Review and Overview Logistics Business, Notes of ALFI Chairman

In the last 10 years (2008 – 2019), global economic turmoil was mostly originated from crisis in the financial, energy and trade sectors.However, these fluctuations or crises did not significantly suppress the demand and supply.

However, at the end of 2019 or in early 2020, almost all countries in the world were shocked by the pandemic corona virus (Covid-19) outbreak, creating economic crisis. This turmoil was originated from health sector, paralyzing the economy and depressing the demand and supply.

“This is totally shocking the world since this is a new case causing a world economy turmoil. The world has no experience with Covid-19,” commends Yukki N Hanafi,Chairman of Indonesian Logistics and Forwarders’ Association (ALFI/ILFA).

Fortunately, hesaid, amidst this health emergencies, almost all countries in the world, including Indonesia, were still optimistic, while building a commitment to implement health protocols so that the economy will get better in the future.

In fact, the International Monetary Fund (IMF) through its World Economic Outlook in mid-October 2020 has revised world economic growth from -5.5% to -4.4% for the next year (2021),a long and difficult accent.

This is reasonable reflecting on how this pandemic affected the economy this year (2020). Data says there were only few countries in the world enjoying the positive growth in 2020, including, while many faced a negative growth. ASEAN countries of Singapore, Malaysia, Thailand, Vietnam, and Indonesia, for example, suffered negative growth.

“What we can do is that building optimism do our best together so that economic growth in Indonesia can rise again in 2021,” said Yukki.

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Recession Anatomy

Yukki, who is also Chairman of the Asean Federation of Forwarders Association (AFFA), explained that in theory, the anatomy of the recession caused by the Covod-19 Pandemic was very different from the previous crises because the impact was also different, especially on the manufacturing sector.

In terms of banking finance, third party funds in banks (state owned and private banks) increased sharply, while credit decreased. This indicates a drop in investment.

Even so, he added, not all sectors experienced a decline due to this pandemic.Some sectors, including the information and technology (IT), communications, health, and agriculture sectors even enjoyed a significant growth.In fact, since August 2020, these sectors have experienced significant growth even though in the previous months they had faced pressure from the impact of Covid-19.

“The impact of Covid-19 has also influenced the behavior of the logistics industry, the backward and forward linkage of the logistics sector to the industry is very strong. This means, if there is a decrease or increase in industrial activity, then logistics activity will experience a greater decline or increase,” said Yukki.

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Competitiveness, Strategic Issues

In mid-October 2020, a Regional Comprehensive Economic Partnership (RCEP) was signed by 15 countries consisting of 10 Asean countries plus China, Japan, South Korea, Australia and New Zealand.

RCEP also conveyed economic measurements from facts to the 15 countries, including;representing 29.6% of the world’s population, 27.4% of world trade, 30.2% of world GDP, and 29.8% of world FDI.

Yukki said, this shows a very large market and a large opportunity, putting competitiveness issueson a must.

Meanwhile, entering the last quarter of 2020, logistics businesses and stakeholders were shocked by the issue of international shipments which was triggered by the scarcity of containers / containers.

Even though so far, he added, international shipments have been heavily influenced by trade to and from the USA.Meanwhile, on the other hand, intra-Asian transportation is considered to be less profitable (shallow margin). The business is more attractive to USA, then followed by to Europe, and then Intra Asia.

Containers shortage is also experienced by a number of countries in Asia, including Indonesia, due to among others by the decline in global trade, including US export activities, which resulted in the global shipping industry rationalizing costs by conducting pending shipments / omissions.

Yukki explained, the problem is getting more complicated, when imports by the USA are not matched by its export activities, resulting in ex-imported containers being stuck in the country and there is a global shortage of containers, including in Indonesia.

On the other hand, the discourse on government intervention to overcome the problem of container shortage is less effective when using incentives because it requires large costs.”The reason is, this kind of condition will naturally return to normal when world trade has recovered according to market mechanisms,” said Yukki.

He also revealed that the high cost of international shipment or the low competitiveness of transportation to and from Indonesia tends to be influenced by the behavior of Indonesian industry and trade. He said imports mostly use 20-feet box, export generally use 40-feet box.

So that every time the import activity must repo a 20 feet container and for export purposes, the 40 feet empty container must be brought in, all of which are calculated in freight. “However, behind all the challenges and problems that we have faced together throughout 2020, lessons can be learned as motivation for business actors, especially in the logistics sector, to move forward next year,” he said.

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