Logistics and Port Reform: The Challenges Of Implementing Reform in Indonesia
LOGISTICS AND PORT REFORM: THE
CHALLENGES OF IMPLEMENTING REFORM IN
INDONESIA
Henry Sandee
World Bank Indonesia Office
June, 12 2014
THE IMPORTANCE OF LOGISTICS AND PORTS
Global supply chains require cost-effective and reliable delivery
schedules. Ports are often a key bottleneck to ensure timely
delivery
Domestically inter-island trade will expand if the costs allow
transport of products from Eastern Indonesia to processing
facilities in Java
Indonesia presents itself increasingly as a maritime economy.
Ports and shipping are high on the agenda
IT IS CHEAPER TO SHIP ORANGES FROM CHINA TO JAKARTA THAN FROM
PONTIANAK
Jeruk Pontianak, Indonesia
Jeruk Mandarin, China
DOMESTIC SHIPPING COSTS IN INDONESIA ARE HIGH
Tanjung Priok – Guangzhou, China
Shipping Costs US$400
NUMBER OF DAYS NEEDED TO SHIP GOODS FROM JAKARTA AND SURABAYA TO
BANJARMASIN
PORTS, DOMESTIC SHIPPING AND HIGH LOGISTICS COSTS
Recent policies in Indonesia to promote domestic trade are a
combination of
‘Protective measures” that increase the price of imports
Implementation of port and logistics master plans that aim
at reducing supply chain costs and improving ports
This presentation will look the challenges of implementing
the port and logistics master plans
TACKLING INDONESIA’SHIGH LOGISTICS COSTS.
A LONG-TERM STRATEGY HAS BEEN DESIGNED
Logistics blueprint issued as a Presidential Decree (2012)
Port Master Plan issued as a Ministerial Decree
Quick wins and long-term strategy
Two cases that highlight the implementation challenges:
Cattle transport from Eastern Indonesia and Indonesia’s
main port Tanjung Priok
PORT AND LOGISTICS MASTER PLANS
Port master plan – identification of 25 key international gate ways. This
should help to create scale economies and reduce the back haul problem
Logistics blueprint – improve inter-island shipping as a key to lower the
costs of domestic trade
Both plans prepared by the private and public sector
Their implementation involves stake holder coordination
TRANSPORTING CATTLE FROM SUMBAWA: TO JAKARTA
THE CHALLENGE OF IMPLEMENTATION.
CATTLE TRADE BETWEEN SUMBAWAAND JAKARTA
COSTS OF TRANSPORTING CATTLE FROM SUMBAWATO JAKARTA
(PER COW)
1,600,000
Cost in Jakarta (slaughter house)
1,400,000
178,000
Transportation Cost (Sumbawa to Jkt)
Cost per Cow (IDR)
1,200,000
1,000,000
650,000
800,000
600,000
400,000
608,000
200,000
-
Cost Component
Cost in Sumbawa (from Farmer to Port
in Sumbawa)
LOGISTICS BLUEPRINT CALLS FOR SELF SUFFICIENCY IN CATTLE
PRODUCTION AND A DECLINE OF IMPORTS
Total costs of transporting cattle from Sumbawa to Jakarta
are higher than the costs of importing cattle
Costs from farmer to the port in Sumbawa are more than 40
percent of total costs
Costs in Sumbawa are high due to high costs incurred in
ports
Waiting time, clearance processes, availability of ships, fees
and taxes
CHALLENGES
Poor local infrastructure in Sumbawa drives up the costs.
Who pays for the upgrading of local roads?
The port in Sumbawa is state-owned and determines which
ships may dock. Terminal handling charges are higher than
in Jakarta and Surabaya.
Regulations also limit which companies may ship cattle
between Sumbawa and Java. Licenses are issued by regional
governments
Challenges of inter-department and central-local
government coordination
THE ‘MOTHER OF ALL CHALLENGES’ – IMPROVING THE PERFORMANCE
OF TANJUNG PRIOK PORT IN JAKARTA
DWELL TIME TRENDS IN THE PORT OF JAKARTA
Dwell time is defined as the elapsed time that cargo spends within the port limits, from the
moment it is unloaded from the vessel and is on the ground until it leaves the port premises
• Increase overall trade costs, impacting productive activities, especially for export
and re-export-oriented industries
• Import dwell time is an important issue in an archipelago like Indonesia
10.5
Dwell time at Tanjung Priok has almost doubled in the last two years
Days
10.1
9.5
8.8
8.3
8.5
7.8
7.6
7.5
6.5
5.5
7.1
6.8
6.7
6.0
5.2
5.4
5.4
5.0
6.6
6.1 5.8 5.8
5.8
5.4
6.0
6.3
6.7
6.4 6.3
6.2
6.1
6.3
6.4 6.4
6.1
5.5
4.7
4.5
1.11 2.11 3.11 4.11 5.11 6.11 7.11 8.11 9.11 10.1111.1112.11 1.12 2.12 3.12 4.12 5.12 6.12 7.12 8.12 9.12 10.1211.1212.12 1.13 2.13 3.13 4.13 5.13 6.13 7.13 8.13
THE NUMBER OF IMPORTED AND EXPORTED CONTAINERS IN JAKARTA
IS GROWING RAPIDLY
Tanjung Priok Throughput (TEU)
7,000,000
6,600,000
6,000,000
5,649,119
5,000,000
4,612,512
3,984,278
4,000,000
3,689,783
3,804,905
3,000,000
2,000,000
1,000,000
2007
2008
2009
2010
2011
2012
Days
MORE THAN 50% OF THE LENGTH OF DWELL TIME IS IN THE
PRECLEARANCE COMPONENT (PORT OF JAKARTA)
7
6
1.88
1.16
1.19
1.08
5
1.24
0.96
4
1.36
1.12
1.13
1.12
3
2
3.71
3.25
3.49
3.46
2.52
1
0
October 2010
July 2011
Downstream
August 2011
Customs Clearance
January 2012
Upstream
February 2012
PRECLEARANCE IS NOT ONLY AN ISSUE IN THE PORT OF JAKARTA. WE
HAVE DATA ON FOUR PORTS
8.0
7.0
6.0
5.0
4.0
3.0
7.2
6.2
5.2
5.9
2.0
1.0
0.0
Tanjung Belawan Tanjung Tanjung
Priok
Emas
Perak
Tanjung Priok
Belawan
Tanjung Emas
Tanjung Perak
Total
Containers
19,306
778
1,314
5,203
26,601
%
73
3
5
20
100
This suggests that the
length of preclearance is
not associated with size of
port
THE CHALLENGES
No 24/7 services and no integrated inspections. Still topic of interdepartment discussion
Higher penalties remain low compared with hiring professional
warehouse capacity. Shipping lines offer ‘free demurrage” for up to 21
days
New Ministry of Agriculture and Trade regulations have resulted in more
physical (so called red lane) inspections
Dry port’s use is constrained because it is not a natural extension
Tanjung Priok
TO CONCLUDE….
Logistics matter to compete on international markets and domestically
Indonesia has made progress in improving its logistics performance
especially in the private sector
Coordination remains a key issue
Implementation turns out to be a real challenge
Improving ports and logistics involves multi stake holders
CHALLENGES OF IMPLEMENTING REFORM IN
INDONESIA
Henry Sandee
World Bank Indonesia Office
June, 12 2014
THE IMPORTANCE OF LOGISTICS AND PORTS
Global supply chains require cost-effective and reliable delivery
schedules. Ports are often a key bottleneck to ensure timely
delivery
Domestically inter-island trade will expand if the costs allow
transport of products from Eastern Indonesia to processing
facilities in Java
Indonesia presents itself increasingly as a maritime economy.
Ports and shipping are high on the agenda
IT IS CHEAPER TO SHIP ORANGES FROM CHINA TO JAKARTA THAN FROM
PONTIANAK
Jeruk Pontianak, Indonesia
Jeruk Mandarin, China
DOMESTIC SHIPPING COSTS IN INDONESIA ARE HIGH
Tanjung Priok – Guangzhou, China
Shipping Costs US$400
NUMBER OF DAYS NEEDED TO SHIP GOODS FROM JAKARTA AND SURABAYA TO
BANJARMASIN
PORTS, DOMESTIC SHIPPING AND HIGH LOGISTICS COSTS
Recent policies in Indonesia to promote domestic trade are a
combination of
‘Protective measures” that increase the price of imports
Implementation of port and logistics master plans that aim
at reducing supply chain costs and improving ports
This presentation will look the challenges of implementing
the port and logistics master plans
TACKLING INDONESIA’SHIGH LOGISTICS COSTS.
A LONG-TERM STRATEGY HAS BEEN DESIGNED
Logistics blueprint issued as a Presidential Decree (2012)
Port Master Plan issued as a Ministerial Decree
Quick wins and long-term strategy
Two cases that highlight the implementation challenges:
Cattle transport from Eastern Indonesia and Indonesia’s
main port Tanjung Priok
PORT AND LOGISTICS MASTER PLANS
Port master plan – identification of 25 key international gate ways. This
should help to create scale economies and reduce the back haul problem
Logistics blueprint – improve inter-island shipping as a key to lower the
costs of domestic trade
Both plans prepared by the private and public sector
Their implementation involves stake holder coordination
TRANSPORTING CATTLE FROM SUMBAWA: TO JAKARTA
THE CHALLENGE OF IMPLEMENTATION.
CATTLE TRADE BETWEEN SUMBAWAAND JAKARTA
COSTS OF TRANSPORTING CATTLE FROM SUMBAWATO JAKARTA
(PER COW)
1,600,000
Cost in Jakarta (slaughter house)
1,400,000
178,000
Transportation Cost (Sumbawa to Jkt)
Cost per Cow (IDR)
1,200,000
1,000,000
650,000
800,000
600,000
400,000
608,000
200,000
-
Cost Component
Cost in Sumbawa (from Farmer to Port
in Sumbawa)
LOGISTICS BLUEPRINT CALLS FOR SELF SUFFICIENCY IN CATTLE
PRODUCTION AND A DECLINE OF IMPORTS
Total costs of transporting cattle from Sumbawa to Jakarta
are higher than the costs of importing cattle
Costs from farmer to the port in Sumbawa are more than 40
percent of total costs
Costs in Sumbawa are high due to high costs incurred in
ports
Waiting time, clearance processes, availability of ships, fees
and taxes
CHALLENGES
Poor local infrastructure in Sumbawa drives up the costs.
Who pays for the upgrading of local roads?
The port in Sumbawa is state-owned and determines which
ships may dock. Terminal handling charges are higher than
in Jakarta and Surabaya.
Regulations also limit which companies may ship cattle
between Sumbawa and Java. Licenses are issued by regional
governments
Challenges of inter-department and central-local
government coordination
THE ‘MOTHER OF ALL CHALLENGES’ – IMPROVING THE PERFORMANCE
OF TANJUNG PRIOK PORT IN JAKARTA
DWELL TIME TRENDS IN THE PORT OF JAKARTA
Dwell time is defined as the elapsed time that cargo spends within the port limits, from the
moment it is unloaded from the vessel and is on the ground until it leaves the port premises
• Increase overall trade costs, impacting productive activities, especially for export
and re-export-oriented industries
• Import dwell time is an important issue in an archipelago like Indonesia
10.5
Dwell time at Tanjung Priok has almost doubled in the last two years
Days
10.1
9.5
8.8
8.3
8.5
7.8
7.6
7.5
6.5
5.5
7.1
6.8
6.7
6.0
5.2
5.4
5.4
5.0
6.6
6.1 5.8 5.8
5.8
5.4
6.0
6.3
6.7
6.4 6.3
6.2
6.1
6.3
6.4 6.4
6.1
5.5
4.7
4.5
1.11 2.11 3.11 4.11 5.11 6.11 7.11 8.11 9.11 10.1111.1112.11 1.12 2.12 3.12 4.12 5.12 6.12 7.12 8.12 9.12 10.1211.1212.12 1.13 2.13 3.13 4.13 5.13 6.13 7.13 8.13
THE NUMBER OF IMPORTED AND EXPORTED CONTAINERS IN JAKARTA
IS GROWING RAPIDLY
Tanjung Priok Throughput (TEU)
7,000,000
6,600,000
6,000,000
5,649,119
5,000,000
4,612,512
3,984,278
4,000,000
3,689,783
3,804,905
3,000,000
2,000,000
1,000,000
2007
2008
2009
2010
2011
2012
Days
MORE THAN 50% OF THE LENGTH OF DWELL TIME IS IN THE
PRECLEARANCE COMPONENT (PORT OF JAKARTA)
7
6
1.88
1.16
1.19
1.08
5
1.24
0.96
4
1.36
1.12
1.13
1.12
3
2
3.71
3.25
3.49
3.46
2.52
1
0
October 2010
July 2011
Downstream
August 2011
Customs Clearance
January 2012
Upstream
February 2012
PRECLEARANCE IS NOT ONLY AN ISSUE IN THE PORT OF JAKARTA. WE
HAVE DATA ON FOUR PORTS
8.0
7.0
6.0
5.0
4.0
3.0
7.2
6.2
5.2
5.9
2.0
1.0
0.0
Tanjung Belawan Tanjung Tanjung
Priok
Emas
Perak
Tanjung Priok
Belawan
Tanjung Emas
Tanjung Perak
Total
Containers
19,306
778
1,314
5,203
26,601
%
73
3
5
20
100
This suggests that the
length of preclearance is
not associated with size of
port
THE CHALLENGES
No 24/7 services and no integrated inspections. Still topic of interdepartment discussion
Higher penalties remain low compared with hiring professional
warehouse capacity. Shipping lines offer ‘free demurrage” for up to 21
days
New Ministry of Agriculture and Trade regulations have resulted in more
physical (so called red lane) inspections
Dry port’s use is constrained because it is not a natural extension
Tanjung Priok
TO CONCLUDE….
Logistics matter to compete on international markets and domestically
Indonesia has made progress in improving its logistics performance
especially in the private sector
Coordination remains a key issue
Implementation turns out to be a real challenge
Improving ports and logistics involves multi stake holders