Publications

The government of Indonesia has initiated the establishment of Bonded Logistics Centers (BLC’s) which serve as multi-function logistics warehouses for imported and local goods by exempting the import duty and value added tax ("VAT") of imports and thus enabling operational flexibility. The legal basis for construction of the BLC’s is the Government Regulation No. 85 year 2015 regarding Bonded Logistics Centers. The BLC’s are located across Indonesia and they comprise multiple products, from automotive to industrial raw materials. The presence of the BLC can speed up logistics processes by cutting the trade chain. The product, initially to be exported, is diverted to the local market, shortening the customer’s lead time for heavy equipment or spare parts needed. Customers also enjoy the benefit from exempted duties by getting equipment and spare parts at more affordable prices. This research analyses the inventories management model in the Indonesia upstream oil and gas industry which were applied by PSC contractors. In this qualitative research, secondary data (journals, books, papers and reports) was examined to perform a comprehensive analysis since no previous studies had been undertaken before. The purpose of the study is to identify the advantages of the use of BLC’s by taking into account the Indonesian PSC model. The findings from the study showed that the use of BLC’s would provide many benefits for the upstream oil and gas industry. With the existence of BLC, PSC Contractors will be able to operate their central warehouse within the BLC area as well as receive goods directly from other stores operated by suppliers and/or other PSC contractors. Therefore, the optimisation of idle/unused parts and equipment will be easier since PSC contractors utilise warehouses within the same area. Warehouse rental costs will also be lower since no taxes are implemented in a BLC. Without a BLC, PSC Contractors had to export their remaining consignment and rented goods outside Indonesia’s custom areas. For example, A drilling rig must be demobilized to a location outside Indonesia before being used in the next working area. With a BLC, no such export is necessary, so that the drilling rigs can be utilised immediately by other PSC contractors. Some benefits from BLC’s will enable PSC Contractors to increase efficiency in terms of time and budget. In terms of time, the existence of BLC’s will allow PSC Contractors to manage their purchasing strategy and ensure delivery when accelerated goods and supplies are needed. From a budget perspective, BLC’s will reduce PSC Contractors’ spending on logistics mobilisation and demobilisation costs. The lowered cost will increase the portion of profit sharing between the Indonesian Government and the PSC contractors, which eventually will improve the economic value of the project carried out by the PSC contractors. Keywords: logistics cost, import taxes, Indonesian oil and gas industry.