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Logistics Development in Indonesia

Indonesia is the 4th most populous country in the world, with a population of around
250 million people and the biggest archipelago in the world consisting of over 17,000 islands
spanning three time zones.
The worlds largest archipelago, Indonesia consists of over 17,000 islands spanning
three time zones. Given its geography, size, population, and dependence on waterborne
transport, the maritime industry plays a significant role in both the domestic and regional
trade, with Indonesian ports emerging as key trading hubs and handling a huge share of long-
distance transportation, cargo capacity and logistics. Indonesian ports will take on ever
greater importance in the context of the AEC. Ensuring connectivity through infrastructure
development is one of the crucial pillars of the ASEAN Connectivity Master Plan.36

Indonesias trade grew constantly over the last decade and as the third fast growing
G20 economy in 2014 the long-term expectations are promising either. In 2014, however,
Indonesias economy has faced the slowest growth pace in five years (~5%), mainly caused
by sluggish exports (-8%) and weak investment growth. Among other things, the political
year 2014 (legislative and presidential elections) appeared to be an significant reason why the
market was concerned about political instability and hence investment realization has
declined37.
Following recent neglect of the maritime sector, the new administration has pledged
to foster its development and to adjust to future demands. In line with the ASEAN
Connectivity Master Plan, upgrading infrastructure and enhancing inter-island connectivity
are viewed as essential to efforts to foster regional economic growth. In this regards, 14
ports38 have been designated as main ports within the trans-ASEAN transport network.39 As
Indonesias biggest port, Jakartas Tanjung Priok handles over two-thirds of Indonesias
international trade. The container traffic is estimated to increase by over 160% by the end of
2015, when the extension of the terminals is supposed to be finish in order to cope with the
huge container turn-over everyday. The modernization of one of ASEANs biggest ports will
be crucial towards overcoming the logistical bottleneck caused by rising trade inflows and
will have a significant impact on Indonesias future trade pattern. The dwell time, a measure
of the time required to unload shipping containers and move them out of port increased from
4.8 days in 2010 to 6.4 in 2013. Not surprisingly, this results in high logistics costs for
businesses, which are then passed on to consumers. In 2014 the Indonesia Port Corporation
signed an agreement with the World Bank to receive strategic support and advisory services
for the governments connectivity agenda.40

2.5
17,000

17,000

AEC

2014 G20
2014 5
-82014

14 38 .39
Priok
2015 160

2010 4.8 2013


6.4 2014
40