Formulating logistics competitiveness
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Meracik daya saing logistik
29 November 2023
By: Hendra Wibawa
Indonesia’s homework to boost the logistics sector’s competitiveness is still challenging as the performance of delivery services is still suboptimal. Meanwhile, it’s important to note that the logistics sector plays a crucial role in driving national economic growth.
The government, business players, and related parties are continuously boosting logistics performance in Indonesia through various initiatives.
Transportation Policy Agency Head of the Transportation Ministry Robby Kurniawan said that logistics challenges would be more difficult in the future.
Hence, he emphasised that collaboration among stakeholders in the logistics sector must be established, especially on programme synchronisation.
“Logistics productivity is expected to increase and contribute to national economic growth,” he said as a speaker at the 2nd Bisnis Indonesia Logistics Awards (BILA) 2023 in Jakarta on Tuesday (28/11).
Particularly, Robby revealed that the Transportation Ministry was conducting a digital transformation as a strategy to make the logistics sector more efficient.
The digitalisation of the logistics sector is a formula that is in line with the directive of President Joko Widodo to make logistics more efficient in Indonesia.
One of the ways to digitalise logistics is by implementing the Inaportnet system at various ports in Indonesia. According to him, the Inaportnet system can make delivery time and logistics costs more efficient.
Robby also revealed that there were other strategies to boost logistics productivity, such as the implementation of airbridge programme, the provision of pioneer transportation subsidies, infrastructure development in eastern Indonesia, and the promotion of rail-based transportation. These initiatives are expected to reduce logistics costs.
One of the facilities that is quite successful is the maritime highway programme as it has multiple impacts on the logistics sector.
Those various efforts are urgent. The data from the World Bank shows that Indonesia’s logistics performance index (LPI) plummeted to rank 61 out of 139 countries with a score of 3.0. Indonesia’s rank went down by 15 ranks from the LPI in 2018 when Indonesia was ranked at 46 with a score of 3.5.
Indonesia’s logistics performance has seen a downturn, primarily due to a decrease in the performance of delivery services. This includes factors such as delivery time, international delivery, as well as tracking and tracing. On the other hand, the logistics indicators from the input side that includes customs and infrastructure are demonstrating positive performance.
Indonesia Logistics Association (ALI) Chairperson Mahendra Rianto reckoned that efforts to suppress logistics costs have shown quite positive results. However, he stated that the government needed to prepare short-term, medium-term, and long-term programmes to accelerate the reduction in logistics costs.
The programmes need to be more detailed and comprehensive to affect each logistics indicator.
For example, Mahendra mentioned that the government could make a programme to lower transportation costs by 10% as the component significantly affects national logistics costs.
According to him, the government and the private sector need to collaborate to ensure the availability of raw production materials and efficient delivery. He said that an optimal delivery route for raw materials and other goods would lower logistics costs.
Meanwhile, Indonesian Port Operators Association (ABUPI) Chairperson Aulia Febrial Fatwa proposed that the national supply chain needed to be improved to make logistics more efficient.
He revealed that, if the supply chain has been improved, logistics would automatically be more efficient. So, in time, logistics costs will decrease.
The government has been too focused on lowering logistics costs, but they forgot to improve the supply chain. “So, the LPI tends to fluctuate. However, logistics costs in Indonesia continue to increase, it never goes down,” Aulia said.
Expansive opportunity
On the other hand, PT Pertamina International Shipping Business Planning Director Wisnu M. Santoso sees that there is an opportunity to develop logistics businesses in Indonesia even though it is overshadowed by challenging conditions, such as high interest rates.
According to him, those in the logistics business must exercise both thoroughness and selectivity to capitalize on opportunities, thereby fostering an environment of enhanced creativity in their operations.
Besides that, business players must also stay vigilant of the risks that may disrupt business growth.
Wisnu reckoned that prudent logistics business growth was a priority that must be maintained amid economic uncertainty. “I see that there is an opportunity as the cake [that is logistics] is growing,” Wisnu said.
To kill two birds with one stone, Indonesia Transportation Society (MTI) Logistics Transportation Forum Chairperson Kyatmaja Lookman hopes that the ‘economic cake’ from logistics business will continue to grow even though there are many new players that create fierce competition.
“We are actually growing. The ‘cake’ is expansive, but there are many entering. So, the barrier to entry is lower and competition is fiercer,” Kyatmaja said.
When business competition in the logistics sector is fierce, business players struggle to adjust their prices.
Hence, he proposed that logistics industry players should innovate to improve the competition to be healthier.
Unfortunately, he reckoned that business competition in the logistics sector in Indonesia tended to be unhealthy.
Centre of Reform on Economics (CORE) Indonesia economist Yusuf Rendy Manilet reckoned that Indonesia needed to improve their LPI as it can positively impact various sectors.
A higher LPI score brings several notable advantages. These include bolstering competitiveness in global production, facilitating smoother distribution of goods and services, and reducing logistics costs.
Yusuf has proposed enhancements to logistics performance by concentrating on key areas that have shown signs of deterioration. These include the ease of importing and exporting, the smoothness of transportation, the reliability of logistics infrastructure, and the availability of logistics services.
