Interview: Shanti Poesposoetjipto

How have economic conditions perpetuated the need to address issues of connectivity?

SHANTI POESPOSOETJIPTO: While Java continues to be the country’s production centre for consumer goods, growth has actually been higher outside Java. As a result, migration rates to the major cities of Java have declined, with a higher percentage of the population choosing to remain in the provinces where favourable employment opportunities have become more readily available. In Kalimatan, for example, the oil, gas and mining industries are driving growth, while in Sumatra, the plantation industries are thriving. It is this economic expansion within the regions that is responsible for Indonesia’s real growth. As economic conditions improve, consumption will ultimately increase. However, this will also put considerable strain on the demand for commodities and fast moving consumer goods.

Besides an expanding domestic market, we are experiencing significant growth rates within the import and export market. The current weakness of the dollar is encouraging higher inflows of products from international ports to Jakarta, and thence from Jakarta to the regions. On the other hand, growing industries and higher production levels throughout Indonesia are leading to more internal traffic from the regions to Jakarta in order to serve the international markets.

The improvement of the country’s connectivity and accessibility are vital for our economic advancement and more specifically the development of our more remote regions. Due to the geographic makeup of the country, the shipping industry and our seaports will be the catalyst to our domestic, regional and international economic trade expansion.

To what extent have recent measures been successful in the reduction of domestic logistics costs?

POESPOSOETJIPTO: Advancements within the area of public-private partnerships (PPP) are expected to improve the overall logistics industry and reduce costs. The government’s will is strong, but we are anxious to see higher levels of execution and delivery taking place. In our experience the lack of coordination between the central and regional government agencies has often been responsible for delays or inaction. Improved synergy among those agencies is required for the successful implementation of PPP projects. Even though shipping remains the most effective way to transport goods to the domestic market, supportive infrastructure such as airports, road networks and warehousing facilities are equally important in driving down logistics costs. The country must continue to work towards a plan that links all of these crucial elements. Frequently, long-term strategies remain compartmentalised and do not consider the entire supply chain.

A single and cohesive plan, combined with actual execution to address our infrastructure challenges, would result in stronger commitment from the private sector. Larger investments in new equipment, vessels and more sophisticated IT systems would be realised and would ultimately drive down the cost of logistics.

How does the recent financial crisis affect the Indonesian shipping industry?

POESPOSOETJIPTO: The difficult economic conditions experienced in Europe and North America have encouraged many shipping companies to redirect their vessels to Asia, where economic growth is currently much higher. As a result, the intra-Asia market is absorbing a larger percentage of their fleet.

However, this led to an oversupply which intensified competition and therefore drove down rates. This has meant that International trans-shipment routes such as Singapore, India, Bangladesh, Thailand, Malaysia and China have became less lucrative. However, since Indonesia’s shipping industry is protected by cabotage law and does not allow foreign-flagged vessels to operate domestically, recent international concerns have not impacted the local industry. Companies such as ourselves will therefore be focusing on developing our domestic market business and will invest accordingly.