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Home > Business/Finance > Diversified Services > Shipping & Logistics
Indonesia Freight Transport Report Q3 2008
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‘Indonesia’s poor infrastructure is impeding the domestic trucking industry and limiting the ability ofsmall business owners to access profitable markets’, concluded a joint report by the Asia Foundation andUniversitas Indonesia, the state-owned university, published in April. The report said the country’scompetitiveness and economic growth were being held back by high transport costs, poor infrastructure,and corruption. Trucking companies and had to pay a wide array of illegal fees to government officials,police, and local thugs, according to the report, which was based on an industry survey. It assessed thecosts of transport by truck across nine major routes between key cities in Sulawesi, Java, West NusaTenggara, and North Sumatra. The results showed it costs more to operate trucks in Indonesia than inother Asian countries including Vietnam, Thailand, Malaysia, and China. Indeed, in our just-publishedIndonesia Freight Transport Report, we predict that road freight traffic will grow by an annual average of6.3% in 2008-12, an improvement on the 5.8% rate registered in the preceding five year period, but stillwell short of the potential, and slower than other freight modes.
There are a number factors behind this forecast. The Indonesian economy and commodity trade will growstrongly, as will Indonesian commodity exports, including mining output. We are projecting annual GDPgrowth of 5.7% in 2008-12. We are now projecting an overall annual average growth rate of 6.7% for thefreight transport sector as a whole during 2008-2012. Total freight growth and road haulage growth willboth be higher than GDP expansion - 6.7% and 6.3% versus 5.7%- but the reality is that for an economyof Indonesia’s size and potential this is still be somewhat below the country’s and the industry’s realpotential. A key problem facing the trucking industry is the lack of investment in new roads. Freightcarried on other transport modes is set to grow faster than on road: by an average of 6.9% for rail, 7% forshipping, 7.1% for pipeline throughput, and 7.4% for air freight.
Indonesia’s freight industry has a poor-to-average BMI freight rating with a composite score of 56.9 outof a potential total of 100. Comparatively speaking, its stronger points include the country’s long-termeconomic risk, freight growth, and the transport intensity index - a measure of immediately past andfuture foreign trade growth. Compared against its peers, however, Indonesia’s scores for long-termpolitical risk, infrastructure growth and the regulatory and competitive environments are alldisappointing, and indicative that a lot more needs to be done before the industry begins to perform closerto its potential.
For the 2008-2012 forecast period, we expect the transport and communications sector to continueoutpacing the economy as a whole. It will achieve average annual growth of 6.1%, versus 5.7% foroverall GDP. The total value of transport and communications GDP will rise to US$48.6bn in nominalterms by 2012, representing 6.5% of Indonesia’s GDP.
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