Logistics is a process of planning, implementing, managing and controlling the flow and storage of goods, services and related information from the point of origin to the point of consumption (CSI 2004). The concept of logistics services has evolved over time with the rapid advances of communication technology, from the narrow emphasis on physical distribution management to integrated management of supply and

distribution chains. The definition of logistics services has expanded to include not only transportation, warehousing and storage and other services related to the transport of goods, but also customer services, production process, information flows and reverse logistics.

Therefore, it is impossible to detach logistics sectors from other supporting components such as security, insurance, contribution of 3PL companies, policy & regulation, national and regional system, logistics associations, and certification of supply chain management and logistics-related professions.

In today’s fast-changing world, Indonesia logistics sectors is facing a new stage of development in term of infrastructure and human capital. As President Jokowi’s Administration reinforced Maritime Sector as main priority, logistics sectors will reclaim its strategic position in creating new opportunities of trade, not only goods but also services, and outreach every corner of Indonesian Archipelago with stronger connectivity.

Macro-economic view to pursue greater efficiency must go hand in hand with micro-economic approach, which enhances reliability of logistics services. Legal certainty, a working system, clear coordination amongst Government agencies are key elements for efficient and reliable logistics sectors supporting the national economic growth.

Paradigm Shift in Logistics Sectors

Notes from Indonesia

Services Dialogue 1

Focus 1

Byline 2

Coffee Talk 2

Coffee Talk 3

Snapshot 3

Global Insight 4

Event 4

Servicing Indonesia | March 2015 | 1

INSIDE

THIS EDITION

Vol. II | March 2015

LOGISTICS

IN NUMBER

Dear ISD Board Members and Friends,

ISD launched its first Dialogue Series on Logistics on February the 25th, 2015 which was attended by approximately 50 participants from private sectors, research institution, initiators of ISD, AIPEG as donor agency and Officials from Ministry of Trade and Ministry of Transportation Republic of Indonesia.

The forum provides the floor for experience sharing of the advances in global transportation by key players and experts, the importance of multi-modal transportation with more open investment opportunities that drive competitive advantage in logistics, the importance of Government coordination in logistics sectors along with the umbrella law and regulations and an integrated working system such as National Single Window which are applicable to all Ministries and relevant Government agencies to simplify logistics clearance process.

The growth of global value chains has increased the interconnectedness of economies. Improving logistics services, in particular, is essential to effective GVC participation. High-quality logistics affect trade even more than distance or transport costs; every extra day needed to ready goods for export and import could potentially reduce trade flows by up to 4%. Is Indonesia ready to enhance its competitiveness in the Logistics Sectors?

~Sinta Sirait, Executive Director

Indonesia logistics cost

equals 24.6% of Gross Domestic Product (ALFI)

44% of total Indonesia logistics cost are contributed by inventories (World Bank)

92% of logistics activities in Indonesia use land transportation (ALFI)

There will be 0.5% of national economic growth in every 5% of logistics cost efficiency (ALFI)

Government offers 56 ports to be managed by private and state-owned enterprise (BUMN)

Ministry of Transportation RI is

formulating 63 types of certifications for logistics-related professions

Focus

With more than 20 years of

international experience in marine transportation services, Jakob Friis Sorensen, President Director MAERSK Indonesia, is undoubtedly eloquent when describing current challenges, impediments, and

opportunities in Indonesia’s shipping industry. Are there any policy and regulations impeding efficiency of Indonesia’s shipping industry? Yes, there is an issue about handling charges in ports that is subject to 10% VAT (Value Added Tax). I think this is very unusual. Normally, National VAT is not applicable in the port that is in international area. What should we develop to support President Jokowi’s Maritime Vision? Ports are important part in “Sea Toll Road” that President Jokowi talked about. We should put more focus on ports, while simplifying policies in export and import. It is also a

Indonesia’s Shipping Industry: Quo Vadis?

Coffee Talk

Byline

Servicing Indonesia | March 2015 | 2

Indonesia is ranked in “Consistent Performers” group together with Thailand, Philippines, and Vietnam amongst

ASEAN countries with 2.95—3.49 out of 5.00 points of Logistics Performance Index (2014). Since the ceiling has not been surpassed, rooms for increasing logistics efficiency, as well as tackling domestic threats, are widely open. The fact that Indonesia’s manufacturing companies allocate 16—17% of total operational cost for logistics indicates inefficiency in various aspects. In the same time, Malaysia and Thailand have successfully minimized the number to around 13—15%. The underlying question would be: “What should Indonesia do to be more competitive?” National Single Window is not the “Skeleton Key” to solve every problem and neither does building new ports. Building new ports in coastal areas without putting an eye on building connectivity would end up in infeasible investment. On another hand,

multi-layers bureaucracy in transporting commodities is seemingly a major cause of inefficiency. For example, due to regulatory and sea freight cost, it is 20% cheaper for Jakarta to import cattle from Australia rather than buying it from Sumbawa. Distance is not always the issue, but efficiency of the process does matter.

The times spent at some ports are sometimes as much as half of the sailing times. Belawan-to-Jakarta and Surabaya-to-Makassar routes clearly demonstrate this problem. Another cause can be apprehended by World Bank Survey, in which 58% of land transportation (trucks) going back from Tanjung Priok Port, Jakarta, are not loaded with commodities and goods. In this case, Indonesia is one step behind Jordan, which has already applied online system to identify loaded and unloaded trucks and use the data to set a schedule of delivery.

To read the full report on this topic, please click HERE.

good start to have National Single Window even though it still needs many improvements. How do you see the development of Kuala Tanjung Port that will be the largest port in the Strait of Malacca? I think it will be a very tough competition with other ports in the area such as Tanjung Pelepas Port in Malaysia. Sometimes, it is better for not having hub port and having direct services. For example, from Jakarta to Bangkok and Jakarta to Ho Chi Minh City and back again; it will be cheaper with direct services instead of going through hub port.

What do you think about National

Single Window (NSW)? NSW is online, but there are many manual works and papers behind that. As an IT system, NSW is not the

solution in itself. Each department and ministry who has process that need to be

put online and become digitalized requires deep analysis of how they can do it simple and clear.

A Snapshot on Indonesian Logistics Taken from presentation of Henry Sandee, Senior Trade Specialist, Multi-Partner Facility for Trade and Investment Climate (MPFTIC) Unit, World Bank

“When you export from Indonesia,

up to 24 different documents are

required.”

Abdul Hamid Batubara, President

Commissioner PT. Chevron Pacific Indonesia (CPI), is very enthusiastic to express CPI’s commitment in managing effective and efficient operations and explain how CPI score more than US$700 million in

accrued financial benefits in each of the last two years. It is truly insightful to have him talking about logistics sectors, especially in oil and gas industry.

How do you see logistics’ role in CPI’s operations? It is very significant. CPI needs logistics in three phases: exploration, project development, and maintenance. People might say, “1% of logistics inefficiency means nothing.” But, since CPI delivers around 40% of national oil production, 1% of efficiency or 1% of inefficiency in logistics creates substantial impact to the business. Then, what are CPI’s secret for logistics efficiency? We need to have right understanding about relationship between business and logistics. In Sumatera operation, CPI increases efficiency in logistics sectors by managing Dumai Wharf in Sumatera. We build CPI’s own warehouse and designate the Bounded Area. By doing this, we can improve on-time arrival of required materials for project and maintenance activities. How do you think about the President Jokowi and VP Jusuf Kalla Maritime Vision? The maritime vision represents a focus in developing Indonesia’s potential. However, we must understand in advance what that vision means. On the Tol Laut (Sea

Toll Road) as an example, is that literally a toll road or is that means there will be more lanes across Indonesia’s coastal line? My view is, Indonesia should create invest-ment-friendly policies that allow new investment to oc-cur in logistics sectors and at the same time enable on-going oil and gas off-shore drilling and operations to be safely and effectively executed. Any policy or regulation in logistics sectors that should be harmonized? The specific Bill about cabotage is a good example on the need to create investment-friendly policies. The Bill requires all vessels operating on Indonesian sea should be deemed Indonesian-flag. Toward this, there are two “school of thoughts”. First, the Bill only regulates cargo and passenger ships. Second, the Bill regulates every-thing on Indonesian sea including deep-water rigs in which it becomes a real challenge. Deep-water rigs are project-based products that are unique, very expensive and sophisticated, and only few players in this business in the world. If the Bill is applied to deep-water rigs, it creates significant operational challenges, which finally put efficiency in off-shore drilling at stake. Do you have inputs to improve logistics sectors? The policy and regulation should provide legal certainty for long-term investment. Government agencies need to involve experts in logistics in every proposed policy and regulation. Ministry of Trade, Ministry of Research and Technology, Ministry of Transportation, Bappenas (National Development Planning Agency), Universities, and Business Representatives should sit down together and formulate the best plan for logistics sectors.

Legal Certainty to Increase Efficiency

Servicing Indonesia | March 2015 | 3

Without that, it is impossible to have an IT system that supports. To have a successful system, you need to audit every process behind it. We have inconsistency amongst regions and departments and also different views in interpreting rules and regulation. When you export from Indonesia, up to 24 different documents are required. It should be five only. In another countries, you can do this online without having papers. Do you think Indonesia need more open ports to support export and import? The idea of the open port is getting higher degree of

efficiency and lower cost. If this is the objective, the more open port, the better. If you want to have five or six ports only, you need to increase the service level or the volume for these ports to have economic upscale. “Ship follows trade” or “Trade follows ship”? It is like two sides of coin. In many cases, trade is being enabled by the ability to ship. If there is no ship, there is no business. It also happens the way round. What really comes first? I think that should be connectivity. If you can move things from one island to another in a cost-effective manner, the trade will definitely grow.

How would you improve Indonesia’s Logistics Sectors?

Snapshot

Yos Adiguna Ginting

Director of External Affairs

PT. HM Sampoerna Tbk.

“The most important aspect to improve in logistics sectors is security. We also need to minimize logistics cost by providing train container depots, which are located close to industrial zones.”

“To make logistics efficient, Government and business sector need to find the way to balance trade between Java Island and non-Java Islands. Besides, capacity and capability of human capital in Supply Chain also need further improvement.”

Antonius Roni Setyawan

Chief Supply Chain Officer

PT. Trakindo Utama

Barriers to Australian Services Growth Under Review

Servicing Indonesia | March 2015 | 4

Event

Global Insight

Permata Kuningan Building, 20th Floor.

Jalan Kuningan Mulia Kav. 9C. Setiabudi, South Jakarta, Indonesia 12980

Phone: +6221-8378 0594. Fax: +6221-8378 0594.

Website: http://www.isd-indonesia.org. Email: secretariat@isd-indonesia.org

The Australian Services Roundtable (ASR) will be a key contributor to a new review by

Australian government into barriers to services exports. The review, announced recently by the Government, is aimed at identifying the barriers to services growth and boosting Australia's services exports. It will focus primarily on the education, financial services, health

services, information technology, professional services, and tourism sectors.

Services account for approximately 70% of Australian economy but only represent 20% of Australia's total exports, indicating massive export growth potential. And with up to 1.5 billion people moving into Asia's middle class over the next 15 years, Australia needs to ensure it is in the best position to take advantage of the opportunities at our doorstep in the Asian region, particularly as the domestic mining boom weakened and primary resources grow slowly. Domestic barriers to Australia’s services export growth include complex and often poorly designed tax arrangements, regulation variance between the states and restrictive labor market laws.

On the international scene, ASR members face many barriers to open services trade. These include recent trends to impose restrictions on cross-border data flows as well as establishing localisation of data rules, and behind-the-border barriers, measured through “institutional quality”, which looks at rigidity in employment law, economic freedom, movement of funds, and the scope for active private sector policy advocacy.

1. Opening remark from Chris Kanter, the Chairman of ISD Board of Founders 2. Panel Session features Bachrul Chairi, the Director General for International Trade Cooperation Ministry of Trade Republic of

Indonesia 3. Presentation by Yukki Nugrahawan Hanafi, the Chairman of Indonesian Logistics & Forwarders Association

4. Presentation by Henry Sandee, Senior Trade Specialist Multi-Partner Facility For Trade and Investment Climate, World Bank 5. Speakers, Panelists, and Moderator 6. Participants of Dialogue Series I

On February 25th 2015, Indonesia Services Dialogue has successfully held Dialogue Series I “Harmonizing

Regulation and Opportunity for Professional Certification”.

For complete review, please click HERE

Date : March 25th 2015 Time : 14.00—17.00 WIB Venue : Thamrin Room 1—2, Double Tree Hotel by Hilton, Cikini, Menteng Agenda : Dialogue Series II on Distribution Services “Enhancing Domestic Efficiency, Identifying Trade Opportunity

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