Indonesia Freight Transport Report Q3 2009

According to a report in the Jakarta Globe, the Ministry of Public Works will receive IDR1.7trn (US$147.9mn) of a US$6-7bn stimulus package being provided by the Indonesian government. The fund will be used to build up to 3,000km of road projects in 2009, and is forecast to create almost 55,000 new jobs. The funds would be used to support existing national roads as well as for four Bina Marga projects.

These are the Lintas Timur Sumatra in the Lampung Province and the Amplas flyover in the north Sumatra provincial town of Medan. The other two are the Manado-Mapangat Road in North Sulawesi Province and the Manokwari-Sorong Road in West Papua Province. Indonesia has experienced very rapid growth in the total number of road vehicles in circulation. Despite being given a high priority in government spending programmes, road construction in Indonesia as a whole has progressed at a slower pace.

Across all freight subsectors, we see transport growth, measured in mn-tonne kms (mntkms), rising by an annual average of 4.7% over the next five years. This is lower than the 6.6% rate registered in the preceding half decade. In part, this is because the Indonesian economy and commodity trade will not grow as strongly as was earlier expected. We are now projecting annual GDP growth of 4.6% in 2009- 2013, a relatively good performance bearing in mind the 2009-2010 global recession. Total freight growth will be higher than GDP expansion. The reality is that for an economy of Indonesia's size and opportunity, this is still somewhat below what both the country itself and its freight industry can achieve.

Out of all the main transport modes, pipeline throughput will lead the way, with average annual growth of 5.4%, followed by road haulage (5.1%), air freight (4.9%), inland water transport (4.8%), and shipping (4.6%).

Indonesia's freight industry has a poor-to-average BMI freight rating, with a composite score of 56.7 out of a potential 100. Comparatively speaking, the country's stronger points include long-term economic risk, freight growth and the transport intensity index (a measure of recent and forecast foreign trade growth). Compared with its peers, however, Indonesia's scores for long-term political risk, infrastructure growth and regulatory and competitive environments are all disappointing. This indicates that a lot more needs to be done before the industry begins to perform anywhere near its potential.

According to our latest estimates, transport and communications GDP rose by 7.8% in 2008. This is 1.7pps faster than overall GDP, which we estimate was up 6.1%. For 2009-2013, we expect the transport and communications sector to expand on a par with the economy as a whole, at an annual average of 4.6%. Transport and communications GDP will rise to US$61.8bn in nominal terms by 2013, or 6.5% of GDP.