President Joko Widodo Releases Indonesian Exports with Large Ships in Tanjung Priok - Photo by President Office

JAKARTA (TheInsiderStories) – Indonesian President Joko Widodo continues to encourage sea toll programs to increase export and logistics  business in Indonesia. Over the last three years, Widodo has expressed its efforts to tackle the issue of stubborn inefficiency in logistics in the country.

Widodo has vowed to turn Indonesia into a global maritime axis partly by building and modernizing the archipelago’s ports, which will in turn improve maritime connectivity and commerce.

The program is expected to lower the price gap between the more developed western part of Indonesia and its struggling eastern counterpart by 30 percent.

The Government also pledged to reduce the dwelling time at major ports such as the Jakarta International Container Terminal Port in Tanjung Priok, Jakarta and Tanjung Perak Port in East Java.

That includes the establishment of an Indonesia National Single Window (INSW) system to deal with dwelling time issues, logistic bounded areas to reduce tariffs as well as continuing massive infrastructure on toll roads, ports and other connectivity infrastructure.

In term of sea connectivity, the government has established Kuala Tanjung and Bitung ports as international hubs and begun to run scheduled ocean freighters on six routes operated by state-owned shipping firm PT Pelayaran Nasional Indonesia, connecting major cities to remote areas, under the ‘maritime highway’ program.

Despite all the government’s effort to tackle logistics bottlenecks, Indonesia ranked only 63rd out of 160 countries, based on the 2016 World Bank’s Logistics Performance Index. While logistic costs remain high, at around 24.6 percent of GDP (compared to its peers Malaysia and Philippines at 19 percent of GDP), at present.

Domestic logistics firms only account for 43 percent of logistics activities in Indonesia, with the rest dominated by foreign firms. Such foreign dominance in the logistics sector along with other sectors in the service business is reflected within the balance of payments with a US$6.5 billion deficit in the service trade balance in 2016.

To showed the seriousness of government to implement the sea toll program, President Widodo releases export with large container vessel at Tanjung Priok Port.  Through the ceremony he want to show that Indonesia economy continues to run well, remains resilient, continues to move and export more expanded.

At that day, the export using large vessels namely CMA CGM Tage with a capacity of 10 thousand TEUs and weighs 95,263 Gross Tonnage. This ship has a Java-Ameica Express service that routinely serves the Port of Tanjung Priok route to West Coast of United States (direct call).

He said, this direct call export will reduce the huge logistics cost. Presented by the President Director of PT Pelabuhan Indonesia (Pelindo) II Elvyn Masassya that each container save costs approximately US$300 and this will provide the competitiveness of Indonesia logistic’s cost.

Currently, there are several large vessels that routinely dock at Tanjung Priok, such as Post-Panama generation APL Salalah and Vessel Pelleas. Direct call routes handled include Northern European destinations, west coast of the United States, and Intra-Asia.

The president said that the commodities shipped on exports this time consisted of 50 percent of shoes, 15 percent of garments, 10 percent of rubber products, tires and derivatives, electronic appliances by 10 percent, and other products by 15 percent. He expect this will increase our exports.

On that occasion the President also said that exports to the United States are a marker that Indonesia has a very strategic role in geo economy in Indo Pacific. As the largest country in Southeast Asia, the President continued, Indonesia is continuing to move to make the Indo Pacific region as one of the main sources of economic growth, trade center, and world industry.

Currently, logistic costs in Indonesia remain high, at around 24.6 per cent of GDP (compared to its peers Malaysia and Philippines at 19 per cent of GDP), at present, domestic logistics firms only account for 43 per cent of logistics activities in Indonesia, with the rest dominated by foreign firms.

Such foreign dominance in the logistics sector along with other sectors in the service business is reflected in the balance of payments with a US$6.5 billion deficit in the service trade balance in 2016.

Coordinating Ministry for Economic Affairs (CMEA) Darmin Nasution sees overlapping regulations as having contributed to high logistic inefficiency. Other than that, lack of infrastructure, the absence of distribution centers, lack of a national cargo transportation map as well as lack of human resources.

Thus, the government launched its ‘Economy Policy Package XV’ in June last year to address the issue.

McKinsey has reported that while cities are still the main source of global economy (contributing 80 per cent of world GDP), such inefficiency in urban logistics drags as much as 2 until 4 per cent of city GDP down in the form of lost time, wasted fuel, and higher cost of doing business. Jakarta itself loses $5 billion a year in congestion.

Statistics Indonensia noted, the country’s balance of trade in 2017 surplus of $11.84 billion. This figure is higher when compared with the surplus in 2016, which amounted to $9.53 billion. The trade balance surplus in 2017 shows the highest level since 2013 and 2014 which experienced a deficit, and then returned a surplus in 2015 and 2016

Indonesian Express Delivery Companies Association estimate that logistic  business growth in 2018 will reach 15 percent level, similar to last year’s growth.

In our view, the sea toll program that has not run as expected due to the lack of adequate port infrastructures, sea transportation in the country is inefficient, with uncompetitive shipping prices.

To realize the sea toll program, Widodo needs commitment from all stakeholders and eliminates sectoral ego. A more progressive policy is needed for all parties to implement the program.

The development of as many as 24 seaports, including five deep seaports need to accelerated for more export lines around the archipelago and lowering the logistics costs.

The flagship program of President Widodo’s administration aiming to overcome the connectivity also is still less than optimal. Referring to data from the Ministry of Transportation, the realization of sea toll road cargoes in 2017 amounted to 212,865 tons or 41.2 percent of the target of 517,200 tons. Meanwhile the realization of return cargoes was only 20,274 tons.

Therefore, the Ministry of Transportation to immediately establish technical regulations related to the implementation of the sea toll road program. The goal is to avoid the overlapping of permissions as well as facilitate the flow of goods in and out of seaport.

The Transportation Ministry should also optimize the carrying capacity of vessels, especially for cargoes returning from eastern Indonesia. This can be done by distributing pioneer ships capable of being liaisons to large ones.

 

Other thing that the government needs to do to succeed the sea toll program is to improve the supporting infrastructure and land transportation modes, especially in the foremost, outermost, and underdeveloped areas .

So, for us, things that must be accelerated are the preparation of storage warehouses, transporter trucks, supermarkets, and manpower for loading and unloading. We believes the availability of infrastructure will better ensure the smooth distribution of commodities and at the end lowering the logistic cost and boost the export.

Email: linda.silaen@theinsiderstories.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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