian logistics costs released by Bappenas, which was considered daring because it was not driven by foreign parties. Trian calls foreign parties aliens because everything that does not benefit the industry is considered an alien. “Because there must be a goal. We are seeing the trend of burning cash which is also carried out by foreign parties. There is a desire to control logistics. When we talk about trade, there are three pillars, namely trade, payment, and logistics. These three will be controlled," he said.
In line with Trian, PT Pelindo (Persero) Managing Director Putut Sri Muljanto said that Indonesia's low logistics costs indicated that the government has succeeded in building infrastructure and establishing connectivity. He gave an example with cement that is the cheapest cargo with 1 kg costing Rp1,000. Based on the financial statements of cement companies that are publicly listed, they account for no more than 15% of logistics costs. This means, continued Putut, other cargo that are more expensive than cement, such as cooking oil, must have logistics costs below 10% or even only 5%. "This means we must be aware that there are those who are trying to make false claims, who say that logistics costs are expensive," he said.
Better logistics connectivity and integration
PT Pelindo (Persero) Managing Director Putut Sri Muljanto explained, when growth declined in 2019 and during the Covid-19 pandemic, national logistics growth was supported by domestic activities. This shows that connectivity is good, everything is clear and has been digitalised.
Pelindo also integrates maritime highway services with commercial services. For example, Putut mentioned that the Surabaya-Jayapura route could use a large cargo ship of 1,000 TEUs, then from Sorong it can use a plain ship from the Transportation Ministry to get around to the small islands. Next, it can use a small cruise ship. This is different from the previous condition which used small ships with high risks. "That integration is what we are currently building together with the Ministry of Transportation and shipping entities. So, the remaining schedule is inter-modal integration that we are helping with," he said.
Putut admitted that this has been implemented on Jakarta-Padang, Surabaya-Kupang, Surabaya-Sorong routes, which lowered logistics costs. Next, Pelindo will build it on Jakarta-Balikpapan, Surabaya-Balikpapan, and Surabaya-Ambon routes. "Then the small ships using the maritime highway owned by the Transportation Ministry will sail to the small islands there, so that the frequency of visits to the islands will increase. From just once a month to 2-3 times a month. For all of that, the ideal completion is estimated in 2025. This cannot be done quickly, because it needs preparation of facilities and equipment in each port involved," he explained.
Lion Parcel Chief Marketing Officer Kenny Kwanto said that the logistics industry is now better, with a combination of air, land, and sea transportation, with a 98% coverage. He explained that Indonesia's vast territory requires a lot of collaboration with other logistics partners. "This is to lower domestic costs in line with the government’s target. At the moment, it is very helpful for us, especially as modes of transportation in Java are very competitive. We can see the prices of land transportation for ourselves. Some are selling for Rp1,000/kg. That encourages us to be more efficient in seeking alternative modes," he said.
Improved connectivity and integration of domestic logistics had an impact on Lion Parcell's sales, which has seen their tonnage grow by more than 50% in 2 consecutive years. Kenny explained that the trend is that online shopping is increasingly sensitive to the Service Level Agreement (SLA). "Because if we look at the segment aged 40 years and under to generation Z, they have FOMO [fear of missing out]. So, when they shop online, they want it to arrive quickly because they want to review it and everything," he said.
