Indonesian Logistics Market Size and Growth
The Indonesian Logistics Market size can be seen as a $163.3billion (Frost and Sullivan) industry, with huge potential growth.
The hyper growth of infrastructure due to President Jokowi’s policies has allowed for significant potential long term growth and sustainability.
Coinciding with these policies has been the introduction of Indonesia into the AESAN Economic Community (AEC). These have both given the Indonesian logistics industry huge opportunity for long term sustainable growth.
The direct market size of the Indonesian Logistics Industry can be seen at $163.3billion in 2015, and has had two years of significant growth, both at 8% and 10% respectfully.
The figures show that the trend of improving and expanding the industry is going to continue and be sustainable, as the world’s 4th largest population will continue to rely on the industry.
Policy Change
Jokowi’s main policy that is linked directly to the Indonesian Logistics Industry would be the relaxing of the Foreign Direct Investment.
This is allowing more international companies to join the Indonesian economy and increase growth. The protection of the domestic industry has still be considered, and the ‘Negative Investment List’ displays the figures involved in certain sectors. The sectors that relate directly to market size growth in Indonesia will be;
Air cargo related to transport supporting services sector; 67% FDI ownership (increased from 49%)
Warehouse distribution; 67% (increased from 49%)
Cold storage; 100% (increased from 33%)
These sectors are supported by the new foreign direct investment changes, but also by the infrastructure investment that Jokowi has devoted majority of the domestic budget too.
AESAN Economic Community (AEC)
The market size has not only grown, but it has also expanded. With the AEC being able to give rise to a wide array of logistics solutions to help reduce the large costs associated with Indonesian logistics.
The strategic positioning of the archaeological country had a key influence in the AEC agreements and facilitates a major sea freight hub for the surrounding countries. The core elements that can help the Indonesian market size grow and expand would be;
Free flow of goods
Free flow of services
Free flow of investments
Free flow of capital
Free flow of skilled labor
These factors will be able to reduce the overall costs associated with the costs throughout the Indonesian supply chain.
Not only reducing costs in the direct chain, it will encourage the international firms to join the industry, which can help to facilitate change and transfer information and services.
As the current costs of logistics in Indonesia is 24% of the $895 billion GDP, transportation expenses need to be stemmed and reduced. This agreement with the AEC can be seen as a positive step in the right direction.