Intense competition has left financially strained Indonesian enterprises trailing their more established, often foreign-controlled counterparts.
Indonesia, with its 17,000 islands spanning over 4,800 kilometers, boasts a population of nearly 280 million and the world’s seventh-largest economy, approaching $1.2 trillion in GDP in 2021.
The nation’s logistics industry, projected to grow over 6% annually, is driven by the rapid expansion of the digital economy. In the first quarter of 2023, the core sectors of transportation and warehousing grew by almost 16%, according to Akbar Djohan, head of Kadin’s logistics and supply chain department.
However, Indonesia faces challenges due to high logistics costs, reaching potentially 23% of GDP, compared to lower figures in countries like Thailand, China, and Malaysia. This is attributed to the nation’s archipelagic topography, necessitating multiple modes of transportation.
Efforts to improve logistics governance and infrastructure, particularly roads and highways, have seen progress. President Joko Widodo’s infrastructure campaign, initiated in 2014, includes substantial upgrades, but there is a notable lag in modernization efforts by Indonesian-owned private companies.
The digital economy sector’s fierce competition hampers underfunded Indonesian enterprises from retooling, providing foreign companies with a competitive edge, controlling 70% of the industry.
Manorsa P. Tambunan from ALDEI sheds light on foreign dominance’s implications, including unhealthy competition and potential price wars. Foreign investors, such as Tokopedia, Lazada, Shopee Indonesia, and BukaLapak, are investing in Indonesia’s e-commerce logistics industry, contributing to a market structure shift.
Tambunan emphasizes concerns about price wars negatively impacting couriers, leading to lower wages and potential misuse of acquired information by foreign entities. He calls for equal opportunities in the logistics industry, urging the government to enforce regulations, including a maximum foreign ownership limit of 49%, set by Presidential Regulation 49 of 2021.
The focus on supporting Indonesian-owned businesses to modernize, protecting them from predatory foreign firms, could foster equitable economic growth. However, addressing foreign ownership issues is crucial to ensure that the benefits of growth are distributed fairly within Indonesia.
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