NATIONAL LOGISTICS: Evaluating Sislognas Again

Bisnis Indonesia, 12 January, 2015, Page 30, Section: Transportasi & Logistik
By Hadijah Alaydrus redaksi@bisnis.co.id
Improvement of logistics costs in Indonesia seems to be still far from expectations, because
implementation of the programme of the National Logistics System blueprint for the first midterm period of 2011 - 2015 has not been optimal.
In fact, Indonesia since 2009 already had a basic idea of the development of the National
Logistics System (Sislognas), which was finally poured into Presidential Regulation (Perpres)
No.26/2012 on the Blueprint of Sislognas and this has been coordinated with the Committee for
the Acceleration and Expansion of Indonesian Economic Development (KP3EI) of 2011 - 2025.
The formation of KP3EI was based on Perpres No. 32/2011 on the Master Plan for the
Acceleration and Expansion of Indonesian Economic Development 2011 - 2025.
To that end, the Perpres on the blueprint of Sislognas allows the formation of a work team whose
membership and duties are defined by the Coordinating Minister for Economic Affairs, in his
capacity as Chief Executive of KP3EI.
In the Sislognas Roadmap, there are the first medium-term programmes from seven key drivers
for the period 2011 - 2015, whose results would have been more or less visible at the beginning
of this year.
In fact, the 30 first medium-term programmes listed in the annex to the Sislognas Perpres, which
are intended to improve Indonesia's logistics network, has not been running significantly.
Of the thirty programmes, only a few programmes have made progresses. We also do not know if
the Government of Joko Widodo - Jusuf Kalla can accelerate the results of the Sislognas
blueprint, such as effectiveness of dryports, hub ports, mode terminals and logistics centres, as
well as short sea shipping (SSS). This is because only 11 months are left for the completion of
the first-stage programmes.

Seeing the slow progress, the new government is unlikely to continue Sislognas in accordance
with the blueprint issued during the era of President Susilo Bambang Yudhoyono.
This tendency apparently has been strengthened by a statement from Coordinating Minister for
Economic Affairs, Spfyan Djalil, last week, a day after a coordination meeting with the national
logistics players.
Coordinating Minister for Economic Affairs stated that his ministry will make changes to the
Sislognas blueprint. "There will be changes," he said, Friday (9 January).
These changes, according to him, are warranted because of the different problems encountered
now compared to the time the Sislognas was decided in 2009. "Sislognas is a concept prepared
several years ago; of course we will now see its relevance," said Sofyan.
One of the new governments programmes that will be tailored to Sislognas is the marine
highway.
Meanwhile, Chairman of Indonesian Logistics and Forwarder Association (ALFI), Yukki N.
Hanafi, supported the planned revision of Sislognas. "It is not dismantled, but it is evaluated,
revised, and adapted," he said.
According to him, improvement the Sislognas blueprint is one of four recommendations of ALFI
to the government, in addition to the establishment of a logistics and transportation agency, the
formulation of a law that regulates logistics and transportation, as well as human resource
capacity building in the field of logistics.
Yukki assessed that regulatory harmonisation of the logistics system should also touch the
regions. "How come that there is Sislognas, but there is no Sislogda [Regional Logistics
System]," he said.

He also assessed that the logistics system should be addressed seriously. He suggested that the
Sislognas is established into a body with responsibility under the President. He said there needs
to be a technical ministry to implement the Sislognas.

Carmelita Hartoto, Chairperson of the Central Board of the Indonesian National Shipowners'
Association (INSA), expressed her support for improvement of Sislognas in line with the
existing developments.

On the other hand, she also expressed hope that the changes should be agreed by the associations
and related business actors, so that operations on the field can take place properly.

"We hope the government can now implement Sislognas, especially in order to reduce logistics
costs to 19 percent, from the current level of 24 percent, within the next five years," she added.

FOCUS ON JAVA
Representing the voice of the shipping industry in Indonesia, Carmelita suggested that the SSSrelated Sislognas programme be focused on the Island of Java. This is meant to provide
equalisation for shipping businesses that fill other lines.
Chairman of Supply Chain Indonesia, Setijadi, recommend a review, implementation of
regulations and support for Sislognas. In terms of the review, Setijadi assessed the need for a
legal umbrella that is higher than the Perpres for Sislognas.

"The position of Sislognas should be above Perpres; it will be even more effective if it takes the
form of a law," he said.
In addition, he recommended a permanent institution for the arrangement of logistics sector, so
that the coordination and implementation of Sislognas will become more effective.

"This is needed because [in the era of the Jokowi Government] there are two coordinating
ministries that are strongly associated with the logistics system, namely the Coordinating
Ministry for Economic Affairs and the Coordinating Ministry for Maritime Affairs."
Thus, the policy direction and concept of Sislognas should be revisited. "For example, the
Maritime Logistics concept in Sislognas is different from the concept of Marine Highway," he
said.

Implementation of regulations, he said, must give good support to the logistics service providers
and players.
In reality, weaknesses in terms of regulations pertaining to the logistics system precisely rest on
coordination and implementation on the field.

With much of the Sislognas blueprint still in need for revamping, it can be concluded that the
path to achieve success in logistics affordability and price equalisation is still far away.

LOGISTICS COMPETITIVENESS: Making Use of Dwindling Time

In less than three years into the future, Indonesia must directly compete with nine countries in
the ASEAN single market, which is called the ASEAN Economic Community 2015. However,
various problems are still plaguing the National Logistics System and rendering the
competitiveness of Indonesian products weak.

Economic integration of the ASEAN community by 2015 will be preceded by the unification of
logistics services throughout ASEAN in 2013. This means that next year the Indonesian logistics
sector must be prepared to fight to sustain the competitiveness of the national economy.

Unfortunately, Indonesias logistics competitiveness is still low. In the 2010 Logistics

Performance Index (LPI), Indonesia is ranked 75th of 150 countries surveyed by the World
Bank. In fact, in the survey in 2007, Indonesia was ranked 43rd. Indonesia is behind five ASEAN
member countries, namely Singapore, Malaysia, Thailand, the Philippines, and Vietnam. This
has happened because of the logistics cost burden that Indonesian business actors must bear
reaches 27.02 percent of GDP, or equal to 14.08 percent of the average cost of production.

Business actors, through the Indonesian Chamber of Commerce and Industry (Kadin Indonesia)
have warned that there are 44 logistics problems that must be resolved to reduce logistics costs
by 10 percent in 2015.
Problems that have arisen, among others, include the potential monopoly by port operators.
Decree of Director General of Sea Transportation No. 59/1/20.97 on the Fixed Procedures for
Operational Services of Ship to Ship (STS) Transfer in the waters of Tanjung Balai Port in
Karimun has appointed PT Pelabuhan Indonesia (Pelindo) I as the service provider of the STS
Transfer, thus this leads to a monopoly.
Another problem concerns the strictness of rules on changing the stockpile location within the
harbour. Moving can only be done when occupancy has reached 85 percent of the stockpile area.
As a result, the goods are held for longer. If the threshold is lowered to 65 percent, the retention
of goods can be avoided. In a number of ports, such as Banjarmasin, ship waiting time can reach
14 days.
In addition, there is also a need for roll on roll off (roro) vessels in order to shift the burden of
freight from road to sea, thereby reducing the cost of logistics up to ten times. Roro vessels are
required from the Port of Tanjung Priok to the Port of Panjang in Lampung, Tanjung Mas
(Semarang), Pekanbaru (Riau), Banjarmasin (South Kalimantan), up to Tanjung Perak
(Surabaya).

No less important is the immediate expansion of the capacity of Tanjung Priok Port, which
serves 70 percent of Indonesia's exports. Tanjung Priok is planned to be expanded toward the
area of North Kalibaru.
"Kalibaru is a race to boost logistics services in Indonesia. If Kalibaru cannot be completed [on
time], the containers must be stored in the ocean. If completed, the increase in the volume of
containers of up to one million TEUs can be handled, said Secretary of the Indonesian Logistics
Council, Anwar Satta, in Jakarta, Friday (3 February). TEU is a unit of volume equivalent to a 20
foot-sized container.

Logistics system
In fact, the government already has a blue print of the National Logistics System (Sislognas),
which is now awaiting the approval of President Susilo Bambang Yudhoyono. Sislognas
identifies problems; it sets strategies and a roadmap to resolve the logistical problems, as well as
selects priority measures.
Director of the Centre for Logistics and Supply Chain of the Bandung Institute of Technology,
Senator Nur Bahagia, asserted that the most important essence of Sislognas is not only about
improving competitiveness, but also improving the welfare of the community by connecting all
the regions in Indonesia.

Sislognas is also designed to maintain the sovereignty and integrity of Indonesia, by treating the
sea as a unifying factor for the islands. This is what gives the characteristic colour to the
Indonesian Sislognas.
"Inter-island logistics becomes the backbone of the national logistics by using the concept of the
foreland and hinterland, instead of using the approach of western and eastern Indonesia," said
Senator, who is involved in drafting the Sislognas blueprint.

Senator warned that, in building the logistics infrastructure, important products should not get
the biggest benefit. Therefore, policymakers in the infrastructure sector need to understand the
Sislognas philosophy more deeply, in that it concerns the national economic security.
Deputy General Chairman for Commerce, Distribution, and Logistics of Kadin Indonesia, M
Natsir Mansyur, revealed that this blueprint should be set immediately so that all the efforts to
improve logistics systems can be harmonised. Without lowering the cost of logistics, Indonesia
would not be able to suppress the price of its goods in the international markets.

For example, the transport cost of a 20-foot container from Papua to Jakarta reaches US$ 2,500 US$ 3,000, while from Hong Kong to Jakarta it is only US$ 1,000. "Indonesian merchandise will
not be able to compete if the cost of logistics is still in the range of 17 percent, even if the interest
cost is added, it accounts for 22 percent. The Philippines, which is also an archipelago, is more
ready with its logistics in welcoming 2015, said Natsir.
Improve coordination
Deputy Transportation Minister, Bambang Susantono, in Surabaya in late January, said that his
ministry continues to work on the completion of a double track railway line from Surabaya to
Semarang as part of the Trans-Java route as soon as possible. The railway service can also be
used to send goods from Jakarta to Surabaya in 22 hours, while today the delivery takes three
days by truck.

Meanwhile, Head of Fiscal Policy Office of the Ministry of Finance, Bambang Brodjonegoro,
told Kompas in Jakarta, Wednesday (1 February), that the government can accelerate the
strengthening of the logistics system by using funds from leftover budget balance. However, the
projects should use multi-year schemes to ensure the continuity of funding support.

Chairperson of the Indonesian Shipowners Association (INSA), Carmelita Hartoto, has not been
too optimistic that Sislognas will immediately bring about a positive impact in improving the
national logistics performance, given its currently poor condition.

"Until now, the blueprint and its legal basis have not been set. I think it is still an initial concept;
the road is still long. Kadin has been invited to discuss, but other associations, such as
commercial shipping, have not been invited to meetings, said Carmelita.
The biggest hurdles that the government must resolve are the sectoral ego and weak interministerial coordination, as well as coordination between the central government and local
governments, because the key to successful implementation of Sislognas rests on such
coordination. Strong leadership is needed to hasten the implementation of Sislognas, considering
that the unification of ASEAN logistics services will begin in 2013.

Head of Presidential Work Unit for Development Supervision and Control, Kuntoro
Mangkusubroto, admitted that coordination is key to successfully building Sislognas.
Coordination is constantly being improved.
Another issue pertains to the parliamentary and presidential elections in 2014. This means that,
starting next year, ministers from various political parties would be busy preparing for the 2014
elections, rather than giving attention to Sislognas.
It should not happen that people will again be taken by surprise and feel unprepared, just like
when the ASEAN - China Free Trade Area was enacted on 1 January 2010, when the ASEAN
single market comes in 2015. Do it now or the Indonesian competitiveness will further slump.