60108 Technical Note March 2011 Private Sector Development National Logistics Blueprint: The Challenge of Implementation Indonesia's Logistics Blueprint in a Nutshell Recognizing the need to ensure the availability of strategic commodities at affordable prices, reduce logistics costs to facilitate the competitiveness of export products, and prepare the country for better market integration within ASEAN, Presidential Instruction No. 5/2008 was issued requiring the release of a National Logistics Blueprint (NLB). The NLB, completed by an inter-ministerial team in early 2010, describes current conditions and major problems in the flow of commodities for domestic use and key export destinations, and proposes an action plan in seven main areas (Figure 1): Figure 1. NLB main areas of action 3. Upgrading the quality of human resources in logistics. The aim is L&R - Law and Regulations to increase the availability of trusted professionals in logistics, by increasing competence through skill certification and HRM- ICT- increasing the role of education SEC- LSP- Strategic Human Information Logistics and training institutions and Export Resources Communication Service in coordination with the Commodities Management and Technology Providers National Board of Professional Certification (BNSP) and the Ministry of National Education. At present, small- and medium- size businesses have difficulty WWI-What & Where infrastructure selecting providers because there is no clear method to identify quality services. INS-Institutions Source: Based on National Logistics Blueprint 2009. 4. Strengthening competitiveness of domestic service providers. 1. Upgrading infrastructure. simplify the trading of export Logistics service providers are Improvements are proposed and strategic commodities, expected to fully participate by mode of transport: airports, improve port and border in the overall change of the seaports, river/sea crossings management, facilitate national logistics system. (ferries), highways, roads and transport across regions, and Incentives are needed to railways. This section also prepare laws and implementing promote increases in the quality stresses the need for smooth regulations regarding multi- and quantity of private sector interfaces between multi-mode modal transportation. The investments. There is a need to transportation networks, so regulatory process also requires encourage private participation that goods can move rapidly harmonizing and simplifying in infrastructure, create a from one mode to another. sets of laws issued by various favorable business climate ministries and agencies, as well for actors in supply chains, 2. Regulatory reform aimed at as synchronizing regulations and a special need to provide creating a business environment among central and local credit schemes to support the conducive to lowering logistics governments. upgrading of the trucking fleet. costs. This reform is intended to Private Sector Development Technical Note 5. Further introducing Information The NLB outlines three stages over inter-departmental team that & Communication Technology 15 years to strengthen Indonesia's has held several roundtable (ICT). The NLB recognizes the logistics performance. In 2010-14, discussions to offer private need for ICT development to the focus is on improving domestic sector representatives and support efforts to improve connectivity, in particular access to public stakeholders a platform the quality and performance ports, improving road and railway to discuss the logistics strategy. of the logistics sector. The connections, and inter-island focus is on strengthening the shipping. The second stage, 2014- · The commodity-specific National Single Window (NSW), 19, concentrates on fully-fledged and supply-chain approach. introducing Customs Advanced integration of Indonesia in ASEAN's Acknowledging the importance Trade System (CATS) and the logistics networks. The third of a commodity-specific National Integrated Logistics stage, 2019-25, focuses on strong approach in identifying major and Intermodal Transportation integration of Indonesia in global bottlenecks and priorities is System (NILITS) to provide logistics networks. key to lowering logistics costs. smooth control on the flow of Although most of the problems goods. What is good about the National identified are common to Logistics Blueprint? all basic-need commodities, 6. Establishing an institutional the supply-chain approach framework. A short-term The NLB has increased awareness provides a framework to National Logistics Team (NLT) about the role of logistics in trade establish distribution centers is expected to be created to facilitation and international and consider special treatment supervise, monitor, evaluate and competitiveness, as well as on the for certain products, such as report on the implementation need to improve the domestic CPO, coal, oil and gas. of the NLB. The team will also flow of local basic goods. The be assigned to assess the need Government presented the NLB to · The NLB identifies immediate for a special agency within the national and international public actions for implementation. Government to coordinate and and private sector communities, The NLB presents a wide harmonize the implementation showing its commitment from the range of actions in different of the National Logistics System highest levels. areas, in addition to the in the medium and long term. institutional framework to set · The NLB recognizes an up a permanent body that 7. Strategic and export commodity important challenge and coordinates and monitors the focus. The NLB mandate is to increases the sense of urgency. implementation of logistics study strategic commodities Indonesia's growth projections reform over the medium and and leading export supply place increasing pressure on long term. Some of these chains to identify major gaps in logistics. High-level political actions were defined as quick the flow of goods and ensure commitment to carry out wins, while others require more availability in domestic and actions to ensure an efficient substantial preparation and international markets. logistics system is needed to investment. Many of the quick achieve concrete results. wins, such as the establishment The NLB also includes a detailed of 24/7 port services and matrix of actions to be taken by · The NLB is a product of public licenses for establishing dry coordinating and line ministries, and private consultation. ports, have been implemented, agencies and institutions. These Reducing logistics costs while others such as Tanjung actions have also been integrated means facilitating the business Priok's Container Terminal into the mid-term development environment and making expansion are ongoing work. plan (RPJM 2010-2014) coordinated government services to private by the National Development enterprises more efficient. It is · The NBL recognizes the need Agency (Bappenas) to ensure essential that the private sector for a coordinating team. As that relevant government parties is consulted and, whenever mentioned above, the NLB prioritize the proposed measures possible, engaged in identifying has been included in the RPJM and allocate adequate budget. problems and solutions. The 2010-2014, and its action Government has appointed an plan is being translated into Private Sector Development Technical Note Government Work Plans recognizing the need for a 30 to 40 percent higher1 (RKPs) in each ministry and coordinating team, there than for a cargo originating relevant agency for 2010- is no acknowledgement of in Singapore. These higher 14. The implementation of the need for a permanent premiums reflect risks that these actions still needs to be team to implement the NLB. Indonesian cargo ships face, supported by mechanisms of International experience such as pirates, organized coordination, monitoring and suggests that there is a need to criminal activity at ports and effective control. Hence, the create even smaller committees roads, general theft from Government established the within this team that control warehouses and trucks, and National Coordinating Team and monitor the progress of labor strikes and work delays. (NCT) to carry out these duties. the various programs and Including the Ministry The recognition of this need is initiatives. The overall team will of Defense and security essential to the success of the also need to be empowered to forces into the equation is reform program. The NCT is also be involved in the issuing or an essential part of having in charge of recommending amendment of legislation to a secure environment for whether the Government facilitate implementation and businesses. should form a permanent to propose the allocation of institution to manage the resources. - Labor unions are also medium- and long-term reported to be a problem implementation of the NLB. · There is a need to establish a in the port sector and their monitoring system to assess actions often cause some Challenges of Implementation the impact of logistics reform services and locations to be on the public and private under-utilized or excessively The NLB is a result of a drive by the sectors. The NLB mentions the costly, limiting the potential Government to establish a roadmap importance of monitoring the to make existing facilities of actions to increase Indonesia's implementation of the reforms, more productive. Including competitiveness. The main gaps but remains vague on how the Ministry of Manpower in the NLB that would need to this could be implemented. and these unions in shaping be addressed in order to have an Monitoring can be done the new logistics system effective reform agenda are: from different perspectives, would reduce tensions and including general indicators of ease the transition towards · The list of actions in the NLB does the overall state of logistics in more professional logistics not reflect a coherent strategy Indonesia, specific indicators services. with objectives and priorities. that reflect implementation Having clear objectives and of certain policies, and private - Quality standards in priorities can help to group sector impact indicators. service provision and similar activities that may compliance with recognized include a range of short-term · Lack of an integrated international standards for and long-term actions. In approach for implementation: the maintenance of major this way, activities may not many issues and relevant infrastructure are crucial necessarily be carried out by a stakeholders are not yet for safety, cost savings, single ministry or agency and involved in the reform process. and interoperability. will be aimed towards solving a The most significant gaps Quality control of service specific obstacle. This approach include issues such as security, provision includes will help to translate the action labor union management, and managing processes, plans into more strategic quality standards. establishing performance programs, facilitating the and integrity criteria, and implementation of activities - Security is often quoted as building competence such and the monitoring of results. a serious concern, which is as skills, experience and why cargo shipments from qualifications. Such elements · The governance structure for Indonesia are reported to help to increase the integrity the implementation of the typically bear a burden of 1 Based on Kurk, C.B. "Tanjung Priok Status NLB remains unclear. Despite insurance premiums up to Report for the WB", January 2010 Private Sector Development Technical Note of personnel, organizational is a need to communicate plan aims to combine regional and culture and motivation, the progress of each initiative sectoral approaches by developing thereby making logistics according to the objectives a stronger national connectivity services a more competitive of each phase. Therefore, it is and be the basis for transforming industry. important to have clear-cut the Indonesian economy by 2030. project stages and pilot-test This new agenda proposes to · Private sector incentives. The the initiatives before roll-out develop industrial clusters based on strategy defined in the NLB to avoid unintended adverse natural-resource endowments to includes the participation impacts or system breakdowns. develop certain economic sectors, of the private sector in new improving national connectivity investments in infrastructure · Communications strategy and to better link growth centers and and the provision of logistics transparency. It is important to reduce transaction costs, and services, but fails to mention provide regular information to advancing national technological exploring methods to the business community and the capacity. encourage its participation public on plans, progress and or models of cooperation. initiatives, making them aware This new Grand Design/Master Plan Defining well in advance of new developments so they will play an important role as the the model by which the can adapt to new procedures main driver in revising and realigning Government will interact with more effectively. Also, periodic the NLB with other blueprints and the private sector and setting information about the progress master plans, and tackling some the rules of engagement of the NLB is a strategy to of the main challenges that the would send clear messages to maintain interest and promote NLB and other master plans faced the business community. It better accountability and alone. This realignment process would reduce uncertainty and transparency. will help to prioritize actions by encourage enterprises to invest avoiding overlaps and regrouping in Indonesia. Moving forward similar activities with common objectives, revise private sector · Pilot and phased Given the urgency of improving incentives and rely on dedicated implementation. Given that logistics in the country, the teams for implementation and many of the actions specified Government is now preparing a monitoring. Implementing such a in the NLB involve many Grand Design/Master Plan that revised NLB will be an important procedures and significant will link specific on-going reform step forward in reducing logistics coordination among a large actions with a larger economic- costs and improving timeliness of number of stakeholders, there corridor strategy. This larger master international and domestic trade in For further information, contact: FPSD Unit Please visit our website: Natalia Cubillos-Salcedo World Bank Office Jakarta http://www.worldbank.org/id/fpd ncubillos@worldbank.org Jakarta Stock Exchange Building Tower 2, 12th floor Technical Notes can be downloaded from the website. Ph. 62 21 52993000 Jl. Sudirman Kav 52-53 Fax 62 21 52993111 Jakarta 12190, Indonesia