Blockchain in logistics shows promise but local adoption continues to lag

Posted by tabitha
Danish freight giant Maersk announced in March that two shipping companies had joined its blockchain-based ship and cargo tracking platform TradeLens, allowing the platform to track the data for “nearly half of the world’s ocean container cargo”. ( Images)


While news of an international blockchain summit in Jakarta has brought a sense of optimism, the adoption of blockchain technology in the country’s logistics sector is still very far from a reality, industry players and officials have said.

One of the reasons for this is that the country lacks blockchain standards.

“For domestic [logistics activity], I think Indonesia faces a huge barrier to implement blockchain in that the country doesn’t have blockchain standards [when] the main requirement for blockchain is standardized data and processes,” Indonesia Logistics Association chairman Zaldy Ilham Masita told The Jakarta Post in a text message.

He said such technology was better regulated in the financial sector, particularly in the payments and banking industries, which explained why financial institutions such as private lender BCA had adopted blockchain technology faster than logistics companies.

As a case in point, the Financial Services Authority (OJK) issued last year regulation No. 13/2018 on digital innovation in finance, which requires untested technology such as blockchain to undergo OJK-supervised controlled tests, dubbed a “regulatory sandbox”, before being mass marketed.

At best, Zaldy continued, the Indonesia Customs and Excise Office was looking into implementing blockchain technology for cross-border trade operations.

Meanwhile, Customs and Excise Office spokesman Deni Surjantoro told the Post that the agency was still in the “initial stage” of brainstorming ways to implement blockchain technology in systems related to commodity exports, imports and free trade areas, among other trade matters.

“The challenge with exploiting blockchain is not just the technology but also the IT maturity of businesses integrated with our system. Also of equal importance is changing such businesses’ cultures, which requires coordination and a strong lead agency,” he said.

Blockchain technology, which is basically used to create a decentralized and very secure online ledger system, only began emerging in Indonesia in 2017 when six local startups banded together to form the Indonesia Blockchain Association.

Even Danish freight giant Maersk and American tech giant IBM – whose open source hyperledger is the most popular blockchain platform among logistic companies – struggled with marketing their blockchain-based ship and cargo tracking platform TradeLens when it was launched in late 2018.

It was only in March that Maersk announced in a statement available online that two shipping companies had joined TradeLens, allowing the platform to track the data for “nearly half of the world’s ocean container cargo”.

“So if someone wants to run blockchain for domestic logistics, I think they’re either dreaming or they don’t understand logistics in Indonesia,” said Zaldy.

Contrary to Zaldy, Chamber of Commerce and Industry (Kadin) official Rico Rustombi is very optimistic about the prospects of blockchain in the local logistics and financial sector irrespective of the government’s regulatory preparedness.

“Governments –not just Indonesia but even China – are always technologically left behind. Kadin sees this has its pros and cons. But regulated or unregulated, the market mechanisms will still run,” he told reporters during the Global Blockchain Investment Summit in Jakarta on Monday.

While acknowledging that no local logistics company had fully implemented blockchain, Rico urged regulators to more proactively study and monitor blockchain as he expected more companies to begin experimenting with the technology as of this year.

He said that blockchain adoption would be accelerated following the conclusion of the summit, which saw Kadin and the Singapore-based Blockchain Asia Forum launch their joint venture learning center the Blockchain Center of Excellence and Education (BCEE).

In fact, the BCEE signed on Monday memorandums of understanding with at least eight logistics-related companies – Sayurbox, KO-IN Toko, Mitra10, Cikarang Inland Port, Dewata Freight International, Proteksi Usaha Indonesia and Kamadjaja Logistics – to begin consultations on implementing blockchain this year.

Rico added that Kadin would commit to promoting blockchain technology as long as businessman Rosan Roeslani remained Kadin chairman. The chamber would not only continue sponsoring the summit and BCEE but also “more concrete programs that can meet the substantial needs of small and medium enterprises”.