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ITE Transport and Logistics

2017 in the Indonesian transport & logistics sector

Indonesia’s prospects are looking good. South-East Asia’s biggest economy is growing, its 260 million population experiencing greater purchasing power, and the nation’s ambition is second to none. Transport and logistics is playing no small part in establishing Indonesia as a regional leader and world power- and this is set to continue in 2017.

ITE Transport & Logistics has identified a number of key trends and talking points regarding Indonesia’s transport and logistics sector to be on the lookout for in 2017. Read on to learn more.

Continued government backing in transport & logistics

Logistics costs are a massive focal point for the Indonesian government. Approximately 24% of Indonesia’s GDP is spent on logistics, so there is a frenzy of nationwide activity aimed at reducing them. 

The government under President Joko Widodo has issued 13 logistics policy packages since November 2015. Featuring massive de-regulation, simplification of licensing procedures and cancellation of thousands of regional regulations stymying development, these plans are aimed at dropping logistics costs more in line with regional norms.

A number of bonded logistics centres (PLBS) have been funded by government dollars and built since 2016, with up to fifty set for opening in 2017. Observers can expect the government to continue throwing its weight behind the logistics and transport sector due to the huge economic significance of the industry. 

In addition, a wealth of ports, airports, roads and rail projects are seeing multi-billion dollars of investment. Updated travel links often means smoother, stronger logistics performance, so keep your eyes firmly fixed on Indonesia’s infrastructure construction efforts.

Growth remains steady

Indonesia’s transport and logistics sector has been experience double digit growth for over a decade. It is one of South East Asia’s transportation’s most exciting unfolding narratives. And, according to Frost & Sullivan, this story looks set to continue.

The international research firm has some solid predictions for growth from the present until 2020. A compound annual growth rate of 15.4% until 2020 has been predicted. What is behind this growth? Massive government spending, as outlined above, greater buying power and a growing middle class, plus a burgeoning e-commerce sector, are the fuel powering Indonesia’s logistics industry growth.

Transport & logistics in Indonesia remains collaborative

An indication of a nation being strongly invested in upgrading its transportation services is how open to collaboration it is. In Indonesia’s case, the answer is very. Whether it is seeking expertise, or securing billions in investment, Indonesia will continue to cultivate international partnerships in the logistics sector. 

Belarus might seem like an unlikely ally. Yet Indonesia will be pushing ahead with a number of joint infrastructure projects, related to transport, with the Eastern European state over the next 12 months. Likewise, billions of dollars of investment from Japan and China has been pouring into rail, air and sea developments aimed at establishing stronger transport networks in Indonesia. 

Indonesia’s position as the AESAN Economic Community’s preeminent economic power suggests greater cooperation between it and other AEC states. The AESAN Clear Skies agreement, for example, promotes free flights for both trade and civilian transport. Direct regional air travel to Indonesia is now available as a result of this international treaty.

Indonesia’s TPP status in doubt

President Widodo has stated in the past that Indonesia was keen to join the Trans-Pacific Partnership (TPP). The TPP is a free trade deal between 12 current countries, including Japan and the United States. Its signatory nations control up to 40% of global trade, so Indonesia’s prior desire to join the partnership “within the next couple of years” is completely understandable. 

However, Indonesia’s TPP involvement looks unclear. Freshly elected US President Trump has repeatedly emphasised his country’s greater need for protectionist measures on trade, casting doubt on America’s continued TPP membership.

Subsequently, Indonesian policy makers are divided about signing the cross-ocean trade agreement. Old worries regarding the economic benefits, coupled with worldwide uncertainty regarding Trump’s presidency, means any Indonesian decision to join the TPP remain unclear. If the US did leave the treaty its very existence may be in jeopardy. Expect to see ongoing, deep discussions on theTPP’s validity and effectiveness amongst Indonesia’s transport community over the coming year.

E-commerce is on the rise in Indonesia

Indonesia is home to over 100 million internet users. Mobile browsing, and crucially shopping, dominates Indonesia’s internet activity, and e-commerce is on the verge of becoming the archipelago nation’s next big industry.

Online retail sales are skyrocketing. 2014 saw Indonesia’s spend $8 billion online, and this figure is predicted to more than triple to $25 billion by 2016’s end. E-commerce is a major worldwide trend, quickly becoming the new normal way people shop, and Indonesia is on the cusp of a digital revolution. 

As such, Indonesia’s logistics industry will have to react. 3pl and courier services are going to have step up the quality and frequency of their services. A wealth of further fulfilment centres and distribution depots will also be needed to constructed to meet increased demand in small to medium sized packages. International companies should also take note of the fact that there is a dearth of technologies required for efficient logistics operations.

This includes items such as warehousing software and inventory technologies. Can your company fill the gap?

A strong future predicted for Indonesia’s transport & logistics sector

2017 looks set to be a great year for transport and logistics in Indonesia. Improved infrastructure networks, international collaboration and e-commerce are all transforming the industry and growth rates remain strong.

International logistics operators, and industry-related technology suppliers, should keep their eyes peeled on Indonesia over the next twelve months.

 

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