Indonesia’s infrastructure can’t keep up with growth

Ok, so the article is a few weeks old, but I just stumbled upon it. Indonesia’s economy has been a great success story the past few years and is often considered by companies looking to shift sourcing away from China. While I personally think they are in far better shape than Vietnam, this report from Asia Sentinel points to the difficulties Indonesia faces as infrastructure is gradually overwhelmed by growth:

At the ports, both imports and exports are skyrocketing, with some major seaport operators reporting that loading and unloading volumes are averaging increases as much as 15 percent in this month alone, and that port delays are continuing to increase. Vegetables and other perishables are being delayed for two to three days before delivery to food stores, merchants complain.

A recent survey found that it takes as long as seven hours for goods to travel the 30 kilometers from the Tanjong Priok port in Jakarta to Jababeka Industrial Estates, an industrial base for 2,000 companies that account for 15 percent, or US$10 billion of Indonesia’s non-oil exports.

The government last week issued an urgent call for port management to improve its services and expand its container yards. Import-export companies say they are losing as much as US$20-30 per container per day because of delays in cargo handling and document clearing, which have soared from 3-5 days up to 10, in addition to the already-high terminal handling charges.

Trade Minister Mari Pangestu and other officials from the Transportation Ministry and the Customs and Excise Directorate General inspected the port last Thursday, coming away complaining about the lack of infrastructure and unsatisfactory logistical services.

Jacob Friis Sorensen, president director of PT Maersk Indonesia and a member of the European Chamber of Commerce said recently that Indonesia’s cost to handle a 20-TEU (ton-equivalent unit) dry container, at US$667, are far higher than most other regional ports. Malaysia’s equivalent cost is US$432, Singapore’s US$416 and China’s US$390. Thailand’s costs are slightly lower, at US$615 and Vietnam’s are slightly higher, at US$669.

Takuji Kamayama, the Japan External Trade Association representative in Indonesia, said conditions have deteriorated since 2007, especially against regional ports, with research showing that from 2005 to 2007 at Tanjung Priok, it took 3.5 days for officials to check containers to obtain export and import permit documents, compared to 2.5 days in Thailand, two days in Malaysia and just one in Singapore.

Operators complain that in addition to the high tariffs and unsatisfactory services, the high population density of the Priok area means that in coming years there will be no space to develop additional infrastructure.

Emphasis mine. Read the whole thing.