Improving Logistics in Indonesia

South-South Knowledge Exchange Hub

Printing Date: 29 October 2015

Report Permalink: http://wbi.worldbank.org/sske/result-story/1374

Source: http://wbi.worldbank.org/sske

Providing Country(ies): Thailand

Recipient Country(ies): Indonesia

Topic(s): Industry and TradeFunding Source: South South FacilityFunding Amount: US $26,385Start Date: April 1st, 2012End Date: April 5th, 2012Key Contact: Henry SandeeLast Updated: February 11th, 2014

Summary:Indonesia faced deficiencies in trade and logistics that increased the costs of transporting goods and threatenedits competitiveness. The Government, with support of the World Bank, sought to develop and implement astrategy to improve logistics. In 2009, Indonesian officials participated in a Bank-supported study tour toThailand, which had implemented a five-year logistics strategy and was a strong performer on the World Bank’sGlobal Logistics Index. The visit focused on how to engage multiple stakeholders in developing a long-termstrategy and on short-run approaches for improving the efficiency of ports. After developing a draft strategy, theGovernment in 2012 supported a second visit to Thailand, partly financed by the South-South Facility, to buildbuy-in on this strategy and capacity to implement it, while deepening learning on key topics, particularly thelinkages between dry and sea ports.

During five days in April 2012, 25 delegates from Indonesian ministries, associations, universities, privatecompanies and the World Bank visited Bangkok to participate in meetings and visit two Thai ports. Delegateslearned about the challenges that Thailand faced in implementing its strategy and the role of the Thai NationalLogistics Council in coordinating it. Delegates received feedback on Indonesia’s strategy from Thai counterpartsand the United Nations Economic and Social Commission for the Asia and Pacific (UNESCAP), which wasassisting Asian countries in port reform. Participants learned how to monitor logistics and discussed issues incross-border trade. The delegation traveled to ports in Lat Krabang and Laem Chabang to learn about reducingship congestion, improving the transfer of shipping containers to dry ports, and applying public-privatepartnerships.

Besides increasing delegates’ know-how, the visit strengthened their skills and commitment to implementIndonesia’s logistics strategy. Delegates prepared memos on lessons learned, and Indonesia’s Deputy Ministerfor Industry and Trade shared a summary of these lessons with the Indonesian Cabinet, highlighting theimportance of engaging multiple stakeholders in executing the strategy, strengthening logistics’ monitoring, andcoordinating sea and dry port development. Partly driven by this exchange, Indonesia’s Presidential Officeissued a decree outlining the country’s logistics strategy and a detailed action plan.

The visit, which was part of a Bank technical assistance program, helped stimulate additional South-Southlearning with Thailand and other countries. According to one delegate, the exchange also demonstrated thatgains in logistics do not always require substantial investments in infrastructure, but may be achieved throughregulatory reform.

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Strategic Context:

Capacity Building Goals:Effectiveness of Organizational ArrangementsStrength of Stakeholder Ownership

Indonesia has faced deficiencies in the coverage and operations of its ports, transport, and other infrastructuresupporting the import, export, and domestic distribution of goods. This problem was reflected in its weakperformance in the World Bank Logistics Index, and—more pointedly— the higher costs of importing an orange toJakarta from Indonesia’s outlying islands than from China. The Indonesian government took initial steps in 2009to develop an approach for a logistics strategy, and sought assistance from the Bank to learn from goodpractices in other countries.

The World Bank, which was supporting trade programs in Indonesia through the Multi-Partner Trust Fund forTrade and Investment Climate, proposed that Indonesian authorities learn from Thailand, which was strongperformer in the Bank’s Logistic Index and had successfully implemented a five-year logistics strategy. In 2009,the Bank supported an initial study tour of Indonesian officials to Thailand financed by a regional trust fund.Through this visit, officials learned about approaches for designing a logistics strategy, engaging multiplestakeholders in the strategy development process, and improving the efficiency of ports. Once officials haddeveloped a strategy, the Bank organized a second study tour to Thailand in 2012 to continue learning onlogistics and port reforms, enhance buy-in on this strategy and capacity to implement it, and identify next steps.The Indonesians’ demonstrated their commitment to this second visit by their willingness to translate thestrategy into English, and the strong interest of Deputy Ministers to participate.

Description:

Exchange InstrumentsStudy Tour

In early 2012, the Bank team in Washington worked with Bank offices in Indonesia and Thailand and countrypartners to arrange the exchange. They selected a 25-member delegation representing a mix of officials fromIndonesia’s infrastructure, transport, and planning ministries; port organizations; academic institutions; privatecompanies; and the World Bank. Two Bank consultants traveled to Bangkok to plan activities for the visit withThai partners, which included Thai ministries, the Thai Chamber of Commerce, the National Economic andSocial Development Board (NESDB), and international organizations in Bangkok supporting trade and logistics.

The study tour took place from April 1 to April 5, 2012 and included meetings and visits to two Thai ports. Thedelegation learned about the steps and challenges in implementing Thailand’s logistics strategy, including indeveloping ports, strengthening service providers, measuring logistics reform, and engaging in public-privatecollaboration. At a roundtable organized by the NESDB, delegates received feedback on Indonesia’s draftstrategy from Thai counterparts and officials from the United Nations Economic and Social Commission for theAsia and Pacific (UNESCAP), which was helping to improve regional ports. Delegates also learned about issuesin cross-border trade.

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The delegates visited ports in Lat Krabang and Laem Chabang on April 4, 2012. The visit to Lat Krabangfocused on the port’s reforms to reduce sea congestion and logistics costs, and efficient mechanisms fortransferring containers from sea to dry ports. The visit to Lam Chabam focused on its public-private partnership(PPP) assigning port operations to a private firm, but port management to public regulator.

The South-South Facility, the Indonesian Government, and private companies covered the expenses of theIndonesian delegates. The NESDB helped to facilitate the visit and fund the expenses of Thai participants.

Outcomes:

Intermediate Capacity OutcomesEnhanced Knowledge and SkillsImproved Consensus and TeamworkIncreased Implementation Know-howRaised awareness

The visit to Thailand enhanced the knowledge and skills of delegates in logistics, improved consensus, andstrengthened their commitment to a reform path. As a first step in applying know-how, delegates preparedmemos on lessons of the visit, submitting them to Indonesia’s Coordinating Ministry of Economic Affairs. TheDeputy Minister for Industry and Trade within this Ministry shared a summary of these lessons with theIndonesian Cabinet. The summary highlighted the importance of

coordinating within the government and involving the private sector in designing and implementing alogistics strategy.developing a logistics strategy with clear targets and indicators.closely coordinating the development of sea and dry ports.

These insights have been critical to Indonesia’s reform effort. Delegates understood the value of engagingstakeholders from the private sector and academia at the start of designing a logistics strategy—not simplyconsulting them after a strategy has been developed. Delegates understood the importance of having a body tocoordinate strategy implementation; Indonesia is considering establishing a Logistics Council modeled afterThailand’s. Indonesian officials became convinced that a system must be created to measure gains in logistics,and enhanced their skills to improve port efficiency, especially by introducing PPPs and optimizing containermovements between sea and dry ports.

Reflecting the value of this exchange, Indonesia’s Presidential Office leveraged learning from the visit to issue adecree outlining the country’s logistics strategy that included a detailed action plan. The exchange also laid thegroundwork for further South-South learning. After the study tour, Thai and Indonesian officials heldvideoconferences to guide the implementation of Indonesia’s strategy and review Indonesia’s multi-year actionplan for logistics. In turn, Thai officials and logistics experts visited Indonesia to explain the contents ofThailand’s second logistics master plan.

Long Term Impact:The exchange was part of Indonesia’s multi-year program to improve logistics, which has been supported by theBank and other partners, notably through the Multi-Partner Trust Fund for Trade and Investment Climate.

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According to an Indonesian professor who participated in the visit, a key longer-term lesson is that gains inlogistics do not necessarily require investments in infrastructure, but can be driven by regulatory reform.Indonesia has since taken steps to engage multiple stakeholders in logistics reform and to embrace a system ofmonitoring and evaluation. For example, Indonesian professors developed a State of Logistics Report, based ona similar product in Thailand, which includes a chapter on estimating logistics costs as a percentage of GDP.

Besides Thailand, Indonesia has also reached out to other countries to learn about logistics issues. For instance,Indonesia has engaged in exchanges with Japan and the Netherlands to learn about the establishment andoperations of dry ports.

Lessons for Effective Knowledge Exchange:

Integrating knowledge exchange programs into broader technical assistance programs can help sustainlearning and follow-up, and improve outputs and development results.When seeking to build buy-in and enhance skills to execute reforms, exchange organizers should choosedelegates representing a mix of high-level officials, mid-level “doers,” and technical staff.World Bank country offices and consultants can be useful resources in helping to design, organize, andfacilitate knowledge exchanges. Technical staff from Bank country offices can often suggest appropriateinstitutions to visit. It can be useful to invite donors and multilateral agencies with relevant expertise to participate in bilateralknowledge exchange programs.

Knowledge Providers:The following Thai officials from public, private, academic, and non-governmental institutions shared theirknowledge and experiences during the visit:

Mr. Bhanumas Srisukha, Chairman of Logistics Development Committee, Thai Chamber of CommerceMr. Paiboon Ponsuwanna, President, Thai National Shippers' CouncilDr. Tanit Sorat, Vice-Chairman, Federation of Thai IndustriesMr. Somsak Wisetruangrot, Chairman, Thailand International Freight Forwarders AssociationMr. Krirkkla Sonthimas, President, Thai Federation on LogisticsMs. Sawitree Ratanachand, Secretariat for the Logistics Development Committee, Thai Chamber ofCommerce Dr. Chula Sukmanop, Inspector General, Ministry of TransportDr. Malee Uabharadorn, Chief of the Transport Logistics Group, Office of Transport and Traffic Policyand Planning, The Ministry of TransportDr. Sompong Sirisoponsilp, Director of Chulalongkorn University's Transport Institute, ChulalongkornUniversityDr. Pongchai Athikomrattanakul, Director of Center for Logistics Excellence (Logex), King Mongkut'sUniversity of Technology Thonburi (KMUTT)Mrs. Anong Paijitprapaporn, Director of the Logistics Bureau, Department of Primary Industries andMines, Ministry of IndustryMr. Sarit Chokchainirand, Managing Director, Effinity Co. LtdMr. Suriyon Thunkijjanukij, Policy and Plan Analyst, Senior Professional Level, Office of NationalEconomic and Social Development BoardMs. Anuwan Vongpichet, Policy and Plan Analyst, Professional Level, Office of National Economic andSocial Development BoardMs. Nopphachit Luangchosiri, Policy and Plan Analyst, Professional Level, Office of National Economicand Social Development BoardMs. Sorraya Yosyingyong, Policy and Plan Analyst, Practitioner Level, Office of National Economic andSocial Development Board

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Officials from the Asian Development Bank and the United Nations Economic and Social Commission for theAsia and Pacific also participated in the exchange.

Knowledge Seekers:The delegation included 20 officials from Indonesian ministries, public agencies, trade associations, academicinstitutions, and private organizations engaged in logistics reform, along with five Bank staff and consultants.

Edy Putra Irawady, Vice Minister, Coordinating Ministry Of Economic AffairsDidi Sumedi, Director for Logistics and Distribution Facility, Ministry of TradeSenator Nur Bahagia, Chairman, Center of Logistics and Supply Chain studies, Bandung Institute ofTechnologyNofrisel bin Arlis Batuah, Head of Educational Affairs, Indonesia Logistics AssociationTri Achmadi , Chairman, Center Of Maritime Study, Surabaya Institute of TechnologyKuncoro Harto Widodo, Vice Chairman, Center of Transportation and Logistics Studies, Gajah MadaUniversity YogyakartaSiti Ariyanti, Head of Educational Affairs, Indonesia Logistics and Freight Forwarder AssociationYusmar Anggadinata, Dry Port Expert, Center of Logistics and Supply Chain Studies - Bandung Instituteof TechnologyErwin Raza Head of Indonesia Logistics Blueprint Review Team, Coordinating Ministry of EconomicAffairsAgus Kurniawan, Cabinet Secretariat Nur Muhammad Sinungan, Coordinating Ministry of Economic AffairsElen Setijadi, Coordinating Ministry of Economic AffairsSukarman, Coordinating Ministry of Economic AffairsPrasetijono Widjojo Malang Joedo, Deputy Minster for Economic Affairs, National Development PlanningAgencyAmalia Adininggar Widyasanti, Director for Trade & Investment and International Economic Cooperation,National Development Planning AgencyBambang Prihartono, Director for Transportation Affairs, National Development Planning AgencyDail Umamil Asri, Deputy Director for Transportation Affairs, National Development Planning AgencyMaliki Achmad, Secretariat for National Connectivity Team, National Development Planning AgencyYunus Gastanto, National Connectivity Team, National Development Planning AgencyAhmad Malkan Lubis, Consultant, World Bank, JakartaWahyu Tunggono Soemardi, Trade Logistics Consultant, World Bank, JakartaNatalia Salcedo Cubillos, Trade Economist, World Bank, JakartaHenri Sandee, Senior Trade Specialist, World Bank, JakartaTitis Arum Pusparesmi, World Bank, Jakarta

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