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Luhut calls World Bank's logistics performance index unfair

Jakarta Globe - July 18, 2023

Jayanty Nada Shofa, Jakarta – Chief Investment Minister Luhut Binsar Pandjaitan on Tuesday attributed Indonesia's poor trade logistics performance as revealed by a World Bank report to having too many ports that scatter across the archipelago. The index might also not provide an apple-to-apple comparison, as other economies such as Singapore do not have as many ports.

The World Bank not long ago released the 2023 logistics performance index (LPI) which placed Indonesia in 61st place out of 139 countries. The LPI measures how efficiently a country moves goods across and within its borders on a 5-point scale. The index uses six parameters, namely: customs, infrastructure, international shipments, logistics competence, timeliness, as well as tracking and tracing. In 2023, Indonesia only scored 3 in overall LPI, falling behind other ASEAN countries such as Singapore (4.3) and Malaysia (3.6).

Indonesia has launched the so-called national logistics ecosystem (NLE) – a digital platform that aims to cut bureaucratic red tape and logistics costs. Indonesia plans to have this platform adopted by 34 ports in the country. The Finance Ministry in March reported that 14 ports had implemented the NLE so far.

"We have a large number of ports. We are currently trying to improve 34 ports and everything is going according to plan. But we have thousands of small ports prone to smuggling," Luhut said at a conference in Jakarta on Tuesday.

Luhut told the forum that it would be unfair to compare Indonesia to Singapore which significantly differs in population size and number of ports.

Indonesia has 34 ports, although the actual number can go up to 116 depending on the quality of the ports. Not to mention the smaller ones that can bring the number to thousands, according to the minister.

"Singapore is the highest-ranking ASEAN country in the LPI report. Singapore is only home to 6 million people and only has one port. So of course, they would score relatively high. But I think people should make an apple-to-apple comparison," Luhut said.

Luhut unveiled his plans to meet the World Bank Indonesia and Timor Leste country director Satu Kahkonen to discuss Indonesia's LPI performance as the country has done many things to improve its logistics.

"The UNCTAD [UN Conference on Trade and Development] names Indonesia in the top 20 countries with the best port performance. So there is a paradox here. We will accept the [LPI] results for now, but I'm going to talk to Satu Kahkonen so they can tell us what we have done wrong and which aspects we should improve," he added.

According to the 2023 report, Indonesia's scores on the respective LPI parameters are as follows: customs (2.8), infrastructure (2.9), international shipments (3), logistics competence (2.9), tracking and tracing (3), as well as timeliness (3.3). Singapore tops the list in the 2023 ranking with an LPI score of 4.3. Followed by Finland (4.2).

Indonesia ranked 46th place in the 2018 LPI survey after scoring an overall score of 3.15.

Source: https://jakartaglobe.id/business/luhut-calls-world-banks-logistics-performance-index-unfai