Novia D. Rulistia, Jakarta – Unreliable and expensive road transportation is a growing constraint to Indonesia's economic development, with the country now having the highest logistics costs in the region, a joint study shows.
The Asia Foundation and University of Indonesia's Institute for Economic and Social Research (LPEM) found that transporting goods in Indonesia was expensive because of charges imposed by local governments and illegal fees collected by police and thugs.
"These impediments, for example, have raised operational costs of a truck by 10 percent per year. The truck owner will then pass the costs to customers," the foundation's director for economic programs Neil McCulloch said Monday.
With the overall vehicle operating costs for trucks at 34 U.S cents per kilometer, the study concluded that Indonesia's logistics costs were higher than Vietnam, Thailand, Malaysia and China, whose costs are only 22 cents per km on average.
More than 35 trucks from more than 20 trucking firms were involved in the study, which was conducted last year. A surveyor, equipped with a global positioning system, was placed in participating trucks on nine different trading routes to obtain the direct costs paid by truck drivers during a trip.
Six of the nine routes selected were in Sulawesi – Bulukumba to Makassar, Pare-Pare to Makassar, Palopo to Pare-Pare, Mamuju to Pare-Pare, Marisa to Gorontalo and Kotomobagu to Manado. Other routes were Sumbawa Besar to Mataram in West Nusa Tenggara, Malang to Surabaya in East Java and Rantau Prapat to Medan in North Sumatra.
For the Malang-Surabaya route, for instance, on average a truck needs to spend an additional Rp 6.41 million monthly in operating costs, retributions and illegal fees.
"Most trucking firms are complaining about the user charges issued by local governments," McCulloch said, adding the charges were collected by different agencies based on the goods loaded.
Local administrations also issue fees for route permits and licenses, which are basically illegal in Indonesia as they are inconsistent with the national regulatory framework, he said.
According to the law, route permits are required only for public transportation vehicles, but in practice they are often required for trucks passing between provincial districts.
In many other countries, illegal fees and permit requirements at the local level are banned within the road transportation regulatory framework, which is more straightforward and less open to interpretation.
"Despite nationally set standards on road transportation and road quality, local governments passed regulations that contradict or disregard national regulations," said McCulloch.
The study recommended enforcing appropriate legislation while seeking to eliminate unnecessary road charges hindering the flow of goods. "We can use the example of measure in Gorontalo to eliminate user charges for natural resources as a model for addressing the high-cost economy," he said.
The study also revealed trucking firms in some areas made regular payments to thugs as well as to police and military officers to ensure the secure passage of their vehicle. Sometimes they even work hand in hand.
The country's poor road infrastructure, according to the study, has also exacerbated problems, driving up maintenance and fuel costs in particular.
The World Bank's Logistics Performance Index in 2007 ranked Indonesia 43 out of 150 countries. The index places Indonesia below many of its neighbors in Asia, including Vietnam, Thailand, Malaysia and China.
In February, the World Economic Forum ranked Indonesia 91 out of 131 countries in the transportation area.