The inherent disadvantage of being an archipelagic country is the high cost of logistics. As a country with 17,000 or so islands, and with industrial activities heavily centralized in certain regions, Indonesia was for a long time no exception, with a lower ranking in the World Bank Logistics Performance Index (LPI) than that of other countries in the Southeast Asia region.

Aware of the need to make a greater effort to bring about efficient logistics and reduce costs linked to the distribution of goods from one region to another, Indonesia introduced a number of initiatives. These included the digitalization of procedures related to international trade, with the Customs Information System and Automation (CEISA) and the Indonesia National Single Window (INSW) which cover the handling of Customs, licensing, ports/airports, and other documents related to export and import.

However, given the complexity of logistics operations, bottlenecks in both international and domestic trade processes persisted. Analysis revealed repetition and duplication in administrative processes, asymmetric information between logistics service providers (LSPs) and their clients, the lack of an end-to-end logistics platform, and inadequate logistics infrastructure. A breakthrough was urgently needed.

It came on 16 June 2020, when President Joko “Jokowi” Widodo signed Presidential Instruction Number 5 of 2020 to develop a National Logistics Ecosystem (NLE). The project had been conceived by the Directorate General of Customs and Excise under the Ministry of Finance and it will be instrumental in the efforts of the Administration to facilitate trade and build an enabling environment for trade operators.

To take the project forward, a national team consisting of various governmental institutions involved in regulating and managing logistics operations was established. Although it is not a formal institution, the team has a formal project management structure:

• A steering committee provides guidance and discusses strategic issues related to the NLE. It consists of members of the Coordinating Ministry for Economic Affairs, the Cabinet Secretary, and the Ministry of Transportation.
• A team lead is responsible for overseeing day-to-day operations. It consists of members of the Ministry of Finance.
• A technical working group is responsible for executing all tasks related to the NLE. The Director General of Indonesian Customs and the Head of the Indonesia National Single Window Agency act as its chair and vice-chair respectively. The group is attended by representatives of all the institutions taking part in managing and regulating logistics operations.

Accompanying the Presidential Instruction was an Action Plan containing 42 elements built around the following four major pillars:

1. Business process simplification: enabling economic operators to submit required documents only once through a single submission (SSm) system. For example, under the “SSm for Quarantine-Customs” (SSm QC), importers/exporters no longer have to submit the same document to both Customs and the quarantine service. Instead, they submit their documents once through the INSW, which dispatches the documents to the authorities concerned. SSm is also used for documents required on carriers’ departure and arrival (SSm Transportation) and for those related to business licences (SSm Licensing).
2. Logistics platform collaboration: establishing an end-to-end logistics platform enabling LSPs and potential clients to connect and exchange information. The platform will include the following features:

• • Bidding services: the platform will enable importers and exporters to request quotes from LSPs.
  • National track and trace (NTT) system: importers and exporters will be able to track and trace the movement of their goods from arrival to departure of the vessels/air cargo in real-time.
  • Logistics calculator: importers and exporters will be able to use the platform to estimate logistics costs such as freight rate, port fees and charges, trucking and warehousing.
  • Financing: importers and exporters will be able to contact financial institutions providing trade finance services directly from the platform.

3. Payment process simplification: all fees and charges related to vessels’ international arrival and departure are requested through a single billing, so payment only needs to be done once.
4. Container terminal layout and distribution channel re-arrangement: in Indonesia, container terminals are strategically zoned to enhance efficiency and security, with specific zones dedicated to loading, unloading, storage, and Customs clearance. To improve container terminal layout, zoning policies are being reviewed. To untangle congestion, a system called “autogate” is being developed to facilitate gate operation, enabling truck drivers to scan a QR code identifying vehicles and container IDs and to open the barriers if the departure has been authorized. Finally, to expand distribution channels, Indonesia is currently working on connecting railways to seaports.

As at October 2024, activities planned under the NLE project have been implemented gradually in 46 seaports and six airports covering 97% of goods traffic through sea cargo and 98% of goods traffic through air cargo respectively.

Data from Indonesia’s National Development Planning Agency (Bappenas) indicates that the proportion of Indonesia’s logistics costs to GDP has fallen to 14.29%. In addition, according to a survey on the effectiveness of NLE services conducted in 2023 under the Australia-Indonesia Partnership for Economic Development (Prospera) programme, the implementation of the NLE project has reduced the average time and cost in processing vessel clearance, goods clearance, and licensing by 57.7% and 37.6%, respectively.[1]

Implementing the NLE project has not been without its challenges.

These include disparities in the maturity of IT systems used by economic operators and governmental institutions, which hinders system interoperability. Some operators were not able to connect to the NLE logistics collaboration platform. Adjustments were made to cover a wider range of IT systems, but this requires time and effort, with multiple system refinements one after another.

Another challenge has been ensuring coordination among all of the various parties involved, ranging from logistics players to governmental institutions, to find consensus on the best way forward in harmonizing systems, regulations, and business processes. There is no primary governmental institution in Indonesia which specializes in governing logistics. Instead, more than 15 governmental institutions have a scope of work related to logistics.

Improving a logistics ecosystem is a huge project involving various parties. For such a project to run properly, it has to be implemented gradually, one step at a time. Each and every detail has to be scrutinized in order to identify what to improve, how to improve it, where to implement the changes, when to start, and who to involve. Each project has to be organized in stages, from the piloting to the evaluation phase, and all new processes have to be implemented progressively to provide operators with the time to adjust their own processes.

Several programmes will be designed when building the ideal NLE, but this does not mean that they will all be deployed at every point of entry. In order to determine which programme to implement at a specific location, the best fit has to be identified beforehand. The NLE project takes into account each environment’s characteristics and needs. For example, the autogate project is only relevant for ports whose traffic is high, given that it involves an increase in port fees and charges to cover the substantial cost of its installation. Implementing autogate in ports whose traffic is low will be counter-productive as there is minimum value added compared to the installation cost.

Harmonizing regulations, systems, and business processes would have been less lengthy and been easier if there had been a leading agency in charge of synchronizing and converging Indonesia’s logistics-related policies.

As mentioned above, evaluations of the impact of the NLE project have shown positive results, although some of its elements are still being implemented. The features of the logistics collaboration platform, for instance, are still being tested with stakeholders chosen to participate in the project (LSPs, trade operators, banks, shipping lines, etc.).

More elements will be added to the project with the aim of fostering end-to-end trade operation digitalization and of further enhancing transparency in the logistics process, closing the information gap between logistics service supply and demand. For example, a national commodity dashboard is in the pipeline. The dashboard will enable users to know commodities’ movements within Indonesia, with information related to commodity type, its volume, origin city, and destination city. It will be beneficial for LSPs in terms of optimizing shipping routes, planning capacity and storage, identifying possibilities to expand new routes, and adapting to fluctuating market demand.

More information
adm.nle@customs.go.id
nle.kemenkeu.go.id

[1] https://www.beacukai.go.id/berita/diseminasi-hasil-survei-prospera-layanan-nle.html