Indonesia’s logistics market may double or even triple in size by 2019 on the back of government funding for transport and infrastructure investment, according to a UK-based global logistics research firm.
Transport Intelligence (Ti) estimated the country’s shipping market would grow by up to 14.7 percent annually until 2019, Ti said in a statement on Wednesday. Contract logistics — which includes outsourced supply chains, warehousing, inventory and distribution — could also increase by the same amount annually over the period, Ti projected.
The combined domestic and international express logistic market could be worth 9.2 billion euro ($9.9 billion) by 2019 from 2.9 billion euro now, Ti said. “Ti believes that if the country’s logistics performance could be improved by boosting investment, Indonesia’s low land and labor costs, huge domestic market and easy access to neighboring Asean [Association of Southeast Asian Nations] markets could make it a highly attractive location for manufacturers seeking alternatives to China,” said Michael King, Ti’s head of operations in Asia.
“However, if the new government does not follow through on its pledges to push through business-friendly reforms, then Indonesia’s economic and trade growth is likely to underwhelm.” The Southeast Asia’s largest economy is behind its regional peers in terms of logistics performances.
Indonesia ranked 53 out of 150 countries in World Bank’s 2014 Logistic Performance Index ranking. Malaysia and Thailand ranked 25 and 35 respectively, while Vietnam sit at 48th place. While logistic timeliness, tracking and tracing ability, as well as competence of logistic operators are on par, Indonesia’s customs and lack of infrastructure undermines overall logistics effectiveness, the World Bank report revealed.
“Low hanging fruit for the new president in terms of trade facilitation and logistics performance includes customs reform, encouraging adoption of a national single window and easing the process of setting up a business in Indonesia,” said King.
“But the key differentiator between our ‘low’ and ‘high’ forecasts is infrastructure development,” King said. Joko had pledged to turn Indonesia as a global maritime axis and improve the connectivity across the vast archipelago by investing heavily in the maritime sector.
The president doubled last year’s infrastructure spending to Rp 290.3 trillion ($22.6 billion) this year. Joko, through Indonesia’s Investment Coordinating Board (BKPM), has also launched a one-stop licensing service for business permits in January, aiming to book Rp 519.5 trillion in investment this year.
Still, King pointed out that transport sector is lacking private investment and “leaving inefficient state-owned enterprises in monopolistic positions that further discourage private operators from entering the market.”