Logistic firms pin hopes on domestic orders

The Jakarta Post, Jakarta | Mon, 02/09/2009 6:26 PM  

The logistics sector, which absorbs the most workers after the manufacturing sector, is relying heavily on growth in the domestic market this year. 

As the global economic downturn erodes demand for imports and exports, the Indonesian Logistics Association (ALI) expects the majority of growth in orders to come from the local market. 

And with the elections looming large, the association's high hopes for domestic orders seem justified, ALI chairman Zaldy Ilham Masita said Saturday. 

"We are optimistic that we'll see 10 percent growth in domestic demand this year, because of the upcoming elections," he said. 

Past experience shows that elections have proved a major boost for transactions that involve logistics services. 

The country is gearing up for legislative elections in April and a presidential election in July. 

In addition, "Indonesia's population of more than 220 million people is also a potential and vast market that will contribute to growth in the domestic demands," Zaldy said. 

Still, the expected growth in domestic orders is relatively low compared to last year's growth of 17 percent. 

On orders related to imports and exports, the industry may see zero growth, with a strong possibility of a descent into negative territory, as the impact of the global downturn peaks at the start of the second half of this year. 

"Exports orders have been declining since the October crisis, and most manufacturing companies are also reducing imports of raw materials because of the high costs," Zaldy said. 

Last week, the Central Statistics Agency (BPS) announced that December exports had plunged 20 percent from a year earlier as overseas demand dwindled, emulating the declining trend in the last three months of 2008. 

Despite growing worries of mass layoffs this year, the ALI expects that absorbance of new employees will still grow by 3 to 5 percent, down from last year's figure of more than 10 percent. 

"We will still see some growth in employment because the logistics sector is very intensive in terms of workforce. Our workers range from truck drivers and warehouse operators, to laborers and other semi-skilled workers," Zaldy said. 

He added most of the jobs created would be for semi-skilled laborers, at a time when most firms were being more selective in hiring skilled laborers. 

To cope with the deepening global crisis, he went on, small logistics firms would consider merging. 

The logistics sector absorbs not only huge number of workers, but also contributes at least 20 percent to the country's GDP. 

Infrastructure is still considered the main challenge for the future growth of the industry. 

"What we need is adequate infrastructure that will ensure the fast and safe transportation of logistics," Zaldy said. 

Under a blueprint on national logistics, recently drafted by the Office of the Coordinating Minister for the Economy, the government will speed up the development of the logistics industry. 

Among other things, the blueprint mandates the establishment of a Logistics Committee tasked with coordinating among related ministries, and the formulation of action plans. 

The blueprint will also lay down concrete efforts to make the industry more efficient and reduce logistics costs. (fmb)