Transforming Indonesia’s Logistics Sector

Indonesia, a country of around 17,000 islands extending 5,150 km east to west is a vast archipelago with Southeast Asia’s largest population and economy. In recent years, Indonesia’s logistics sector has been beset with inefficiency and poor performance, however following the implementation of various government policy initiatives including the National Logistics Ecosystem (NLE) platform, the high costs of logistics in Indonesia is reducing. Asian Insiders partner Primadi Soerjosoemanto explores the transformation of Indonesia’s logistics sector.

For some time, Indonesia’s logistics and supply chain sector has been known to be overburdened and inefficient with the cost-to-GDP ratio of over 23% since 2015 telling the story. Yet the Indonesian government has declared their goal to be the world’s fifth to seventh largest economy by 2045. Clearly the logistics infrastructure must be improved. The country has launched initiatives to lower related costs-to-GDP ratio 17% by 2024 with the NLE platform and the adoption of a sea toll programme. However progress on these has been suboptimal with several port operations unable to even support such programmes, as well as inefficient local bureaucracies, limited uptake of suitable technologies and fragmentation between players along the chains.

In the years 2010 to 2018 Indonesia has improved its rating on the World Bank’s Logistics Performance Index – up 29 places from 75th in 2010 to fourth by 2018 – through a range of policy initiatives governing the internal logistics infrastructure. While this improvement is noteworthy, Indonesia’s logistics cost to GDP ration remains up to three times higher than five benchmarked countries (Germany, Singapore, South Korea, Japan and China). Suboptimal capacity utilisation is particularly notable in Indonesia’s sea-tolls on return voyages, while long turnaround times lead to bottlenecks putting further strain on warehousing process with long delays ensuing.

Indonesia, like many countries, was several affected by the Covid-19 crisis. The lack of an effective, centralised government response led to poorly coordinated local remedies, including a lock-down in Jakarta while business-as-usual in mining and agriculture. Accordingly the Indonesian Logistics Association (ALI) reported nearly 50% decline in overall business performance over the pandemic with some operations down 70-80% in total business volumes due to emergency measures taken to prevent transmission. Post Covid, the industry positions itself for recovery and growth with the opportunity present for significant uptake of digital and automation technologies.

Many countries around the world are making dramatic advances in their logistics management systems, mainly due to digitisation along with smoother online customs and government authorisation processes. Indonesia is able to take advantage of the lessons learned and also of the rapid recent growth of online shopping with the increase in the number of local and global players now competing in Southeast Asia’s largest market. The other side of the pandemic has led to a surge in local e-commerce with reports suggesting that the internet economy is likely to account for as much as 50% of all commercial transactions by 2025.

In fact, Indonesia has come out of the pandemic in remarkably good shape, with a GDP growth in 2022 of 5.3%, a nine-year high, spurred by a global commodities boom along with a significant jump in domestic spending. This growth in export and imports lends weight to the present efforts to improve the logistics infrastructure and reduce associated costs.

Transforming Indonesia’s logistics sector is also supported by a trend towards industry concentration, where previously it has been a very diffused market. International players make up around 30% of the sector, while the remaining 70% is divided amongst a large number of local, regional firms. In recent years there have been an increasing number of mergers and acquisitions that will allow larger operators to offer regional core shipping and logistics hubs, while providing provincial warehousing and fulfilment centres.

President Joko Widowo has recognised the need to transform the Indonesian logistics sector and cutting high logistics costs, by promoting and boosting the numbers of Special Economic Zones (SEZs), government-led industrial districts in major parts of the country. In addition, the promotion of the Logistics Corridor Development Strategy, the National Transport Master Plan and the more recent National Logistic System intended as an integrated platform to connect and harmonise the end-to-end flow of logistics process across the country. Further, the government is promoting integration of information from several databases, including the government’s export-import licensing website the Indonesia Single Window (INSW) with Indonesia’s port system (Inaport), the Trade Ministry’s online trade system (Inatrade) and the Customs-Excise Information System and Automation (CEISA) along with other regional databases.

This is all supported by the national Development Policy Loan Project to subsidize and reduce the costs of improving system reliability and efficiency. Taken together, government leadership, policy development and increased spending has already led to improvement in Indonesia’s competitiveness in trade with a significantly more to come over the next few years. Watch this space.

For further information on this and any aspect of business affecting your plans for Indonesia, Asian Insiders provides years of experience and hands-on practical knowledge. For a no-obligation call, please contact Jari Hietala, Managing Partner: jari.hietala(at) or Primadi Soerjosoemanto, Indonesia Partner: primadi.soerjosoemanto(at)

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