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Indonesia Logistics Industry Grow in 2011

Indonesia robust economic growth may help the country logistics industry grow by 8.3 percent to Rp 1.4 trillion (US$155.16 million) in 2011 from 1.29 trillion in last year, research and consulting firm Frost & Sullivan said.

Indonesia presents great opportunities for logistics service providers as most of the leading business segments (oil and gas, minerals and plantations) have shown a considerable revenue growth over the past few years, he told a media briefing.

Oil and gas, mineral and plantation business segments are expected to maintain their dominance in fueling the growth of the industry in 2011, the firms Asia Pacific vice president for transportation and logistics, Gopal R., said Thursday.

He continued that oil and gas would remain the most potential segment for logistics service providers to explore this year. In 2010, oil and gas contractors spent around $1.5 billion on sea transport with local ship owners grabbing about $700 million worth of contracts, he added.

The potential for logistics services in the oil and gas industry could reach $3.2 billion in 2011, Gopal

As the largest coal exporter in the world, Indonesia logistics service providers would also benefit more from the sector in 2011, he said.

Frost & Sullivans data shows that in the first nine months of 2010, Indonesia had shipped about 209.4 million tons of coal out of the country. In 2009, the country exported a total of 230 million tons of coal.

The Indonesian Coal Mining Association forecasts that Indonesia may boost coal production to 340 million tons this year, an increase of 23 percent from 275 million tons in 2010.

Gopal also highlighted several key factors that could boost the growth of the logistics industry in Indonesia this year, such as strong economic growth fueled by high domestic consumption, the recovery of world trade growth, demand growth for Indonesian key commodities, a wave of production plant relocation to the country and strong foreign capital inflow.

Poor infrastructure development, together with unavailability of qualified professionals, will still be a major constraint hindering Indonesia logistic industrys development in several years ahead, he said.

According to the Central Statistic Agency, the size of Indonesia transportation and logistics market stood at Rp 149 trillion.

Frost & Sullivan estimates that there is still a hidden potential amounting to Rp 843.7 trillion as many companies still transport their goods independently. Gopal said that in the future, those companies might outsource the transportation of their goods.

He suggested that the government work harder to improve inter-islands connectivity to help logistics service providers transport goods easier and faster. He praised the government for preparing a blueprint for Indonesia logistics industry to be more integrated and connected.

The firm identifies several future trends that might assist logistics business stakeholders understand the market better. The firm says that customers expect service providers to have broader area coverage and more advanced technology to ensure their goods arrive on time, such as a vehicle tracking system and bar coding system.