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Indonesia's Logistics Industry to See Double Digit Growth in 2012 Says Frost & Sullivan - Retail/FMCG and service parts logistics will be areas of focus
Indonesia's Logistics Industry to See Double Digit Growth in 2012 Says Frost & Sullivan


NewswireToday - /newswire/ - Jakarta, Indonesia, 2012/01/17 - Retail/FMCG and service parts logistics will be areas of focus.

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Frost & Sullivan is forecasting the Indonesian logistics industry to grow 14.2 per cent to IDR 1,408 trillion (US$153.54 billion) in 2012 as compared to an estimated IDR 1,233 trillion (US$134.46 billion) a year ago, due to strong economic growth fuelled by high domestics consumption, says Frost & Sullivan.

Mr. Gopal R, Vice President, Transportation & Logistics Practice, Asia Pacific at Frost & Sullivan said that the relocation and strong flows of capital are expected to drive manufacturing activities in Indonesia and boost logistics demand.

He added that external trade for Indonesia is expected to see a strong growth of 32.5 per cent to reach US$514.2 billion in 2012.

"The import/export forwarding, shipping and air freight-related businesses will remain strong due to sustainable external trade activities. The growth of foreign direct investment (FDI) is expected to continue in 2012 with an estimated value of US$21.5 billion," Mr. Gopal said.

He added that FDI realization in transport and storage sector reached US$2.2 billion by September 2011, which has the second largest contribution to FDI, after mining sector.

He said that the strong FDI influx to the mining industry is expected to boost the industrial growth and offer business potential to the transportation & logistics sector.

The Indonesian transportation and logistics industry is forecast to grow at a compound annual growth rate (2011-2016) of 14.7 per cent to reach IDR 2,442 trillion (US$266.3 billion) in 2016, Mr. Gopal said. "However, underdeveloped infrastructure will slow down the growth if the bottleneck persists in the coming years," he cautioned.

Freight movement in Indonesia
Mr. Gopal forecasts Indonesia's total ocean cargo volumes to increase 5.8 per cent to 943.1 million tons in 2012 as compared to 891.5 million tons in 2011.

He said the shipping industry is affected by overcapacity and low rates on Trans-Pacific and Asia-Europe long-haul routes. "However, it is expected to maintain a steady growth driven by the demand from intra-ASEAN trade," he added.

Mr. Gopal noted that Indonesian ship operators are dominating the local market since the Government released a regulation requiring domestic transportation to use locally-owned ships. However, imports and exports shipping are still dominated by foreign operators.

Mr. Gopal expects rail freight to be revitalized by rising demand for Indonesian commodities. He predicts that cargo volume by rail to increase to 20.4 million tons in 2012 as compared to 19.7 million in 2011.

"Freight transported by the Java railway consists mostly of petroleum fuel, fertilizer, cement, coal and containers. The South Sumatra and West Sumatra dominant traffic is coal and the North Sumatra main traffic is crude palm oil," he said.

Mr. Gopal added that rail freight volume rose 3.6 per cent for the first 10 months to October 2011 from a year earlier. He noted that currently, rail networks in Indonesia are not well developed and managed and it is suffering from under-investment.

Mr. Gopal is predicting cargo volume by air to grow 5.7 per cent to 920,000 tons in 2012. He said that Indonesia's airport facilities and capacities expansion can increase the Indonesian air cargo market.

He noted that the four main airports in Indonesia – Sukarno-Hatta, Juanda, Ngurah Rai and Polonia – made up for 47.2 per cent of the total air cargo throughput in 2011. He added that Sukarno-Hatta airport contributed about 36 per cent of the total air cargo volume in Indonesia.

Key industry trends
Mr. Gopal said that there is a higher inclination towards outsourcing variety of value-added services and it is the area of growth for the logistics industry in Indonesia in 2012. "Logistics service providers need to work towards more value-added services while strengthening the intermediate services," he added.

He added that service quality and reliability are top priorities for customers to consider when selecting logistics service providers. "End users are moving towards integrated supply chains with professional service providers," he said.

Mr. Gopal said that Indonesia's transportation and logistics market is expected to see an accelerating growth, aided by the growing Asian economy. He added that Indonesia's key export commodities include oil & gas, crude palm oil, coal, appliances, textiles and oil and gas.

He foresees retail/fast moving consumer goods (FMCG) and service parts logistics to be the areas of growth for the logistics sector in Indonesia.

"With more than 230 million population and a wide geographical area, demand for retail/FMCG distribution across the country offers a huge market for the logistics sector," Mr. Gopal said.

He advised logistics service providers to tap into the lucrative market by offering end-to-end distribution services from inbound material flow to finished goods warehousing, inventory management, inspection, returns handling and nationwide delivery.

Mr. Gopal said that service parts market is one of the fastest growing segments in Indonesia. He added that service parts delivery had become very crucial for manufacturers, especially in the machinery, automotive and electronics industry. He noted that international logistics service providers have invested and committed to expand their service offerings in service parts logistics.

Moving forward
Mr. Gopal said that logistics service providers in Indonesia should move towards offering specialized logistics solutions for specific industries such as FMCG, construction, service parts and mining as compared to the current generic logistics services.

He added that a logistics network of industrial centers should be developed on the outskirts of Jakarta for improved access to the Port of Tanjung Priok as the current high traffic congestion in Jakarta resulted in a longer lead time, shipment delay and an inefficient supply chain.

The Indonesia Government should also integrate transportation hubs – seaports, airports, terminals and distribution centers – with the transport network and develop state-of-the art logistics infrastructure for efficient distribution.

"Companies should also strengthen its human resources capabilities with professional and experienced logistics personnel along with market expansion," Mr. Gopal said.

About Frost & Sullivan
Frost & Sullivan (, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents.

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Indonesia's Logistics Industry to See Double Digit Growth in 2012 Says Frost & Sullivan

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