On course to become the world’s largest megacity, Jakarta, Indonesia, is powering the country’s e-commerce market — expected to top $300 billion by 2025. Poor infrastructure, however, is threatening to stunt what could be exponential growth. 

Jakarta’s rapidly growing e-commerce market is capturing global attention. As retail players like Amazon and Alibaba invest and expand in the market, logistics providers are moving to support them. 

Local providers and e-commerce platforms have established warehousing and distribution operations, while global providers have recognized the strategic opportunity to link Jakarta’s 10 million population to trade hubs at the Port of Tanjung Priok and Soekarno-Hatta International Airport.

In a country where logistics costs equal 23% of GDP, increasing efficiency and service quality while lowering lead times is essential. 

High Priority 

As the government begins to prioritize infrastructure, supply-chain efficiencies and logistics costs have already seen improvements. Since 2014, investments in the Port of Tanjung Priok have reduced dwell time from a week to just over three days — boosting productivity and cutting storage costs.

The government is planning to invest another $40.7 billion between now and 2029 to upgrade physical and digital infrastructure, including the expansion of the city’s Mass Rapid Transport (MRT) system and construction of a 120-kilometer transit railway. Scheduled for completion by 2027, the project aims to relieve traffic congestion.

Natural Disasters

Despite these improvements, frequent volatile weather events like landslides and flooding will continue to undermine Jakarta’s potential and limit logistics capabilities. Last year, 80% of infrastructure spending was dedicated to maintenance and repairs alone. 

Japan, similarly exposed to natural disasters, offers lessons. Its use of “eco-drainage” has helped cut repairs spending and increased infrastructure lifespans by up to 30 years. Drainage in Jakarta is poor, and receives limited funding. 

A Digital Future 

Digitalization is a crucial driver of e-commerce growth, but bandwidth throughout Indonesia is poor. In some areas, just 2.5% of the population has internet access. Digital infrastructure developments would create significant new potential.

Without these investments, Jakarta’s logistics costs will remain high, undermining profitability and investor confidence. But as infrastructure develops, the region’s e-commerce market will thrive.

Beth Poole is a research analyst at Transport Intelligence.