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Recent Study: Indonesia Freight Transport Report Q1 2014

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2014-01-05 22:18:27 - New Transportation market report from Business Monitor International: "Indonesia Freight Transport Report Q1 2014"

2014 Growth Forecast Reduced As Headwinds Strengthen After strong growth, the Indonesian economy has entered a difficult patch. A flight away from the rupiah and toward US dollar assets has combined with a widening current account deficit (4.4% of GDP in the second quarter) and continuing concerns over inflation (running at around 8.6% in the third quarter) to cause a degree of uncertainty. In this context Bank Indonesia has had to adapt a tightening stance on monetary policy, pushing up the benchmark interest rate in various steps since mid-2013. In August, the government announced a stimulus package offering tax cuts for labour intensive and commodity export sectors. Adding to the overall picture Indonesia is entering an electoral period, with legislative

polls due in April 2014, followed by presidential elections in July of the same year.

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The economic policies of the front-running candidates are not yet entirely clear. Taking all this into account we have reduced our 2014 GDP growth forecast to +5.3% (down from +6.0% in our last quarterly report). This reflects what we see as a slowdown in investment and private consumption during the year. To be sure, our long-term outlook remains sanguine, with real GDP growth projected to average 6.2% per annum over the coming decade. Much of this, however, will be driven by strong growth in fixed capital. Should improvements in the investment climate stall or reverse - after all, the country is still ranked at a lowly 120th in the World Bank's Doing Business 2014 report - Indonesia could fail to realise its strong growth potential.

Our freight transport forecast for 2014 shows a significantly slower pace of growth, as the economy slows. This slowdown will be partially offset by something of a recovery in foreign trade that we expect during the course of the year, helped by the government's recent export stimulus package. On the medium to longer term we continue to think that the key to sustainable growth is investment in port infrastructure, including road and rail links in the hinterland areas. We are encouraged to see some evidence of progress on this front. Capacity problems remain an issue, but new investment projects in ports, airports, road, and rail are being launched.

Industry Data

* Air freight volumes are forecast to expand by 7.0% in 2014, with average annual growth of 7.1% during our forecast period to 2018.
* Rail freight volumes are estimated to rise by 8.3% in 2013, with average growth of 7.8% during our forecast period.
* 2014 Tanjung Priok total tonnage forecast to grow 4.0% to 55.192mn tonnes, with average growth of 4.9% expected over our forecast period to 2018.
* 2014 Palembang total tonnage forecast to grow 2.6% to 12.73mn tonnes, with average growth of 3.7% over our forecast period.
* Indonesian foreign trade (exports + imports) expected to grow by 5.6% in real terms in 2014, up from 2.3% in 2013.

Key Industry Trends

Air Freight In Positive Territory In 2013: The air cargo sector continued growing in 2013, despite the impact of a weak national currency, according to the available data. In the first five months of 2013 a total of 66mn packages had been flown from the country's 24 commercial airports, an increase of 25.7% on the 52.5mn packages carried the preceding year. Frost & Sullivan predicted 2013-airfreight volume growth of 19.6% to 1.16mn tonnes. National airline Garuda Indonesia had signed an agreement with the ministry of trade and the Association of Indonesian Express Delivery Services (Asperindo) to handle more airfreight.

Garuda vice-president of communications Pujobroto said the airline was considering whether to buy a freighter in 2014, such as an Airbus A330-200F or the Boeing B737-700C. The firm wants to increase the contribution of the cargo divisions from the current seven percent of revenue to 10 percent. He also said that Garuda wanted to make Kuala Namu International Airport in North Sumatra and Sultan Hasannudin Airport in South Sulawesi their cargo hubs after Soekarno-Hatta International Airport in Cengkareng.

More Ships Are Flying The Indonesian Flag: The implementation of cabotage policy in Indonesia has resulted in a greater number of locally flagged vessels in the country. The number of Indonesian-flagged ships rose by twofold to 12,536 ships as of July 2013, compared with 6,041 ships in 2005, when the policy became applicable. This was revealed through data issued by the Indonesian National Shipowners' Association (INSA). The rise shows that the policy has benefited domestic players and increased investment in the country's shipping industry, INSA chairman Carmelita Hartoto, said. This has also promoted old players to expand their footprints and new players to enter the industry, Hartoto added. Hartoto also said that with a greater number of vessels capacity had grown more than threefold to 17.89mn gross tonnes from 5.67mn gross tonnes in 2005.

Further Signs Of Automobile Industry Freight Demand: A new car terminal in Sumatra, Indonesia has been successfully inaugurated by Indonesia's state-owned port operator Pelabuhan Indonesia II (Pelindo II). The facility covers an area of 6,560 square feet at the port of Boom Baru and possesses the ability to take delivery of as many as 300 cars on a daily basis. The majority of the units are likely to be received on rollon, roll-off vessels from the port of Tanjung Priok in Java.

Key Risks To Outlook

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