Indonesia is the fourth most populous country in the world and an important market for us. John Boudreau, Country General Manager Indonesia, is at the helm for Hapag-Lloyd in the country. In this interview, he tells us how COVID-19 has affected the 17,000-island country; why Indonesia wants to move its capital; and what the problem with palm oil is.
Tell us a bit about the market development in Indonesia. How has the market been doing during the pandemic and what does the future hold?
Looking at GDP, the Indonesian economy has averaged 5% growth per annum for 10 years. In 2020, due to COVID-19, GDP has declined by 6.6 percent through 3 quarters. In looking at exports, there is not always a direct correlation between GDP and cargo volumes. As an example, between 2017 and 2018, export volumes were nearly unchanged year on year. At the same time, Hapag-Lloyd grew by 21 percent. Hapag-Lloyd also bucked the trend in early 2020, while GDP declined our volumes grew by 11% in the first quarter. At “half-time” the growth was 10% and as COVID-19 impacts set in, the growth slipped to 7% and full year will be 3%. This is still pretty good considering this difficult year, but it feels like we had a Formula 1 start and a moped finish. This continues to be a very unusual year. Normally December is a slow month in Asia because the cargo for the Western holiday markets is already in stores or distribution centers. This year, we are completely full and optimizing available equipment and vessel space. We should have a very strong start in 2021 through Chinese New Year and beyond!
What are the key commodities for exports in Indonesia?
Paper products are among our biggest exports. So it is no surprise our biggest exporter is a company called Asia Pulp and Paper. They run an enormous, vertically integrated business. The company has its own tree farms, which they harvest and convert into different types of paper (mainly tissue, packaging and printing). They are also using recycled paper in their processes. The company even has their own logistics arm. It is a great customer for us because they have the ambition to be the number one paper product supplier in the world, and they are growing accordingly. The exports we transport are finished products. Other important commodities include rubber in 20-foot containers and finished tires in 40-foot containers.
We know that Indonesia is very focused on tourism. How has COVID-19 affected that aspect of the economy?
I’m going to tell you something that may make some of our colleagues around the globe jealous. As an employee with a work visa for Indonesia, I am allowed to travel domestically here. In August, I went to Bali for ten days and I was able to witness how tourism has been affected by the pandemic. The hotel was a third of the usual price. I didn’t have to wait to get a table at any restaurants. Beaches were empty. It was like having your own private island. Indonesia has temporarily banned international tourism and the only travelers are domestic. For the people that make their living from tourism, it is horrible. The industry is suffering greatly.
How has COVID-19 affected our business and our team in Indonesia?
Interestingly, in the first half, COVID-19 was not yet a big issue in Indonesia. As I said, we had quite a strong first half of the year. But around the half-year mark, the number of cases started to go up and the government quickly implemented measures to suppress the spread of the virus. Today, there are still restrictions on how many people are permitted in the office at the same time, and which industries are even allowed to operate offices. Luckily, logistics is considered essential and so we are able to keep our office open. In Jakarta, we divided our 42 team members into three groups based on risk factors and the way they get to the office. The people in group A have lower risk factors and live close to the office which enables them to get to work without using mass transit. Group B similarly has lower risk factors but may have to commute to work. Group C consists of older colleagues, those who have underlying health conditions and people who have to commute a long way to the office. Working from home has been a key to our business continuity success. We want to protect every one of our colleagues. At this point, I would like to express my gratitude to them for their fantastic work over the past months. It has been impressive to witness how agile and nimble the company has performed around the world given the difficult circumstances.
Indonesia is one of the most populous countries in the world and an exciting market for us. What can you tell us about the cultural makeup of Indonesia?
Culturally, the country is very diverse and interesting. Indonesia is 85 percent Muslim, but at the same time very tolerant towards other religions. Christians make up about 10 percent of the population; the rest is Hindu, Buddhist, and others. There are different parts of the country where a certain religion is more concentrated. Bali, for example, is primarily Hindu. Aceh is almost entirely Muslim. Indonesia is a land of more than 17,000 islands, and each has its own traditions, dialects, food and customs. It is a fantastic place to live, work and experience.
Let’s talk a bit about environmental issues. Palm oil and paper are both important goods from Indonesia. Both have a significant impact on the environment. What role does environmental protection play in Indonesia?
Managing its vast ecosystem is a balancing act for the government. Indonesia is a massive country with thousands of islands that are both resource-rich yet fragile. Besides the pulp, paper, rubber and furniture industries, which are encouraged, Indonesia has to contend with illegal deforestation and mining. There are also forest fires purposefully started to clear land for farming. The land can then be used for palm oil production. Palm oil is a major commodity in all of South East Asia, but the impact on the environment is significant. Cynics may argue that they are only replacing trees with other trees. Yet, a plantation is a monoculture and does not provide the same diversity as the pre-existing forest. It certainly is a challenge for the government. But let’s be clear, this same conflict existed in the west centuries ago – we can hope that Indonesia will make better, informed choices.
The capital Jakarta struggles with flooding due to intense seasonal rainfalls, which may also be an effect of global warming. Indonesia is planning to move the capital to a different location. What can you tell us about the project?
Last year, the President announced a plan to move the capital from Jakarta to Balikpapan on the island of Kalimantan (Borneo). The idea is to move the capital to a less densely populated area to take some pressure off the overcrowded metropolis of Jakarta. This is going to take many years and in fact the project has been suspended to allow the full focus on the pandemic. Indonesia has many very ambitious projects like this, it is very cool to be here at this moment in time as the country plans and executes its vision for the future.
What is life in Jakarta like?
In Europe, weather is the topic of most small talk, here it is traffic, which poses a big problem. In Jakarta, driving five kilometers can take up to two hours. Maybe one of the few positive side-effects of COVID-19 is that traffic has been greatly reduced. Of course, it will come back once the pandemic is defeated. The metropolitan area of Jakarta is home to some 25 to 30 million people with a very high population density. I used to live in Shanghai which is even a little bigger than Jakarta. Shanghai has fourteen different subway lines. Jakarta doesn’t have a comparable public transport system. The main mode of transport is the motorbike – and they are everywhere!
Also in Jakarta you can notice a big gap between the Haves and the Have-nots. It is not on par with Mumbai, but there are many small neighborhoods that are quite poor. You see people on the streets collecting trash that they sell for money. While poverty is a big issue, homelessness is not. I lived in New York City and I’ve been to San Francisco. Compared to these cities, Jakarta does not have significantly more homeless people. On the other end of the spectrum, you have beautiful high-rise apartment buildings and gated communities. It can be quite a contrast.
Some markets in Asia, like Korea or Japan, are already quite mature. How do you see the growth potential of Indonesia?
Indonesia has a large population of younger people. 26 percent of Indonesians are 15 years or younger. The country is young, mobile, and tech savvy. This means there are lots of possibilities for growing imports and exports. The government is, of course, more interested in promoting exports. But as disposable income increases, people are hungry for consumer products from international markets. For Hapag-Lloyd, the task is now to turn potential energy into kinetic energy. Many projects are on the way that will play out soon and will lead to more growth and more opportunities. The country has a very bright future. There are limitations in other Asians countries that I don’t see in Indonesia. Currently, the only major services to Indonesia are our JSJ and SAL services. But there is a comprehensive feeder network connecting the country’s many ports to our own main line vessel system. Right now, this is a viable business model for us. In the future, we may be able to expand direct vessel calls in second tier cities that are getting bigger and bigger every year.
What is life outside of the office is like for you in Indonesia?
I start almost every morning by biking for 40 minutes. It is a great way to start the day and gets me ready for that first cup of coffee. During the pandemic, we hardly have any customer appointments in person. That means I am stuck behind my desk for the most part of the day. This makes me value my morning bike rides even more. Besides that, I enjoy the many great restaurants in Indonesia that offer domestic but also international dishes. The biggest drawback for me is to be away from my daughters for so long. The pandemic has made home leave impractical this year. I last saw my girls nearly a year ago on January 6th. Zoom or FaceTime are a poor substitute for a real hug.
About John Boudreau
John has been in the shipping industry for almost 35 years. For the majority of his career, he worked for Maersk and the Maersk subsidiary Safmarine in the United States. His last four years at Safmarine, he spent in Shanghai. Moving from China back to the US, he started at UASC in New Jersey. After the merger with Hapag-Lloyd, John was eager to go back to Asia to experience the growth there first hand. Since mid-2017, he has been Country Manager Indonesia at Hapag-Lloyd.