HOW IS INFRASTRUCTURE HAMPERING INDONESIA'S ECONOMIC DEVELOPMENT?
Lack of adequate infrastructure causes Indonesia's logistics costs to rise steeply, thus reducing the country's competitiveness and attractiveness of the investment climate. According to data published by the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) around 17 percent of a company's total expenditure in Indonesia is absorbed by logistics costs. In peer regional economies this number lies below ten percent. In particular transport costs are high; for land as well as sea. Despite Indonesia's archipelagic geography, the country's sea transport is yet to be developed substantially. Currently, sea transport is even more expensive compared to land transport. The weak circumstances for fostering a conducive inter- and intra-island trading network result in inflationary pressures on domestic produced products. This partly explains the paradoxical situation that sometimes domestic produced fruit is more expensive compared to imported fruit. It also leads to substantial regional price differences. Rice or cement, for example, are much more expensive in eastern Indonesia than in Java or Sumatra due to extra costs that arise from point of production to end user. It also means that Indonesian entrepreneurs are losing out on lucrative opportunities as logistic problems (which includes transport, warehousing, cargo consolidation, border clearance, distribution and payment systems) kills or prevents certain businesses from expanding. One might assume that Indonesia - being the world's largest archipelago and, as such, having large quantities of waters as well as seas at its disposal - contains a flourishing seafood business. However, it is far from flourishing, largely due to a lack of cold storage transport. This same matter is hampering Indonesia's horticulture businesses.