Market Overview

The Indonesian freight and logistics market is currently trading at an inflection point. Being the world’s fourth-largest populated country with an excellent potential for growth, Indonesia is a key market in the global scenario. Given the scope of household consumption in a densely populated country and its strategic location on geographical terms, Indonesia, an archipelago of around 17,500 islands, is currently a center of attraction for global investment. However, logistics is a key pain point for doing business in Indonesia. Logistics cost varies between 25%-30% of the GDP in Indonesia, as compared to developed economies, where it is below 5% of the GDP. Even neighboring countries, like Malaysia, incur half the cost as a percentage of GDP for logistics expenditure. Given that Indonesia has the world’s 16th largest economy and is the fourth most populous country in the world, there is a display of momentum in the economy, with steady prospects for higher growth, in the more ideal economic scenarios.

Scope of the Report

A complete background analysis of the Indonesian freight and logistics market, which includes an assessment of the economy and contribution of sectors in the economy, market overview, market size estimation for key segments, emerging trends in the market segments, market dynamics, and logistics spending by the end-user industries, is covered in the report

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Key Market Trends

Rail Freight Transport - To Witness High Growth

Currently, rail transport infrastructure is present only on the islands of Sumatra and Java. Rail transport by goods volume only makes around 1% of the total volume of goods transported in and out of Indonesia. However, this volume is larger than the volume handled via air freight within the country. One of the reasons attributed to this is that rail transport is mostly used for wholesale high volume bulk commodities, such as coal, while air transport is used for less space occupying high-value goods. There is an immediate need for the deployment of mass urban rail networks to shift the transport of goods and passengers away from overburdened roads. This shift will require double tracks on major trunk rail lines, the revival of dormant tracks (some 2,500 km unused, mainly on Java), and the extension of other rail lines, in addition to new station developments with improved accessibility and multimodal integration.

Indonesia’s railways are operated under the state-owned enterprise (SOE) PT Kereta Api Indonesia (PT KAI), which held the monopoly over the sector until 2007. Law No. 23/2007 signaled a shift in attitude toward the nation’s railways to include them in national development by equipping the sector with more competitive strategies in terms of service and pricing. The railroad network in Java and Sumatra has a strategic role in serving the coal transportation distribution. The railway line that directly connects the mining plant location to port access and the availability of adequate locomotives and carriages make it an attractive choice for mining companies and expeditions to establish coal transportation cooperation with trains. In terms of time, the transportation of coal by train is far more certain in time, fast to the destination, free of traffic, safe and efficient in costs, and environment-friendly as mass transportation. The country is planning to reduce the logistics costs by improving railway infrastructure with the development of new tracks in Java, Sumatra, (BRT) in 29 cities, Sulawesi, and Kalimantan – which comprises 2159 km of inter-urban railways and 1099 km of urban railways.

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