Indonesia’s Logistics Reform

Photo source: Pelindo III

 

On June 26, 2018, the World Bank approved a new loan program worth US$300 million for Indonesia, labeled Second Indonesia Logistics Reform Development Policy Loan (DPL). This loan aims to support the Indonesian government in implementing logistics reform to reduce costs and improve the capabilities of the logistics chain in Indonesia.

It consists of three pillars: improving port performance, improving logistics services, and strengthening trade facilitation. These three things are to be achieved by strengthening port governance and operations, fostering a competitive business environment for logistics service providers, and making the trading process more efficient and transparent.

This funding is the second stage of World Bank DPL for logistics reform in Indonesia. Earlier in November 2016, the World Bank has agreed to lend US$400 million to improve logistics and smoothen connectivity in Indonesia.

The World Bank welcomes the early results of the DPL series, with significant progress across the three key pillars already in place. The World Bank monitoring works indicate that the reforms supported by these funding have begun to impact on a number of areas, including the acceleration of new port projects with additional private participation, the growth of investment in logistics, and the reduction of time and costs of the trade processing.

The long and fragmented logistics chain is a constraint to Indonesia’s competitiveness, according to Massimiliano Calì, World Bank Senior Economist. “Addressing this bottleneck is likely to increase production and exports, thus boosting economic growth.”

It is expected that logistics improvements can reduce the cost of goods and services, especially in remote and underdeveloped regions of Indonesia. “This reform will help Indonesia achieve its target of higher inclusive growth,” said Rodrigo Chaves, World Bank Country Director for Indonesia and Timor-Leste.

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