Market Trends of indonesia freight and logistics Industry
The transportation and storage sector witnessed a rise by 36.68% YoY in 2022, fueled by investment and increased mobility
- In 2022, transportation and storage experienced remarkable growth, surging by 36.68% YoY, due to higher community mobility and increased foreign tourist arrivals. The sector continued its rapid expansion in Q1 2023, recording a 15.93% YoY growth rate. During the same period, Indonesia achieved an impressive total investment realization of IDR 328.9 trillion (USD 0.021 trillion), representing 23.5% of its full-year investment target for 2023. Road transport accounted for 44% of the transport sector's GDP contribution, and rail accounted for only 1.4%.
- Indonesia's transportation and storage sector is crucial for facilitating the movement of goods, people, and services across the vast archipelago, contributing significantly to the country's economy. In the second quarter of 2022, the transportation and warehousing sector experienced a notable growth rate of 21.27% compared to the same quarter in 2021. Additionally, the first quarter of 2022 saw a positive growth rate of 15.79% in the sector. To enhance the transport and storage sector and support the development of the new Indonesian capital city, the government allocated approximately USD 19.27 million for road infrastructure projects in the Sepaku sub-district, Penajam Paser Utara district.
- The nation's focus on infrastructure expansion primarily centers around transportation. Within this sector, road, rail, and port infrastructure projects constitute 29%, 22%, and 23%, respectively, of the overall value of ongoing and upcoming infrastructure initiatives. In 2022, the foreign direct investment in vehicle and other transportation industries in Indonesia amounted to approximately USD 1.5 billion.
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Indonesia faced fiscal challenges amid surging crude oil prices and subsidy pressures in 2022
- The price of the Indonesian crude basket increased to an average of USD 99.4 per barrel between January and April 2022, compared to USD 68.5 per barrel in 2021, recording a 45% increase YoY. In the face of a widening gulf between domestic and international prices, state-owned Pertamina adjusted prices of three non-subsidized, high-grade fuel variants - Pertamax Turbo, Dexlite, and Pertamina Dex. After that, the price of unsubsidized Pertamax rose by 39% to USD 0.83 from April, with the fuel types accounting for 16% of total consumption and the rest of the subsidized fuels. By contrast, the prices of commonly used subsidized variants, Pertalite (90) and Premium (88), which accounted for over 80% of consumption, have remained unchanged for the past three years.
- In Q1 2022, total subsidies were up by 80% YoY, of which energy subsidies increased by 55% YoY. Compensation due to PT Pertamina amounted to USD 3.3 billion in 2020, of which USD 1.06 billion was pending, alongside USD 4.56 billion for 2021, which might have been much higher than the budgeted USD 9.32 billion in 2022. Assuming a 20% increase in total subsidies and higher compensation toward the state-owned oil player, a cumulative headroom for 0.4% of GDP will be required of this year's math for the country to remain within the -4.85% target.
- To reduce growing subsidies, the Indonesian government increased subsidized fuel prices by approximately 30% in September 2022 despite the potential risk of mass protests. The price of subsidized gasoline was raised from IDR 7,650 (USD 0.5) per liter to IDR 10,000 (USD 0.67) per liter, while the price of subsidized diesel rose from IDR 5,150 (USD 0.35) per liter to IDR 6,800 (USD 0.46) per liter.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- Indonesia's population is projected to reach 324 million by 2045, from 277 million in 2023
- Investment in the oil and gas industry in Indonesia reached USD 13.7 billion in 2023, a 13% YoY increase
- E-commerce sector is projected to register a CAGR of 10.41% during 2023-27, supported by the launch of BNPL in the country
- The transportation and storage sector witnessed a rise by 36.68% YoY in 2022, fueled by investment and increased mobility
- Indonesia aims to phase out LPG and fuel imports by 2030 and utilize domestic resources
- Japanese brands are leading the distribution of commercial vehicles, and Chinese investors are developing Indonesia's EV market
- The Indonesian government is aggressively promoting the country as a production hub for EV batteries, offering consumer subsidies to boost demand
- Capacity expansion initiatives, coupled with increasing oil exports and wheat imports, are driving growth
- Indonesia is adopting port digitalization under the National Logistics Ecosystem (NLE) program to enhance port efficiency
- The preference for road and sea freight transport is growing due to rising investments and initiatives in Indonesia
- Indonesia aims to become one of the leading global economies under Vision 2045, driven by growth in manufacturing
- Supply and worker shortages and the government's 30% subsidized fuel price hike increased PPI and CPI
- Indonesian government aims to manufacture around 600,000 electric vehicles by 2030
- Overall exports grew by 26% YoY in 2022, with China and the US as major export partners
- Implementation of fuel economy standards combined with accelerating electrification is expected to decline trucking fuel costs
- Rising focus on infrastructure with USD 430 bn investment and National Logistics Ecosystem implementation
- Government focusing on development of road & sea infrastructure to facilitate international freight services
- Port infrastructure under development to enhance port connectivity, with investments worth USD 2.5 billion
- The Ministry of Trade provided subsidies for freight rates during the 2023 Christmas and 2024 New Year period
- Indonesia invested USD 400 billion in infrastructure development to enhance global connectivity and economic growth
