RI Seeks to Replace Singapore, Malaysia as Regional Logistics Hub

March 11, 2016, Jakarta Post

Indonesia is eyeing to take over the role of its neighboring countries as Southeast Asia’s main logistics hub as the country launched on Thursday its first-ever bonded logistics centers (PLB) that will ease the flow of basic materials in and out of the country.

As many as 11 centers were simultaneously inaugurated by President Joko “Jokowi” Widodo in a ceremony that took place at a center operated by PT Cipta Krida Bahari in Cakung, North Jakarta.

In his speech, Jokowi said Indonesia, as the biggest economy in the region, had the potential to replace Singapore and Malaysia as Southeast Asia’s logistics centers.

“This kind of logistics centers must be established on every island and in every province [in Indonesia],” the former furniture businessman told the audience.

“I hope that PLB businesspeople can soon bring overseas inventories into the country.”

Among government officials attending the ceremony were Finance Minister Bambang Brodjonegoro, Communications and Information Minister Rudiantara and the Finance Ministry’s director general of taxation, Ken Dwijugiasteadi.

The 11 centers — located in Jakarta (Cakung, Sunter), Banten (Merak), East Kalimantan (Balikpapan), West Java (Cibitung, Karawang, Cikarang and Subang) and Bali (Benoa and Denpasar) — are operated by various companies, including automotive firm PT Toyota Motor Manufacturing Indonesia, integrated explosive services provider PT Dahana and oil and gas services provider PT Petrosea.

The newly inaugurated centers will function as warehouses for imported goods, such as automotive spare parts, heavy equipment and oil and gas equipment.

According to a 2015 finance minister regulation (PMK), the goods can be stored at the centers for up to three years and will be temporarily exempted from import duty and import-related taxes during that period.

Their establishment is part of the government’s second policy package — issued in September — that aims to slash logistics costs with their close proximity to several industrial areas, namely Cikarang, Cibitung in West Java and Balikpapan in East Kalimantan.

The centers are also expected to reduce dwelling time at ports, which is supposed to eventually jack up the country’s business competitiveness in Southeast Asia.

At present, Indonesia ranks 109th on the World Bank’s ease of doing business list, having risen by one notch only from last year’s position. Singapore continues to top the list, while Malaysia sits at the 18th position.

The two neighbors fare better, as well, in terms of port dwelling time, with Singapore’s at 1.5 days and Malaysia’s at three days.

Indonesia’s average dwelling time, on the other hand, reaches 4.3 days, as revealed by data from state-owned port operator Pelindo II.

“How can we compete with Malaysia and Singapore if our dwelling time remains higher than theirs? Our people are not less smart. Insha Allah [God willing], we will see dwelling time fall to three [days] around these months,” Jokowi said.

The President reiterated his seriousness to deal with the matter, adding that heads would roll again if the target could not be achieved.

His remarks were a reminder of last year’s Cabinet reshuffle when he replaced then trade minister Rachmat Gobel with Thomas Lembong, a move reportedly triggered by the high dwelling time.

Bambang said that the government was planning the establishment of 50 more bonded logistics centers across the archipelago in 2017.

“Hopefully we will become Southeast Asia’s logistics hub within the next two to three years.”

Meanwhile, Cipta Krida Bahari president director Iman Sjafei said that the government’s decision to establish the logistics centers, which he claimed as a breakthrough, seemed to have triggered “psy-war” (psychological warfare) between Indonesia and Singapore.

“My client told me that Singapore had reduced its logistics-related fees to compete with Indonesia,” he said, adding that the PLB’s presence domestically could save his customer up to US$4 billion in storage and handling expenses.

Cipta Krida, a subsidiary of investment firm PT ABM Investama, plans to open new centers in Balikpapan, Samarinda in East Kalimantan, Surabaya in East Java and Banjarmasin in South Kalimantan.

“The process is ongoing. We have not decided on the goods to store yet. It will be up to our clients’ demands,” Iman said.

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