RI logistics costs lower than Thailand, LPEM-UI, JBIC say
The Jakarta Post, Jakarta
Logistics costs in Indonesia are significantly lower compared to Thailand, in contrast to the wide-spread perception that the country has higher cost compared to other Asian countries, according to a report.
The report -- based on a joint study conducted by Institute for Economic and Social Research, University of Indonesia (LPEM- UI) and Japan Bank for International Cooperation (JBIC) -- was released on Monday.
The study took 75 firms in Greater Jakarta, Makassar, Surabaya and Medan as its respondents. The firms are exporters of textiles and clothing, food and beverages, electronics and automotive parts.
The study showed that total logistics costs in Indonesia comprised 14.08 percent of total production costs, while in Thailand the figure stood at 22 percent, as revealed in the seminar "Enhancing Indonesia's competitiveness: Meeting the Challenges for Industrial Development".
Indonesian exports have been suffering from low competitiveness, due to low productivity and other problems at the factory or firm levels. In addition, logistics inefficiency increases transaction costs that in turn put more downward pressure on competitiveness.
"Thailand may have higher logistics cost than Indonesia, but they are strong (in terms of total) investment," M. Chatib Basri of the LPEM-UI told reporters on the sidelines of the seminar.
The government needs to deregulate and simplify bureaucracy as a short-term solution to increasing investment, as well as improving institutions such as the tax office, customs and others in the long term, said Chatib, who is also an economic advisor to Coordinating Minister for the Economy Aburizal Bakrie.
The study further revealed a surprising finding that the cost of logistics from suppliers to manufacturers was almost double the cost from factories to port, contrary to the wide perception that costs in ports were the major factor in reducing the country's product competitiveness.
"One explanation is that Indonesia's export industries still require more imported than domestic input, which has an implication to the higher input logistics costs," it said.
The study said that logistics costs from input to manufacturer contributes 7.22 percent of the total cost, in-house logistics contributes 2.82 percent and logistics from factories to port 4.04 percent.
The main sources of the inefficiency in logistics in export industries, based on respondents perceptions, were poor infrastructure, illegal imposts along distribution chains, and government regulations such as those for export procedures.