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Reports for SMEs

+ Indonesia Trade and Logistics Market to

surpass $349 billion by 2026

The Indonesian trade and logistics market size is estimated to reach USD 349.5
billion by 2026. It is anticipated to exhibit a CAGR of 7.9% during the forecast
period. The increasing infrastructure development, exponential rise in e-
commerce and the encouraging trade among ASEAN are expected to drive the
growth.

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+
Table of Content

Definition / Scope Market Size and Forecast

Market Overview Market Outlook
Key Metrics Technology Roadmap
Market Risks Competitive Landscape
Market Drivers Competitive Factors
Market Restraints Key Market Players
Industry Challenges Strategic Conclusion
Technology Trends References
Other Key Market Trends

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Definition / Scope
Logistics is a business to control, execute, and plan the movement of material,
capital, and service. In a general sense, logistics is a part of supply chain
management that controls, implements, and plans the effective and efficient flow of
goods, information and services between the point of origin and point of
consumption. Global logistic market is segmented into logistics model types, where
further categories are first party logistics, second party logistics, third party logistics,
and fourth party logistics. Many retailers and manufacturers are recognizing logistics
management as an important aspect globally. Moreover, logistics management is
making an organization more competitive in terms of quality, cost, flexibility, and
delivery. Due to these factors, organizations are now focusing on improving their
logistics activities.

Logistics and Trade involve purchasing, materials management, inventory control,

warehousing, transport, and distribution. Logistics support effective and efficient
supply chain management by integrating the flow of materials and goods from the
initial purchase of raw materials through to the final delivery of a product to
customers.

This includes all trade logistics processes that occur with regard to customers,
retailers, manufacturers and suppliers, and the company, or logistics processes that
occur both inside and outside the trading company. This is the only way to ensure
that the required goods and merchandise are quickly accessible from the warehouse
and goods distribution centers and can be provided by the appropriate service
partners for transport to the customer, retailer, manufacturer, or supplier.

There is no official definition of logistics for most ASEAN countries. Logistics covers
business activities ranging from transport and storage, post and couriers and
distribution for Indonesia.

Market Overview
The Indonesian logistic market is expected to get a noteworthy CAGR of 7.9 percent
in revenue to reach US$ 349.5 billion by the year 2026. With yearly product exports
of $197 billion, Indonesia has currently ranked the 28th largest export economy in the

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world. The country boasts a positive trade balance of $17 billion after deducting
annual imports of $180 billion from their total export value.

The Trade and Investments industry in Indonesia continues to maintain its

momentum, driven by economic and social developments and population growth.
The recent change of government has helped Indonesia to become an attractive
place for investment.

The key trends that drive Indonesia’s trade and logistics market namely, economic
growth, which fuels the purchasing power of consumers; increasing urbanization;
participation in international trade and investment; the rise of e-commerce platforms,
which allows customers and producers more choices in terms of suppliers; and the
emergence of economic regional groupings such as ASEAN, which facilitate and
enhance trade.

Exponentially proliferating Internet of things (IoT) in logistics sector enable freight

companies and consumers to direct access to the company network via the internet.
At the same time, IoT penetration also provides opportunities for hackers to mount an
attack. Many security issues have been identified in recent years. This factor is
working as a restraint for global logistics market.

Some of the restraints of the market are huge competition and low production of
goods, high transportation cost and fuel prices, etc. The Trade and Investments
industry in the Indonesia region will expand at a CAGR of 0.5% over 2020-26.
Indonesia is going to have an expected CAGR of (-0.32) % in Imports and CAGR of
0.79% in Exports during the same time. Indonesia is a trade surplus country and will
continue to be in the same state till 2020.

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Indonesia Trade Balance recorded a surplus of 2.0 USD bn in Jan 2021, compared
with a surplus of 2.1 USD bn in the previous month. Indonesia Trade Balance data is
updated monthly, available from Jan 1967 to Jan 2021, with an averaged value of
538.9 USD mn.

The data reached an all-time high of 4.6 USD bn in Dec 2006 and a record low of
-2.3 USD bn in Apr 2019. CEIC extends history for monthly Trade Balance. The
Central Bureau of Statistics provides Trade Balance in USD. Trade Balance prior to
January 2008 is sourced from the International Monetary Fund.

Indonesia’s Total Exports reached 16.5 USD bn in Dec 2020, an increase of 12.2 %
year on year. Total Imports recorded 14.4 USD bn in Dec 2020, a decrease of 6.5 %
year on year.

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Market Risks
The outbreak of COVID-19 Pandemic

● During the COVID-19 (coronavirus) pandemic, transporting goods from point A to

point B has slowed for multiple reasons, including workers getting sick from the
virus and truckers struggling to get products to stores fast enough.

● But it’s been getting better than 2020, and the risk that occurred due to the
outbreak of COVID-19 is lowering.

Huge competition and low production of goods

● Indonesian Trade and Logistics market is badly affected by huge competition and
low production of goods.

● There is high competition in the trade and logistics market in Indonesia. Due to
the low production of goods in the country, the huge import is needed due to this
the cost rises which affect the market.

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Top Market Opportunities

Increasing Infrastructure Investment

 The ongoing and upcoming government projects for improving the logistics
infrastructure in Indonesia include the setting up of Mass Rapid Transit in Jakarta
as well.
 The project has a budget of USD 1.7 billion and is aimed at relieving traffic
congestion. The transit is expected to be fully constructed and operational by the
year 2027, thereby having a positive impact on the freight forwarding business in
the country.
 Additionally, the transit will consist of 2 corridors namely the North-South corridor
and the East-West corridor.

Encouraging trade among ASEAN

 The establishment of the ASEAN Economic Community in the year 2015 was
aimed at improving the trade scenario in the region by freeing up the movement
of people and goods across the bloc.
 The Blueprint for 2025 adopted by ASEAN leaders at the 27th ASEAN Summit in
2015 will help in facilitating the utilization of the ASEAN Trade in Goods
Agreement and allow liberalization of logistics services across the nations
including Indonesia.

Market Drivers
Increasing demand

 There is rising demand and scope of trade and logistics market in Indonesia. This
has become a plus point in the market growth.
 Trade and logistics are very crucial to run daily life normally. There won’t be
available every necessary good in a particular place. So the trade and logistics
market has a high demand.
 Healthcare logistics is flourishing post COVID-19 with the need for more vaccines
and drugs in Indonesia.

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Robust economic growth

 The per capita income of Indonesia in 2019 was US$ 4135.569 and which was
expected to be US$ 4200 and 4450 in the year 2020 and 2021 respectively.
 This boosts the demand for trade and the logistics market. So the robust
economic growth in Indonesia has boosted the trade and logistics market growth.

Rising population and availability of cheap manpower

 Indonesia has a large population, so the consumption rate of Indonesia is also

high. This has become a major factor for the growth of the trade and logistics
market in Indonesia.
 Cheap manpower is helping Indonesia to become a vast export country
worldwide. Key factors in the growth of the Trade and investment industry have
become cheap manpower.
 As the manpower costs lower, the overall cost of the trade and logistics market is
decreased this is a big opportunity for the industries.

Market Restraints
Trade liberalization is increasingly accompanied by efforts to liberalize logistics
services as nations have realized the importance of logistics services in achieving
economic progress and integration. However, liberalization also brings with it costs
and challenges. High transportation cost is another restraint for the Indonesian Trade
and logistics market. Due to the high transportation cost the market has not grown to
its full potential and it has also been like a blockage for the growth of this market.

The market has the potential to grow from the root but the transportation cost that
occurs in Indonesia is quite expensive so the Indonesians are not willing to invest
fully in this market. And this is creating restrain to grow the Trade & Logistic market in
Indonesia.

Indonesia’s logistics sector is still highly shielded from foreign competition by certain
restrictions its government imposes on the entry of foreign logistics services into its
domestic market. These restrictions are mainly in the forms of foreign equity
participation limits, joint venture and representative office requirements for several
categories in the core, and related and noncore logistics services. Although the

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related freight services have the largest number and most substantive commitments,
the restrictions on market access in this sector are quite substantial.

Industry Challenges
The logistics sector also faces challenges internationally. Free trade agreement in the
ASEAN region leads to a more competitive market. Customer expectations of offered
goods and services have increased. Similarly, customers demand lower costs. To
respond to this situation, Indonesia needs an outperformed logistics performance.

Another Industry challenge is high fuel prices. The fuels that are used in
transportation vehicles are being expensive nowadays. And anyone would do the
business or market to gain profit. But due to the high fuel prices, the marketers are
not getting any profit. And this is creating huge challenges in this Trade and Logistics
Market in Indonesia.

Exponentially proliferating Internet of things (IoT) in logistics sector enable freight

companies and consumers to direct access to the company network via the internet.
At the same time, IoT penetration also provide opportunities for hackers to mount an
attack. Many security issues have been identified in recent years. This factor is
working as a challenge for trade and logistics market.

Two new business model have been widely used in trade & logistics in responding
the business during the coronavirus outbreak. The two models include business
digitalization and business reform in any aspects of the business. Due to COVID-19,
there is a shift in Consumer Purchasing Behavior from Traditional Hypermarkets,
Supermarkets to Online Shopping for groceries and Other Items. E-commerce
platforms such as tokopedia, Lazada, Shopee have revolutionized the retail market
and other market players have to incorporate the payment process by digital wallets.

Likewise, retail stores such as Hyperfresh have introduced their own E-commerce
platforms for online retailing to compete with traditional Supermarkets. This is
expected to increase the scope and competition in the Last Mile Deliveries and
companies need to adjust to the trend.

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Technology Trends
Indonesia is facing two major developments in its economy that have bearing on the
logistics industry. The first is an evolving business model, called e-commerce, and
the second is the “use” of technology in service delivery. In ASEAN, the e-commerce
market has been estimated to reach at US$38.195 billion in 2021.

The internet retail market includes the display and purchase of items via internet and
the delivery of the purchased item to the consumer. The popularity of online shopping
has increased globally in the last couple of years. There are a large number of global
online retailers such as Amazon.com, eBay, Wal-Mart, bestbuy.com and Target
brands, Inc.

Unlike the traditional business model of physical stores, e-commerce is encouraged

as it creates multiple sources of delivery for big- and small-sized vendors, at a lower
cost option. It also helps consumers access a variety of goods in distant locations.
However, the e-commerce business model poses a unique challenge. Goods from
vendors are distributed to warehouses, from whence it is dispersed to customers in
small parcels. The process gets complicated as there are a large number of suppliers
and warehouses, while customers are spread across multiple locations.

Added to these is the question of payment and product return. Managing all these
activities greatly require an efficient and credible logistics system. It also requires
logistics companies to acquire technology to streamline the entire supply chain.

Pricing Trends
Trade & Logistics companies that transform their pricing could increase revenue by 2
to 4 percent, translating to as much as a 30 to 60 percent increase in operating profit.
However, achieving this upside requires a strategy that tackles the entire pricing
cycle. Here, we make the case for reforming pricing and outline a five-step process to
achieve it.

Pricing in trade and logistics is not ‘one size fits all’. Long-term contracts and spot
cargo require different pricing strategies. This means that logistics companies cannot
apply a single approach to pricing their services.

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Most logistics companies have a mixture of different contract durations, and the ratio
of each varies by type of company (Exhibit 3). This mix of long-term, medium-term,
and spot contracts affects optimal pricing strategies. Additionally, each segment of
logistics has its own specific challenges

Regulatory Trends
The Indonesian economy possesses sound fundamentals of social stability, strong
domestic demand for goods and services, steadily increasing foreign reserves (just
under $135 billion in July 2020), and stable prices with moderate-to-low inflation.

However, persistent trade and investment barriers are driven by protectionist

sentiment, persistent and pervasive corruption, poor infrastructure, inconsistent
interpretation and enforcement of laws, and labor rigidity, which continue to inhibit
greater levels of economic growth and prosperity.

In mid-February 2020, the Government of Indonesia submitted an omnibus bill on

Job Creation to the Indonesian parliament, which would simultaneously revise more
than 70 existing laws, to streamline red tape, attract greater levels of investment, and
fuel job creation and economic growth.

Labor and environmental groups, as well as those opposed to increased centralized

government control, have been largely at odds with the business groups that are in
favor of the bill’s streamlined bureaucratic processes and flexible labor regulations.

The bill, if passed in its current form, will affect all aspects of the Indonesian
economy, including how U.S. businesses engage. Topics include investment, labor,
micro-small-and-medium enterprise policy, research and innovation, land acquisition,
economic zones, job creation, sanctions and fines, sovereign wealth fund activity,
and more.

In addition, the Indonesian logistics market was also supported by e-commerce

growth and Presidential Regulation No. 44 of 2019 concerning the elimination of the
negative investment list.

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Other Key Market Trends

Growing E-commerce in the country

● Indonesia has the largest population in Southeast Asia by far, and its e-
commerce penetration is still very low, making it one of the hottest e-commerce
markets in the world. Attracting both global and local companies’ interests,
Indonesia now has a fast-growing e-commerce scene and is poised to become a
global powerhouse.

● E-commerce is expected to expand at CAGR of 10.21% in Indonesia. Although

the market is not as mature as e-commerce in Malaysia or Singapore, the
Indonesian population of more than 260 million makes the absolute numbers of
growth in the country high, with millions of new online shoppers every year. The
user penetration will be 57.4% in 2021and is expected to reach 77% by 2025.

● The gross merchandise volume (GMV) for online transactions is predicted to

reach USD 130 billion by the end of 2020. The average revenue per user is
expected to amount to US$240.75. This growth of e-commerce is a major driver
for the cross-border and domestic road freight logistics market growth.

Increasing Trucks to support the increasing demand for road freight transport

● The population of freight trucks is expected to grow to 50% every year in the next
few years. The growth was due to the support of the improvement of toll road
infrastructure and the expansion of factories of large companies.

● The performance of these business services will be even greater if inter-modal

synergies, namely cooperation between trucking service companies and ship and
railroad transportation companies, also occur, because the process of shipping
goods will reach a wider area between regions and islands.

● However, government policy support is needed to facilitate truck transport

mobility, so that the intensity and volume of trips also increase. Among the
policies needed is monitoring the weighbridge, which is placed directly at the
entrance and exit of the industrial area, given the flow of traffic in and out of
trucks in places.

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Market Size and Forecast

The logistics market in Indonesia grew significantly in a five-year period (2020 to
2025) by 45.95% to US$ 55.9 billion, thanks to a number of infrastructure projects
developed by the Indonesian government. The contribution of the logistics market to
Indonesia's Gross Domestic Product (GDP) in 2020 reached 5.5%. This makes
Indonesia one of the countries with the largest logistics market in ASEAN. Indonesia
has the largest population in Southeast Asia by far, and its e-commerce penetration
is still very low, making it one of the hottest e-commerce markets in the world.

Attracting both global and local companies’ interests, Indonesia now has a fast-
growing e-commerce scene and is poised to become a global powerhouse.With
yearly product exports of $197 billion, Indonesia has currently ranked the 28th largest
export economy in the world. The country boasts a positive trade balance of $17
billion after deducting annual imports of $180 billion from their total export value.

Indonesian Trade Balance recorded a surplus of 2.0 USD bn in Jan 2021, compared
with a surplus of 2.1 USD bn in the previous month. Indonesia Trade Balance data is
updated monthly, available from Jan 1967 to Jan 2021, with an averaged value of
538.9 USD mn.

The Trade and Investments industry in Indonesia continues to maintain its

momentum, driven by economic and social developments and population growth.
The recent change of government has helped Indonesia to become an attractive
place for investment.

Indonesia eyes market opportunities for rattan furniture in Japan. Meanwhile, there
are at least six market targets in Saudi Arabia: business, furniture, garments, books,
bedroom furniture, and baby clothes.

The Indonesian government is preparing a strategy for boosting exports, to meet the
target for the economic growth of 6.1 percent next year. It is far from this year’s
target, which is set at 5.1 percent. Therefore, the Indonesian Ministry of Trade must
revise its strategy.

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Market Outlook
The Indonesian logistic market is expected to get a noteworthy CAGR of 7.9 percent
in revenue to reach US$ 349.5 billion by the year 2026. E-commerce is expected to
expand in the high double digits in the future in Indonesia. Although the market is not
as mature as e-commerce in Malaysia or Singapore, the Indonesian population of
more than 260 million makes the absolute numbers of growth in the country high,
with millions of new online shoppers every year.

The gross merchandise volume (GMV) for online transactions is predicted to reach
USD 130 billion by the end of 2020. This growth of e-commerce is a major driver for
the cross-border and domestic road freight logistics market growth. The sector is
projected to remain as the key driving factor for the transportation sector. Rising
Internet based retailing is boosting the development of the logistics market.
Dramatically multiplying online shopping across global market is acting as significant
driver of the strategic market. Besides, bother free shopping and home delivery
options are supporting the market at present. Further, brief timeframe transfer
delivery, after sales backing and administrations are powering the internet retail
market. Knowing the reality, online retailer ought to give great logistics

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administrations to shape and keep up great and agreeable associations with the
clients. The development in internet retail market is in this manner driving the
logistics market as of now and comparable pattern is foreseen to be seen over the
gauge period. Moreover, cross-fringe sales will end up being a huge development
driver of generally speaking internet business, as indicated by overview members.
This was the view held by the two transporters and LSPs.

For the United States, Indonesia has identified two opportunities. First, market
information about furniture products. It includes product type, shape, design, color,
and materials that attract American consumers. Second, fishery products. Moreover,
Indonesia is interested in penetrating France’s market for dolls and garments.
Another country, Belgium, is perfect as a destination for Indonesia to export
pineapple and pineapple juices, garments, wood furniture, and frozen shrimp.
Exporters of those products or commodities contributed 11,9 percent of Indonesia’s
total non-oil exports to the United States. It equals US$ 15.7 billion.

Technology Roadmap
Unsurprisingly, Covid-19 has created shifts in consumer behavior. Many physical
stores were forced to close, causing people to flock online to buy their daily
necessities. Indonesia’s e-commerce boom is only just beginning, and the habits
developed during the pandemic will increasingly become entrenched as the ‘new
normal’ for consumers going forward.

Enterprise Resource Planning (ERP) systems and Software-as-a-Service (SaaS)

companies are providing flexible technology solutions to the e-commerce business.
Automation or robotics is also increasingly being used in warehouses for activities
like loading/unloading, labelling and sorting products in shelves.

Moreover, the increasing use of Internet of Things (IoT) and Big Data Analytics are
assisting companies with inventory and procurement management. Hence, going
forward, the changing business model will put pressure on logistics companies to use
technology to reduce inefficiencies and improve precision in final delivery. But
attached to these innovations are new expectations and standards, forcing logistics
companies to either adapt or fall behind.

Much pressure comes from customers in the form of individuals and enterprises, all
of who are demanding their products or services come faster and cheaper than ever

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before. Cloud technology can enable platforf solutions, which in turns makes it
possible to use new business models, such as ‘virtual freight forwarding’. It can also
provide flexibility and scalability, as well as standardized and harmonised processes
across the whole organisation.

Distribution Chain Analysis

Indonesian Logistics and International Trade involves purchasing, materials
management, inventory control, warehousing, transport and distribution.

Logistics supports effective and efficient supply chain management by integrating the
flow of materials and goods from the initial purchase of raw materials through to final
delivery of a product to customers.

Fig: Supply chain of Indonesia’s Trade and Logistics Market

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Competitive Landscape
The Indonesian trade and logistics industry does not have a high level of industry
concentration, especially with regard to the international players. International players
are responsible for approximately 30% of the market size.

The remaining 70% is made up of local players. Within the 70%, the concentration is
medium, and even the 10 largest players do not make up for more than 30% of the
local market. This can be attributed to the fact that the large players are more
focused on trade transport and logistics infrastructure, and hence, are more than just
logistics infrastructure providers.

The market players vary by economic stature, industry and operating strategy. The
industry has seen many mergers and acquisitions of small start-ups over recent
years.  The market is fragmented in nature and is headed towards consolidation. The
global players have an upper hand, years of experience and are efficient operators.

Logistics players are facing an era of unprecedented change as digitisation takes

hold and customer expectations evolve. New technologies are enabling greater
efficiency and more collaborative operating models; they’re also re-shaping the
marketplace in ways that are only just beginning to become apparent. New entrants,
whether they be start-ups or the industry’s own customers and suppliers, are also
shaking up the sector.

Competitive Factors
The market is highly fragmented and fairly competitive. There are currently a large
number of players in the market making it a competitive industry. The connected
products help companies develop closer customer relationships through product
differentiation and moving away from price competition.

The key players have been exploring the market by adopting mergers & acquisitions,
expansions, investments, new service launches, agreements, collaborations, and
joint ventures as their preferred strategies.

Technologies such as WMS, TMS, Cloud reporting, ASRS, RFID tagging, and more
are done by the companies as logistics companies in Indonesia are competing on
price, clientele, industries catered, services offered, and more to win over their
clients.

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Online Aggregators such as Kargo backed by big conglomerate groups are providing
an Interactive platform for shippers and clients, reducing the logistics cost. Smart
warehouses provided by tokopedia, micro-warehousing startup Crewdible and cross-
border e-commerce fulfillment AllSome are supporting small individual sellers to
become enterprises.

Warehousing Aggregators such as Waresix, Ritase are funded by huge investors

such as Sequoia Capital, Jungle Ventures, Golden Gate Ventures, Insignia, and
more. These players have been exploring new geographies through expansions and
acquisitions across the globe to avail of a competitive advantage through combined
synergies.

The lucrative prospects within this market are also attracting a large number of new
industry players. This competition is resulting in heavy investment by the top players
into research and development to differentiate them from the rest.

Key Market Players

The key market players in Indonesian Trade & Logistics Market are Deutsche Post DHL
group, CEVA Logistics, PT Samudera, PT Siba Surya, PT Bhanda Ghara Reksa.

Company Profile of Key Market Players:

Deutsche Post DHL group

● Deutsche Post DHL Group is the world’s leading logistics company. The Group
connects people and markets and is an enabler of global trade.

● It aspires to be the first choice for customers, employees and investors

worldwide. The Group contributes to the world through responsible business
practice, corporate citizenship and environmental activities.

● By the year 2050, Deutsche Post DHL Group aims to achieve zero emissions
logistics.

CEVA Logistics

● Led by Rodolphe Saadé, the CMA CGM Group is a world leader in shipping and
logistics.

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● Its 489 vessels serve more than 420 ports on five continents around the world
and carried nearly 22 million TEUs (twenty-foot equivalent units) in 2019.

● Present on every continent and in 160 countries through its network of 755
offices and 750 warehouses, the Group employs 110,000 people worldwide, of
which 2,400 in Marseille where its head office is located.

PT Samudera

● PT Samudera Indonesia Ship Management (SISM) incorporated in 1991 to

support shipping activities by providing professional, efficient and added value in
a form of competitive advantage for the customers.

● SISM is a merger from the several ship management divisions in numerous

shipping business units in Samudera Indonesia.

● SISM is also supported by highly competent people and a team of expertise to

operate the ships safely and to meet national and international requirements
according to market needs, as well as best practices in ship management.

PT Bhanda Ghara Reksa

● As a State-Owned Enterprise (SOE) engaged in logistics services which was

established on April 11, 1977 in Jakarta, PT.

● Bhanda Ghara Reksa (Persero) or BGR Logistics as "Beyond Digital Logistics

Company" has a vision of becoming a logistics company that provides integrated,
reliable and reliable solutions.

Strategic Conclusion
The demand for trade and logistics services is going to increase in Indonesia due to
growing urbanization, increasing trade and investment due to integration, and
emerging new business models like e-commerce are accelerating the demand for
efficient logistics. In addition, the success of their emerging e-commerce business
depends heavily on an efficient logistics delivery system. The logistics sector is
inherently complex due to its scope, ranging from physical infrastructure covering
four modes of transport, customs, and services.

Both comprehensive and integrative policies, together with a strong governance

structure and implementation capacity, are needed to achieve the seamless logistics

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that they seek. Though the Indonesia Trade and logistics market was affected by the
sudden outbreak of COVID-19 pandemic for some time, it has started doing well now.
So, it is expected that during the forecasted period, there would be proper growth in
the Indonesia trade and logistics market.

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investments-industry

19. https://www.transparencymarketresearch.com/logistics-market.html

Further Reading
Further reading to be listed here

Please do not delete the section if you are leaving it blank

Appendix
 CAGR: Compound Annual Growth Rate

 IoT: Internet of Things

 SEA: Southeast Asian

 SMEs: Small and Medium Enterprises

 US$: United States Dollar

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