Bright Prospects for the Logistics Industry
    Category: Column By : Gopal R Read : 1911 Date : Monday, June 09, 2014 - 07:48:59

    The logistics industry in Indonesia has gained significant momentum with the growth of Indonesia’s economy. The Indonesian logistics industry is expected to grow at an estimated CAGR of 15% for the next four years. It will benefit from rising trade, investments and growth in private consumption. Benefits include significant volume increase, the value of the overall industry’s contribution and development of logistics capability from basic services to value added services.

    Indonesia’s logistics industry continues to record strong value growth supported by higher freight movement in Indonesia. Indonesia’s rising middle class and its increasing disposable income help drive demand for goods, in turn driving up demand for better logistics effectiveness.

    Adding to the domestic demand, the development of the ASEAN Economic Community (AEC), which will be introduced next year, is also expected to stimulate demand through regional integration and removal of trade barriers. Expansion of output from key industries and a rise in containerization levels also are expected to result in higher demand for logistics services.

    The way forward

    The majority of the Southeast Asian economies are expected to grow at around 6% for next few years. Indonesia will have an advantage, with growth fuelled by consumption, which today contributes more than 50% of GDP. In this scenario, the logistics industry is sure to benefit.

    The focus of the Indonesian government on improving infrastructure will include improving logistics and transportation infrastructure, with a goal of achieving domestic and regional connectivity and integration. Indonesia will also become further integrated into global logistics network in the coming years. This planned integration is expected to help customers and service providers realize an integrated and truly multimodal transportation solution, topped by reliable and improved logistics solutions.

    The AEC’s introduction will attract new market entrants from other ASEAN countries. Competition in the domestic market is likely to rationalize inefficient pricing for logistics services through economies of scale. The longer term may see consolidation of logistics service providers to allow firms to gain a stronghold across the region, and the short to medium term is expected to benefit logistic services providers and customers alike through better service quality and efficiency.

    At the moment, Indonesia’s logistics sector is mostly focused on the domestic market. However, Indonesia’s logistics industry is in a position to establish itself regionally in ASEAN. Critical to this growth path is:

    1. Coordination and cooperation among relevant institutional agencies to facilitate transportation between neighboring ASEAN countries;

    2. Enhanced transport security and safety in the regional transportation and logistics networks; and

    3. Strengthened regional and global integration.

    Indonesia has the potential to spearhead the growth of its logistics industry to be able to deliver complex local and regional solutions, adhering to global standards. Critical success factors in this journey to excellence will be to Integrate, Implement and Innovate. In short, the answer is for the local logistics industry is “Indonesia”: “In” (Integrate) “do” (Implement) “ne” (new, or  innovate) “sia” (systems, IT and assets).