Toll roads will not significantly reduce logistics costs: economist

Jakarta, (ANTARA News) - Senior economist of the Institute for Development of Economics and Finance (Indef) Faisal Basri opined that toll roads are not an effective solution to reduce Indonesia's logistics costs significantly.

In return, the country's logistics could be strong if the goods were to be transported by vessels instead of trucks, he stated at a press briefing on Indef's offer for Strategic Development Agenda of Natural Resources and Infrastructure here on Thursday.

The toll roads just helped to ease the flow of vehicles joining the annual mass exodus (Mudik), he noted at the press conference, held ahead of the convening of the second round of Indonesias presidential debate on Feb 17.

He believes that the logistics costs can be significantly reduced if land transportation were to be shifted to sea freight. However, only some 10 percent of Indonesias logistics are transported by sea, while the remaining 90 percent are still transported by trucks.

Transporting the logistics by means of land transportation has resulted in expensive costs, as they are transported by trucks through the Trans-Java and Sumatra Toll Roads. However, using sea transport for shipping goods is economical, Basri explained.

The land freight rate per kilogram is relatively expensive, while the cargo that can be carried by a truck is also limited.

In comparison, the sea freight cost of Brazilian mango could be reduced to zero, as a cargo ship could transport up to 20 thousand tons, Basri, a senior economist of the University of Indonesia, stated.

Apart from his view that land transportation is an ineffective solution to the country's logistics costs, Basri admitted that the constructed toll roads might have reduced the current logistics costs than before.

The toll roads contributed to the reduction in logistics costs, particularly if the tariffs were adjusted. They also shortened the travel time. However, the cost reduction was, nationally, not significant, and Indonesias products would still fail to compete with their foreign counterparts, Basri stated.

A pharmaceutical factory in Medan, the capital city of North Sumatra Province, for instance, preferred importing medicine bottles from Guangzhou, China, to purchase similar products from Java Island due to cost disparity.

He said the price of a container of medicine bottles from Java Island was recorded at US$827, while a container of similar products imported from China just cost US$600, he pointed out.

"The logistics costs can be reduced, but our products are not able to compete with the prices of imported products that are transported by sea," Basri added.

Source: ANTARA News

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