Mon, 02 Aug 2010

The Indonesia Services Dialogue is an informal forum to discuss and consider ways to increase growth and efficiency in the Indonesian Services sector. The debate includes government policy makers, regulators, and services providers and users from the business community.

The Indonesia Services Dialogue is currently coordinated by associated government agencies, KADIN Indonesia, local think tanks, the World Bank in Indonesia, with the support of the Multi-Donor Facility for Trade and Investment Climate.

The Government of Indonesia and the business sector have identified domestic connectivity as a key development challenge. An improved connectivity within the country and with the rest of the world may have the following benefits:

* Improved access to goods and services at lower and more stable prices
* Reliable and efficient transport services can increase market access as well as the competitiveness of Indonesian goods, as they can reach markets with a lower final price
* Greater diversification in production and exports as it helps businesses develop competitive advantages in higher value added goods
* Encourage the processing of commodities at domestic processing plants instead of abroad
* Unemployed and poor workers will have access to greater job and income opportunities in surrounding areas and in the now closer urban areas.
* Micro and small businesses will be able to serve a large number of clients and have greater access to needed inputs

Efficient services are a key component of domestic integration. Connectivity services such as courier services, port operations, land and sea transport services, railways, telecommunications, and supply chains in general, are all inter-linking activities that make domestic market integration possible. To tackle these issues, the Government is preparing a “National Logistics Blueprint” which will set out strategies and an action plan for logistics infrastructure and services in the coming years.

Examples of the implications of Indonesia’s poor connectivity

* The price of a bag of cement in certain parts of Papua is 20 times that in Java. Oranges from China are cheaper than oranges from Pontianak (Kalimantan).
* 70% of differences in rice prices across provinces can be explained by the degree of remoteness, which in turn is a reflection of poor logistics and inadequate transport infrastructure (World Bank 2010).
* High quality products with great potential, such a shrimps from eastern Indonesia, cannot be commercially processed in Java, and commodities, like pineapples, are canned abroad because it is cheaper to transport them to Malaysia than to ship them to Java.
* The costs of bringing a container from Jakarta’s main industrial sites are double that in Malaysia and Thailand.
* A truck on a round-trip from Bandung to Jakarta may spend up to 75% of its time parked due to customs processes, warehouse delays, and lift-on and lift-off queues.