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Indonesia Freight Transport Report Q1 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: November 2007 Product Code: R302-1504 Description A total of eight companies were reported in July to have submitted proposals to build an international portin Indonesia’s Banten province as part of an effort to improve the country’s infrastructure. Banten is in western Java, Indonesia’s most populous island. Local media suggested the cost of the project would be around IDR10.1trn (US$1.12bn). Construction would start in late 2008 and continue through to 2025. In total the government says it plans to develop 25 new international ports. BMI’s newly-released Indonesia Freight Transport Report concludes that maritime freight traffic will grow at an annual average rate of 7.3% in 2007. There are a number of factors behind this strong forecast. The Indonesian economy and commodity trade will grow strongly in a country that is, after all, one of the world’s largest archipelagos. There will be an interplay between growing domestic demand for freight between and within islands and the wider boom in regional container-based traffic. Demand for freight from nearby China will benefit Indonesia. Port capacity is growing, as is the requirement for crude oil and liquid natural gas (LNG) tanker capacity. We are now projecting an overall annual average growth rate of 6.9% for the freight transport sector as a whole during 2007-2011. To put this in context, growth will be higher than GDP expansion - expected to average 5.9% per annum - but the reality is that for an economy of Indonesia’s size and potential this will still be somewhat below the country’s and the industry’s real potential. Safety concerns and poor regulation are important constraining factors. By transport mode, we expect air freight to lead the way, followed by pipeline throughput, maritime and coastal freight. Air freight growth reflects the dynamic effect of growing domestic deregulation and rapidly rising regional passenger and freight demand, despite safety concerns (highlighted by a European Union ban on Indonesian carriers at the end of June), and the possibility of a shakeout among the new budget operators. Indonesia’s freight industry has a poor-to-average BMI business environment ranking with a composite score of 36 out of a potential total of 70. This places it below the regional average of 44.5. Comparatively speaking, its stronger points include the country’s long-term economic risk, freight growth, and the transport intensity index - a measure of immediately past and future foreign trade growth. Compared against its peers, however, Indonesia’s scores for long-term political risk, infrastructure growth and the regulatory and competitive environments are all disappointing, and indicative that a lot more needs to be done before the industry begins to perform closer to its potential. For the 2007-2011 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 5.7%, versus 5.9% for overall GDP. The total value of transport and communications GDP will rise to US$35.6bn in nominal terms by 2011, representing 6.5% of Indonesia’s GDP. Table of Contents
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