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   Vol. 14  No. 28
Friday March 27, 2015

Bali And The Jokowi Factor

Bali And The Jokowi Factor

     At this time of year, the approach to Jakarta’s Soekarno-Hatta International Airport passes over vast areas of flooded coastland. Shallow sea walls offer little in the way of defense for farmland. On arrival, a half-built terminal stands bereft of workers, its completion years behind schedule.      Immigration queues are lengthy and obvious processing shortcomings remain unaddressed.
     A lack of planning and investment are clear deficiencies at this key gateway to Indonesia, South East Asia’s biggest economy and the fourth most populous country in the world with some 250 million people.
     A first glimpse of Soekarno-Hatta offers an accurate overview of the challenges facing what some analysts believe could, with the right reforms and investments, be one of the fastest growing logistics and air freight markets in the world over the next decade.
     Roads to and from the airport and nearby Tanjung Priok port are rundown, flooding is common, and elderly, overloaded trucks belch toxins, adding to the transport chaos and further damaging the decrepit roads they rely on. Indeed, large swathes of Jakarta were under water for much of January and February thanks to poor river defenses.
     In this congestion-clogged and monsoon-flooded mega city—Greater Jakarta is thought to now have a population of almost 30 million—half-completed transport projects are common, including the pylons for a ten-year monorail project that has now been abandoned, leaving industrial statues across the city.
     “There have been countless projects and blueprints designed to improve transport in Jakarta and Java, but not many ever happen,” comments one executive at a leading global contract logistics provider from his office in the capital. “Outside of Java on the other islands it is even worse. The roads and trucks are in a terrible state and the whole forwarding and transport sector is fragmented, so it’s very hard to find partners.”
     But hope may be on hand in the statesmanlike form of ‘Jokowi,’ the popular name for Indonesia’s new President, Joko Widodo. Having reduced Indonesia’s crippling fuel subsidies at the start of the year, he has promised to invest much of the proceeds in urgently needed transport infrastructure. New ports, roads, railways, and airports are in the pipeline. He has also pledged to embrace trade facilitation measures, tackle corruption, and even find ways of removing the State from the large swathes of the transport business it currently dominates.
     “If Jokowi can reduce the logistics burden so there is at least some certainty supply chains can be managed effectively then Indonesia could win a lot of the manufacturing production that is now finding coastal China too expensive,” said the logistics executive. “It has cheap land and labor and a huge domestic market, it’s just very hard to do business here.”
Jan Willem Winkelhuijzen     A recent McKinsey study forecasts Indonesia rising from position 16 to position 7 of the world’s largest economies by 2030. Jan Willem Winkelhuijzen, (right) Indonesia Country manager at DHL Supply Chain, said the archipelago remained one of the world’s most attractive markets for consumer products. “However, challenges exist, most importantly mastering the ever-present staff shortages, employing expats, tedious administration and procurement processes, inefficient authorities, and lack of transparency.
     “But due to high profit margins and continuously rising revenues, most multinational companies have committed to Indonesia for the long-term, a trend that is likely to be followed by SMEs as well.”
     This optimism is echoed elsewhere. A new report launched this month by Transport Intelligence argues that if Jokowi can improve the country’s logistics performance, which currently costs around 24 percent of GDP each year, then the transport industry will be a major beneficiary.
     ‘Indonesia Transport & Logistics 2015 – A New Dawn?’ concludes that Indonesia’s overall freight forwarding market will expand by an average of 11.7 percent per year from 2013 to 2019. But this could leap to 14.9 percent if Jokowi can improve his country’s logistics performance substantially by investing in new infrastructure and committing to trade facilitation reform. Likewise, the air freight forwarding market could grow by 11.5 percent CAGR and the express market by 21.5 percent over the period.
     Should he fail to improve Indonesia’s dilapidated infrastructure, however, then Indonesia could miss out on a huge opportunity to boost economic growth and the ‘high’ figures mapped out in Ti’s 60-page analysis will be drastically reduced.


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