Indonesia port facilities leave lot to be desired

Indonesia – southeast asia’s biggest economy-continues to maintain a healthy GDP growth rate even as fear of a double dip recession loom amid the debt woes of Europe and the US, Indonesia’s GDP growth is projected to hit 6.5 percent this year, for rising further to 6.7 percent 2012.

Shipping, logistics and supply chain companies could see improved connectivity in the near term, president Susilo Bambang Yudhoyono has earmarked substantial spending in his 2012 budget to shore up infrastructure in the sprawling archipelago. As much as 150 km of new rail lines will be laid and 14 new airports will be built.

And while the chairman of the Indonesian national shipowners’ association Carmelita hartoto expressed her surprise to cargonews asia about the budget not recognizing the role of sea transportation as the backbone of connectivity across the sprawling archipelago she is pleased that growth continues to be on track. Growth is good news for shipping because more than 80 percent of the cargo is transported by sea.

Ineffective and inefficient sea transport connectivity, however, has meant high logistics costs, said hartoto, drawing attention to indonesia’s low sixth ranking among ASEAN countries in the logistics performance index. Indonesia needs to work hard for the next four years to attain the goals set for 2015 under the ASEAN Connectivity initiative.

We need to cut supply chain logistics by 10 percent to compete with other ASEAN members “Hartoto said adding that port facilities have to be improved. “in many ports we are not happy with productivity and turnaround rates. She observed, tough in some ports the standards were acceptable.

Compared with ASEAN ports, barring Singapore, indonesia’s stevedoring costs ar higher and not competitive, she said, some ports have also reached their maximum capacity in container handling and more berths have to be built to alleviate congestion, but she conceded that often expansion was constrained by limited area, she believes shipping lines would be willing to invest in new terminals provided incentives matches those provided in Thailand, Vietnam and Indonesia

The INSA chief, who heads the shipping and logistics group andhika, expressed sadness over the failure by and large by Indonesian shipowners to take advantage of cabotage regulations and grow their fleet, the share of Indonesian ships in the country’s dometic trade is still low and as for participation in the export-import trade the share is just 15 percent, but hartoto is quick to explain that this is not due to smaller numbers of national ships, but more because of FOB (freight on board) arrangements entered into by traders.



INSA members have grown their fleet in some sectors such as dry bulk, tankers and offshore support vessels and this has helped Indonesian owners to participate more in domestic trade, where they are able to at least cover up costs compared to international operations.

Hartoto stresses that owners are not wholly to blame because fleet expansion is constrained by a number of factors. Indonesian owners were hoping for some incentives in the budget to boost shipping, but burning issues such as funding for ship acquisition and tax breaks continue to remain on the back-burner.

It is only in recent years that domestic banks have begun lending to shipping, but hartoto points out that interest rates are high, the tax regime is also seen by owners as not competitive compared with other ASEAN countries, the shortage of competent and trained crew as per shipping standards is also making shipowners wary about adding more vessels.

Progress has been relatively faster on the logistics side, andhika offers is multimodal transportation including land, sea and air, hartoto said, the group has built a network of maritime businesses ranging from CFS warehouses, trucking, stevedoring, ship agency, shipping, freight forwarding and ship management and manning services.

And international logistics and supply chain companies are riding on indonesia’s growth as investor confidence in the world’s fourth largest populated country with 240 million people is rising

“Indonesia is a strong and developing market, Kevin burrell, president director of CEVA Logistics Indonesia told cargons asia, burrell sees potential to strengthen the company’s position in the market at a time when more global companies are now establishing their presence and operations in Indonesia has doubled its growth for the last three years, burrell expects the positive trend to continue and yield a very healthy growth.

Ceva is one of the largest logistics companies in Indonesia with over two million sq ft of warehousing, 2,200 employees and 800 truck load movements a day. Ceva has grown its fright organization considerably after applying its operational excellence framework, the company is expanding its network in balikpapan and in batam and also Surabaya, medan and semarang.

Burrell concedes that the geographical land scape offers challenges making logistics in Indonesia a lot more complex and fragmented than in other more developed markets, but emphasizes that this provides opportunities for companies such as Ceva to leverage on their expertise in end-to-end supply chain needs.

This is possible, burrel emphasizes, because Ceva has built up a robust distribution network and an integrated supply chain with local and global distribution capability.

The uncertainties in the world economy are bound to have an impact on most industries including logistics, but Burrell notes that Indonesia was one of the strong economies that were able to ride the storm with minimal reductionin GDP growth, the local economy proved to be robust and more stable than some of the other markets in the region, he points out, adding that the country has become an attractive place for many companies to establish their presence including investing in manufacturing plants where historically they have imported goods, this in turn has triggered the growth of logistics industries.

The trend is primarily driven by the recognition in recent years that Indonesia, being the fourth most populated country country in the world, presents a huge domestic opportunity with increasing domestic consumption, CEVA’s Burrell said.

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