World Bank approves loan for Indonesia`s logistics sector
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The Executive Board of the World Bank has approved a US$400 million Development Policy Loan for the Indonesias Logistics Reform, which will be used to improve the countrys logistics system and connectivity.
“These reforms will help Indonesia in achieving higher inclusive growth,” World Banks Country Director in Indonesia Rodrigo Chaves said in a statement received by ANTARA here on Thursday.
Chaves explained the US$400 million loan will support Indonesia to overcome obstacles in the supply chain, such as dwelling time and trading permits.
The inefficient dwelling time has resulted in Indonesias logistics costs accounting for 25 percent of the total costs, while Thailand is only 15 percent and Malaysia is 13 percent.
Currently, the cost of container shipping of oranges from Shanghai, China to Jakarta is cheaper than the cost of similar items shipping from Jakarta to Padang, West Sumatra.
Though, the distance between the two cities in Indonesia is only a sixth of the distance between Jakarta and Shanghai.
“Logistics efficiency will improve connectivity and provide a significant impact on the competitiveness of the country. Improved logistics can reduce the cost of goods and services flows, especially in remote and underdeveloped regions in Indonesia,” Chaves said.
The Development Policy Loan will support Indonesia over a transition period from the commodity-dependent economy to manufacturing-based economy with high competitiveness.
World Banks Senior Economist Massimiliano Cali added that the high cost and unreliable logistics are obstacles in improving national competitiveness.
“Managing these problems will increase production and export, thus lifting economic growth,” he said.
The three main objectives of this funding is increasing the performance of the ports, improving the competitiveness of logistics services and strengthening trade facilitation.
World Banks support for the logistics reform is an important part of the Partnership Framework of World Bank Group States, which is centered on the governments priority to bring significant changes.
Questions & Answers
Q.What specific issues in Indonesia's logistics system will the loan address?
What specific issues in Indonesia's logistics system will the loan address?
The US$400 million loan will support Indonesia in overcoming obstacles such as inefficient dwelling times and issues with trading permits. These problems contribute to the high logistics costs in the country.
Q.How do Indonesia's logistics costs compare to its neighbours?
How do Indonesia's logistics costs compare to its neighbours?
Indonesia's logistics costs are currently 25 percent of total costs, significantly higher than Thailand's 15 percent and Malaysia's 13 percent. This inefficiency impacts the country's competitiveness.
Q.What are the main goals this funding aims to achieve for Indonesia's logistics sector?
What are the main goals this funding aims to achieve for Indonesia's logistics sector?
The funding has three main objectives: increasing the performance of ports, improving the competitiveness of logistics services, and strengthening trade facilitation. These reforms aim to reduce costs and boost economic growth.
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