Moving Cargo Faster in Indonesia’s Main Sea Port
February 19, 2014
- Indonesia’s main port Tanjung Priok handles two-thirds of Indonesia’s international trade and container traffic continues to grow.
- Long dwell time at the port is causing high logistics cost for businesses and consumers.
- The World Bank is working with the government to improve the logistics system which will help reduce the country's freight logistics costs.
Jakarta, Indonesia – As trade grows and the traffic of shipping containers increases, Jakarta’s Tanjung Priok Sea Port is struggling to keep up.
Tanjung Priok handles over two-thirds of Indonesia’s entire international trade. According to the Indonesia Port Corporation, or Pelindo II, container traffic is expected to grow by over 160 percent by 2015.
”The year 2014 will perhaps be the worst year for Tanjung Priok, because the port’s extension will only be finished in 2015,” said Zaldy, Head of Indonesian Logistics Association.
The time for a container to travel to and from industrial center Cikarang just outside Jakarta has multiplied in recent years.
“Four to five years ago, one of our trucks travelling from Cikarang to Tanjung Priok and back can get three trips a day. But now it’s almost 1.1 trip a day,” says Zaldy. “The bottleneck to enter and exit the port is very heavy.”
Four to five years ago, one of our trucks travelling from Cikarang to Tanjung Priok and back could get three trips a day. But now it’s almost 1.1 trip a day. The bottleneck to enter and exit the port is very heavy.
Long dwell time at the port cause high logistics cost
Dwell time measures the time from the moment the container is unloaded, until it leaves the gates of the container terminal. The average import container dwell time at Tanjung Priok Port has increased from 4.8 days in 2010 to 6.4 days in 2013.
This long dwell time leads to high logistics costs for businesses, which are then passed onto consumers in higher prices. About 19 percent of the inputs for foreign and export-oriented firms are imported.
Logistics costs across Indonesia account for some 24 per cent of GDP – an enormous tax on Indonesia's economic growth. The World Bank 2012 Logistics Performance Indicator report ranks Indonesia 59th out of 155 countries, well behind other middle-income countries in the region. Often it is cheaper to import, for example, oranges from China rather than from within Indonesia. Poor logistics connectivity also constrains the potential of the regions, increasing general living costs.
Efforts to reduce the port’s dwell time are on their way.
“At the end of January this year, we’ve launched an ICT system to speed-up document processes in Tanjung Priok,” said R.J. Lino, CEO of the Indonesia Port Corporation.
Lino explained that many companies prefer to store their containers inside the port since it is cheaper. To discourage this, the port plans to implement higher rates to free up more space at the port.
“With these and several other initiatives, we target to reduce the dwell time to four days by this year,” says Lino.
World Bank support to improve the country’s logistics system
A recent study from the World Bank in collaboration with the Institut Teknologi Bandung shows that the main cause of the delay is the pre-clearance stage, accounting for 58 percent of dwell time.
The study reports that many sources of delay can be seen throughout the import process. Focusing on easing the pre-clearance stage, however, could reduce the overall dwell-time average at Tanjung Priok. The customs clearance average time is already very competitive by international standards, taking only one day. A faster removal of the containers after the customs clearance would require larger investments that would entail road improvements, and perhaps a deeper transformation of the trucking industry.
The World Bank recently signed an agreement with the Indonesia Port Corporation to provide advisory work in an effort to advance the government’s connectivity agenda.
Says Senior Trade Specialist Henry Sandee: “We will help outline a strategy to improve Indonesia's current logistics system, by identifying a list of policy priorities that will have the most impact in reducing the country's freight logistics costs.”
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