Agus Pambagio, Sidik Pramono, Jakarta – Logistics costs are a key factor in national economic competitiveness. In recent months, however, Indonesia's national logistics system, particularly its maritime transportation, has sounded serious alarm bells.
Container shortages on various routes and soaring freight rates have impacted the uncertainty of goods distribution services. Additionally, major ports are experiencing serious structural crisis below the waterline due to progressive sedimentation (silting) and the resulting shallowing of port basins and access channels.
Silting crisis
This silting crisis is exacerbated by a rigid regulatory gridlock. Under Government Regulation No. 61 of 2009 concerning Shipping and Port Affairs, the legal mandate and budget allocation for dredging and channel maintenance sit strictly with the Ministry of Transportation, funded via Non-Tax State Revenue (PNBP) through the local Harbourmaster and Port Authority Offices (KSOP). Port operators are legally barred from undertaking independent dredging operations as doing so would constitute a violation of state financial laws and be classified as a state loss.
Consequently, due to the Transportation Ministry failure to execute timely dredging, major port channels have grown dangerously shallow. To prevent commercial container ships getting stuck in the mud (running aground), they are forced to limit their vessels to just 70% of their cargo capacity. This 30% reduction in vessel utilization triggers massive inefficiencies, driving up the unit cost per container, impacting port efficiency, delaying supply chain movement, and ultimately reflected in the price tag for everyday consumers.
Beyond the silting crisis, maritime traffic has also been negatively impacted by the Iran War in the form of rising non-subsidized fuel prices. The government restricts official base tariff increases, resulting in shipping liners operating at a loss. To offset these losses, liners have begun to unilaterally imposing emergency fuel surcharges of around 10 million per container, overriding existing contracts with cargo owners. Refusal by cargo owners to pay the additional fees results in delayed departures or a total refusal of service. Furthermore, liners are increasingly reluctant to absorb the cost of repositioning empty containers back to major hub ports like Tanjung Perak (Surabaya), Tanjung Priok (Jakarta), and Belawan (Medan), causing serious container scarcity in various routes.
Market distortions in determining container freight rates are also increasingly evident in situations of limited supply, whereby the freight contract mechanism shifts to highly volatile spot pricing. Service users are forced to accept surcharges, peak season pricing, and even prime rates without adequate transparency. Under these conditions, the government has practically no instruments to ensure fair rates when the market experiences significant disruption or pressure.
A policy vacuum regarding commercial maritime shipping rates has also been identified. Unlike the aviation sector, where the government determines the upper and lower tariff limits, or certain land transportation sectors that have reference tariffs, maritime container transportation remains entirely subject to market mechanisms. As a result, price volatility occurs without adequate oversight. Yet, according to the Shipping Law, the state has a mandate to ensure the smooth distribution and affordability of national maritime transportation costs. Under such circumstances, the government should not simply spectate when disruptions occur that has severe implications on industry and society.
Structural reforms
These ground-level realities have highlighted the structural weaknesses within the national logistics governance, contradicting the government's vision of transforming the National Logistics System (SigLogNas). Limited capacity and operational reliability at major hub ports have become the norm rather than the anomaly. Increased waiting times, irregular ship traffic, congestion, unreliable costs for cargo owners have all exacerbated the challenges of maritime logistics.
The Indonesian government has set a target to reduce its logistic costs to 8% of Gross Domestic Product (GDP) by 2045. Currently, these costs are still in the range of 14.29% to 14.5% of GDP, functioning as a substantial hidden tax on the entire domestic economy. This economic loss is particularly evident when comparing Indonesia with its regional competitors. Benefiting from better port efficiencies and superior supply chain integration, neighbouring countries operate at a lower logistics cost: Malaysia at around 13% of GDP, Thailand at around 12-13%, and Singapore at an optimal baseline below 10%.
The Transportation Ministry as the main regulator in the transportation sector must undertake system-wide overhaul of the National Logistics System to insulate the economy against future disruptions. Prioritizing the maritime sector in this overhaul is also necessary to resolve the ongoing maritime crisis. A resilient maritime framework is undoubtedly essential to improve and secure the country's archipelagic supply chains.
In the face of global economic slowdown, market transparency to ensure robust economic activity is also becoming much more urgent. In the case of unpredictable emergency fuel surcharge, for example, the Ministry of Transport should require mandatory reporting of cost structures and transparency of surcharges, as well as prepare a tariff stabilization mechanism during periods of disruption, including guidelines for reasonable price increases and oversight of service contract implementation. Additionally, an integrated monitoring system to monitor strategic domestic routes and enable effective oversight of vessel positions and container availability can also serve as key action to improve maritime traffic via data-driven governance.
The Transportation Ministry as the only agency with the mandate and obligation to dredge waterway and basin to ensure safe and smooth maritime transportation must also act by allocating PNBP funds to speed up port cleaning projects, deepen navigation channels and port basis, thus safely restoring vessel capacity to 100%.
The ongoing maritime crisis underscores the fundamental impact of ineffective maritime connectivity to overall national logistics costs. Substantial improvements cannot be achieved by building concrete infrastructure alone but also requires transparent and coordinated governance. Improving the national logistics system is no longer an option. Indonesia's economic resilience today and for future global shocks depends on a robust and strong national logistics system than can anticipate and handle recurring disruptions and simultaneous pressures. Reforms today for the resilience of today and tomorrow.
[Agus Pambagio, Managing Partner PH&H, Public Policy Interest Group. Sidik Pramono, Lecturer of Faculty of Administrative Science, Universitas Indonesia. The views expressed in this article are those of the author.]
Source: https://jakartaglobe.id/opinion/alarm-bells-in-indonesias-maritime-logistics-ecosyste