This paper focuses on the challenges in the logistics of rice and soybeans in Indonesia. Rice distribution is complicated because rice production is concentrated in Java, while its consumption is high all over Indonesia. Soybeans are predominantly import and must contend with both import logistics and domestic logistics challenges.
At the national level, logistics roughly contributes 21–23% of Indonesia's gross domestic product (GDP), much higher than in other developing countries. Transportation and inventory costs dominate logistics costs in Indonesia, while administrative costs such as fees and charges at the port contribute less than 6%. High logistics costs are passed on to consumers, raising the prices of goods, including staple foods.
Compared to the national average for all goods, the transportation and logistics of rice and soybeans experience a higher burden of administrative costs, but transportation and industry costs remain important. Many of these cost components are affected by government policies and regulations, introducing monetary and time costs that affect the logistics of these goods as they move through their supply chains.
Programs to reduce logistics costs have mostly focused on eliminating price disparities affecting essential goods between the western and eastern parts of Indonesia. This task is difficult to achieve due to Indonesia’s archipelagic geography and unequal economic development. The effort to achieve more equal prices through the Sea Highway and public service obligation (PSO) programs for state-owned enterprises has experienced only mixed success and accommodates the high costs rather than addressing their underlying causes.
We identify 24 regulations from nine logistics processes and their associated logistics costs. Rice and soybean logistics expenses are affected by regulation that affects logistics costs related to warehousing, shipping, and trucking. Land transportation (trucking) is the largest contributor to transportation costs, which can be attributed to monetary and time costs created by regulations regarding a value-added tax on some services, mandatory appointment of local freight forwarding services, and the weighing of vehicles at a weigh station. Sea transportation and administrative costs are also important.
To reduce the impact of regulations on the logistics costs of rice and soybeans, we recommend five changes:
• In the port, the government through the Ministry of Transportation (MOTr) can set a port service productivity threshold and provide incentives for ports that can stay within the threshold in order to offer competitive rates and quality of port services.
• During the import process and customs clearance, system integration with customs authorities in soybean-exporting countries should be pursued to cut the time in the issuance of certificates of origin. A special quarantine method using quarantine ships or floating labs should be designated by the Ministry of Agriculture (MOA) to allow the process to start before ships enter the port
• The mandatory use of local freight forwarding services should be relaxed to allow companies outside the local area to carry out freight forwarding when services are not available in the area.
• Finally, food reserve policy should incorporate incentives, such as interest subsidies, for buying or releasing food stocks that should be provided for both public (Bulog and food state owned enterprises (SOEs)) and private actors.