This study is focused on Indonesia based on secondary data and interviews that attempt to address the issues of archipelagic countries in supporting ASEAN logistics connectivity. A key finding shows the concept of archipelagic logistics chain is needed to link logistics capability to economic and social development that contribute to a sustainable economic growth.

1. The Role of Archipelagic Countries
in ASEAN Logistics Connectivity
Togar M. Simatupang
School of Business and Management
Bandung Institute of Technology
Presented at the international conference on ASEAN Logistics Connectivity: Challenge and Opportunity on
30-31 July 2013 held by the Transportation Institute of Chulalongkorn University at the Patumwan
Princess Hotel, Bangkok, Thailand

2. Overview
• Introduction
• ASEAN Integration of Logistics Services
• Archipelagic ASEAN
• Research Approach
• Findings
• Discussion
• Conclusions
2

3. Introduction
3

4. Introduction
• ASEAN trade value reached nearly US$ 1,500 billion. The
market size is growing continuously at the rate of 5-6% per
year.
• The deeper ASEAN logistics integration is developed, the
greater trade activities among ASEAN countries grow.
• Trade and logistics facilitation play an important role in
reducing cost and improving business competitiveness.
• The ASEAN logistics connectivity might be a hurdle that
inhibits the members to realize the potentials of ASEAN
economic community.
• This paper aims at disclosing the challenges in logistically
connecting archipelagic countries with other members and
proposing action plans to overcome these challenges.
4

5. ASEAN Integration of Logistics Services
5

6. 6

7. Logistics Integration Roadmap
• Objective: Integrate ASEAN into one seamless market
for goods, services and investment and encourage the
establishment of more production networks through:
– Liberalization and facilitation measures in the area of
logistics services
– Creation of an integrated ASEAN logistics environment
• Scope:
– To cover freight logistics and transport and trade related
activities
• Status:
– For signing at the 39th AEM on 24 August 2007 in Manila
7

8. Key Focus for Integration
1. Encouraging Progressive Liberalization in
Logistics and Transport Services
2. Enhancing Trade and Transport Logistics
Facilitation
3. Expanding Capability of ASEAN logistics service
providers
4. Building ASEAN Logistics Human Capacities
5. Enhancing Multimodal Transport Infrastructure
and Investment
8

9. Liberalization of Logistics Services in
ASEAN in 2013
 Transport Services
 International Maritime Transport
 International Rail Freight Transport
 International Road Freight Transport
 International Air Freight Transport
 Courier services
 Non Transport Services
 Maritime Cargo handling services
 Storage & warehousing services
 Freight transport agency services
 Freight inspection services
 Packaging services
 Customs clearance
2008
Subject to laws / regulations
49%
Foreign
ownership
2013
70%
Foreign
ownership
2011
51%
Foreign
ownership
9

10. ASEAN Connectivity
• It is estimated that a one percent increase in infrastructure
spending in Asia can increase private consumption by one
to two per cent of gross domestic product (GDP).
• According to the Asean Logistics Study 2008, the logistics
cost of intra-Asean container movements is estimated to be
US$2.25 billion a year, with about 55 per cent representing
out-of-pocket costs (transport, terminal and access costs)
and 45 per cent time costs.
• Implementing a comprehensive logistics infrastructure
could reduce average logistics cost by 4 per cent and
logistics time by 9 per cent. This is substantial amounting to
roughly US$140 million in logistics cost reductions in a year.
10

11. Archipelagic Southeast Asia (aSEA)
• Archipelagic Southeast Asia (aSEA) covers five Association of
Southeast Asian Nations (ASEAN) member countries—Brunei
Darussalam, Indonesia, Malaysia, the Philippines, and Singapore—
together with Papua New Guinea (PNG) and Timor-Leste.
• The aSEA region includes the Brunei Darussalam-Indonesia-
Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) and the
Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT).
• The key to understanding the region lies in an appreciation of its
archipelagic nature. aSEA includes more than 24,000 islands spread
across 5,200 km from east to west and 3,400 km from north to
south. It has a population of over 350 million, 225 million of whom
live in Indonesia with a further 87 million living in the Philippines
(Green, 2008).
Source:
http://www.adb.org/publications/maritime-connectivity-archipelagic-southeast-asia-overview
11

12. Archipelagic Areas
• Launched in 1993 and 1994, respectively, the IMT-GT (the Indonesia-Malaysia-Thailand Growth
Triangle) and BIMP-EAGA (the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN
Growth Area) cooperation programs cover primarily archipelagic areas at the subnational level.
• The IMT-GT includes 32 provinces and states—14 provinces in southern Thailand, 8 northern states
of Peninsular Malaysia, and 10 provinces covering the entire island of Sumatra in Indonesia.
• BIMP-EAGA includes the sultanate of Brunei Darussalam; the provinces of Kalimantan, Sulawesi,
Maluku, and West Papua in Indonesia; the states of Sabah and Sarawak and the federal territory of
Labuan in Malaysia; and provinces in Mindanao region and Palawan in the Philippines.
• Both programs were established to help promote socioeconomic development in less developed
and disadvantaged areas by increasing trade, tourism, and investment—backed by an underlying
strategy of mobilizing the private sector as engine of growth.
• The IMT-GT supports development of five economic corridors through sector strategies in transport
and energy; trade and investment; agriculture; halal products and services; tourism; and human
resource development.
• BIMP-EAGA pursues a four-pronged strategy enhancing connectivity, establishing BIMP-EAGA as
food basket for ASEAN (and the rest of Asia), promoting BIMP-EAGA as a premier regional tourism
destination, and ensuring sustainable management of the environment.
Source: http://aric.adb.org/rci_digest/rci_digest.html
12

13. Archipelagic ASEAN
13

14. ASEAN Archipelagic Logistics
“More than 80 per cent of freight is transported through
the sea in archipelagic ASEAN. With better connectivity,
costs and distance can shrink remarkably within ASEAN
and beyond”.
Pushpanathan (2011)
14

15. 15
Source: http://asiafoundation.org/in-asia/2010/09/22/philippines-spearheads-asean-
effort-to-establish-regional-ro-ro-sea-transport-network/

16. ASEAN-Japan-
India Logistics
Network
16
Source:
http://www.mofa.go.jp/policy/oda/whi
te/2011/html/honbun/b1/s3_2.html

17. Scheme of National Logistics System
17

18. Scheme of Pendulum Nusantara
Source: Lino, R.J. (2012), "Indonesia Maritime Infrastructure", World Export Development Forum 2012. 18

19. Research Approach
19

20. Conceptual Model
Logistics Policy Analysis (Force Field Analysis)
Desired
State
Current
State
Driving Forces
Restraining Forces
Regulatory Responses
National and
International
Logistics Policies
Policy Making
Attributes of Maturity
Definition
Characteristics
Liberalization
Logistics Integration
Logistics Performance
Intervention
NegotiationInformingProgression
20

21. Understand the current situation and future plan about
the role of archipelagic countries in ASEAN logistics
connectivity by the questionnaire
Viewpoint of ASEAN logistics
connectivity
Viewpoint of driving and
retraining forces
1. Role of Indonesia as an archipelagic country
towards desired change of ASEAN logistics
connectivity:
 Create an archipelagic ASEAN network
within ASEAN that can offer cost effective,
reliable and, safer logistics connectivity
that fosters a mutual free flows of goods
and trades.
 Members will develop and be engaged in
archipelagic ASEAN network.
2. Current situation of driving forces for ASEAN
logistics connectivity:
 Liberalization and facilitation measures in the
area of logistics services
 Creation of an integrated ASEAN logistics
environment : infrastructure, institutional
framework, trade flows, logistics services
3. Current situation of restraining forces for ASEAN
logistics connectivity:
 Liberalization and facilitation measures in the
area of logistics services
 Creation of an integrated ASEAN logistics
environment
4. Common possibility of removal actions in the future
 Plan of logistics services liberalization
 Plan of ASEAN logistics integration development
21

22. ASEAN Logistics System
22

23. Respondents
• Government agencies (4 respondents)
– Directorate General of Customs and Excise
– Ministry of Trade
– Ministry of Transportation
– Ministry of Public Works
• Third party logistics (3 respondents)
– Multinational logistics service provider
– National logistics service provider
– Indonesia Port Corporation
• Importer and exporter (2 respondents)
• Logistics experts (3 respondents)
23

24. Analysis
Objectives:
 Liberalization and facilitation
measures in the area of logistics
services
 Creation of an integrated ASEAN
logistics environment
Driving Forces:



Restraining Forces:



Removal or Reinforcement
actions:


24

25. Findings
25

26. Desired Change
• Create an archipelagic ASEAN network within
ASEAN that can offer cost effective, reliable
and, safer logistics connectivity that fosters a
mutual free flows of goods and trades.
• Members will develop and be engaged in
archipelagic ASEAN network.
26

27. Supportive Factors
Strong and growing
domestic demand and
more opportunities to
establish new markets
Opportunity to invest
in business and
infrastructure
Abundance of fertile
land and natural
resources
Master plans to guide
development and
growth
27

28. Restricting Factors
Weak institutions,
bureaucratic
inefficiencies, and lack
of key government
leadership
Conflicting interest
between regional and
central government
Lack of sound
infrastructure to
support growth
Unstable logistics of
strategic commodities
Endemic corruption
Under developed
logistics capacity: low-
best practice and low-
skilled workforce
High cost of capital and
various currencies
among countries
Lack of understanding
of ASEAN connectivity
in narrowing
development gaps
Lack of institutions with
strong capital structure
to finance planned
projects
28

29. Removal Actions
Inclusive business
participation
Enhancing
logistics capacity
Develop common
logistics
infrastructure
Harmonization of
regulation
29

30. Conclusions
30

31. Conclusions
• Logistics connectivity provides both opportunities and challenges to ASEAN
members.
• Although Indonesia has strategic position for ASEAN, but lack of coordination
across business actors and between government agencies.
• The biggest obstacle is how leadership and governance can be developed to
improve both soft and hard infrastructures.
• A key finding show the concept of archipelagic logistics chain needs to linking
logistics to economic and social development that contribute to a sustainable
economic growth.
• The recommendation is expected to narrow development gaps and encourage
policy coordination in realizing ASEAN logistics connectivity including actions to
develop common logistics infrastructure, inclusive business participation,
increasing logistics capacity, and harmonization of regulation.
• Further investment by ASEAN members is needed especially in infrastructure to
realize the potential benefits of logistics connectivity to regional and global
markets.
31

32. Thank You
32