Indonesia's logistics shows improvement but still needs a lot of improvement

Indonesia's Logistics Performance Index (LPI) in 2018 achieved a score of 3.15 out of 5. This score is the highest score achieved by Indonesia since 2007. The assessment conducted by the World Bank uses 6 criteria, namely customs clearance & border management, quality of infrastructure related to trade & transportation, ease in arranging international shipments at competitive prices, competence & quality of logistics services, ability to track ( tracking & tracing ) shipments, and the frequency with which shipments reach the scheduled/expected time. Of the six criteria, Indonesia is the weakest in terms of customs clearance) & border management and infrastructure quality related to trade & transportation.

Graph 4.1. Indonesia Logistics Performance Index Score per indicator 2007 – 2018 by the World Bank

Indonesia is ranked 51st out of 167 countries involved in the 2018 Logistics Performance Index (LPI) assessment. When compared to ASEAN countries, Indonesia is ranked 5th after Singapore, Thailand, Vietnam and Malaysia.

Graph 4.2. The 2018 ASEAN Logistics Performance Index by the World Bank

Then regarding logistics costs, Indonesia still has the highest costs among the 10 ASEAN countries. Indonesia's logistics costs in 2020 reach 22% of total GDP ( Armstrong & Associates, Inc. , 2020). In the National Logistics Discussion in August 2021 yesterday, Arif Suhartono as Main Director of PT Pelindo II explained that there were several causes for Indonesia's high logistics costs, namely government regulations regarding unconducive logistics ecosystems, low land & maritime value chain efficiency, operations & infrastructure performance ports that are not optimal, as well as supply and demand which is still Java centric so that it is not balanced.

 Grafik 4.3. Logistics Cost Negara ASEAN Tahun 2020 - Global 3PL Market Size Estimates by Armstrong & Associates, Inc.

The Ministry of Transportation has carried out several initiatives to reduce logistics costs and improve Indonesia's logistics performance, including:

• Establish a policy direction for the development of the sea transportation sector for 2020-2024 to support national maritime connectivity.
• Implementing the hub and spoke concept at Indonesian ports as one of the efforts to support the Sea Highway program
• Collaborate with ministries/agencies to form a National Logistics Ecosystem (NLE) so that the logistics process is more efficient and integrated
• Digitizing port services, such as licensing, services, SIMLALA, SITOLAUT, Inaportnet at 54 ports

In addition, on October 1, Pelindo I, III and IV were merged into Pelindo II. This initiative aims to increase the effectiveness and efficiency of national ports. In addition, the merger of the four companies opens the opportunity to compete globally for Indonesia's maritime logistics.