By: Bambang Sabekti, National Logistics and Port Practitioner
Many Indonesians are surprised to learn that shipping goods from Jakarta to Papua can cost more than sending cargo from Jakarta to Melbourne. The usual conclusion is that shipping companies are charging excessive freight rates.
That assumption is misguided and risks leading policymakers toward the wrong solutions.
Indonesia’s government does not directly regulate freight rates or own merchant fleets. Intervention mainly takes place through state-owned operators such as PT Pelni under Public Service Obligation (PSO) schemes financed by the state budget.
Yet despite years of subsidies and intervention, freight disparities remain largely unresolved because policymakers have failed to address the structural problem at the center of Indonesia’s logistics challenge: trade imbalance.
Ship Follows the Trade
In shipping, one principle dominates commercial decisions: “ship follows the trade.” Cargo flows determine where vessels operate, how often they sail and how freight rates are formed. Routes with balanced two-way trade tend to have lower freight costs because ships carry cargo in both directions. Routes with weak return cargo are more expensive because vessels still incur operating costs even when they sail back empty.
This so-called “dead freight leg” is central to understanding why eastern Indonesia faces persistently high logistics costs.
Ships sailing from Jakarta to Papua are typically full, carrying food, construction materials and consumer goods. On the return trip, however, there is often insufficient outbound cargo from Papua to Jakarta. The vessel operator must therefore recover round-trip operating costs largely from one direction of trade, pushing freight rates sharply higher.
The Jakarta-Melbourne route tells a different story. Indonesia exports products such as furniture, textiles and crude palm oil, while Australia ships wheat, beef and manufactured goods back to Indonesia. Because vessels carry cargo in both directions, operating costs are spread more evenly. Freight costs are therefore lower despite the longer distance.
Distance Is Not the Core Issue, but Trade Balance
The same structural imbalance is increasingly visible in Sumatra, one of Indonesia’s largest export-producing regions. Commodities such as palm oil, rubber, coffee, coal and pineapple leave the island in large volumes, while inbound cargo remains comparatively limited. The result is a growing need for shipping lines to reposition empty containers back to export hubs.
That imbalance was highlighted recently when IPC TPK Panjang received the MV MSC Polonia III carrying 1,787 TEUs of empty containers, reportedly the largest empty-container repositioning shipment in the port’s history. While such arrivals may appear operationally significant, they are also evidence of mounting structural inefficiency.
Repositioning empty containers is costly. Shipping companies must absorb slot costs, fuel expenses, port handling charges and vessel operating costs, all of which are ultimately reflected in higher freight rates charged to exporters. As a result, exporters in Lampung can face higher logistics costs than exporters shipping through Jakarta, despite producing globally competitive commodities.
Indonesia’s response to regional freight disparities has relied heavily on subsidies, particularly through the government’s Tol Laut program. In 2025, the government allocated Rp623.37 billion for Tol Laut operations across 39 routes and 104 port calls as part of broader sea transport PSO spending totaling Rp5.04 trillion.
Yet the program transported only 32,732 TEUs during the year, a relatively small volume compared with the logistical needs of eastern Indonesia.
The Supreme Audit Board (BPK), in its audit of Pelni’s 2024 financial statements, concluded that management of the Tol Laut program remained suboptimal and had negatively affected the company’s finances. According to the audit findings, Pelni incurred at least Rp29.38 billion in losses because subsidy payments failed to fully cover operational costs.
The problem is structural. Subsidies may reduce shipping costs temporarily, but they do not create return cargo. Ships continue returning partially empty, meaning the burden of the dead freight leg merely shifts from shippers to the state budget.
Without broader industrial and trade development in eastern Indonesia, subsidy dependence risks becoming permanent. At the same time, subsidized operations can discourage private shipping companies from entering those routes commercially.
A more sustainable approach would focus on generating productive economic activity in underserved regions. Investments in agriculture, fisheries, livestock processing and downstream industries would create outbound cargo flows naturally, lowering freight costs through market mechanisms rather than state intervention.
Indonesia has historical precedent for this approach. During the Soeharto era, transmigration and agricultural expansion policies in Kalimantan and eastern Sumatra stimulated production, created return cargo and attracted commercial shipping activity without requiring permanent freight subsidies.
The government’s livestock shipping program illustrates the same policy dilemma. In 2025, PSO funding for livestock vessels reached Rp79 billion to transport roughly 49,845 cattle, equivalent to around Rp1.58 million per animal in subsidies. Yet livestock carriers inherently generate limited return cargo opportunities.
A more effective strategy would be to develop modern slaughterhouses and cold-chain facilities in eastern Indonesia, particularly in Nusa Tenggara Timur and Nusa Tenggara Barat. Processed chilled or frozen meat transported in reefer containers could generate commercially viable return cargo while also creating local value-added industries.
More than a decade after the launch of Tol Laut, freight disparities between western and eastern Indonesia remain significant. The BPK findings reinforce what many in the logistics sector have long argued: subsidies alone cannot solve structural trade imbalances.
Solve Trade Imbalance First
Freight costs in Indonesia are high not because shipping operators are inherently exploitative, but because trade flows remain uneven. Unless Indonesia addresses the imbalance at the production and industrial level, logistics costs will continue to burden consumers, exporters and regional economies alike.