Behind the Border Logistics Challenges

and Measures in Indonesia.

HENRY SANDEE, WORLD BANK INDONESIA OFFICE

Trade & Competitiveness Global Practice

September 2017

Logistics behind the border challenges impact on competitiveness

3

10

-10

-16

-7-10

1 0

-14

32

-21

19

-30

-20

-10

0

10

20

30

40

Cambodia Indonesia Vietnam Malaysia Thailand China Singapore Philippines Myanmar Lao PDR India

Changes in Ranking LPI 2014-2016 for Indonesia and ASEAN + China

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Logistics in an Archipelago. A Framework

Intra-island logistics Inter-island logistics International logistics

Uncertainty in delivery due to either congestion or absence of quality roads

Unreliability of domesticshipping due to poor performance of ports

High costs and uncertainty to export according to schedule

Minimal presence of railway services

Serious backhaul problem with ships returning to Java filled for 30 percent only

The time it takes to import a container is uncertain.

Absence of short-sea shipping

Standard supply chains from Java to Eastern Indonesia complex

Import dwelling time ismuch lower but has it reduced logistics costs we do not know

Backhaul issues in road transport

Broadband to Eastern Indonesia significantly delayed

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Concentration of economic development in Indonesia

Transport costs only explains 17% of the logistic costs in Indonesia

Source: WB & LPEM-FEUI survey in 5 cities in Indonesia

• Logistics cost/sales is more precisethan logistics cost/GDP . This conceptmeasures at the micro level

• Countries that use logistics cost/sales include Japan, Finland and Germany

• Survey of 205 firms in Jakarta, Bekasi, Semarang, Surabaya, Medan, and suggests that logistics cost/sales of Indonesian manufactures is around 19-20%, which is higher than in Thailandand Malaysia (15% and 13%)

• Survey suggests that inventory carryingcost contributes to 26% of logistics costincurred by Indonesian manufacturers

Components of Logistics Cost/Sales (%) Total LogisticsCost/Sales = 20%

Logistics

Admin Transport &

3.4% Cargo Handling

8%

Warehouse3.3%

5.2%

Inventory

N = 75

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Some facts about the state of logistics in Indonesia

Intra-Island Logistics

• Indonesia’s logistics cost account for 20% of manufacturing sales in West Java versus 14% in Thailand

• Inventory costs=26% of logistics costs in Indonesia versus 16% in Thailand and 13% in Malaysia

• Trucks traveling between West Java and the port of Jakarta can now only do one round trip per day. Five years ago they could do two road trips

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Inter-Island Logistics

• Transport costs from Java to other islands are high because of inefficient ports but sea freight costs are competitive

Tanjung Priok – Guangzhou, ChinaShipping Costs US$400

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Some facts about the state of logistics in Indonesia

To Eastern Indonesia: Ships Have A Long Turnaround Time

Port of destination

Waiting timeTime at berth

(effective)Time at berth

(idle)Turnaround

time

Container Handling Charges

Sorong 24 hours 16-21 hours 10 hours 50-89 hours IDR2,168,290

Jayapura 24 to 72 hours 48 hours 60 hours 72 to 96 hours IDR1,840,094

The time spent at some ports is sometimes as much as half of the sailing time (ex. Belawan-Jakarta, Surabaya-Makassar)

To reduce logistics costs one needs to tackle costs incurred in ports rather than sea freight costs

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0.0

5.0

10.0

15.0

Trucking Charges

Sidoardjo-PortPort Charges

(Surabaya)

Sea Freight

(Surabaya-

Ambon)

Waiting time @

Port (Value of

time)

Port charges

(Ambon)Port to Hinderland

(Ambon)

Million Rupiah

Source: WB Survey of shipping liner 2014, Ministry of Trade survey 2014

Example: Logistics cost scenario for 1 TEU of rice from Surabayato Ambon

The cost of having rice waiting

at ports (value of time) can be

significantly high in the overall

logistics cost

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20.0

International Logistics: Dwell Time in the Port of Jakarta

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6.24

7.59

3.14

3.89

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DW

ELL

TIM

E (D

AYS

)

MONTHS

Import Dwell Time in Tanjung Priok Port

DT

Avrg. 2013: 6.5 daysAvrg. 2014: 4.9 daysAvrg. 2015: 4.2 daysAvrg. 2016: 3.4 daysAvrg. 2017 (up to April): 3.5 days

Can we tackle behind the Border Logistics?

In an archipelago Improve intra-island and inter-island logistics

A key issue is the same as in most emerging economies: How to find breakthroughs in infrastructure financing

• Select priorities

• Promote greater participation of the private sector (PPP)

• Promote higher investments by sub-national governments

• Land acquisition……

• But do not underestimate the importance of regulatory reform

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NO. DOCUMENT QUANTITY UNITS

1 PENGISIAN FORM 37

2 SURAT PERMOHONAN 24

3 KTP 47 copies

4 AKTE PENDIRIAN 45 set

5 SK MENKUMHAM 44 copies

6 DOMISILI 43 copies

7 NPWP 42 copies

8 FOTO DIREKTUR 13 pcs

9 SIUP 42 copies

10 TDP 41 copies

11 KADIN 41 copies

12 LAYOUT LOKASI/SITUASI 24 copies

13 SURVEY LOKASI 24 times

14 INFORMASI PERUNTUKAN LAHAN 0 copies

15 ADVICE PLANNING 21 set

16 PERTIMBANGAN TEKNIS BPN 18 set

17 PEMBEBASAN LAHAN 4 set

18 IJIN LOKASI/P2R 19 set

19 SOSIALISASI WARGA 11 set

20 PENSERTIPIKAT/PENGGABUNGAN 9 set

21 AKTE KEPEMILIKAN 18 set

22 PERTEK KKOP 0

23 KKOP 0

24 PEIL BANJIR 14 set

25 GARIS SEMPADAN SALURAN 13 set

26PEMAKAI KEKAYAAN DAERAH (JEMBATAN/AKSES JALAN) 12 set

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Regulatory requirements for

investment

NO. DOCUMENT QUANTITY UNITS

27 GAMBAR DRAINASE 4 set

28 REKOMENDASI KAJIAN DRAINASE 12 set

29 BERITA ACARA SOSIALISASI/KONSULTASI PUBLIK AMDAL 9 set

30 BERITA ACARA KERANGKA ACUAN ANDAL 3 set

31 BERITA ACARA ANDAL & RKL-RPL 3 set

32 REKOMENDASI DAMPAK ANALISIS LINGKUNGAN 14 set

33 TAMPAK BANGUNAN 3 set

34 POTONGAN BANGUNAN 3 set

35 GAMBAR DETAIL BANGUNAN 4 set

36 GAMBAR RENCANA SANITASI DAN LISTRIK/MEP 4 set

37 PERHITUNGAN KONSTRUKSI 3

38 KLARIFIKASI KONSTRUKSI BANGUNAN DARI PU 1

39 GAMBAR SITE LOKASI MESIN 1 set

40 GAMBAR ANDALALIN 4 set

41 BERITA ACARA RAPAT ANALISIS DAMPAK LALU LINTAS 4 set

42PERSETUJUAN REKOMENDASI ANALISIS DAMPAK LALU LINTAS 12 set

43 BERITA ACARA RAPAT PEMBAHASAN SITEPLAN 3 set

44 PERSETUJUAN RENCANA TAPAK (SITEPLAN)/SK 11 set

45 PERUBAHAN STATUS TANAH SAWAH 5 set

46 IJIN MENDIRIKAN BANGUNAN 8 set

47 IJIN GANGGUAN (HO) 7 set

48 TDI/TDP/TDUP 5 set

49 IJIN I PAL 1 set

50PUNGUTAN RETRIBUSI/PMBP/PAJAK PUSAT DAN DAERAH 8 set

51 IJIN PRODUKSI 3 set

52 IJIN SNI 2 set

53 IJIN EDAR 1 set15

(Cont’d)

However, this does not mean that nothing can be done in the short-run…

Regulatory reform is another key priority that currently receives World Bank support

• Simplification of licensing

• Embedment of logistics policies in the working programs of line ministries

• Mainstream regulatory impact analysis

• Recent economic packages issued to improve logistics include many measures that await implementation by line ministries

• WB estimates are that logistics costs (as a percentage of sales) can be reduced by 20 percent by carrying out key logistics reforms.

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How can we tackle behind the Border Logistics?

Thank you

Henry SandeeEmail: hsandee@worldbank.org

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