World Bank Approves $400m Loan for Indonesia's Logistics Reform

The World Bank's Board of Executive Directors approved the first Indonesia Logistics Reform Development Policy Loan to enhance logistics and strengthen connectivity.

    The US$400 million financing will support the Government of Indonesia to address bottlenecks in the country's supply chains, such as long dwelling time in ports and lengthy procedures for trade clearances, according to a World Bank press release.

    The Logistics Reform Development Policy Loan will also support Indonesia's much-needed transition from dependence on commodities to a more competitive manufacturing-based economy. As a result, Indonesia's logistic costs account for 25 percent of manufacturing sales, compared to 15 percent in Thailand and 13 percent in Malaysia. 

    It is cheaper to ship a container of Chinese mandarin oranges from Shanghai to Jakarta than to send similar freight from Jakarta to Padang in West Sumatra, even though the distance between the two Indonesian cities is one sixth of the distance between Jakarta and Shanghai.

    The three main components of the financing are to enhance the performance of ports, improve competition in logistics services, and strengthen trade facilitation.

    The World Bank's support to logistic reforms in Indonesia is an important component of the World Bank Group's Country Partnership Framework for Indonesia, which focuses on government priorities that have potentially transformational impact.