Indonesia is mulling the introduction of 24-hour operations and fast-tracking a plan to double the number of bonded logistics centers in the country to reduce cargo dwell times at its major ports.
State-owned port operators have also been requested by the government to implement better systems to track containers and investigate ways to reduce handling and clearance fees.
The administration of President Joko Widodo has been working with the industry to reduce cargo dwell times, but efforts so far have only yielded positive results at the country’s primary gateway of Tanjung Priok in Jakarta. Average dwell times at Tanjung Priok are down to between 3.7 days and 4.2 days from more than one week a year ago, but dwell times at other major ports, including Belawan on the northeast coast of Sumatra and Tanjung Perak in Java, are still up to eight days.
Cargo dwell time is defined as the time from when the cargo is unloaded from a vessel to when it leaves the port gates.
“We expect the major ports to operate 24 hours a day with more competitive fees. There should also be a more effective and efficient tracking mechanism,” Transportation Minister Budi Karya Sumadi said after weekend meetings with port operators Pelindo I and Pelindo III and the director general of customs and excise.
Increasing the efficiency of the country’s ports is a priority for president Widodo to reduce logistics costs from the current level of 24 percent of GDP, a scenario the World Bank said places “an enormous tax on the country’s economic growth.”
“Remarkably, it is often cheaper to import oranges from China than for Indonesian growers to sell outside of their own island,” the bank said in a report published following a visit by its president Jim Yong Kim to two Indonesian ports last year.
The government is targeting a reduction in average dwell times at Tanjung Priok to between 2.2 days and 2.5 days, but also wants other ports in the country to up their game.
"We cannot delay the development of modern ports any longer. This supports trade flows and investment in this country," Widodo said at the opening of New Priok Container Terminal 1 in Kalibaru last week. The terminal adds 1.5 million 20-foot-equivalent units to the port’s annual container capacity.
The government is trying to develop a hub and spoke model for cargo flows in the country, with major ports acting as hubs that quickly evacuate incoming cargo to logistics centers in other parts of the country. This is in line with a recommendation in the World Bank report that stuffing and stripping containers at facilities away from the ports would free up valuable space and improve efficiency.
By the end of this year, the number of bonded logistics centers in the country is to be increased to 50 from 22.
“By diluting the accumulation at the major ports and switching it into the spokes at the (bonded logistics centers), we hope to cut the dwell time,” said Director General of Customs and Excise Heru Pambudi.
The World Bank estimates Indonesia needs around $50 billion of investment to develop its transport and logistics sector over the coming five to 10 years. A reduction in logistics costs to 16 percent, which would be similar to the situation in Thailand, would save the country between $70 billion and $80 billion per year and add up to 2 percent to annual GDP growth.
A version of this story originally appeared on IHS Fairplay, a sister product of JOC.com within IHS Markit.