Indonesia Logistics Costs Can Match Asian Peers in Two Decades: Roland Berger

Singapore sovereign wealth fund GIC said it is making its first investment in Indonesia's logistics sector. (Antara Photo/Sigid Kurniawan)

By : Tabita Diela | on 8:50 PM March 16, 2016
Category : Business, Economy

Jakarta. Indonesia is on the right trajectory to reduce its logistics costs to 19 percent of its gross domestic products (GDP) by 2020, thanks to government efforts to modernize ports and open up the logistics sector to foreign investment, according to an assessment from global consulting firm Roland Berger.

Total logistics costs could further decline to 9 percent of the GDP by 2035 with further reform in port operating models and the development of better port infrastructure, Anthonie Versluis, Roland Berger's global head of ports practices, said on Wednesday (16/o3) He added that for the country to achieve that result, it would also need to consolidate its fragmented forwarding industry and solve unbalanced cargo flows between its islands.

Today logistics costs account for 26 percent of Indonesia's $861 billion economy. The is one of the worst numbers in all of Asia, and far behind Singapore's 8 percent, Malaysia's 14 percent, Japan's 9 percent and South Korea's 13 percent of GDP.

"From our analysis, Indonesia has the potential to bring [down] the cost of logistics ... but it must escalate reforms in the industry to achieve this ambitious target. The public and private sectors need to work collaboratively to reduce this burden," Versluis told reporters.

A recent World Bank report titled "Private Investment Is Essential" pinned Indonesia high logistic costs on under-utilized logistics assets, which is exacerbated by long and fragmented supply chains, low port efficiency and road congestion.

The government, however, has released economic policy packages since September which, among other goals, aim to streamline the bureaucracy in ports and open up the port and logistics management to foreign investment.

One of the foreign company's seeking to tap into Indonesia's logistic business is OpenPort, a Hong Kong-based digital company that provides app-based services for tracking business-to business shipments. OpenPort just opened its office in Jakarta at the end of last year.

The OpenPort app according to the company allows different shipping and forwarding companies as well as their clients to track delivery of goods on a single platform, allowing a seamless integration of the logistics network at a fraction of the costs of conventional delivery service.

The app also allows carriers to increase utilization of assets and working capital by accepting delivery jobs through the app,  said Max Ward, CEO and co-founder of OpenPort.

"The key to revolutionizing logistics is through direct collaboration between shippers and transporters," Ward said. "It is possible through new technology and a new way of thinking about supply chain management."

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