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Vincent Lingga, The Jakarta Post
Jakarta | Thu, April 6 2017 | 12:19 am
Vincent Lingga, The Jakarta Post
Jakarta | Thu, April 6 2017 | 12:19 am
A raid by the police at the East Kalimantan port of Samarinda on March 17 uncovered massive rent-seeking practices and confiscated Rp 6.1 billion (US$450,000), believed to be illegal fees collected by stevedores from coal mining companies.
A preliminary investigation found that most coal companies had been extorted by stevedores organized under the Komura cooperative. Some firms even claimed having to pay up to $220,000 in monthly illegal fees, otherwise their coal exports were not loaded. Police also found that stevedores charged up to Rp 180,000 per 20-foot container and Rp 350,000 per 40-foot container, more than 15 times the fees charged at other major seaports.
The massive illegal levies are only a small part of the labyrinth of seaport handling in Indonesia, which has made our logistics costs the highest in Southeast Asia.
But as the world’s largest archipelagic country with over 14,000 islands, ports as the key part of sea transportation play a vital role within the logistics system.
There are two main constraints in the system. One is the lack of physical infrastructure and the crumbling of a lot of existing infrastructure. This problem is being solved through the development of infrastructure, such as ports, airports and roads, which has been accelerated since 2015.
The second constraint, inefficiency caused by regulatory and bureaucratic barriers and corruption, is supposed to be the main target of the 15th reform package.
It is now almost four months since chief economics minister Darmin Nasution pronounced that “the 15th reform package, which will focus on the logistics system, will be issued within a few days.” Yet the launch date remains uncertain.
The long delay only shows the complexity of the tangled regulatory and bureaucratic web affecting the logistics system. The port-handling process alone involves more than a dozen institutions and service providers apart from land transportation.
The utter inefficiency in port handling and sea transportation in Indonesia has often been exposed by studies by national and foreign institutions. But even incremental improvement seems difficult.
After a few months in office President Joko “Jokowi” Widodo set up in early 2015 a special task force in charge of expediting dwell times — the total time spent releasing containers from the port after a vessel berths — at major seaports to two to three days from as long as one week.
But after two years, the dwell time even at Tanjung Priok, Indonesia’s largest port that handles almost 70 percent of the country’s imports, remains one of the most inefficient in the ASEAN region.
No wonder a 2016 World Bank report cynically noted: “It is cheaper to ship a container from Shanghai, China, to Jakarta than from Jakarta to the West Sumatra capital of Padang, though Shanghai and Jakarta are six times farther apart than Jakarta and Padang.”
Inefficient port handling and sea transportation hinder connectivity between the islands, preventing least developed regions from linking to growth centers on other islands. Poor sea freight logistics makes it very difficult to connect resource-rich regions on the outer islands such as Sulawesi, Kalimantan, Papua, Maluku and Nusa Tenggara to the more developed Java and Sumatra.
This connectivity problem has been among the main barriers to the development of manufacture on the sparsely-populated outer islands, because manufactured products have to be transported either to the most-populated islands of Java and Sumatra or be exported.
However, poor sea transportation makes the supply chains extremely fragmented and prevents manufacturing companies from integrating into global value chains.
The 2016 World Bank study concludes that manufacturers estimate logistics costs account for 20 percent of their sales, comprising 40 percent for transportation and cargo handling, 17 percent each for administration and warehousing and 26 percent for inventories, also the highest in Southeast Asia.
The high inventory costs reflect the uncertainty in supply chains, as many industrial companies often simply don’t know when their inputs or parts will arrive due to uncertainty in port handling, bureaucratic paperwork and inefficient road transportation.
A 2013 study by the Bandung Institute of Technology and the Association of Indonesian Logistics concluded that transportation accounted for almost 50 percent of logistics costs. This study also blamed price differences between regions on poor connectivity, as unreliable supply chains prevent traders and local producers from responding timely to price changes.
Logistics services also suffer from an extremely fragmented regulatory and licensing system as too many institutions issue and implement too many regulations.
“We operate in a highly fragmented regulatory environment, as each service component of the logistics system requires permits from different institutions and is subject to different laws and regulations,” says H. Syarifuddin, the executive director of the Association of Courier, Postal and Logistics Service Providers (Asperindo).
For example, trucking, freight forwarding and warehousing need to be registered with different government agencies, thereby preventing the integration of supply chain services. This fragmentation means laws and regulations are developed separately by each ministry. Worse, the logistics sector also is subject to the different regulations of local administrations.
This is quite inimical to enhancing efficiency, because as a growing sector, the logistics services industry is constantly evolving to meet new demands that need a more integrated approach that ensures efficiency throughout the supply chain.
