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Indonesia Logistics Expenditure to Reach $160b in 2014

Jakarta. Companies operating in Indonesia may spend as much Rp 1,816 trillion ($160 billion) to move goods, materials and merchandise to and from Southeast Asia’s largest economy this year, according to Frost & Sullivan, an industry tracker.

That would be 14.7 percent more than last year’s estimate of Rp 1,583 trillion, the firm said.

Around Rp 328.8 trillion of last year’s spending was outsourced to logistic firms, while the remaining Rp 1,254.5 trillion was spent on in-house logistic services.

Gopal R., Frost & Sullivan’s global vice president for transportation and logistic practice, said growth in the industry will be driven largely by the improvement in international trade as well as a rise of the middle-income group, which would increase demand for goods and logistics.

“Growth in international trade will stimulate regional integration, removal of trade barriers, coupled with the rise in containerization levels and expansion in key external drivers of the industry such as economic, demographic and consumer drivers, which in turn will lead to high demand for transportation,” Gopal said in Jakarta on Tuesday.

Volume-wise, sea freight remains dominant but rail transportation and airfreight are expected to grow rapidly as a result of the rise of the middle-income group.

Frost & Sullivan forecast that the volume of sea-borne freight will rise 4.3 percent to 1.04 billion tons, while rail transportation and airfreight will grow 8.5 percent to 25.5 million tons and 15.3 percent to 1.34 million tons respectively.

The rise in airfreight volumes will be driven largely by private consumption as more and more Indonesians use these services to deliver goods and merchandise, according to Gopal.

“Soekarno-Hatta [International Airport], as the main gate for international trade, will have cargo volume growth in a range of between 5 percent to 7 percent, fueled by an increase in private consumption,” he added.

The growth in logistics movement via railways was due to poor infrastructure for land-based transportation on Java Island, with its extensive railway network, said Zaldy Ilham Masita, the president of the Indonesian Logistics Association.

“We see that there’s an increasing trend to shift from using trucks to trains. We expect that the completion of the Jakarta-Surabaya double-track railway would make the train the logistical backbone in Java,” Zaldy said.

However, he noted certain challenges, especially related to decision-makers’ poor understanding of logistic services and the lack of clear implementation of the national logistic blueprint.

“The government must first understand that logistics are different. The building of infrastructure alone is not enough, what they need is to make logistics more efficient,” Zaldy said, while highlighting the ongoing construction of New Priok port, which may result in unintended consequences.

“The construction will cause a traffic logjam due to the increased volume, which will push up the cost of logistics even more,” he added.

Source : www.thejakartaglobe.com, Tuesday, March 18 2014