Academic journal article Asian Social Science

The Impacts of the Marine Transportation Openness Policies against the Transportation Costs

Academic journal article Asian Social Science

The Impacts of the Marine Transportation Openness Policies against the Transportation Costs

Article excerpt

Abstract

Transportation costs are the driving factors of the world trade growth, lower transportation costs can increase the competitiveness of a commodity. With the openness of the transportation services sector, transportation costs due to the removal of tariff and non-tariff barriers will be lower. Some of the commodities exported and imported by Indonesia are farm commodities thus how the policies influence their transportation cost needs to be known. Analysis was performed using the 2010 cross section data of 15 countries. The analysis result indicated that the transport services sector openess did influence the transport costs of imports yet it didn't significantly influence the export transport costs.

Keywords: transportation costs, openess, restriction index

(ProQuest: ... denotes formulae omitted.)

1. Introduction

Krugman (2002), Baier and Bergstrand (2001) mentioned that the decline in transport costs is the factor that encourages the growth of world trade. Krugman (1991), Deardorff (1995), Henderson et al. (2001), Hummels et al. (2001), Limao and Anthony (2001), stated that the transportation cost's role had increasingly risen since the advent of trade openess where trade barriers in the forms of both tariff and non-tariff are reduced and even eliminated. Behar and Anthony (2010) agreed it by stating that the transportation cost is one of the factors that influence the volume of trade and its pattern.

Salvatore (2004) stated that the transportation cost provide both direct and indirect influences on the economy. The immediate impact can be observed from the the side of the trade in the raise of the traded commodity's price, while the indirect influence effects the production venue and the industrial centers. The diminishing transport costs is thought to be caused by changes in modes of used transportation-related technologies that are used such as the development of the jet engine (air transport), types of ships and containers (marine transport) (Harley 1980; Mohammed & Williamson, 2004).

Radelet and Sachs (1998) noted the importance of transport costs influence on trade and its growth through three channels. First, high transport costs reduce exports and its the economic growth. Second, higher transportation costs reduce the natural resources' advantages or the benefits which eventually resulting in lower savings for investment. Third, countries with higher transport costs reduce their trade and also foreign direct investment (FDI), while trade and FDI are the main sources of technology transfer. The reduction of transportation costs would cause the price of the imported goods become cheaper, so the cost of production of goods that use those imported goods as intermediate inputs also become cheaper and be more competitive in the international market. As well as the final product, the cheaper transport costs will lead to cheaper products' price at the final consumers' level.

Transportation cost is one component of the logistics costs other than the handling and administration costs. A good state of logistics costs is a very important prerequisite for a country so that it can have strong competitiveness in the international market and to maintain the supply of goods in the domestic market. Based on the 2011 data acquired from the Chamber of Commerce and Industry (Kadin), Indonesia's logistics costs was accounted for 17 percent of Indonesian total production costs, or about 27 percent of Indonesian Gross Domestic Product (GDP). This figure was relatively much higher than other countries' logistics cost in like 5 percent in Japan (10% of GDP), 6 percent in Singapore (8% of GDP), 8 percent in Malaysia (13% of GDP), 10 percent in Thailand (15% of GDP) and 12.5 percent in China (19% of GDP).

Based on logistics performance index (LPI) in 2012, out of the 155 countries surveyed, Indonesia ranked 59 with a score of 2.94, an improvement from the year 2010 rank of 75 with a score of 2. …

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