The Indonesian government is currently making concerted efforts to plug infrastructure deficits in its logistics industry to attract foreign investment.
Structural reforms in the government also show movement away from government ownership towards private sector participation and more independent regulation. This movement is ongoing, with further deregulation expected in many sectors.
How foreign logistics companies are positioned
The Indonesian government has been eager to attract private investment in logistics and
infrastructure, and has been working on developing a number of tools and a variety of measures to attract foreign investment.
Since 2010 strong sectors for investment have continues to be in the transport, storage and communications industry (Indonesian Ministry of Trade).
Indonesian Growth is Long Term
Indonesia is the world’s fourth most populous nation, as is currently the world’s sixteenth most prosperous nation.
Indonesia has a mixed economy with both private and government enterprises. A member of the G-20, Indonesia has the largest economy in South East Asia. Within the next decade it is expected to make it into the world top ten.
Indonesia’s economy is currently driven by and oil and agriculture. Approximately 90% of the Indonesian population is engaged in agriculture
Logistics Critical to Indonesia’s Growth
For foreign companies wishing to take advantage of the many logistics opportunities in the ASEAN region, Indonesia (officially the Republic of Indonesia) sharing its borders with Papua New Guinea, East Timor, and Malaysia, as well as neighboring countries including; Singapore, The Philippines, Australia and Palau is an excellent gateway to the region.
The Indonesian government has recognized that logistics is vital to the economic performance of the country and its future. As part of the government’s commitment to accelerate improvement in logistics and transport it has set about introducing structural reforms in attempt to boost trade and foreign investment. These structural reforms include a commitment by the government to invest $250 billion into developing its ports and infrastructure, making Indonesia an attractive prospect to both public and private investors looking for new opportunities.
Indonesia’s Economic Areas
The economy of Indonesia is mainly based on agriculture and oil. Approximately 90% of Indonesia’s population is engaged in agriculture. Indonesia’s major exports are oil and gas, electrical appliances, plywood, textiles and rubber
Indonesian Oil and Gas Logistics
Indonesia’s oil and gas industry is one of the main economic activities, Indonesia is now capitalizing on its vast unexplored oil & gas reserves in the frontier, deepwater regions of East Indonesia.
The movement of oil & gas production from West to East is the next big thing for Indonesia’s oil & gas sector. (Source:http://www.gasandoil.com/natural-gas-logistic-handling-and-contracts-forum)
Indonesia’s Textiles Industry
Indonesia’s garment and apparel sector is mainly situated in the free trade zone on the island of Java, particularly that of West Java and the island of Batam.
61% of manufactured garments are exported to international markets as various leading international apparel brands use Indonesia as a manufacturing base for their global exports. Exports of textiles and garments rose by 19.7% to $12.1 billion USD at the end of 2011* (*Indonesian Ministry of Trade).
The export of these garments is an attractive entry prospect to foreign companies wishing to invest in this industry and Indonesian markets. Foreign companies are also required by Indonesia to assist in meeting challenges of providing a sustainable infrastructure to meet the growing logistical needs of the textile industry.
Indonesia’s Rubber Industry
Indonesia is the second-largest rubber producer in the world and supplies a substantial amount of rubber to the international market. Since the 1980’s, the Indonesian rubber industry has shown a steady increase in production. Around 80 percent of the countries rubber production is produced by small-hold farmers.
With a continuing global demand on Indonesia’s rubber industry, it has been recognized that further foreign investment and support of the transport and logistics of the product is required.
Indonesia’s Logistics Infrastructure
The single biggest issue facing Indonesia is that Indonesian trade facilitation is the countries ‘paper-based systems’, which increases the cost of logistics in addition to reduced efficiency. Other bottlenecks in the Indonesia transportation and logistics industry include goods to be exported leaving the ports too late and consequently do not reach the regional transshipment ports on time.
Indonesia’s Port & Air Logistics
Indonesia has 25 strategic ports and 27 Airports with domestic and international status the majority of the hubs are focused on Jakarta and Java, which has created major challenges for inter-island connectivity and development. Many of the inter-island connections are conducted through small commercial and non-commercial ports and hundreds of small domestic airports.
As an attempt to expedite delays on international shipping all Indonesian ports will in the future be required to operate 24 hours a day for 7 days a week to ensure a speed up of customs clearance and to try and facilitate reduced logistics costs in the region.
Indonesia’s Rail Logistics
Rail is Government owned and is both relatively high cost and has less than desirable service levels with slow and many delayed services. The Indonesian government is currently investing in its rail networks.
Indonesian Logistics Education
Development of Logistics skills and knowledge is critical to Indonesia’s future. Companies like Latus are pro-actively positioning themselves to assist in Logistics education and skills development.
However specialist foreign logistics companies are also well placed to bring their knowledge and expertise to the Indonesian market.
Considering Entry to the Indonesian Logistics Market?
In order to support the continuing growth and improvement of the Indonesian logistics sector it is estimated that up to $2 billion USD in investment annually to realise Indonesia’s goals. Foreign companies wishing to enter into the logistics market should consider short distance inter island transport and logistics opportunities.
Australian, USA and Canadian companies in particular with large ex pat Indonesian populations should be looking to leverage that resource to investigate the market opportunities.
Alternatively undertaking courses like our ASEAN Logistics Intensive enable foreign companies to learn and network with Viet Namese logistics professionals to identify potential opportunities.
Summary
Indonesia is a remarkable country with a resourceful and enterprising population. It is certain that Indonesia will continue to grow and develop and take its place as the worlds 10th most prosperous nation. Foreign logistic companies should be seriously investigating the opportunity Indonesia offers for their logistics skills and expertise.
