28 June 2024 - Technical Assistance II

Domestic logistics costs in Indonesia exhibit significant regional disparities. In the western region, these costs constitute 8.9% of the price of goods transported, compared to 5% in the eastern region. However, transporting goods from west to east incurs a markedly higher cost of 37.5%, compared to 29.1% for the opposite direction. This stark discrepancy underlines the issue of cargo imbalance, where the risk of transporting empty cargo on return journeys and the scarcity of fleet availability in the eastern region inflate costs.

To address this issue, it is vital to foster the development of new industrial and economic centres in the eastern region. This strategy would not only balance the cargo loads between the two regions but also enhance the overall logistics ecosystem, particularly in land transportation.

On the international front, export logistics costs are significantly influenced by geopolitical events, such as the ongoing conflict in the Red Sea region. This situation has led to a rerouting of maritime traffic from the Suez Canal to the Cape of Good Hope, doubling the travel distance and substantially increasing freight rates for containers, dirty tankers, and dry bulk.

These insights are part of the key findings from a meso-level analysis of national logistics costs conducted by the Ministry of National Development Planning/Bappenas, supported by ARISE+ Indonesia. The study, led by ARISE+ Indonesia's Senior Logistics Expert, Ebi Junaedi, was shared with logistics companies and relevant ministries in Jakarta on 28 June 2024, gathering feedback before finalising the study.

P.N. Laksmi Kusumawati, Director of Trade, Investment, and International Economic Cooperation at Bappenas, emphasised the strategic importance of these insights. "Assessing national logistics costs is crucial for enhancing Indonesia's competitiveness, responding to the needs of investors and businesses alike," she remarked. "A robust national logistics system is essential for fostering domestic and global economic integration, which is pivotal for achieving the vision of a Golden Indonesia by 2045."

Rifka Hidayat, representing the Indonesian Logistics and Forwarder Association (ILFA), expressed support for the study. "The insights gained from this analysis should inform future logistics cost policies, enhancing our competitiveness on a global scale," Hidayat said, underscoring the potential impact of the study's findings on policy formulation.

The recommendations from this analysis are poised to significantly impact policy formulation, aiming to streamline logistics costs and boost economic growth across Indonesia.

Going forward, even though the ARISE+ Indonesia programme has concluded, Bappenas and other relevant ministries will continue to update the logistics cost calculation using the meso method.

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