Indonesia must take urgent steps to reduce its national logistics costs to boost competitiveness, the ALFI (Indonesian Logistics and Forwarders Association) Institute said on Friday, outlining five key policy priorities aimed at reforming the country’s supply chain infrastructure.
Despite progress in recent years, Indonesia’s logistics costs remain higher than many of its Southeast Asian neighbors, including Vietnam, Malaysia and Singapore. According to ALFI, national logistics costs have fallen from 26% of GDP in 2014 to an estimated 14.3% in 2024, but remain uncompetitive.
“High logistics costs are a structural barrier to Indonesia’s global competitiveness,” ALFI Institute Chairman Yukki Nugrahawan Hanafi told media.
“As trade becomes increasingly complex and tariffs rise, we must focus on lowering these costs to secure new market share and strengthen domestic industry.”
Yukki said the elevated logistics burden is largely driven by transportation, warehousing, and administrative expenses, worsened by fragmented infrastructure and an inefficient supply chain.
“The core of the problem lies in infrastructure that is not evenly distributed or integrated across the archipelago,” he said. “Improving both the quantity and quality of logistics systems will not only lower costs but position Indonesia as a regional hub for trade, services, and investment.”
To address the issue, ALFI has proposed five policy areas for reform: First, expand logistics infrastructure across land, sea and air to improve national connectivity.
Second, simplify fiscal and trade systems to make logistics operations more efficient and cost-effective.
Third, harmonize regulations and reduce bureaucratic red tape across the logistics value chain.
Fourth, modernize transport fleets to enhance operational performance and reliability, and fifth boost human capital, with a focus on digital literacy and logistics management across all modes of transport.
“These reforms must be implemented in an integrated and consistent manner,” Yukki said, urging collaboration between the public and private sectors. “Reducing logistics costs is not just a matter of economic efficiency, it’s key to Indonesia’s future as a competitive, globally connected economy.”