Frost & Sullivan Indonesia Logistics Outlook 2012

Indonesia Logistics Industry Outlook:

2012: An Executive Insight

Presented by:

Gopal R

Vice President, Asia Pacific

Transportation & Logistics Practice

January 17, 2012

1 Indonesian Logistics Market

2 Market Projection, Drivers and Restraints

4 Key Industry Trends

5 Strategic Roadmap

3 Freight Movement in Indonesia

Agenda

2

Indonesia's Service Sector Offers Growth Opportunity

Growth of GDP and Service Segment, 2007 - 2012

Growth of Service Segment, 2007 - 2012

Years

Gro

wth

(%

) G

row

th (

%)

Years

Source: Indonesian Statistical Agency, World Bank, Analysis by Frost & Sullivan

• With dynamic industrial activities, Indonesia’s

real GDP in 2012 is estimated to witness an

increase of 6.6 percent from 2011

• Services segment will follow the pace of the

economy, as industries such as financial

sector, hotels, hospitals, retail,

telecommunications and airline are

experiencing continuous expansion

• The rise in Indonesia’s middle class will result

in profound changes, including growth

opportunity for transportation & logistics

industry

• Transportation, storage and courier segment is

expected to expand 11.5 percent this year,

aided by the growth in exports and

manufacturing sector as well

3

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2007 2008 2009 2010 2011(e) 2012(f )

Nominal GDP Services Real GDP

0.0%

5.0%

10.0%

15.0%

20.0%

2007 2008 2009 2010 2011(e) 2012(f )

Services Transportation, storage and courier

Railways Transport

1.0%

Road Transport

56.1%

Sea Transport

7.6%

River, Lake and Ferry Transport

3.3%

Air Transport16.1%

Services Allied to

Transport

15.9%

Transport and Storage segment contributes 3.3 percent

to country GDP

Source: Indonesian Statistical Agency, analysis by Frost & Sullivan

Indonesia Economy, 2011 Indonesian Transportation and Storage Segment

Distribution, 2011(e) (IDR 235.70 trillion)

Transportation makes up 84.1 percent of the total

transportation, storage and courier market

4

Agriculture. forestry & f ishing

15.3%

Mining & quarrying

11.1%Manufacturing

24.8%

Construction10.3%

Transportation & storage3.3%

Communication3.4%

Services 31.9%

Total transportation & logistics market in Indonesia

estimated at IDR 1232.92 trillion in 2011

Potential market for the outsourced / contract

logistics service providers in Indonesia

Transportation,

storage and

courier

(IDR 235.70

trillion)

Logistics Expenditure is hidden in:

Tra

ns

po

rta

tio

n &

Lo

gis

tic

s

Ma

rket

Ma

rket

Va

lue

IDR 235.70 trillion IDR 997.22 trillion

Source: Indonesian Statistical Agency, analysis by Frost & Sullivan

Other services

(IDR 218.40trillion)

Mining & quarrying


Manufacturing


Agriculture, forestry

and fishing


Construction


Trade


Communication

(IDR 32.74trillion)

5

Transportation & Logistics market in Indonesia: The

Evolution

Transportation & Logistics Market Size, 2006 - 2011

Growth (%)

IDR

, T

rill

ion

s

Years

Source: Indonesian Statistical Agency and other sources, analysis by Frost & Sullivan

Transportation & Logistics market in Indonesia has grown by a Compound Annual Growth Rate (CAGR) of

13.5 percent between 2006 to 2011

20.8 27.8 (5.8) 14.3 13.4

6

511

640

839770

876997

143 150 171 182 212 236

654

790

1,010951

1,087

1,233

0

200

400

600

800

1,000

1,200

1,400

2006 2007 2008 2009 2010 2011(e)

Hidden Logistics Cost Transport, storage and courier T&L Market Size




5 Strategic Roadmap


Agenda

7

Key drivers and restraints for Indonesia transportation

& logistics market

Strong economic growth fuelled by high domestic consumption

Relocation and strong flows of capital drive manufacturing

activities and boost logistics demand DR

IV

ER

S

RE

ST

RA

IN

TS

Underdeveloped logistics infrastructure and slow pace in addressing infrastructure

bottlenecks

Geographically dispersed market increases logistics cost

Availability of qualified logistics industry professionals

Source: Frost & Sullivan

8

Government’s initiatives in economic transformation and development

of logistics industry

The result of poor connectivity, process and weak infrastructure is

evident in many price differentials and transport problems

9

Market Reality...

Some 10 percent of Indonesian

exports leave ports too late and

consequently do not reach the

regional transshipment ports on time.

Ships destined for local destinations

are frequently delayed

Gasoline prices in Di Kisar Island

are three times higher in rainy

season than in dry season

1. Shrimps from eastern Indonesia,

cannot be commercially

processed in Java.

2. Commodities like pineapples are

canned abroad because it is

cheaper to transport them to

Malaysia than to ship them to

Java Trucks transport approximately

70 percent of freight in Indonesia

but majority of the trucks on the

road in Indonesia are old and

poorly maintained

The costs of bringing a container

from Jakarta’s main industrial sites

to the port are double that in

Malaysia and Thailand

1. The price of a bag of cement in certain parts

of Papua is 20 times that in Java.

2. The price of a gallon of water in Medan is

double that in Jakarta.

3. Oranges from China are cheaper than

oranges from Pontianak (Kalimatan)

A truck making a round-trip from

Bandung to Jakarta may spend

up to 75 percent of its time

parked due to customs

processes, warehouse delays,

and lift-on and lift-off Queues

Trade and transport logistics are

still mainly ‘paper-based

systems’, which increases

logistics costs in addition to other

charges

Source: World Bank, Frost & Sullivan Analysis




5 Strategic Roadmap


Agenda

10



Key Industry Trends

5 Strategic Roadmap


Agenda

4

11

Transportation & Logistics Market: Key Trends

12

Service Trend

• Higher inclination toward outsourcing variety of value added services

• Logistics service providers need to work toward more value-added services

while strengthening the intermediate services

Customer Trend

• Service quality and reliability are top priorities when selecting logistics service

providers

• End users are moving toward integrated supply chains with professional service

providers

Economic Trend

• Growth of Indonesian logistics market fuelled by strong growth of external trade and substantial inflow of FDI

• Rising intra-Asia trade favors the transportation & logistics industry

Business Trend

• Retail / FMCG Logistics

• Service Parts Logistics




5 Strategic Roadmap


Agenda

13

Moving forward…

14

Next

Step

• Specialized logistics solutions for specific industries (e.g

FMCG, construction, mining)

• Develop a logistics network of industrial centers on the

outskirts of Jakarta for improved access to the Port of

Tanjung Priok

• Integrate transportation hubs (seaports, airports, terminals,

distribution centers) with the transport network and develop

state-of-the-art logistics infrastructure for efficient distribution

• Strengthen human resource capability with professional and

experienced logistics personnel along with the market

expansion

• Improve cross sector regulations and streamlining permit

applications

• Focus on basic logistics services with common value-

added services

• High traffic congestion in Jakarta results in longer lead

time, shipment delay and inefficient supply chain

• Underdeveloped infrastructure and poor connectivity lead

to increased logistics costs

• Growth of logistics market is not supported by the growth of

professional human resources

• Overlapping regulations at the central and local

government levels as well as among sectors and

institutions cause hassle and inefficiency

Logistics industry in Indonesia

M o v i n g t o w a r d Current

Any

Questions?

15

Frost & Sullivan Indonesia Logistics Outlook 2012

Business

logistics expenditure

transport logistics

industry transportation

trillionpotential market

market reality

eastern indonesia

growth opportunity

growth of gdp