Op­por­tu­ni­ties abound for Malaysian lo­gis­tics firms in In­done­sia

New Straits Times - - Business / Bursa Malaysia - marco@lb­bin­ter­na­tional.com The writer is founder and CEO of LBB In­ter­na­tional, which pro­vides lo­gis­tics di­ag­nos­tics, sup­ply chain de­sign and so­lu­tions and mar­ket re­search in Asia, Europe and the Mid­dle East.

With the pro­jected mega in­vest­ments in the In­done­sian trans­porta­tion and lo­gis­tics sec­tor over the com­ing years, In­done­sia will be nar­row­ing the lo­gis­tics gap with other Asean coun­tries.

week CeMAT South­east Asia hosted In­done­sia’s largest lo­gis­tics con­fer­ence and ex­hi­bi­tion in Jakarta.

The theme was “Ac­cel­er­at­ing in­ter­con­nec­tiv­ity: Asean and be­yond”. In­done­sia is the largest Asean mem­ber coun­try, in terms of size and pop­u­la­tion.

Un­der the lead­er­ship of the Pres­i­dent Joko Wi­dodo, it is trans­form­ing its trans­porta­tion and lo­gis­tics sec­tor quickly.

Ac­cord­ing to the trans­port minister the gov­ern­ment is com­mit­ted to heav­ily in­vest­ing in trans­porta­tion and lo­gis­tics in­fra­struc­ture in con­nect­ing the ar­chi­pel­ago through sea, road, rail and air.

Cur­rently, In­done­sia has one the world’s high­est lo­gis­tics costs, on av­er­age about 26 per cent of gross do­mes­tic prod­ucts (GDP).

In prac­tice, this ranges be­tween five and 40 per cent of the sales value.

In com­par­i­son, it is 13 per cent for Malaysia. The In­done­sian gov­ern­ment is de­ter­mined to bring down lo­gis­tics costs to 19 per cent of its GDP by 2020, with gov­ern­ment ef­forts to mod­ernise ports and open up the lo­gis­tics sec­tor to for­eign in­vest­ment.

The up­grad­ing of its ports as well as many new port de­vel­op­ments will al­low for a bet­ter ac­cess of large in­dus­trial parks to ports.

Cur­rently, much of in­dus­trial traf­fic be­tween in­dus­trial parks and ports passes through In­done­sia’s largest cities like Jakarta, Surabaya and Medan.

An­other strat­egy, bet­ter known as model shift, is tar­geted at re­mov­ing freight ve­hi­cles from road to rail through ex­pand­ing rail in­fra­struc­ture.

Rail in­fra­struc­ture is lim­ited to Java and Su­ma­tra, mainly the rail track de­vel­oped dur­ing the Dutch colo­nial era.

Al­though the ex­pan­sion of rail is crit­i­cal for ports, rail in­fra­struc­ture de­vel­op­ments in In­done­sia will take mas­sive in­vest­ments over many decades in or­der to make any se­ri­ous im­pact on vol­ume per­cent­age of cargo moved by rail.

Lo­gis­tics costs are also high in In­done­sia due to a lack of am­bi­ent and cold room ware­houses through­out the coun­try.

A few traders have in­vested in their own ware­houses in var­i­ous parts of In­done­sia, mo­nop­o­lis­ing dis­tri­bu­tion chan­nels and hereby ar­ti­fi­cially in­creas­ing sup­ply chain costs.

Th­ese mo­nop­o­lies of ware­house in­fra­struc­ture are also not very ben­e­fi­cial for the qual­ity of fa­cil­i­ties and food safety.

Both gov­ern­ment-linked and pri­vate sec­tor lo­gis­tics ser­vice providers are slowly in­vest­ing in ware­house in­fra­struc­ture on is­lands other than Java, Su­ma­tra and Bali.

One of the im­por­tant eco­nomic stim­u­lus pack­ages in 2015 was the Bonded Lo­gis­tics Cen­tre li­cence.

The Bonded Lo­gis­tics Cen­tre is a multi-func­tional lo­gis­tics ware­house for stock­pil­ing goods im­ported or lo­cally with the ease of tax priv­i­leges by with­hold­ing the pay­ment of im­port du­ties and free of value-added tax (VAT) or sales tax, as well as op­er­a­tional flex­i­bil­ity.

Th­ese priv­i­leges are not only given to lo­cal lo­gis­tics ser­vice providers but for­eign ones as well.

With the pos­si­bil­ity of mas­sively re­duc­ing sup­ply chain lead­times and costs, In­done­sia is a rather pris­tine area for pro­fes­sional lo­gis­tics, open to in­vestors in trans­porta­tion and lo­gis­tics in­fra­struc­ture.

And with the pro­jected mega in­vest­ments in the In­done­sian trans­porta­tion and lo­gis­tics sec­tor in the com­ing years, In­done­sia will be nar­row­ing the lo­gis­tics gap with other Asean coun­tries.

In­done­sia’s lo­gis­tics progress will be im­por­tant for the lo­gis­tics in­te­gra­tion of Asean and the eco­nomic per­for­mance of mem­ber coun­tries.

In other words, great op­por­tu­ni­ties abound for Malaysian lo­gis­tics firms want­ing to ex­pand to In­done­sia.

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