An Indonesian Melancholy
There may be strong GDP
growth, surging passenger demand on an array of international and domestic
lanes, and a seemingly relentless roll call of new aircraft orders from
the likes of national carrier Garuda Indonesia, but not all is well in
Indonesia, as presidential elections loom in July.
Such is the extent of congestion around
capital city Jakarta that passengers travelling at peak times need to
allow three hours to make it from the central business district to Soekarno–Hatta
International Airport (CGK), located just 20 kilometers to the west.
For freight the challenge is just as daunting.
Leaving aside the woeful lack of road capacity, logistics operators are
also struggling with a shortage of trucks and warehouse space both near
to, and at, CGK. This is exacerbated by
Indonesian bureaucracy which, both by port and airport, adds in time and
costs to supply chains due to delays, red-tape and, in some cases, graft.
Away from Jakarta, the logistics challenges are even more severe.
Indeed, the logistics spend of an average
company in Indonesia is now 17 percent of revenue, compared to single
figures for most other countries in South East Asia, according to the
Indonesian Chamber of Commerce and Industry. Logistics costs as a percentage
of GDP are now among the highest in the world at 27 percent, compared
to just 8 percent in Singapore and 13 percent in Malaysia.
 Richard
Strollo, (left) Managing Director for the South Asia Region at BDP International,
said Indonesia was one of Asia’s fastest growing logistics markets,
but operators faced many challenges, including the high cost of distribution
and a lack of cold chain storage facilities.
“There is so much demand for domestic
trucking and warehousing across other verticals in Indonesia that produce
shortages have been a resulting consequence,” he said.
“At airports, there is definitely
a lot more activity as imports are called upon to meet demand among a
rising number of middle class consumers. There is a clear need for more
air cargo capacity at airports.”
 “Indonesia
entrepreneurs are losing out because the logistics challenges are preventing
companies from expanding,” said Morten Damgaard, (right) CEO SE
Asia at Agility Logistics.
He said there was a shortage of storage
and distribution facilities, especially in areas away from Jakarta where
warehouses were often small, making it difficult to manage suppliers from
a 3PL perspective.
Ministers do at least accept there is a
shortfall in aviation infrastructure, both for passengers and cargo. One
recent estimate put the amount required to upgrade aviation infrastructure
to meet demand at $15bn between 2015 and 2019, although this seems unlikely
to be achieved given that only $2.6bn was invested over 2009-2014. The
$15bn estimate includes upgrades to Soekarno–Hatta and a recently
built airport in Medan, plus the construction of 45 new airports in remote
areas of the archipelago.
Private operators have now taken over three
local airports, but reform of the sector has also been slow, which has
made attracting finance difficult. Although recent new developments at
Denpasar and CGK have paid lip service to liberalization, state-owned
or state-linked providers retain their ascendancy.
There is also a shortfall of information,
both on how much cargo capacity is currently available at airports, and
on investments planned to expand this capacity. At CGK, the national hub
that the government hopes to develop along the lines of Singapore’s
famous Changi International, there does appear to be some progress.
An $820m expansion will modernize terminals
and increase total capacity to almost-60 million passengers per annum.
A reconfiguration of runways will generate additional parking and taxiway
space, and a third and fourth runway are scheduled for construction, with
the first set to open in 2017.
Construction of a new $215m cargo terminal
to the west of Terminal 2—with existing services set to be moved
from Terminal 1—is scheduled to start this year and open for operations
in 2016, according to state-controlled airport operator Angkasa Pura II.
However, Air Cargo News FlyingTypers was unable to confirm if
this schedule was being maintained amid local reports suggesting private
investors are still being sought, which could result in delays.
Air freight operators certainly hope there
is progress soon. “Soekarno is hopelessly over-utilized in terms
of flights, runways, and facilities and this is now a major bottleneck,”
said Damgaard.
Sky King |
