Tuesday, 1 Rajab 1441 / 25 February 2020

Tuesday, 1 Rajab 1441 / 25 February 2020

Toll roads not significantly reduce logistic costs: Faisal

Jumat 15 Feb 2019 17:28 WIB

Red: Reiny Dwinanda

Senior economist of the Institute for Development of Economics and Finance (Indef) Faisal Basri

Senior economist of the Institute for Development of Economics and Finance (Indef) Faisal Basri

Foto: Tahta Aidilla/Republika
Transporting logistics by means of land transportation resulted in expensive costs.

REPUBLIKA.CO.ID, JAKARTA -- Senior economist of the Institute for Development of Economics and Finance (Indef) Faisal Basri opined that toll roads are not an effective solution to reduce Indonesia's logistics costs significantly. In return, the country's logistics could be strong if the goods were to be transported by vessels instead of trucks, he explained.

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The toll roads just helped to ease the flow of vehicles joining the annual mass exodus (Mudik), Faisal noted. He made the statement at a press briefing on Indef's offer for Strategic Development Agenda of Natural Resources and Infrastructure here on Thursday, held ahead of the convening of the second round of Indonesia's presidential debate on Feb 17.

Faisal believes that the logistics costs can be significantly reduced if land transportation were to be shifted to sea freight. However, only some 10 percent of Indonesia's logistics are transported by sea, while the remaining 90 percent are still transported by trucks.

Transporting the logistics by means of land transportation has resulted in expensive costs, as they are transported by trucks through the Trans-Java and Sumatra Toll Roads. However, using sea transport for shipping goods is economical, Faisal explained.

The land freight rate per kilogram is relatively expensive, while the cargo that can be carried by a truck is also limited. In comparison, the sea freight cost of Brazilian mango could be reduced to zero, as a cargo ship could transport up to 20 thousand tons, Faisal, a senior economist of the University of Indonesia, stated.

Apart from his view that land transportation is an ineffective solution to the country's logistics costs, Faisal admitted that the constructed toll roads might have reduced the current logistics costs than before. The toll roads contributed to the reduction in logistics costs, particularly if the tariffs were adjusted.

The toll roads also shortened the travel time, Faisal said. However, the cost reduction was, nationally, not significant, and Indonesia's products would still fail to compete with their foreign counterparts, Faisal stated.

A pharmaceutical factory in Medan, the capital city of North Sumatra Province, for instance, preferred importing medicine bottles from Guangzhou, China, to purchase similar products from Java Island due to cost disparity. Faisal said the price of a container of medicine bottles from Java Island was recorded at US$827, while a container of similar products imported from China just cost US$600.

"The logistics costs can be reduced, but our products are not able to compete with the prices of imported products that are transported by sea," Faisal added.

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