INDONESIA’S COMPETITIVENESS TEND TO WEAKEN

Indonesia's level of competitiveness in terms of basic infra structure was reckoned to drop unless action was taken to improve things. It must be un­derstood that neighboring Asean countries were also busy improving their infra structure. So if Indonesia sat on the laurels it was almost certain that the na­tion's competitiveness would decline. The effect was that foreign investors would be reluctant to invest here.

Lately the polemics going on at the market was reluctance of the Association of Indonesian Lo­gistics [ALI] to increase Container Handling Charge by 10% proposed by PT Pelindo II. The point was that the CHC Tariff increase would make Indonesia's Logistics products to be uncompetitive amidst Asean countries.

ALI estimated increase of CHC tariff by 10% would increase logistics cost by around Rp800 billion per year. The problem was that logistics cost today was already high. IF CHC Tariff increased by 10% of USD 10 per kilometer, it would jack up logistics cost to Rp800 billion per year. By 2016 it would go as high as Rp1 trillion.

According to ALL additional logistics cost of Rp800 billion per year was based on the assumption Tanjung Priok harbor capacity of 7 million of 20 ft. containers. The increase was not small, considering logistics cost was still high, around 26% of GDP. Supposedly all parties were committed to reduce lo­gistics cost, instead of increasing them, no matter how small.

Moreover CHC cost at Tanjung Priok Harbor Jakarta was already high compared to that in Asean countries. To illustrate, CHC tariff for 40 ft contain­ers in Bangkok, Thailand was only USD 95 and in Laem Cha Bang, Thailand USD 85 while in Port Kiang, Malaysia only USD 113, Ho Chi Minh port Vietnam USD 69, Manila seaport USD 115.- and Tanjung Priok Port Jakarta USD 124.5.

Supposedly the Minister of Transportation paid more attention to increasing logistics cost due to CHC tariff increase as it would bring serious im­pact on the general public. Increase of CHC would but increase profit of harbor operators but bring down Indonesia's competitive edge. In regard to that matter ALI urged the Government to change CHC transac­tion from USD to Rupiah.

It was extremely strange if Indonesia still had to quote CHC charges in USD, while other countries were quoting in local currencies. This was not to mention high logistics cost on the way from factory to harbor like: illegal collection, traffic jam, ineffi­cient transportation, slow administration service and high cost of handling in harbor. So now it was about time the Government, provider of logistics service and players of logistics making moratorium of logis­tics cost no matter how small to lessen logistics cost significantly.

The point was that the National Logistics Sys­tem [Sislognas] in Perpres No. 26/2012 had set tar­get to reduce logistics cost up to 5% and support of all parties was needed including all Pelindo and provider of logistics service. Moreover Pelindo II already had additional profit by exchanging USD to Rupiah as CHC was paid in USD.

By ALI's persuasion, the Directorate of Sea Transportation, Ministry of Transportation stated they were still analyzing the proposal to increase CHC tariff proposed by Pelindo II. The point was that this Ministry would evaluate whether the CHC price in­crease was justifiable. Meanwhile Pelindo II argued that price increase of CHC was very reasonable since there had been no increase since 2008.

Besides the increase was small, not even USD 10.-compared to the price of container itself which was USD 30,000 - USD 50,000.

Pelindo II denied that tariff at Tanjung Priok harbor was the most expensive in the Asean region. Other countries could apply cheap price because facil­ities were built by the Government. At Tanjung Priok harbor, facilities were not built by the Government but by Pelindo II as State Owned Enterprise IBUMN] which was profit oriented.

Pelindo II was peristent in their argument that CHC cost would not increase logistics cost be­cause so far the factor that caused logistics cost to expand was long unloading and check out of goods in harbor. Owner of goods could not be sure when their goods could exit so they had to order for more goods to save them for 3 weeks to one month ahead And yet of check out time could be shortened to one week, importers needed not to spend more inventory expenses. The conclusion: even if there had to be increase of CHC tariff, in fact the increase would be insignificant.

To settle argument between the two oppos­ing fronts, i.e. ALI and Pelindo, it was recommended to the Government through the related ministers to end the polemic so climate of certainty in doing busi­ness in harbor would be there. The Government must be able to accommodate need of both parties and arive at a melting pot of arguments.

About the plan to increase CHC price about which ALI complained, the Government could accom­modate interest of both parties whereby to find Win-win solution. It was to be understood that certainty in doing business, as related to harbor facilities and service needed serious attention by all parties.

Prompt and comprehensive solution was needed so Indonesia's competitive edge would not be eroded and the nation would not lose momentum in developing harbor service business. (SS)

Business News - June 4, 2014