Reform actions need to be matched with greater capacity to outperform regional neighbors
Jakarta, January 15, 2010 – Indonesia is determined to become an important player in international trade markets, and is following through on the logistical front with a series of a positive reform measures. In the last three years, the Indonesian government has:
* launched public and private dialogue on trade facilitation and logistics; * established a National Logistics Team to address the costs of international trade, and the unique logistics costs of a large archipelago; * launched a National Single Window System.
In a seminar on trade logistics organized jointly with the Governmentâ€™s Logistics Team, the World Bank today released new analysis on what more could be done to boost Indonesiaâ€™s logistics performance and surpass competitors in the region. According to Connecting to Compete in Indonesia, Indonesiaâ€™s overall performance is in line with its per capita income level. When compared to other lower middle income countries in the region, Indonesiaâ€™s performance is above the group average in three areas: ease of arranging shipments; tracking and tracing of shipments; and timeliness of delivery. However Indonesiaâ€™s global ranking in the Logistics Performance Index has fallen over the past three years due to stronger efforts by other countries in the region to implement reforms that improve logistics performance. International comparisons have shown that countries with better logistics performance have higher GDP growth and trade growth.
â€śThereâ€™s a lot to do in Indonesia to improve its capacity to ship goods, connect to international markets, and increase its competitiveness,â€ť said Mona Haddad, World Bankâ€™s Sector Manager at the International Trade Department. â€śBut we are really encouraged by the government actions to prioritize trade logistics reform in its 100-day plan and Medium-Term National Development Plan.â€ť
Djadmiko, head of the National Logistics Team acknowledges the importance of logistics reform in accelerating growth, making Indonesia more competitive, and increasing investment levels: â€śAfter two years of preparation, the Indonesian government is about to release its logistics blueprint aimed at tackling both short-term actions and long-terms reform in the logistics sector, as well as providing a broad strategy to make domestic and international trade logistics more efficient.â€ť
According to the report, the cost of shipping of a 40 feet container from Padang on the coast of West Sumatra to Jakarta is currently US$600, while the transportation of the same container from Jakarta to Singapore costs US$185, despite being further away. In addition, differences in logistics costs are an important reason why rice prices in one province can be up to 64 percent higher than in another.
Connecting to Compete in Indonesia notes that action is needed on a number of fronts –particularly on border management, service sector performance (transport, logistics and freight-forwarding services), and overall logistics infrastructure. However the most important front is the inter-agency coordination in implementing reforms, which may require a higher level body with a stronger mandate. The areas in which Indonesia has improved are telecommunications and information technology infrastructure, private logistics services, and the incidence of corruption logistics activities.
Logistics Performance Indicators
Much of Connecting to Compete in Indonesia was based on the results of the 2010 Logistics Performance Index, which is based on a worldwide survey of operators on the ground (global freight forwarders and express carriers), providing feedback on the logistics â€śfriendlinessâ€ť of the countries in which they operate and those with which they trade. They combine in-depth knowledge of the countries in which they operate with informed qualitative assessments of other countries with which they trade, and experience of global logistics environment.
Indonesia ranks 75th among the 155 economies rated in the Logistics Performance Indicators (LPI), compared with 43 in 2007. The fall in ranking reflects stronger efforts by other countries to introduce reforms and improve logistics performance. Vietnam, India, and the Philippines all have higher LPI scores than Indonesia despite their lower income levels. Nevertheless, Indonesia remains among the top 8 lower middle-income performers in 2010.
The LPI was launched globally on January 15, 2010.