"This line of business has considerable potential as the transport and delivery method of choice in Indonesia, especially for perishable goods, but requires a shift in political will away from trucking." Budi Noviantoro, President Director of KALOG
Kereta Api Logistics (KALOG), a subsidiary of the well-known state owned enterprise Kereta Api Indonesia, was established in 2009 and offers total logistics solutions ranging from railway container transport to courier services. Please present the company’s background to the GBG Indonesia audience as well as elucidate upon your strategies going forward.
KALOG is still a young company, having only been founded three (shud read : five, ed) years ago. We recently achieved our first profit, and expect to build upon our growth by setting a target income of 360 billion IDR for 2014 – a figure that should see profit rise to 39 billion IDR.
Our company makes available a range of logistics services that includes container transport, cement transport, couriers, and loading and unloading coal. We are currently focused on developing the capabilities of our coal loading and unloading services, particularly in South Sumatera, as this is an area of huge demand. Our strategy has therefore been to invest in new facilities for this arm of our company, such as gantry cranes and conveyor systems.
By 2016, we plan to be able to increase our capacity from the current level of 1.5 million tonnes of coal per year to 8 million tonnes per year. The subcontractors for this project have already been selected, and we expect that construction will begin next month (June 2014).
In addition to the potential for coal-related logistics in South Sumatra, what trends and developments are you seeing in Indonesia’s logistics industry and how does this shape your outlook?
In Java, the market for container transport services will continue to expand. The rate of this growth, however, depends upon whether Indonesia will be able to put in place the necessary infrastructure. The responsibility is on both SOEs like ourselves and the government to ensure that this is the case, and we have already begun developing terminals to load and unload containers.
The government at the same time should soon be completing the construction of a double track mainline from Jakarta to Surabaya, though land acquisition is still an issue for the remaining 10km that needs to be built. Theoretically, once these infrastructure projects are finished we should be able to add forty trains every day that we can transport cargo on, which totals an extra 40,000 tonnes per day.
With all this said, we continue to face challenges in being able to compete head to head with trucks. Despite the fact that a trip between Jakarta and Surabaya would take a truck 3 days to complete compared to only 18 hours for a train, there is still a lack of action on the part of the government to prevent overloads for trucks and make the most out of railway logistics. For example, transport via railways is subject to 10% value added tax, whereas trucking transport services are not.
More also needs to be done to lessen double-handling. Right now, our railway stations/terminals have difficulty in setting up directly within ports and instead must use trucks to move goods from vessel to train, even if the total distance between them is only a kilometre or two.
As opposed to having to locate our facilities outside state owned ports, it would be more efficient to move containers directly from vessels to our trains and the government must therefore encourage cooperation between its SOEs.
What can you tell us about your plans for working with the private sector?
We carry out joint operations with both local and international private sector players in the logistics industry. Our company has already initiated cooperation with multiple firms, including Global Putra International, with whom we have signed an MOU to work together in the field of courier services and container transport. These agreements with private sector companies often involve discussions on standardisation and tariffs within the logistics sector. Our company is also interested in more technical forms of cooperation, such as working with partners who can offer access to their network in international markets.
Are there any new services that KALOG intends to introduce in the future?
From a more long term perspective, it is important to keep in mind that KALOG was established to create door-to-door logistics services, moving beyond the limitations of station-to-station transport to become a total logistics solutions provider. Because of this, through partnerships we hope to continue to develop our courier service and broaden the extent of its reach to include cities in other countries. We currently have 44 courier outlets, but plan in the future to make this service available at all of our train stations.
How is your company positioned towards further cooperation with foreign partners and international investors?
We are very much interested in working with multinational businesses, having already collaborated with international logistics firms such as CMA CGM based out of France. Working with potential foreign partners is not limited to logistics companies; we have also been subject to interest from conglomerates such as Danone and Unilever.
In addition to the aforementioned cooperation to expand our courier services, gaining expertise in cold storage technology is one of the areas that we are interested in working with foreign partners. This would open up opportunities to transport beef, corn and chicken, and enable us to offer other more specialised logistics services. To better understand how we can initiate this type of partnership and set about constructing railways in close proximity to factories, we have reached out to Indonesia’s beef associations as well as private groups involved in agribusiness and food including Charoen Pokphand.
As a final message, what would you like our readers to remember about Indonesia and Kereta Api Logistics?
We welcome international parties interested in entering the market through partnerships with local logistics companies. It is my hope that the entry of these foreign companies will encourage the government to enact the changes needed to fully support the railway logistics sector in Indonesia. This line of business has considerable potential as the transport and delivery method of choice in Indonesia, especially for perishable goods, but requires a shift in political will away from trucking.
Source: Global Business Guide Indonesia.