During the last five years, Indonesia has invested heavily in infrastructure designed to bring down the comparatively high logistics costs that hamper businesses across the vast archipelago nation of 17,000 islands.
The government’s Sea Toll Road program, for example, set out to revamp Indonesia’s ageing and inefficient maritime infrastructure, including the construction of up to 35 new ports spanning Java to West Papua.
According to port consultant David Wignall, who has extensive experience in Indonesia, there has been progress.
“There has been a lot of construction,” he explained. “Kuala Tanjung Multipurpose Terminal has been finished, while Makassar New Port is in the start-up phase.
“But apart from New Priok, and to a lesser extent Teluk Lamong in Surabaya, they have not attracted (the expected) traffic.”
He added that there needs to be further development in the rest of the country, beyond just the main ports.
Handling around 65% of Indonesia’s total trade volumes, Jakarta’s Tanjung Priok port was expanded in 2016 with the opening of New Priok Container Terminal One (NPCT1). According to Wignall, the deep-sea terminal handled 1.2 million TEU last year and has quickly earned direct calls to Europe and the US West Coast, thus helping to reduce shipping costs by removing the need for transhipment in Singapore or Malaysia.
“Volume growth within the port was strong last year. However, Terminals 2 and 3 have stalled, and there is no sign of them being delivered on schedule despite a growing need for them,” Wignall noted, adding that the port under-construction at Patimban “will not be able to replace this lack of progress”.
On the other hand, he said that good progress had been made on toll roads. An example being the trans-Java highway opening in December 2018. The government says it has built 3432km of national roads and 940km of toll roads in the last four years.
The road-building helped Indonesia improve its ranking on the World Bank’s Logistics Performance Index for 2018, climbing 17 places to 46 out of the 160 countries surveyed.
It still lags behind its regional rivals, however. Vietnam, for example, is 39th; it is also investing heavily in logistics infrastructure as its economy and manufacturing sector expands.
Both countries are competing to benefit from the US-China trade war and a potential shift in manufacturing away from the Middle Kingdom.
“More manufacturing is expected to move to Indonesia, with Central Java acting as a key relocation target for low-cost industries,” noted Wignall.