Optimizing Indonesia’s Logistics Performance Based on Data: Challenges and Solutions to Improve Competitiveness

Indonesia’s logistics sector continues to show promising growth. Based on projections, logistics market revenue is expected to reach US$300.3 billion by 2024, a sharp increase from US$220.9 billion in 2020. This logistics data indicates that the logistics sector has a very important role in driving national economic growth, especially in terms of distribution and supply chain management.

However, behind this significant growth, Indonesia’s logistics sector also faces various challenges. High logistics costs and infrastructure that has not been fully optimized are some of the factors that must be improved immediately. With collaboration between the government and businesses, as well as the use of digital technology, Indonesia has a great opportunity to improve competitiveness in the global market and optimize the potential of the growing logistics market.

LPI Performance in Indonesia

According to data from the Central Statistics Agency (BPS), this sector contributed 5.98% to economic growth in the third quarter of 2023. However, despite its great potential, data from the logistics sector in Indonesia still faces a number of significant challenges. One of the most recent highlights is the World Bank’s downgrade of Indonesia’s Logistics Performance Index (LPI) rank in 2023, from 46th in 2018 to 61st. This reflects major obstacles, particularly high logistics costs, sub-optimal infrastructure, and freight imbalances between regions.

But entering 2024, Indonesia’s logistics sector is faced with increasingly complex challenges. With logistics costs still reaching 23.5% of Gross Domestic Product (GDP), much higher than other ASEAN countries such as Malaysia at only 13% of GDP, serious efforts are needed to overcome various structural barriers. This paper aims to explore the steps that can be taken to improve logistics efficiency and performance in Indonesia, and support sustainable national economic growth.

Causes of Indonesia’s LPI Performance Decline

The components of Indonesia’s Logistic Performance Index (LPI) value in 2018 and 2023, there are significant changes in several aspects. One component that has increased is customs, which rose from 2.67 in 2018 to 2.80 in 2023. This indicates an improvement in the efficiency of customs management. However, other components such as Infrastructure and Logistic Competence & Quality stagnated at 2.90, indicating that there is still work to do in improving the quality of infrastructure and logistics competence in Indonesia.

On the other hand, some components showed a decline. International Shipments dropped from 3.23 to 3.00, as well as Tracking & Tracing from 3.30 to 3.00, indicating a decline in the efficiency of international shipments and tracking of goods. Meanwhile, Timeliness (timeliness) also saw a decline from 3.67 to 3.30. This decline indicates significant challenges that need to be addressed, especially to maintain on-time delivery and improve tracking capabilities, which are critical in an increasingly complex global supply chain.

Strategies to Improve Indonesia’s Logistics Performance

To improve logistics performance in Indonesia, several strategic steps need to be taken by the government. One of the main efforts is to strengthen collaboration between the government and the private sector, to ensure the availability of raw materials and efficient delivery. This collaboration can reduce logistics costs and improve the flow of goods distribution. Digitization of services through the National Logistics Ecosystem (NLE) is also an important step. The NLE aims to simplify bureaucracy and business processes by integrating data and eliminating duplication, ultimately speeding up the process of delivering goods and documents in the logistics sector. In addition, to improve competitiveness, a focus on improving indicators such as logistics competence, international shipping speed, goods tracking, and timeliness is necessary.

In addition, the government must also develop structured and comprehensive short-, medium-, and long-term policies, tailored to the conditions on the ground. This policy program must be aligned with existing regulations in various sectors and regions, and pay attention to the precautionary principle in its implementation. In addition to the government, the role of the Indonesian Parliament is also very important in overseeing the implementation of logistics policies. This legislative support will ensure that policies are made in accordance with the aim of improving logistics efficiency and promoting post-pandemic economic recovery.

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