This presentation provides an update of current status of logistics in Indonesia, and discusses some anticipated future trends for the AEC and beyond.\n - PowerPoint PPT Presentation
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Current Status and Future Trends of Logistics in Indonesia under AEC Togar M. Simatupang School of Business and Management Bandung Institute of Technology - Indonesia ASEAN+6 Trade Logistics Connectivity Symposium 2015 under the theme of “ASEAN+6 Connectivity at the Crossroads: Progress and Future” at the Thailand International Logistics Fair Co-organized by the Department of International Trade Promotion (DITP) and Reed Tradex 3-4 September 2015, Bangkok International Trade & Exhibition (BITEC) Bangkok 10260 Thailand
Transcript
Current Status and Future Trends of Logistics in Indonesia under AEC
Togar M. Simatupang
School of Business and Management
Bandung Institute of Technology - Indonesia
ASEAN+6 Trade Logistics Connectivity Symposium 2015 under the theme of “ASEAN+6 Connectivity at the Crossroads: Progress and Future” at the Thailand International Logistics Fair Co-organized by the
Department of International Trade Promotion (DITP) and Reed Tradex3-4 September 2015, Bangkok International Trade & Exhibition (BITEC)
Bangkok 10260 Thailand
Overview
1. Objective This presentation provides an update of current status of
logistics in Indonesia, and discusses some anticipated future trends for the AEC and beyond.
2. Status of Logistics Industry in Indonesia3. Development and Progress of the infrastructure and
logistics system in Indonesia4. Preparation of infrastructure and logistics system for AEC
in 2016 and beyond5. Preparation of infrastructure and logistics system to
concert with ASEAN+66. Human resources7. Concluding remarks
2
Status of Logistics Industry in Indonesia
3
Logistics Supply Chain
Source: Gupta, S., Goh, M., Desouza, R. and Garg, M. (2011), “Assessing trade friendliness of logistics services in ASEAN”, Asia Pacific Journal of Marketing and Logistics, Vol. 23 No. 5, pp. 773-792.
The typical actorsinvolved in the transportation of goods from shipper to importer.
4
Challenges
• Improving the availability of infrastructure:– World Bank (2014) reported the 5th rank under Singapore, Malaysia, Thailand,
and Vietnam.– Global Competitiveness Report (2013-2014) issued by World Economic Forum
(2014) noted Indonesia’s infrastructure at the 61st rank out of 148 countries.
• Enhancing the national logistics performance:– Logistics Performance Index(LPI) at the 53rd rank out of 160 countries, the rank
of infrastructure is at 56. – The growth of logistics services is around 14% per year.– National logistics costs is aroun 23,6% of GDP (2013) and 14% of production
cost (2012).
• Balance trade between west and east of Indonesia– 80% of GDP is produced in Java-Sumatra-Bali– 80% of 245 million of population are in Java-Sumatra-Bali
• Maritime-based industry• ASEAN Economic Community (AEC) in 2015
5
Level of Competitiveness
6
0,00 1,00 2,00 3,00
Trip time (hr/100 km)
Vietnam
Indonesia
China
Thailand
Malaysia
High land transport costs – low connectivity of economic centres
0 2 4 6 8
Developing Asia
ASEAN
Indonesia
China
Thailand
Malaysia
Singapore
Demand growing 8-10% pa to support growth
Key centres congested, large areas under-developed
0 0,2 0,4 0,6 0,8
Malaysia
China
Philippines
Thailand
Indonesia
Vietnam
Expressway Density (km/1000pop.)
Backlog in Expressway Development
Indonesia
Indonesia
Indonesia
Low Competitiveness in Infrastructure Road (GCI 2011)
Persistent Problems in Doing Business in Indonesia for 2013-2014 and 2014-2015
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Logistics Performance Index 2014
Country LPI 20141 2 3 4 5 6
rank rank rank rank rank rank
Singapore 5 3 2 6 8 11 9
Malaysia 25 27 26 10 32 23 31
Thailand 35 36 30 39 38 33 29
Indonesia 53 55 56 74 41 58 50
Philippines 57 47 75 35 61 64 90
Vietnam 48 61 44 42 49 48 56
China 28 38 23 22 35 29 36
South Africa 34 42 38 25 24 41 33
Saudi Arabia 49 56 34 70 48 54 47
India 54 65 58 44 52 57 51
Japan 10 14 7 19 11 9 10
1= Custom, 2= Infrastructure, 3=International Shipment, 4= Logistics Quality and Competence, 5=Tracking dan Tracing, 6 = Time lines. 8
9
Dwelling Time and Shipping Cost
10
Market Size of the Logistics Industry in Indonesia
11Source: Indonesian Statistical Agency, Analysis by Frost & Sullivan, 17 March 2015.
Transportation makes up around 87.6 % of the total transportation, storage and courier market
Logistics Expenditure in Key Industries
12
Transportation and Logistics Market Size Projection
13Source: Indonesian Statistical Agency, Analysis by Frost & Sullivan, 17 March 2015.
• Expected to grow by CAGR of 15.2%• Economic growth a key driver
Domestic Demand in ASEAN to Drive Growth: Key to success for Indonesia is logistics and trade facilitation that amplify
business competitiveness and reduces cost
• ASEAN’s T&L sector expanding rapidly, in line with the region’s economic growth
• The projected growth in ASEAN countries will have anaverage growth of 7.9% where exports play a greaterrole, while domestic demand is expected to be moderate
Regional
Economic Growth
• LSPs in Asia’s T&L sector, homegrown and global, are rising
• AEC will foster more collaboration and market entry
• Consolidation will also be likelyNumber of Logistics
Service Providers
• Rising domestic demand, especially in infrastructure investment and private consumption in ASEAN will change the nature of trade in the region
• Domestic consumption has been driving growth inIndonesia that represents more than 50% of GDP
Domestic Needs
14Source: Indonesian Statistical Agency, Analysis by Frost & Sullivan, 17 March 2015.
Development and Progress of the Infrastructure and Logistics System
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Status of Infrastructure and Logistics Development
Acceleration and Expansion of
Economic Development 2011
National Logistics System 2012
Jokowi's Nine Priorities Agenda (Nawacita) 2014
Maritime-Axis Development 2015
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Government focus and initiatives
17
• Master plan of Acceleration and Expansion of Economic Development
• Aims to be one of world’s biggest economies by 2025
• $442.72 billion in investments required
MP3EI:
(2011 – 2025)
• 17 infrastructure projects worth $22.26 billion identified at launch May 2011
• May set up bank to finance infrastructure projects
• 6 economic corridors: Sumatra, Java, Kalimantan, Sulawesi & N Maluku, Bali & Nusa Tenggara, Papua & Maluku
MP3EI: Infrastructure (42.5%)
MP3KI:
(2011 – 2025)
Tax incentives
IT & Communications
• Acceleration & Expansion of Poverty Reduction
• Policies directed at elevating the poor
• 60 million poor & near poor (24% of total population)
• Boost downstream investment; outside Java & Bali (East Indonesia)
• 129 business sectors eligible for tax allowance
• 60 million poor & near poor (24% of total population)
• Telkom allocates $150 million to expand fiber optic network to 2 million homes in 2012
• 497 cities; focus on Java
• 13 million homes targeted through 2015
Achieving economic transformation through the strategies of the Master Plan
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• Master plan of Acceleration and Expansion of Economic Development (2011-2012)
• Aims to be one of world’s biggest economies by 2025
• $442.72 billion in investments required
MP3EI’s Position on National Development Plan
The National Mid-term Development Plan
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REGIONAL APPROACH IN INFRASTRUCTURES DEVELOPMENT
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New Development Region
(Maintenance and construction
of new roads for the region
development)
Grown Regions
(a high standard road network
development, include private sector)
Developing Regions
(Maintenance and improvement of
national roads and involve the
private with the Government Support)
Construction of public works infrastructure implemented through a development
regional approach which is suitable to “infrastructure for all” and “sustainable
development” principles
Source: Kemenko Perekonomian
6 Economic Corridor Development
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IPTEK / INOVASI
1 2
322
MP3EI
ConnectivityEconomic Corridors
National Logistics System
Economic Mission 2025Self sufficient, advanced, just, and prosperous Indonesia
Science & Tech
Improving Prosperity
Improving competitiveness
National Logistics System & Indonesia Economic Master Plan (MP3EI)
Source: State of Logistics Indonesia 2013 at http://www.indonesia-investments.com/upload/documenten/world-bank-state-of-logistics-indonesia-2013.pdf
Human Resources
Logistics Infrastructure
Logistics Service Providers
Key Commodity
Information and Communication Technology (ICT)
Harmonization of Regulation
National Competitiveness
Social Welfare
Six Key Drivers of National Logistics System (NLS)
23Source: State of Logistics Indonesia 2013 at http://www.indonesia-investments.com/upload/documenten/world-bank-state-of-logistics-indonesia-2013.pdf
Corridor Papua & Maluku
Corridor Sulawesi
Implementation Framework
Strategy, Program, and Action Plan
Program and Action Plan Ministries, Province/Regency/City
Locally Integrated and Globally Connected for National Competitiveness and Social
WellfareMP3EI
Mid Term of National Development Plan
KONSUMEN
PRODUSEN
Regulasi dan Kebijakan
Infrastruktur Transportasi
SDM SDMSDM
SDM SDMSDM
Infrastruktur Infomasi (TIK)
Regulasi dan Kebijakan
Grosir Distributor Pasar Ritel
Saluran Distribusi
Pelaku dan Penyedia Jasa Logistik
Corridor Kalimantan
Corridor Bali dan Nusra
Corridor Jawa
Corridor Sumatra
Background Substances The challenges of implementation24
Sumber: Sislognas (2012)
Scheme of National Logistics System
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Sea Lines of Communication
Alur Laut Kepulauan Indonesia (ALKI) or Archipelagic Sea Lanes
Jokowi’s Nine Priorities Agenda
1. To renew the state’s obligation to protect all people and provide security to all citizens through the free and active foreign policy, national security and the development of reliable national defense based on integrated national interests and strengthening national identity as a maritime nation.
2. The presence of the government through a clean, effective, democratic, and reliable governance, by giving priority and efforts to restore public confidence in democratic institutions and continue the consolidation of democracy through reform of the political party system, electoral and representative institutions.
3. To reject a weak state by reforming the system through corruption-free dignified, and reliable law enforcement.
4. To build Indonesia from its periphery; to strengthening the rural areas within the framework of a unitary state of Indonesia.
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Jokowi’s Nine Priorities Agenda
5. To improve the quality of Indonesians by improving the quality of education and training through “Smart Indonesia” program and increasing Indonesia’s social welfare and health through the “Healthy Indonesia” and “Prosperous Indonesia” programs.
6. To improve people’s productivity and competitiveness in the international market so that Indonesian can move forward and stand up with other Asian nations.
7. To achieve economic independence by moving the strategic sectors to domestic economy.
8. To revolutionize the nation’s character through a policy of restructuring the national education curriculum with advanced civic education; to teach the history of the nation, the values of patriotism and to love the country, as well as to build the passion and character to defend the state through national education.
9. To strengthen diversity and social restoration of Indonesia by highlighting the policy of education for diversity and creating spaces of dialogue among citizens.
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Scheme of Pendulum Nusantara: Maritime Highway
Source: Lino, R.J. (2012), "Indonesia Maritime Infrastructure", World Export Development Forum 2012. 29
The government will need to invest Rp 699 trillion (US$57.40 billion) for its sea-highway program between 2015 and 2019 in support of President Joko “Jokowi” Widodo’s maritime-axis doctrine.
The “Brunei, Indonesia, Malaysia and the Philippines” East ASEAN Growth Area (BIMP-EAGA)
Beyond ASEAN Connectivity
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Proposed Physical Connectivity
• Upgrade infrastructure and facilities at prioritized gateway ports, airports, and border check points
• Improvement of cold-chain infrastructure and efficient cargo handling of labor
• Enhance Multi Modal Transport Infrastructure
– Promote trade terms and practices related to multimodal transport including INCOTERMS
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Proposed People-to-People Connectivity
• Increasing business connectivity and partnership among responsible agents;
• Increase participation of business sector in forming relevant negotiation strategies involving in international transport and logistics;
• Accelerate the support for the establishment of ASEAN logistics curriculum
• Accelerate the MRAs on National Skills Qualification System towards a standardized process in capacity building.
• Human Resource Development– Upgrade skill through joint training and workshop
– Encourage the establishment of regional center of excellence
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Proposed Institutional Connectivity
• Logistics Service Provider (LSP)– Adopt best practices in providing logistics services
– Promote Regional Cooperation of LSP
– Develop / Update database on logistics service provider
• Acceleration of the implementation of ASEAN Framework Agreement on the Facilitations of Goods in Transit (AFAFGIT)
• Removal of constraints on movement of goods across border
• Encourage implementation of 24x7 customs operations in selected border points
• Simplify administration of the issuance international trade documentation by competent authorities
• Review the need for selected non-tariff barriers (NTB) and explore possibility to remove unnecessary NTB
• Standardize the protocol establishing ASEAN single window with regards to the diversity of infrastructure, legal, and data system of individual member countries,
• Explore possibility of allowing drop-shipments at transit countries by international land transportation
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Proposed Safety and Security
• Clearer regulations on the implementation of cargo security requirements
• Support for service providers in the training and costs of implementing safety and security measures and physical installations
• Better support from governments in creating awareness and education amongst the stakeholders in the supply chain in complying with the safety and security regulations implemented by various international regimes
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Preparation of Infrastructure and Logistics System to Concert with
• ASEAN Plus Three Logistics Cooperation for Future Trade Facilitation, proposed by Japan– Improving physical and digital connectivity and development of logistics
support services—due to infrastructure investment (in transport, telecommunications, etc.) and ICT technical progress—have reduced trade costs of conducting cross-border business and thus encouraged trade and investment activities.
• EPAs with ASEAN+6 target:– ensuring free movements of goods, services, and people (mutual abolition of
tariffs; development of logistics systems, infrastructure, and simpler customs clearance; services deregulation; and movement of skilled temporary workers and provision of training programs);
– Facilitation of intraregional economic activities (standardization of investment rules and dispute settlements; and harmonization of intellectual property systems, certification systems, and competition laws);
– Economic cooperation (economic/social infrastructure and cooperation in human resource development, industrial policy, environment, and energy conservation).
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Current Status of ASEAN Plus Connectivity
• The logistics and transportation market in Indonesia remains highly fragmented. All logistics firms are trying to leverage on transportation market growth according to their capabilities and competencies.
• The increasing needs of outsourcing logistics services to the 3rd Party Logistics (3PL) to maximize cost efficiency. Presidential Regulation Number 39 of 2014 allows FDI maximum at 33% for distribution, warehousing, and cold storage. FDI of global logistics companies with advantages of standardized process and work quality, best practices for handling cargo and technology, visibility of logistics activities, and customer relationship management.
• Local logistic companies are suggested to improve efficiency in terms of business operations, by adopting the Just in Time (JIT) technique, to reduce the inventory carrying cost and transportation cost.
• Dealing with House Keeping:
– Consumer product distribution, Logistics bottlenecks in main ports
– Master plan for economic development, Coordination with local government
– Regulatory reform to reduce/eliminate unnecessary costs through regulation review, clearing house for regulation, regulatory impact analysis (RIA), and regulation update.
• Economic Partnership Agreements (EPA) to improve logistics and transportation.
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Streamlining Trade Procedures and Distribution Logistics
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RationaleLower the cost and risk of transnational economic activity and promote the efficient division of
labor within the region.Improve the efficiency not only of production activities but also of distribution between
production centers and from production to consumption sites.
JapanEast Asia Physical Infrastructure
Advancements in information technology and the standardization of distribution tools such as pallets
Current Cooperation
Emphasis on logistics (e.g. Just In Time, Supply Chain Management)
Future Priority
Action TargetReduce within five years the time needed to deliver goods from the point of production to destinations by more than two third
Actions Plan
Training of Certified Logistics Master Promotion of IT in the logistics sector More efficient customs clearance
Streamlining the flow of goods
Private Sector Needs
Source: Satoshi Suenega(2004), "Japan’s Technical Cooperation in Logistics", Technical Cooperation Division, Ministry of Economy, Trade and Industry.
Human Resources of Logistics
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Logistics Services Integration in ASEAN
• Objectives of Roadmap
– To create ASEAN single market by 2020 by strengthening economic
integration through liberalization and facilitation measures in area of
logistics services
– To enhance competitiveness of ASEAN production base through
creation of integrated ASEAN logistics environment
– Measures will cover FREIGHT LOGISTICS and Related Services
3. Service Provider 4. Human Resource 5. Multimodal Transport
Barriers to free trade in the logistics services sector
• Geographic and demographic barriers;
• Barriers due to infrastructure (maritime, air and road);
• Barriers due to customs procedures and inspections;
• Barriers due to cross-sectoral investment regulations;
• Barriers due to licensing requirements and transparency;
• Barriers due to labor limitations;
• Barriers due to mode specific restrictive laws and regulations; and
• Barriers due to inefficient container movement.
The key is HUMAN CAPITAL!
Source: Gupta, S., Goh, M., Desouza, R. and Garg, M. (2011), “Assessing trade friendliness of logistics services in ASEAN”, Asia Pacific Journal of Marketing and Logistics, Vol. 23 No. 5, pp. 773-792. 51
Human Capital Strategy
HUMAN CAPITAL
STRATEGY
Logistics Services• Skill requirements• National qualifications
Trade facilitation and policies:• Administrative processes
(customs, MRA) • Safety and Security• Product standardization
and conformance
Individual differences• Awareness and
engagement in AEC• Skills and qualifications• Productivity
Who
Free flow of skilled labor (people-to-people connectivity):
• Mobility of qualified service professionals
Human resources can be transformed to human capital
through education, training, healthcare, and
encouragement of moral values. 52
Immediate Attention
Human capital that specialize in logistics-related services: productivity (education
and training), labor market improvement, core competencies and
qualifications, the accreditation of trainers is on track as proposed, the competency-
based system is progressing in partnership with employers and unions
Innovation: tech development by learning and imitation, capability improvement to absorb new tech, research capabilities of each ASEAN Member Country (promoting
skills, job placements, and developing labor market information networks)
Harmonization: MRAs and regulatory harmonization, testing centre, trade policy, the national assessment and
certification system is in place to support the national qualifications framework
, trainer certification systems
Movement of skilled and unskilled workers: the issuance of visas and employment
passes for ASEAN professionals and skilled labor who are engaged in cross-border
trade and investment related activities, a ten-year human capital roadmap for
logistics sector in AEC
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A need for a new institution to facilitate logistics human capital development
Agreement on the establishment the
Chartered Institute of Logistics and Supply
Chain in ASEAN
Approving: objectives, strategies,
action plans, and funding models
Launching for the ASEAN academy for
logistics human capital development
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The ASEAN Academy for Logistics and Supply Chain (proposed)
• Serve as the ASEAN Skills Standards Authority to fully establish competency standards, policies and programs and to accredit trainers and assessors and develop ASEAN logistics centers within the network of ASEAN University.
• Enhance cooperation among ASEAN University Network (AUN) members to increase mobility for both students and staff within the region.
• Strengthen the links to logistics industry at the national and ASEAN levels and the ASEAN Academy for Logistics and Supply Chain.
• identify gaps related to logistics services in human resources and establish special support programs to provide logistics-related knowledge to fill the gap and make a more competitive liberalized environment
• Complete the features of the nine-level qualifications framework, , with particular emphasis on recognizing and certifying the new skills that have been identified as important for the ASEAN economic and social development goals.
• Develop competency-based training and assessments.
• Develop ASEAN assessment policies regarding the qualifications framework.
• Accelerate and expand the production of logistics graduates and certification.
• Secure the support of external development partners to assist in building capacity, developing policies and implementing the qualifications framework.
• Conduct a bi-annual review to monitor the status, progress and effectiveness of logistics human capital roadmaps to ensure their timely implementation.
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Concluding Remarks
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Concluding Remarks
• AEC is an opportunity to enhance economic and social development that requires the support of logistics and transportation.
• Indonesian government has established a set of policies to mainly enhance domestic matters.
• The real development is not at the central government but at the regional level (provinces and districts).
• There are several issues of AEC in Indonesia: Indonesia is merely markets for intermediate and consumer goods that cause negative balance of trade or trade deficit, the increased gap of service trade deficit along with goods trade, and the incoming skilled workers from overseas.
• Human Capital Development in logistics:
– Upgrade skill through joint training and workshop
– Encourage the establishment of regional center of excellence
• There is a need to launch the ASEAN academy for logistics human capital development.
