Frost & Sullivan Indonesia Logistics Outlook 2012


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Frost & Sullivan analysis on Indonesia's Logistics Outlook for 2012 - presented by Gopal R, Vice President, Transportation & Logistics Practice, Frost & Sullivan Asia Pacific at the Frost & Sullivan - ALI 2012 Indonesia Outlook Media Briefing, January 17, 2012 in Jakarta, Indonesia.

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Frost & Sullivan Indonesia Logistics Outlook 2012

  1. 1. Indonesia Logistics Industry Outlook: 2012: An Executive InsightPresented by:Gopal RVice President, Asia PacificTransportation & Logistics PracticeJanuary 17, 2012
  2. 2. Agenda 1 Indonesian Logistics Market 2 Market Projection, Drivers and Restraints 3 Freight Movement in Indonesia 4 Key Industry Trends 5 Strategic Roadmap 2
  3. 3. Indonesias Service Sector Offers Growth Opportunity 30.0% Growth of GDP and Service Segment, 2007 - 2012 • With dynamic industrial activities, Indonesia’sGrowth (%) 25.0% real GDP in 2012 is estimated to witness an 20.0% increase of 6.6 percent from 2011 15.0% • Services segment will follow the pace of the 10.0% economy, as industries such as financial 5.0% sector, hotels, hospitals, retail, 0.0% 2007 2008 2009 2010 2011(e) 2012(f ) telecommunications and airline are Nominal GDP Services Real GDP Years experiencing continuous expansion Growth of Service Segment, 2007 - 2012 20.0% • The rise in Indonesia’s middle class will result Growth (%) in profound changes, including growth 15.0% opportunity for transportation & logistics 10.0% industry • Transportation, storage and courier segment is 5.0% expected to expand 11.5 percent this year, 0.0% 2007 2008 2009 2010 2011(e) 2012(f ) aided by the growth in exports and Services Transportation, storage and courier manufacturing sector as well Years Source: Indonesian Statistical Agency, World Bank, Analysis by Frost & Sullivan 3
  4. 4. Transport and Storage segment contributes 3.3 percentto country GDP Indonesian Transportation and Storage Segment Indonesia Economy, 2011 Distribution, 2011(e) (IDR 235.70 trillion) River, Lake and Ferry Transport Mining & Sea 3.3% quarrying Transport 11.1% 7.6% Manuf acturing 24.8% Agriculture.f orestry & f ishing Air Transport 15.3% Road 16.1% Construction Transport 10.3% 56.1% Services Allied to Services Transport 31.9% Transportation & 15.9% storage 3.3% Communication Railways 3.4% Transport 1.0% Transportation makes up 84.1 percent of the total transportation, storage and courier market Source: Indonesian Statistical Agency, analysis by Frost & Sullivan 4
  5. 5. Total transportation & logistics market in Indonesia estimated at IDR 1232.92 trillion in 2011 Logistics Expenditure is hidden in:Transportation & Logistics Agriculture, forestry Manufacturing Construction and fishing (IDR 254.79trillion) (IDR 105.21trillion) Transportation, (IDR 156.81trillion) storage and Market courier Mining & quarrying Trade Communication (IDR 235.70 (IDR 114.04trillion) (IDR 115.23trillion) (IDR 32.74trillion) trillion) Other services (IDR 218.40trillion) Market Value IDR 235.70 trillion IDR 997.22 trillion Potential market for the outsourced / contract Source: Indonesian Statistical Agency, analysis by Frost & Sullivan logistics service providers in Indonesia 5
  6. 6. Transportation & Logistics market in Indonesia: The Evolution Transportation & Logistics Market Size, 2006 - 2011 20.8 27.8 (5.8) 14.3 13.4 Growth (%) IDR, Trillions 1,400 1,233 1,200 1,087 1,010 951 1,000 790 997 800 654 876 839 770 600 640 400 511 200 150 171 182 212 236 143 0 2006 2007 2008 2009 2010 2011(e) Years Hidden Logistics Cost Transport, storage and courier T&L Market Size Source: Indonesian Statistical Agency and other sources, analysis by Frost & SullivanTransportation & Logistics market in Indonesia has grown by a Compound Annual Growth Rate (CAGR) of 13.5 percent between 2006 to 2011 6
  7. 7. Agenda 1 Indonesian Logistics Market 2 Market Projection, Drivers and Restraints 3 Freight Movement in Indonesia 4 Key Industry Trends 5 Strategic Roadmap 7
  8. 8. Key drivers and restraints for Indonesia transportation& logistics market Strong economic growth fuelled by high domestic consumption Government’s initiatives in economic transformation and developmentDRIVERS of logistics industry Relocation and strong flows of capital drive manufacturing activities and boost logistics demandRESTRAINTS Availability of qualified logistics industry professionals Geographically dispersed market increases logistics cost Underdeveloped logistics infrastructure and slow pace in addressing infrastructure bottlenecks Source: Frost & Sullivan 8
  9. 9. The result of poor connectivity, process and weak infrastructure is evident in many price differentials and transport problems 1. The price of a bag of cement in certain parts of Papua is 20 times that in Java.Trade and transport logistics are 2. The price of a gallon of water in Medan isstill mainly ‘paper-based double that in Jakarta. 3. Oranges from China are cheaper than Gasoline prices in Di Kisar Islandsystems’, which increases oranges from Pontianak (Kalimatan) are three times higher in rainylogistics costs in addition to other season than in dry seasonchargesA truck making a round-trip from 1. Shrimps from eastern Indonesia,Bandung to Jakarta may spend cannot be commerciallyup to 75 percent of its time processed in Java. Market Reality... 2. Commodities like pineapples areparked due to customsprocesses, warehouse delays, canned abroad because it isand lift-on and lift-off Queues cheaper to transport them to Malaysia than to ship them to JavaTrucks transport approximately70 percent of freight in Indonesia The costs of bringing a containerbut majority of the trucks on the Some 10 percent of Indonesian from Jakarta’s main industrial sitesroad in Indonesia are old and exports leave ports too late and to the port are double that inpoorly maintained consequently do not reach the Malaysia and Thailand regional transshipment ports on time. Ships destined for local destinations are frequently delayed Source: World Bank, Frost & Sullivan Analysis 9
  10. 10. Agenda 1 Indonesian Logistics Market 2 Market Projection, Drivers and Restraints 3 Freight Movement in Indonesia 4 Key Industry Trends 5 Strategic Roadmap 10
  11. 11. Agenda 1 Indonesian Logistics Market 2 Market Projection, Drivers and Restraints 3 Freight Movement in Indonesia 4 Key Industry Trends 5 Strategic Roadmap 11
  12. 12. Transportation & Logistics Market: Key Trends 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 strong growth of external trade and substantial inflow of FDI • Rising intra-Asia trade favors the transportation & logistics industry Business Trend • Retail / FMCG Logistics • Service Parts Logistics 12
  13. 13. Agenda 1 Indonesian Logistics Market 2 Market Projection, Drivers and Restraints 3 Freight Movement in Indonesia 4 Key Industry Trends 5 Strategic Roadmap 13
  14. 14. Moving forward… Logistics industry in Indonesia Next Current Moving toward Step • Specialized logistics solutions for specific industries (e.g• Focus on basic logistics services with common value- FMCG, construction, mining) added services • Develop a logistics network of industrial centers on the• High traffic congestion in Jakarta results in longer lead outskirts of Jakarta for improved access to the Port of time, shipment delay and inefficient supply chain Tanjung Priok• Underdeveloped infrastructure and poor connectivity lead • Integrate transportation hubs (seaports, airports, terminals, to increased logistics costs distribution centers) with the transport network and develop• Growth of logistics market is not supported by the growth of state-of-the-art logistics infrastructure for efficient distribution professional human resources • Strengthen human resource capability with professional and• Overlapping regulations at the central and local experienced logistics personnel along with the market government levels as well as among sectors and expansion institutions cause hassle and inefficiency • Improve cross sector regulations and streamlining permit applications 14
  15. 15. AnyQuestions? 15