Trade And Logistics Practices In Indonesia – International Trade Perspective
History of Indonesia
International trade between two or more nations is an essential factor in a rising standard of living, offering employment and allowing customers to enjoy a superior range of products. International trade has taken place since the original civilizations instigated trading, but in current years, international trade has been progressively significant with a higher GDP share devoted to imports and exports (Roy and Roy, 2016). The aim of this report is to develop a clear understanding of the patterns, characteristics, and nature of the international trade and the trade policies and practices to affluence or eliminate trade barriers, in the framework of a specific Low-cost country. The country that has been selecting to execute this report is Indonesia.
Austronesian people, who make a maximum of the contemporary population, arrived from Taiwan to South East Asia. In around 2000 BCE they reached in Indonesia. The inherent Melanesian populates went to the distant eastern areas. The agricultural situations were goods. The time wet field rice cultivation was established in the eighth century BCE, towns and villages settled (Nations Online, 2018). In addition, small empires instigated to flourish by the first century CE. Sea-lane position of Indonesia supported international commerce. China and Indian Kingdoms were already having trade with Indonesia numerous centuries BCE. Therefore, trade has formed the history of Indonesian. With the starting of seventh century CE, the influential Srivijaya naval kingdom succeeded because of trade. Buddhism and Hinduism were introduced with it. At the end of 13th century, the Majapahit Kingdom of Hindu was originated under Gajah Mada and in eastern Java, its effect strained over much of Indonesia; this era is frequently denoted as a “Golden Age” in the history of Indonesia (Lambert, 2018).
Indonesia possesses an overall export of 144,489,796.42, which is in thousands of US dollar and overall imports are valued at 135,652,799.79 in thousands of US dollars resulting to optimistic trade equilibrium of 8,836,996.63 in thousands of US dollar. The growth of trade is -6.24% in contradiction to the growth in the world of -4.43%. Indonesia’s GDP is around 932,259,177,770 in present US dollar. Service export of Indonesia is around 24,150,866,112 in BoP, present US dollar and import of services are 30,637,167,847 in Bop, present US dollar. Exports of services and goods in Indonesia in terms of percentage of Gross Domestic Product are over 19.08% and services and goods imports in terms of percentage of GDP are over 18.31% (World Integrated Trade Solutions, 2018).
Source [(World Integrated Trade Solutions, 2018)]
Indonesia geography represents some of the huge challenges for the transport and logistics operators. Extending over 5 million square kilometers of sea, overall land area of 1,919,317 square kilometers, and 17,500 islands, the archipelago nation is vast (Transport Exhibition, 2016).
In spite of the geographical influences, the administration has promised to improve the transport infrastructure of Indonesia.
As per Frost & Sullivan, in 2013 the sector of services added around 35.9% in the GDP of Indonesia. Of this, logistics and transportation sector added 3.6%. When divided into the distinct sector of transport, which detained an overall market value of over $25 billion (Transport Exhibition, 2016). The following details have been provided below:
- Air transport – 21.65%
- Railway transport – 0.86%
- Sea transport – 6.84%
- Road transport – 53.09%
- Ferry, lake, and River transport – 3.05%
- Transport related services – 14.51% (Transport Exhibition, 2016)
Freight Flow Statistics
The most of the railways of Indonesia are on Java, utilized for freight transport and passengers. There are three networks of the non-contiguous railway in Sumatra with two new networks are being established in Sulawesi and Kalimantan. Indonesia has confirmed its strategy for the network of national railway lately. Metropolitan railway subsists in the form of commuter rail in Surabaya, Bandung, and Jakarta. New quick transit and light rail system of transit are presently under construction in Palembang and Jakarta. In spite of Indonesia has a leftward running for roads, maximum of the railway lines are using right-hand running because of Dutch influence (Zaman, Vanany and Awaluddin, 2015).
Indonesia is a marine country. Indonesia has potential in the marine sector. There is huge potential in marine transportation and marine resources. In fact, many of the Indonesia transport is approved out by utilizing sea transportation, which is approx. 88%. Payload power competence associated with other kinds of transportation like land and air causes the goods carriage through sea transport more competent (Zaman, Vanany and Awaluddin, 2015).
A network of connectivity can be utilized as a degree to study the presentation of the system of transportation that will support makers of the decision to prioritize investment in transport. Connectivity is the directories of the quantity that could be utilized to evaluate and measure the transport performance (Zaman, Vanany and Awaluddin, 2015).
Indonesia endures applying a prohibition on poultry parts imports, which has been in place since 2000. The industry of the United States estimates the lost exports valued at over $10 million or more per year. The GOI regulates imports by the issuance of import licenses. Import licenses for complete chickens never been issued in Indonesia. Whereas turkey and duck licenses have been distributed before, they were repudiated in 2014. Furthermore, the Ministry of Agriculture regulation of Indonesia states that exports of poultry are only allowed from nations where halal slaughter is entrenched in all slaughter amenities (Export Gov., 2017b).
Indonesia occasionally alters its practical rates and in the last five years, it has augmented its applied rates of tariff for a variety of products that contest with products that are locally manufactured. This comprises cosmetics, wine and spirits, non-electrical and electrical milling machines, electronic products, iron wire, chemicals, wire nails, medicines, and a variety of agricultural products containing vegetable oils, coffee, milk products, fruit juices, tea, and animal. The most favorable tariffs allowed in Indonesia are 6.9% (Export Gov., 2017).
Indonesia’s foreign direct investment in Indonesia contracted around 20.2% yearly to IDR 89.1 trillion in the 2nd quarter of 2018. It was listed as the second straight quarterly decline in FDI, as depositors were very caring toward the financial of the country because of the drop in the currency and Indonesia registered a trade shortage. Singapore is the main investment source with USD 1.6 billion, tracked by Japan with USD 1.4 billion, and then China with USD 0.5 billion. FDI in Indonesia is around 74.10 IDR Trillion from the year 2010 till 2018, touching the unprecedented high of around 112 IDR Trillion in the 2017th fourth quarter and the lowest record of around 35.40 IDR Trillion in the 2010th first quarter (Trading economics, 2018).
In 2016, the Ministry of Finance allotted directive 182 of 2016, which charges a 7.5% on some of the imported products transported by business units irrespective of the rate of the tariff in FTA and WTO schedules of Indonesia. The nation has widespread favored trade relationships with different nations. Under the free trade agreement of ASEAN, obligations on imports from the ASEAN nations usually series from 0% to 5%, excluding those products stated on prohibiting lists (Export Gov., 2017a). Indonesia also offers special market entree to Korea, New Zealand, Australia, Pakistan, China, India, and Japan under district ASEAN contracts and to Japan in a bilateral contract.
Indonesia is contributing to discussions for the Partnership of Regional Comprehensive Economic, which comprises the ten ASEAN followers and six extra nations that are Korea, China, China, New Zealand, Japan, and Australia (Export Gov., 2017a).
According to the review meeting of WTO, i.e. World Trade organization on Indonesia country trade policies suggest that the government of the country should enhance may policies and procedures in numerous areas in order to meet its international commitments (Yulisman, 2013). It must involve in the investment and trade measures related to the global trading rules. The members majorly encourage the country to make better utilization of investment and trade strategies that comply with the worldwide promises and that are helpful of the many-sided system of trading and better imitate ambition of Indonesia to possess a foremost part on the international stage.
Conclusion
The above report has provided a detailed analysis of the Indonesia country in order to understand its economic and financial stability. The report is comprised of numerous aspects such as import and export statistics, freight composition, connectivity of the country with logistics hubs and freight corridors. Besides this, it has highlighted some of the trade barriers, and trade policies of the country. Moreover, it has also highlighted the foreign direct investment in the country for the development and growth. From the analysis, it could be said that Indonesia needs to review its trade policies and trade barriers such that it can gain more opportunities for commerce and trade with other countries. This will result in the development of Indonesia and of other nations.
References
Export Gov. (2017a) Indonesia – Import Tariffs [online]. Available from https://www.export.gov/article?id=Indonesia-Import-Tariffs [accessed 21 December 2018]
Export Gov. (2017b) Indonesia – Trade Barriers [online]. Available from https://www.export.gov/article?id=Indonesia-Trade-Barriers [accessed 21 December 2018]
Lambert, T. (2018) A Brief History Of Indonesia [online]. Available from https://www.localhistories.org/indonesia.html [accessed 21 December 2018]
Nations Online (2018) History of Indonesia [online]. Available from https://www.nationsonline.org/oneworld/History/Indonesia-history.htm [accessed 21 December 2018]
Roy, M., and Roy, S.S. (2016) International Trade and International Finance: Explorations of Contemporary Issues 1st ed. Germany: Springer.
Trading economics (2018) Indonesia Foreign Direct Investment [online]. Available from https://tradingeconomics.com/indonesia/foreign-direct-investment [accessed 21 December 2018]
Transport Exhibition (2016) Transport & logistics in Indonesia: building a better future [online]. Available from https://www.transport-exhibitions.com/Market-Insights/Indonesia/Transport-logistics-in-Indonesia-building-a-bet [accessed 21 December 2018]
World Integrated Trade Solutions (2018) Indonesia Country Growth V/S World Growth V/S Gdp Growth [online]. Available from https://wits.worldbank.org/CountryProfile/en/IDN [accessed 21 December 2018]
Yulisman, L. (2013) Revise and improve trade policies, WTO tells Indonesia [online]. Available from https://www.thejakartapost.com/news/2013/04/15/revise-and-improve-trade-policies-wto-tells-indonesia.html [accessed 21 December 2018]
Zaman, M.B., Vanany, I., and Awaluddin, D. (2015) Connectivity Analysis of Port in Eastern Indonesia. ELSEVIER, 14(2015), 118-127.