Asok Kumar – President Director, Schenker Petrolog Utama, Indonesia
The president director of DB Schenker’s Indonesian affiliate, PT Schenker Petrolog Utama, explains the significance of Indonesia within their global network, highlighting the vast potential of the Indonesian market. Furthermore, he reviews the unique environmental characteristics of Indonesia as the largest archipelago in the world, pinpointing how they have seized this challenge to the industry as an opportunity.
How significant is Indonesia for DB Schenker’s global operations?
From my personal perspective it is not significant enough, yet; my job is to change that. Indonesia is the fourth most populous country in the world, has the highest GDP within the Association of South East Asian Nations (ASEAN) and is certainly the largest and most important economy in the region. However, if you compare the size of DB Schenker’s operations in Indonesia with its operations in Malaysia or Singapore it falls short. Due to the highly developed nations on our doorstep – especially Singapore – some opportunities are limited as a lot of business is taken out of Indonesia. Many major MNC’s choose Singapore as their regional hub, even though Indonesia is the main market, as the infrastructure in Singapore is better developed, regulations are more transparent and there is less bureaucracy which provides enhanced ease of doing business.
Indonesia is undoubtedly a challenging place to do business due to complexity of its environment and its regulatory framework. In terms of licenses and authorities, there used to be no centralized body; businesses here had to see many different authorities on a regional level on a day to day basis. From a logistics perspective its challenging as the infrastructure is not yet as developed as it could be. As example, a commonly used logistic concept, already implemented in China, Singapore, Thailand and many more countries, is the concept of bonded logistics parks (BLP) which act as special economic zone, where goods can be stored, manipulated and held until use without the pay of duty. It will be implemented in parts of Indonesia now, however in comparison with aforementioned countries it is a rather late implementation.
In a 2014 interview you said “Indonesia’s progress is clearly visible”; where did you identify this progress and how has this dynamic evolved in the last two years?
His Excellency president Joko Widodo and his government have recognized the pitfalls of their logistics infrastructure and how it impacts the Indonesian economy. The government has made it one of their focal points to reduce the logistics expenditures by developing the infrastructure across the archipelago. I have recently witnessed strong developments and I am delighted of this progress.
At DB Schenker we have the obligation to support our customers in enhancing the ease of their supply chain and provide cost efficiencies – the government developments will help us as well as our clients, as it will bring the overall costs down for our clients and us, and allows us to offer even more efficient and effective logistics’ solutions.
From a pure economic perspective the government has achieved much as well; despite the low commodity price and Indonesia’s dependency on it, economic growth was achieved and credits certainly belong to the new government. Indonesia is moving in the right direction and I am confident that this progress will be maintained consequently bringing Indonesia at its deserved level of significance in the region!
Could you please give us a brief introduction of DB Schenker’s operations here in Indonesia including the Joint Venture (JV) formed and the rationale behind it?
DB Schenker has been in Indonesia since 1974 in association with Petrolog Indah with whom we formed a JV in 1999. As business, we’re involved in all aspects of the logistic value chain across all Industries. A significant share of our client portfolio in Indonesia comes from the oil and gas industry as well as related industries such as engineering procurement and construction (EPC), various project management providers and many more. The JV with Petrolog is on one hand a necessity as regulations dictate to have a domestic partner, on the other hand it is a partner with whom we realize unique synergies in the Indonesian market to better serve all aspirations of our clients. Together with our trusted partner we have grown in Indonesia ever since the JV was formed and I am confident that we will continue our common growth in the future.
Since the JV in 1999 you have opened twenty affiliates and branch offices around Indonesia, one of which was opened in Batam in 2009. What is the strategic significance of Batam to DB Schenker’s Indonesian operations?
Initially we identified the need to open our office in Batam due to inquiries of our oil and gas clients. The location allows us the effectively serve clients from this sector from Indonesia, Singapore and Malaysia alike and this strategic positioning is valued by our customers. Ever since our establishment on Batam, it has evolved into a major industrial hub in Indonesia. Undoubtedly due to the right incentives set; free trade zone, enhanced development in infrastructure and much more has made it to a valued location for business of all industry sectors.
Which of your services to the Indonesian oil and gas industry are most in need measured in revenue and volume?
From a pure revenue standpoint we grow the most with our airfreight services, on the other hand it is also the most costly service in any logistics portfolio which is why this dimension isn’t appropriate for comparison. From a volume perspective, the workload from the oil and gas industry across our different business units is very balanced. Despite lacking specific industry statistics, I can say with full confidence that we are among the top three services providers to the oil and gas industry in Airfreight, Ocean freight and global projects oil and gas (GPOG). Especially in the latter we’re invited in literally all tenders undoubtedly due to our brand recognition, customer loyalty and genuine spotless track record of delivery in full on time (DIFOT).
With some 75 percent of Indonesia’s oil and gas reserves located offshore, Indonesia’s hydrocarbon industry is experiencing a paradigm shift from on- to offshore. How will this affect the business dynamic of DB Schenker in Indonesia?
Whereas the market dynamics for the logistics sector as a whole will undeniably change, it will not change for DB Schenker. Obviously servicing offshore sites with our services is much different from servicing onshore sites, nonetheless we have already an established portfolio in offshore services valued by our clients. Therefore we will not need to reinvent ourselves, as we already have the means, the expertise and the reputation to serve our clients’ offshore aspirations to the full extent.
Offshore projects are associated with much higher costs than onshore projects, how does DB Schenker provide unique cost efficiencies to its clients?
I mentioned earlier that the Indonesian government is now implementing BLP’s; two years ago we submitted a paper to regulatory authorities arguing for a BLP in Balikpapan, East Kalimantan Indonesia. Our argued rationale was, that up until now, equipment used for Oil and Gas projects in that area was stored in Singapore’s BLP and as soon as it was needed it was shipped to Balikpapan which skyrocketed logistical costs. Now the government is building a BLP in Balikpapan allowing us, and other players, to serve our clients more efficiently bringing the cost down.
Currently, I would estimate 70 to 90 percent of all equipment stored in Singapore’s Loyang Offshore Supply Base is destined for Balikpapan in Indonesia. The sole rationale for this location was the absence of equivalent facilities with equivalent regulations in Indonesia. Now the benefit of such location will shift from Singapore to Indonesia! I would not consider this to be our sole achievement, however we did go the extra mile to support this Indonesian achievement ultimately allowing us to better serve our clients.
DB Schenker “At the forefront of environmental initiatives in the logistics sector” – How does this apply to the Indonesian affiliate?
The issue of ecological sustainability has become part of DB Schenker’s global strategy and is firmly anchored in everything we do. It is our responsibility as leading conglomerate, to address this issue cornered by climate change, rising energy demand and globalization as a whole. Commitment to be ecological sustainable is not just a slogan for us; which is why we actively measure CO2 output and energy usage in every affiliate around the world, with specific key performance indicators that have to be kept. We assume responsibility and don’t ignore our environment – in Indonesia just as everywhere else in the world!
Every company entering a country needs a trusted logistics partner. Why is DB Schenker in Indonesia the trustworthy partner of choice?
Providing logistics services in Indonesia is a complex business and not easily done. In contrast to many of our competitors that recognize the “challenge”, we identify the nature of Indonesia’s characteristics as opportunity. Undoubtedly its remote locations, underdeveloped infrastructure, complex regulatory framework and high level of bureaucracy need to be addressed appropriately, and indeed, at DB Schenker we have the in-depth market knowledge, international recognized expertise and best practices, and the human resources to excel in Indonesia’s challenging environment unmatched by competition!