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Evaluating Port Reform in Indonesia: a Case Study of the Ports of Tanjung Priok and Tanjung Emas

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Evaluating Port Reform in Indonesia: a Case Study of the Ports of Tanjung Priok and Tanjung Emas Evaluating Port Reform in Indonesia: A case study of the Ports of Tanjung Priok and Tanjung Emas Jasmine Kaur Bachelor of Economics (Honours), Murdoch University Masters in Taxation, University of Melbourne This thesis is presented for the degree of Doctor of Philosophy at Murdoch University 2018 Declaration I declare that this thesis is my own account of research and contains as its main content work which has not previously been submitted for a degree at any tertiary education institution. Jasmine Kaur 20/06/2019 ii Acknowledgements This thesis would not have been completed without the support and guidance of many individuals. I would like to thank both my supervisors, Professor Malcolm Tull and Dr Ranald Taylor for their mentorship, guidance and encouragement over the last three years in completing this thesis. To my primary supervisor, Malcolm, thank you for your invaluable feedback, time and support. Your encouragement kept me going and allowed me to navigate my research roadblocks to accomplish this challenging task. I am also grateful for my colleagues at the Asia Research Centre, especially Jacqui Baker, for her invaluable comments and feedback. I would also like to extend my gratitude to my Indonesian colleagues for all their assistance especially, Dr Susetyo Darmanto and his colleagues at Universitas 17 Agustus 1945 in Semarang for assisting me with my field trip. I am also grateful to Mr Erry Akbar Panggabean for his assistance and time to respond to the many questions I have had on Indonesian ports. To my mum, thank you for encouraging me to undertake my studies in the field of Economics and for your relentless support and encouragement throughout my education. iii Abstract In 2008, the Indonesian government introduced the ‘2008 Shipping Law’ to develop an efficient, competitive and responsive port system that supported trade and promoted economic growth. This law was designed to remove the legislated monopoly power of the Indonesian Port Corporations (Pelindos) and separate the role of ‘operator’ and ‘regulator’. Private companies were issued with port business licenses to operate and manage ports, leading to a shift in the governance model from the traditional ‘public ownership model’ to the ‘landlord model’. It has been almost a decade since this law was passed in Indonesia. However, there has been very little analysis undertaken to assess if these reforms brought about an improvement in port performance. This research aims to contribute to the literature by providing a comprehensive analysis of the port governance framework in Indonesia and how it has evolved since the ‘2008 Shipping Law’ came into place. The research includes case studies of the Ports of Tanjung Priok in Jakarta and Tanjung Emas in Semarang. The methodology involved in evaluating port reform is a mixed methods approach (Rao and Woolcock 2003; Rao et al. 2003). This approach provides a broader analysis of the Indonesian port reform while offsetting the weakness inherent in using only one approach. In the case of Indonesia, this methodology was useful especially as data was not readily available at the port level. The quantitative results based on both financial and non-financial indicators, show that port performance at both the Port of Tanjung Priok and Tanjung Emas has improved since 2008. However, it is difficult to argue that the improvement in port performance was only because of the ‘2008 Shipping Law’ and not other factors such as increasing cargo volumes that also affected performance. In order to improve understanding of the determinants of performance, a qualitative analysis is undertaken using the ‘Matching Framework’ (Brooks and Balthazar 2001). This framework provides a qualitative analysis suggesting that the political environment in Indonesia needs to provide more certainty to achieve the outcome of an ‘efficiency oriented configuration’ and to realise the gains from port reform. Also, the separation of the ‘operator’ and ‘regulator’ roles, has not worked well in practice. The results suggest that path dependency and the legacy of colonisation plays a critical role in explaining the trajectory of port reform in Indonesia as legal reform has not always been able to bring about institutional reform. Although the ‘2008 Shipping Law’ was the trigger for the beginning of a reform process, the results suggest that more needs to be done to implement them and realise their full potential. This includes the need for further policy changes to bring about a conducive environment for economic growth and a more flexible approach to private sector and, in particular, foreign investment, in ports. iv Table of Contents Declaration ................................................................................................................................. ii Acknowledgements .................................................................................................................. iii Abstract ..................................................................................................................................... iv Table of Contents ....................................................................................................................... v List of Figures ........................................................................................................................ viii List of Tables ............................................................................................................................ ix Abbreviations and Acronyms .................................................................................................... x Chapter 1 : Introduction ............................................................................................................. 1 1.0 Background and Context of Study ................................................................................... 1 1.1 Research Questions ........................................................................................................ 10 1.2 Case Study Location....................................................................................................... 11 1.2.1 The Port of Tanjung Priok ....................................................................................... 14 1.2.2 The Port of Tanjung Emas ....................................................................................... 17 1.3 Research Methodology ................................................................................................... 20 1.4 Data Sources ................................................................................................................... 22 1.5 Interview Design and Field Visits .................................................................................. 23 1.6 Chapter Outline .............................................................................................................. 24 Chapter 2 : Literature Review .................................................................................................. 28 2.0 Introduction .................................................................................................................... 28 2.1 Institutional Reform and Port Governance..................................................................... 30 2.2 Port Governance Model ................................................................................................. 41 2.2.1 Port Devolution........................................................................................................ 46 2.2.2 The evolving role of Port Authorities ...................................................................... 50 2.3 Private Versus Public Debate ......................................................................................... 53 2.4 Trends in Port Governance ............................................................................................. 63 2.5 Port Automation and Cyber Security ............................................................................. 81 2.6 Conclusions .................................................................................................................... 84 Chapter 3 : An Overview of the Indonesian Economy ............................................................ 87 3.1 Introduction .................................................................................................................... 87 3.2 History and Macroeconomic Environment .................................................................... 91 3.2.1 President Suharto’s era ............................................................................................ 93 v 3.2.2 Fiscal Decentralisation in Indonesia ........................................................................ 98 3.2.3 Indonesia’s Economic Growth Post Asian Financial Crisis .................................. 102 3.3 Middle Income Trap ..................................................................................................... 106 3.4 Indonesia’s Economic Development Plan.................................................................... 110 3.4.1 Jokowi’s Administration and Indonesia’s ‘Global Maritime Axis’ ...................... 114 3.4.2 Public Private Partnerships (PPPs) and Foreign Direct Investment (FDI) ............ 120 3.4.3 Corruption in Indonesia ......................................................................................... 123 3.5 Path Dependence in Indonesia’s Leadership ...............................................................
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