From Indonesia to the region: A new multimodal service to help local firms grow

After nearly a decade of steady growth, the global economy is now facing the looming prospect of a downturn.

But amid the gloom, there is one bright spot: the Association of Southeast Asian Nations (ASEAN).

ASEAN is tipped to be the world’s fourth largest economic bloc by 2030, after the United States, China, and the European Union, fueled in part by its fast-expanding intra-Asia trade.

In recent years, a new group of high-growth, high-potential countries within the bloc have emerged to join the “Tiger” economies, comprising Hong Kong, Singapore, South Korea and Taiwan.

With growth rates of around 5 percent, Indonesia, Malaysia, the Philippines, Thailand and Vietnam are powering ahead as Asia’s “Tiger Cub” economies.

Against this backdrop, Indonesia is stepping up on its efforts to boost infrastructure and logistics, with DHL Global Forwarding launching a new small-freight multimodal logistics service known as DHL ASIACONNECT+.

The less-than-truckload (LTL) scheduled service connects Indonesia to DHL ASIACONNECT, DHL’s highly successful road freight network across Singapore, Malaysia, Thailand, Vietnam and China.

This means businesses moving goods out of the Indonesian archipelago now have a strong viable alternative to traditional air and ocean freight, tapping DHL ASIACONNECT’s robust scheduled road network to reach key ASEAN trading markets.

“Adding Indonesia to the service portfolio gives customers a new option for multimodal freight service, which is up to 35 percent cheaper and reduces carbon emissions by up to 54 percent compared to air freight,” said Vincent Yong, President Director of DHL Global Forwarding Indonesia.

“It is also 65 percent faster as compared to ocean freight, providing the perfect middle ground for customers who want more flexibility.”

The new ‘Tiger’ economy

Indonesian President Joko Widodo wants to push the envelope further by having Indonesia crack the world’s top 10 economies by 2030, up from its current 16^th place.

Central to this is the “Making Indonesia 4.0” plan, a roadmap aimed at upgrading five manufacturing industries: food and beverage, textile and garment, automotive, chemical and electronics.

The goal is to have the manufacturing sector account for a sizable 21 to 26 percent of the country’s gross domestic product (GDP) by 2030, and, in turn, lift overall exports to make up 10 percent of the economy.

“A successful ‘Making Indonesia 4.0’ can drive real GDP growth by between 1 and 2 percent per year, so that GDP growth per year will rise to 6 to 7 percent in the period of 2018 to 2030,” President Widodo said in 2018.

More than half of Indonesia’s trade flows are regional, with 58 percent of its exports and 69 percent of its imports going to and coming from trading partners in Asia Pacific, according to DHL’s Global Connectedness Index.

Already, export values between Indonesia and other ASEAN countries are on the rise. Data from the Indonesia Trade Ministry Report 2019 shows that the value of goods sent to Vietnam, for instance, jumped about 23 percent from 2016 to 2018.

E-commerce, in particular, has played a considerable role in driving exports up. The sector is expected to rocket 88 percent from 2015 to make up US$21 billion (€19.06 billion) in gross merchandise value of Indonesia’s Internet economy this year, and surge further to hit US$82 billion by 2025, going by latest research by Google, Temasek and Bain.

Opening the doors of opportunity

The new DHL ASIACONNECT+ will help open more doors for businesses to tap on the rising demand for its products in the region.

Under the service, shipments from various cities in Indonesia, including Bandung, Balikpapan, Semarang and Lampung, containing locally produced goods, such as textiles, machinery and electronic goods, will be consolidated in Jakarta by air or truck before being air-freighted to Singapore and transported via road freight to Kuala Lumpur, Penang and Bangkok.

An extension of the offering to Vietnam and China, as well as imports to Indonesia from the various cities along DHL ASIACONNECT will follow at a later stage.

It comes on the back of Indonesia’s continued push to develop its infrastructure, with US$429 billion in funding to go toward massive projects spanning airports, power plants, rails and ports from 2020 to 2024.

“There is significant value for businesses in Indonesia to strengthen their intra-Asia supply chain. Half of the trade from Asia are bound for destinations within Asia and Asia’s economies are forecasted to be larger than the rest of the world combined by 2020,” said Bruno Selmoni, Vice President, Head of Road Freight & Multimodal ASEAN and South Asia, DHL Global Forwarding.

He pointed out that Indonesia is also gaining traction as a manufacturing hub for companies looking to diversify from China due to rising costs.

“Building a greater range of transportation options for businesses enables companies to better leverage Indonesia’s strategic location as a production base for the increasingly affluent domestic and regional markets.”

To help customers better run their logistics operations, DHL ASIACONNECT+ offers a standard tariff that allows them to manage their costs, as well as a single point of contact for end-to-end shipments as well as online track and trace capabilities via the DHL Interactive platform.

It also helps sustainability-conscious businesses achieve another important objective: reduced carbon emissions.

“In line with Deutsche Post DHL’s goal to reduce all logistics-related emissions to net-zero by 2050, the new multimodal solution will help Indonesian businesses slash their carbon footprint by up to half as compared to pure-play air freight services,” said Yong.

“Taking the sustainable route is no longer a choice today. It’s a necessity.”