World Bank Study to support Connectivity Agenda in Indonesia

November 12, 2013

Indonesia’s state port authority, Pelindo II, to benefit from World Bank advisory services to help sharpen focus of logistics reform and strengthen connectivity.

JAKARTA, November 12, 2013 – The World Bank signed an agreement today with the Indonesia Port Corporation (IPC) or Pelindo II to provide advisory work in an effort to advance the government’s connectivity agenda.

The service, referred to in the World Bank as a Reimbursable Advisory Service, or RAS, 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.

“Reimbursable advisory services are widely used in middle income countries in Eastern Europe and Latin America. Our partnership with the IPC marks an important deepening of our long-standing partnership with Indonesia, and we look forward to exploring more ways on how to better deliver shared prosperity to all Indonesians," says World Bank Vice President for East Asia and the Pacific, Axel van Trotsenburg.

High logistics costs impede 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 less expensive to import, for example, oranges from China than rather than from within Indonesia. Poor logistics connectivity also constrains the potential of the regions, increasing general living costs.

Higher investment in infrastructure is urgently needed, yet Indonesia’s infrastructure investment during the 2010-11 period is among the lowest in Asia, at less than 4 percent of GDP. China, Thailand and Vietnam all spend more than 7 percent of their GDPs on infrastructure.

"The costs of logistics across Indonesia account for some 24 per cent of GDP (Gross Domestic Product), higher than in neighboring countries. Cutting down costs and improving the quality of logistics and transport systems would vastly improve Indonesia’s access to international markets and increase trade," says Henry Sandee, a senior trade specialist at the World Bank.

Under a memorandum of understanding signed with the World Bank last May, the IPC also expressed interest to explore the possibility of financing a second study on port development in Indonesia.

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