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Indonesia Moves to Cut High Logistic Distribution Cost
Source: http://news.xinhuanet.com
Source Date: Wednesday, April 10, 2013
Focus: Knowledge Management in Government
Country: Indonesia
Created: Apr 16, 2013

JAKARTA, April 10 (Xinhua) -- Indonesia is making efforts to tackle high logistic cost that has long plagued the country's manufactures, mainly through constructing more infrastructures and creating regional logistic pools and logistics hubs to secure availability of logistics in nearest locations.

 

Indonesian Trade Minister Gita Wirjawan said Wednesday that high logistic cost was caused by limited infrastructure available in the country, particularly in the eastern region, adding it has led to the high disparity of growth between eastern and western regions.

 

Citing as an example, the minister said that cargo transport firms usually charge extra fees on logistic cargo shipment to the eastern region since their ships may return unloaded, thus leading to higher cost for logistic distribution to the eastern region than to the western region.

 

"Such a problem also hinders investors from investing in eastern region. It would eventually slow down the growth in eastern region," the minister said.

 

The minister added that logistic distribution problem would harm the competitiveness of Indonesian products in both domestic and international markets.

 

To address this problem, he said, his ministry has been actively developing national logistic system and improving the regions' connectivity as well as inter logistic hubs.

 

"It was conducted through traditional market revitalization, construction of regional distribution centers and development of network that connects each logistic hub located in each economic corridor," the minister said.

 

According to data released by the ministry, logistic cost accounts for 24.64 percent of the country's gross domestic product (GDP) that reached 1,800 trillion rupiah (185.6 billion U.S. dollars) in 2011.

 

Indonesia was ranked the 59th in the results of Logistic Performance Index survey conducted last year, below Singapore, Malaysia, Thailand and Vietnam.

 

Sofyan Wanandi, chairman of Indonesian Employers Association ( Apindo), an organization joined by manufacturers operating in Indonesia, said earlier that logistic cost in Indonesia made up of up to 17 percent of overall industrial cost, adding that it was the highest in Asia.

 

"In Malaysia it was only 8 percent, while in Japan it stood at 5 percent. This is what the government should address by constructing more infrastructures," he said.

 

The Indonesian government is in its great efforts to build infrastructure projects to facilitate investors interested in investing in the largest economy in Southeast Asia that recorded high growth of above 6 percent amid global crisis in the last few years.

 

The government has allocated 363 trillion rupiah (37.4 billion U.S. dollars) to finance the construction of new airports, seaports, toll roads, power plants and more infrastructure necessities in a program called MP3EI until 2014.

 

It expects great participation of private sector in carrying out the project construction as it needs huge funds and resources to accomplish the program that began in 2011.
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