Expediting clearance of goods
Few newspapers paid attention to Finance Minister Sri Mulyani Indrawati’s briefing at the inauguration of the new chief of the Indonesia National Single Window (INSW) authority on Monday on the key role of the agency in expediting the clearance of goods from seaports.
As Indonesia is an incredibly vast, diverse archipelago, seaports are key to facilitating the smooth distribution of goods. No wonder efficient port handling, besides efficient business and investment licensing, has been one of President Joko “Jokowi” Widodo’s top priorities over the past five years.
He has markedly improved investment licensing through the online single submission (OSS) system for documents and applications for business licenses from any government authority. Jokowi strengthened the INSW system last year by establishing a special agency under the Finance Ministry to manage its operations.
The INSW, launched in 2007, is an integrated system of customs clearance that enables traders and stakeholders to interact through a web portal with 18 relevant government ministries and agencies with minimal physical interaction to expedite the issuance of import/export licenses and all other documents needed for the release of goods from ports.
To ensure that the INSW is really a single gateway for the electronic processing of documents and permits for goods clearance, the INSW is assisted by a steering committee headed by the coordinating economic minister and consisting of all other ministers and heads of agencies related to the clearance of goods in ports. The INSW is also connected to the ASEAN Single Window system to facilitate a smoother flow of goods within the free trade area.
The combination of inadequate infrastructure and inefficient seaport operations has made Indonesia’s logistics costs the highest in the ASEAN region, making its exports much less competitive.
The government has accelerated infrastructure development to improve connectivity between the various islands and between the country and the international market. Strong connectivity to global value chains is crucial for Indonesia, because international trade (exports and imports) accounts for almost 50 percent of the gross domestic product, and more than 80 percent of this trade is done through sea transportation.
But physical connectivity is not enough. Institutional connectivity related to customs and other administrative procedures, licensing bureaucracy and technical standards is no less important. Hence, the role of the INSW system.
As international trade is increasingly dominated by global supply chains, or the fragmentation of production processes, where a single good and its inputs travel through multiple countries during assembly, the main obstacles to trade are often lengthy customs procedures, licensing inertia and other bureaucratic hassles, which are all classified as nontariff barriers.
Therefore, cutting red tape for importers and exporters, at and behind the border, is part and parcel of the program to ensure that goods and services can be delivered quickly and cheaply. As a World Bank study has found, the removal of nontariff barriers, such as arduous licensing procedures, is more effective than lower tariffs for expanding international trade.