Indonesia Freight Transport Report Q4 2009

In mid-July the European Commission lifted a ban on four Indonesian airlines, including flag carrier Garuda, from entering European airspace. The ban remained in place for other Indonesia-based airlines.

In a statement the Commission said that Indonesia had achieved 'significant improvements' in air safety since the ban was first imposed in June 2007. The statement said that Garuda Indonesia, Airfast Indonesia, Mandala Airlines and Premiair could be taken off the blacklist, 'because their authority ensures that they respect international safety standards'. Indonesian transport minister Jusman Syafii Djamal said, 'this is the fruit of our labour. We appreciate the passion, trust and technical co-operation which has been shown by the European Union safety unit. This was not an easy journey.' He insisted that European tourists thinking of visiting Indonesian resorts including Bali and Lombok could have 'no doubt' about the safety of the country's airlines.

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 7.0% 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 air freight (5.0%), inland water transport (4.8%), road haulage (4.6%), and shipping (4.5%).

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$59.4bn in nominal terms by 2013, or 6.5% of GDP.