WASHINGTON D.C., June 28, 2018 – A US$300 million loan approved today by the World Bank’s Board of Executive Directors will help the Government of Indonesia deepen reforms to reduce the costs and improve the reliability of the country’s maritime logistics.
The Second Indonesia Logistics Reform Development Policy Loan (DPL) builds on the reforms supported by the first Logistics DPL approved in November 2016 and addresses some of the key bottlenecks in the movement of goods within and across Indonesia’s borders.
“Efficient maritime logistics is vital for higher growth of the manufacturing, agriculture and service sectors,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “Better logistics will increase the country’s competitiveness and also help poverty reduction by lowering the price of goods and services in remote regions, especially in Eastern Indonesia.”
Inefficient port operations, uncompetitive logistics services markets and lengthy trade procedures hinder Indonesia’s competitiveness. Ports are often a bottleneck in the country’s logistics chain, hampered by inadequate infrastructure, burdensome regulations and low productivity.
These constraints contribute to the higher costs of logistics for manufacturing firms in Indonesia compared to Thailand and Vietnam and to the lower logistics performance of Indonesia relative to other countries in the region, as measured by the World Bank’s Logistics Performance Index.
“In the world's largest archipelago, with around 17,000 islands, the logistics supply chain is typically long and fragmented. This project will address some of the main bottlenecks at various points of the supply chain,” said Massimiliano Calì, World Bank Senior Economist.
The project’s main focus is on strengthening ports’ governance and operations, enabling a competitive business environment for logistics service providers, and making trade processing more efficient and transparent.
Reforms supported by the first Logistics DPL have already caused benefits to Indonesia, including an acceleration of new port projects with additional private sector participation, increased entry of operators in logistics markets and a reduction of time and costs of trade processing.
The World Bank’s support to Indonesia’s logistics sector is a vital component of the World Bank Group’s Country Partnership Framework for Indonesia, which focuses on government priorities for transformational development impact. This DPL is also leveraging additional lending from the Government of Germany through the German Bank for Development (KfW) and the Government of France through the Agence Française de Développement (AFD).
