frost & sullivan indonesia logistics outlook 2013 and beyond

Indonesia Logistics Industry Outlook

2013: An Executive Insight

Presented by:

Gopal R

Global Vice President

Transportation & Logistics Practice

March 6, 2013

1 Indonesian Logistics Market

2 Market Projection, Drivers and Restraints

4 Key Industry Trends

5 Strategic Roadmap

3 Freight Movement in Indonesia

Agenda

2

Indonesia's Logistics Sector Offers Growth Opportunity

Growth of GDP and Service Segment, 2008 - 2013

Growth of Service Segment, 2008- 2013

Years

Gro

wth

(%

) G

row

th (

%)

Years

Source: Indonesian Statistical Agency, World Bank, analysis by Frost & Sullivan

• With dynamic industrial activities, Indonesia’s

real GDP in 2013 is estimated to witness an

increase above 6.5 percent, slight increase

from last year’s 6.3 percent.

• Services segment will follow the pace of the

economy, as sectors such as financial

services, hotels, hospitals, retail,

telecommunications and airline are

experiencing continuous expansion

• The rise in Indonesia’s middle class will result

in profound changes, including growth

opportunity for transportation & logistics

industry

• Transportation, storage and courier segment is

expected to expand 13.1 percent next year,

aided by the growth in exports and

manufacturing sector as well

3

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

2008 2009 2010 2011 2012(e) 2013(f)

Services Transportation, storage and courier

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

2008 2009 2010 2011 2012(e) 2013(f)

Nominal GDP Services Real GDP

Transport and Storage segment contributes 3.5 percent

to the economy

Source: Indonesian Statistical Agency, analysis by Frost & Sullivan

Indonesia Economy, 2012 Indonesian Transportation and Storage Segment

Distribution, 2012(e) (IDR 287.36 trillion)

4

Transportation makes up 85.5 percent of the total

transportation, storage and courier market

Total transportation & logistics market in Indonesia

estimated at IDR 1426.9 trillion in 2012

Potential market for the outsourced / contract

logistics service providers in Indonesia

Transportation,

storage and

courier

(IDR 287.4

trillion)

Logistics Expenditure is hidden in:

Tra

ns

po

rta

tio

n &

Lo

gis

tic

s

Ma

rket

Ma

rket

Va

lue

IDR 287.4 trillion IDR 1139.5 trillion


Other services

(IDR 258.27trillion)

Mining & quarrying

(IDR 137.83 trillion)

Manufacturing

(IDR 280.14 trillion)

Agriculture, forestry

and fishing


Construction


Trade


Communication

(IDR 37.17trillion)

5

Transportation & Logistics market in Indonesia: The

Evolution

Transportation & Logistics Market Size, 2007 - 2012

Growth (%)

IDR

, T

rill

ion

s

Years

Source: Indonesian Statistical Agency and other sources, analysis by Frost & Sullivan

Transportation & Logistics market in Indonesia has grown by a Compound Annual Growth Rate (CAGR) of

12.7 percent between 2007 to 2012

27.8 (5.8) 14.3 13.4 14.2

6




5 Strategic Roadmap


Agenda

7

Key drivers and restraints for Indonesia transportation

& logistics market

8

Strong economic growth fuelled by high domestic consumption

Relocation and strong flows of capital drive manufacturing

activities and boost logistics demand DR

IV

ER

S

RE

ST

RA

IN

TS

Underdeveloped logistics infrastructure and slow pace in addressing infrastructure

bottlenecks

Geographically dispersed market increases logistics cost

Availability of qualified logistics industry professionals

Source: Frost & Sullivan

Government’s initiatives in economic transformation and development

of logistics industry




5 Strategic Roadmap


Agenda

9

Freight movement in Indonesia

• Seaports handle more than 90 percent of total non-road freight traffic in Indonesia

• Cargo transportation in Java-Sumatra region is still dominated by the freight trucks accounting more

than 80 percent for the movement of mining, industrial, plantation and agricultural products

Freight Traffic, 2008 - 2013

Years


To

ns

, M

illi

on

s

10



Key Industry Trends

5 Strategic Roadmap


Agenda

4

11

Transportation & Logistics Market: Key Trends

12

Service Trend

• Higher inclination toward outsourcing variety of value added services

• Logistics service providers need to work toward more value-added services

while strengthening the intermediate services

Customer Trend

• Service quality and reliability are top priorities when selecting logistics service

providers

• End users are moving toward integrated supply chains with professional service

providers

Economic Trend

• Growth of Indonesian logistics market fuelled by growth of external trade and sustained inflow of FDI

• Rising intra-Asia trade favors the transportation & logistics industry

Business Trend

• Oil & Gas Logistics

• Infrastructure Project Logistics

• Food & Fresh Produce Logistics




5 Strategic Roadmap


Agenda

13

National Logistics Blueprint, 2010 - 2025

14

Source: National Logistics Blueprint, Asia-Pacific Economic Cooperation

6 key drivers to promote the success of the logistics revitalization programs

Indonesia’s logistics to

be Locally

Integrated &

Globally

Connected effectively & efficiently,

for national

competitiveness by

2025

Laws & Regulations

Key

Commodity

Focus

Logistics Infrastructure

Human

Resources &

Management

Information,

Communication

& Technology

Logistics

Service

Providers

Indonesia is determined to become an important player in

international trade & markets. The government focuses

particularly on 6 key areas with the objectives of:

• ensuring the availability of strategic commodities

• promoting low cost economic activities

• strengthening national competitiveness

The implementation strategy of MP3EI will integrate 3

main elements:

1. Developing the regional economic potential in 6

Indonesia Economic Corridors;

(Sumatra Economic Corridor, Java Economic Corridor,

Kalimantan Economic Corridor, Sulawesi Economic Corridor,

Bali – Nusa Tenggara Economic Corridor, and Papua –

Kepulauan Maluku Economic Corridor)

2. Strengthening national connectivity locally and

internationally

3. Strengthening human resource capacity and

national science & technology to support the

development of main programs in every

economic corridor

Master Plan for the Acceleration and Expansion of Indonesian

Economic Growth (MP3EI), 2011 - 2025

15

Source: Master Plan for the Acceleration and Expansion of Indonesian

Economic Growth (MP3EI) 2011 – 2025

TARGET: Transforming Indonesia into one of the 10 major

economies in the world by 2025

1. Connecting the centers of major economic growth

based on the principles of integration and not

similarity, through “inter-modal supply chain systems”

2. Expanding economic growth through accessibility

improvement from the centers of growth to the

hinterland

3. Distribute the benefits of economic development by

improving the quality of connectivity to the less

developed areas, isolated areas, and border areas in

order to achieve equitable economic development

Aims and objectives of the National Connectivity

Strengthening

ASEAN Economic Community(AEC) in 2015 will amplify

the export value to ASEAN countries

16

Low export value in several ASEAN countries. Eg:Myanmar, Laos, Brunei and Cambodia

Indonesia has not fully capitalized ASEAN market opportunities

Indonesia coordinates 5 potential products out of 12 priority products in AEC regulation scheme, namely Agricultural,Electronics, Fishery,Woods and textile products

AEC free flow of goods and service regulation will enable Indonesia leverage

low export trade countries in ASEAN bounderies

Accelerating the Development of Transportation & Logistics Industry in the region

Gateway Opportunity:

“ASEAN Economic

Community

(AEC) in 2015”

Moving forward…

17

Next Step

• Specialized logistics solutions for specific industries (e.g

FMCG, construction, mining)

• Develop a logistics network of industrial centers on the

outskirts of Jakarta for improved access to the Port of

Tanjung Priok

• Integrate transportation hubs (seaports, airports, terminals,

distribution centers) with the transport network and develop

state-of-the-art logistics infrastructure for efficient distribution

• Strengthen human resource capability with professional and

experienced logistics personnel along with the market

expansion

• Improve cross sector regulations and streamlining permit

applications

• Focus on basic logistics services with common value-

added services

• High traffic congestion in Jakarta results in longer lead

time, shipment delay and inefficient supply chain

• Underdeveloped infrastructure and poor connectivity lead

to increased logistics costs

• Growth of logistics market is not supported by the growth of

professional human resources

• Overlapping regulations at the central and local

government levels as well as among sectors and

institutions cause hassle and inefficiency

INDONESIA

M o v i n g t o w a r d

Current

Domestic Logistics

Focus

Locally Integrated,

Globally Connected