Jokowi Opens Bonded Logistics Centers to Improve Indonesia’s Competitiveness’
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Indonesian President Joko Widodo inaugurated 11 bonded logistics centers on Thursday (10/03) as part of Indonesia’s second economic stimulus package that was unveiled on 30 September 2015. These bonded logistics centers aim to curtail the country’s notoriously high logistics costs which makes businesses in Indonesia less competitive and the general business climate in Southeast Asia’s largest economy less attractive. The official opening ceremony for the 11 centers (mostly located on the island of Java) was held in Jakarta.
At a bonded logistics center imported goods – which can be subject to certain tax incentives – are stored that are later distributed to the industries. Currently, however, the bulk of goods imported by Indonesian companies are stored in Singapore or Malaysia. This causes logistics costs to rise steeply as storage costs in Singapore and Malaysia are high.
Indonesian Finance Minister Bambang Brodjonegoro said the flow of goods at these centers will be closely monitored by Indonesia’s Tax Department in order to combat illegal activities. Brodjonegoro added these centers will be given tax incentives such as a moratorium (delay) for tax and import duty payments (these are paid when goods are moved outside the center, not – as is the case now – when goods enter the center).
Contrary to the bonded warehouse system (which is only used by the owner), the bonded logistics center can be used by other companies.
Entrepreneurs and other industry players have reacted positively to this news. Ernovian Ismy, Secretary General of the Indonesia Textile Association (API), said these centers can curtail logistics costs for textile companies by 34 percent. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), said logistics costs in the food and beverage sector can be cut as the supply of raw materials can be sped up.
Next year Indonesian authorities want to see the existence of 50 bonded logistics centers in the country.
Questions & Answers
Q.What is the primary goal of establishing these new bonded logistics centers?
What is the primary goal of establishing these new bonded logistics centers?
The main aim is to reduce Indonesia’s high logistics costs. This is intended to make businesses more competitive and improve the overall attractiveness of the business climate in Southeast Asia's largest economy.
Q.How do these new bonded logistics centers differ from the existing bonded warehouse system?
How do these new bonded logistics centers differ from the existing bonded warehouse system?
Unlike the bonded warehouse system, which is exclusively used by the owner, the new bonded logistics centers can be utilised by multiple companies. This offers greater flexibility and access for various businesses.
Q.What tax incentives will be offered at these bonded logistics centers?
What tax incentives will be offered at these bonded logistics centers?
The centers will provide tax incentives such as a delay for tax and import duty payments. These payments will only be due when goods are moved outside the center, rather than upon their initial entry.
Q.What benefits do industry associations anticipate from these centers?
What benefits do industry associations anticipate from these centers?
The Indonesia Textile Association expects textile companies to cut logistics costs by 34 percent. The Indonesian Food and Beverage Association believes the supply of raw materials can be expedited, reducing costs in their sector.
Reader pulse
Will these new centers significantly cut logistics costs?
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