Sunday, 11 November 2012


National efficiency was still the hot issue in the discourse of Indonesia’s economy; this issue was directly related to the case of Indonesia’s downfall in rating of competitiveness recently.

The unpleasant news originated from the release of the World Economic Forum (WEF) an Independent organization well known for their annual meeting of global business leaders and political elite of the word, intellectuals, and journalists in Davao, Swiss who rated Indonesia’s economic competitiveness this year in 50th position among 142 nations, falling by 4 grades against last year.

WEF’s release was indeed a heavy blow on the Government of RI. Not only because Indonesia’s competitiveness was way below neighboring countries like Malaysia (25), Brunei Darussalam (28), Thailand (38) or Singapore (2) Not even because Indonesia ranked with third world countries who were mostly poor countries in Africa.

WEF release was so painful because Indonesia had been too overjoyed by some national economic indicators which were perhaps sparklingly bright amidst the world’s gloomy economy. By Semester 1-2012 Indonesia’s Gross Domestic Product accumulatively arrived at growth percentage of 6.3% against same period the previous year.

Even Inflation rate per August was still at safe level, only 4.58% year-on-year. Downturn of competiveness level by WEF also made all other achievements seemed flavorless. Such was perhaps the things that made businesspeople of the national logistics sector feel uneasy.

It seemed reasonable that the Association of Indonesian Logistics (ALI) pied the Government to increase budget for infra-structure in the APBN State Budget by threefold to reduce logistic cost.

Ali felt that to arrive at logistic cost of 10% in 2025, the Government needed to increase allocation of infra structure fund as per next year. The allocated budget for infra structure in APBN at that time was about 2%, way below that of China who allocated fund of around 6% for infra structure.

According to ALI, with additional budget for infra-structure, infra structure development to support logistic activities would also be made faster, so logistics cost could be automatically reduced.

Previously, the Coordinating Minister of Economy Hatta Rajasa disclosed the Government set target for national logistics fund at 10% for 2025, lower than logistics cost today at 14.08%. Today logistics cost in Indonesia was way higher compared to other countries in Asia which was only around 4% - 10%. Therefore infra structure was one of the Government’s priorities.

The national logistics system was today still not efficient, the weak point was connectivity which needed to be developed in order to strengthen competitiveness and improve people’s welfare. Beside increasing allocation for infra-structure, the Government must also withdraw subsidy for oil so the fund could be used for revitalizing transportation armada as well as infra-structure development.

If the subsidy fund was transferred for infrastructure development and revitalization of transpiration armada, it would lower logistic cost in the long run. Human resources was one important aspect to be observed. Indonesia needed personnel who were competent in logistics management, but today trained personnel in logistics were still scarce in Indonesia, which tend to stagnate the logistics operation itself.

Logistics companies frequently seek for personnel from abroad since logistics managers of high quality was still limited in number at home. Logistics personnel needed proper education and training. To be exact, logistics personnel in Indonesia needed certification on logistics so the quality would be well guaranteed whereby to bring progress for logistics business in Indonesia.

About the target to set logistics expenses to become 10% in 2025 as set by the Government, it was considered as realistic enough to assume average annual inflation at 5%, the target was sizable enough. It was still conservative but quite reasonable, because the inflation factor must be considered as well. Provided that the pre-conditions were met, the target would hopefully be met.

The instruments to support the national logistics system in enhancing efficiency in economic activities in economic activities in fact already existed, i.e. through the Masterplan Program of Economic Acceleration and Expansion (MP3EI). The MP3EI program had the logistics betterment as the main agenda.

To illustrate, the selling price of lemon from China was cheaper than that from Pontianak, Indonesia because the transportation cost (including logistics) was lower in China. The price of cement in Papua was twentyfold of the price in Java due Transportation and logistics factors.

Building of airport and seaport as an effort to upgrade transportation system would bring the greatest benefit if the logistics system were also developed. In this case the prioritized factor was not the transportation armada like sophisticated aircrafts and ships, but more on the available good and efficient logistics as supporting factors.

Improvement of the logistics system must be on the hardware and software side which were vital and must therefore be prioritized because Indonesia was way behind other neighboring countries (peers group).

In ASEAN 5, including Indonesia, the Philippine, Thailand, Singapore, Malaysia and Indonesia, in terms of logistics, was most probably lowest by rank. It seemed reasonable to say that Indonesia’s neighboring countries were more ready to face the worst of the chain effect of crisis in Europe compared to four other ASEAN states as their infra structure and logistics were more ready.

Therefore, supportive to implementation of CAFTA which was effective as per 2012, and toward implementation of the ASEAN Economic Community 2015 it was most advisable for the Government to prioritize on building efficient logistic system. The fund in APBN Annual Budget must be increased while strong human resources must be prepared by conducting more systematic training sessions. By these efforts, economic growth of better quality could be enhanced more.    

 Business News - September 12, 2012    

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