Determinants of Port Performance – Case Study of 4 Main Ports in Indonesia (2005–2015) 1. Introduction

Economics and Finance in Indonesia Vol. 63 No. 2, December 2017 : 176–185 176 p-ISSN 0126-155X; e-ISSN 2442-9260 Determinants of Port Performance – Case Study of 4 Main Ports in Indonesia (2005–2015) Atika Aqmarinaa,∗, and Nuzul Achjara aDepartment of Economics, Universitas Indonesia Abstract Port plays significant role in supporting economic growth of a country. This study aims to analyze the determinant of port performance in Indonesia. In this research, the ports selected are four main ports in Indonesia which are Port of Belawan, Port of Tanjung Priok, Port of Tanjung Perak, and Makassar. These ports are designed as the hub ports in the national sea transport system of the country. The study used pooled OLS as the methodology to analyze the determinant. The result of this studies shows that total traffic is not influenced by operating surplus per ton, whereas the rest of variables such as turnaround time, idle time, berth of occupancy rate, rate of return, number of employee and cargo equipment have significant results and significantly influenced the total traffic. Keywords: port; port performance; Indonesia; determinants of port performance; ports in Indonesia Abstrak Pelabuhan mempunyai peran penting dalam mendukung pertumbuhan ekonomi suatu negara. Tujuan diadakannya penelitian ini adalah untuk menganalisis faktor penentu kinerja pelabuhan di Indonesia. Dalam penelitian ini, empat pelabuhan utama dipilih sebagai sampel, yaitu Pelabuhan Belawan, Pelabuhan Tanjung Priok, Pelabuhan Tanjung Perak, dan Makassar. Penelitian ini menggunakan metoda OLS sebagai metodologi untuk menganalisis determinan. Hasil dari penelitian ini menunjukkan bahwa Total Traffic tidak dipengaruhi oleh Operating Surplus per Ton. Sementara itu, variabel-variabel lainnya yang digunakan seperti average ship turnaround time, idle time, berth occupancy rate, rate of return, number of employees dan cargo equipment terbukti memberikan pengaruh yang signifikan terhadap Total Traffic. Kata kunci: pelabuhan; kinerja pelabuhan; Indonesia; faktor penentu kinerja pelabuhan; pelabuhan di Indonesia JEL classifications: R41; R42 1. Introduction Global Competitiveness Index calculation methods, infrastructure is considered as a basic requirement Infrastructure is one of the key aspects support- for factor-driven economies and the second pillar of ing a country’s competitive position in the global the required twelve. environment. Grigg (1988) defines infrastructure Seaports, as part of infrastructure, are believed to as the physical system that provides transporta- have substantial role in managing the supply chain tion, drainage, building and other public goods used which involves the production and distribution of to fulfill the needs of people in the nation. Under commodities, which would in turn affect the nation’s development. Jouili & Allouche (2014) stated that ∗Corresponding Author: Department of Economics, Univer- seaports are seen as a factor of economic growth sitas Indonesia, Jl. Prof. Dr. Sumitro Djojohadikusumo, Beji, Kukusan, Beji, Depok, West Java, 16424, Indonesia. Email: which have high contribution levels to the develop- [email protected]. ment of economic sectors, as well as to the gen- Economics and Finance in Indonesia Vol. 63 No. 2, December 2017 AQMARINA, A. & ACHJAR, N./DETERMINANTS OF PORT PERFORMANCE... 177 eration of economic benefits. This is so for most 2. Literature Review countries in the world, particularly countries that are archipelagic in nature, such as Indonesia, Philip- pines, and the Caribbean countries. Port services 2.1. Definition is indisputably important for such countries due to the nations’ nature that frequently relies on maritime systems to channel goods within or outside Ports are the medium that connect ships with land the country. for both passengers and logistic flows. Tarantola (2005) as cited by Roa et al. (2013) defined a port Seaports have quite lot of functions since it will help as an area connected to sea, ocean or river and the country to distribute the goods domestically and considered as entities. Flere (1967) defines ports internationally which served as the gateways of to exist in order to provide the facilities of termi- trade and influencing development and growth of nals and services for ships to move goods and/or nations. However, this great potential is yet to be passengers. Referring to the definition by Tarantola utilized properly by Indonesia and is behind com- (2005), it shows that ports are certainly important pared to other maritime countries in Southeast Asia. for a country in terms of facilitating the movement of The condition of ports in Indonesia are categorized goods (freight) or passengers. Port efficiency mea- as below average compared to the rest of the world. sures the effectivity of the port in terms of mobility In fact, The Jakarta Post1 reported that the poor and safety of goods (no defects detected from the connectivity of infrastructure in Indonesia caused goods distributed) and passengers (no accidents). increases in logistic cost, resulting in logistics fees One definition of port efficiency is as follows: Heyne in Indonesia appearing more expensive compared (2008) as cited by Tossa (2016) defines efficiency to the ASEAN average. Based on the Logistics Per- as the condition where the wants could be achieved formance Index (LPI) which ranks maritime sector by using the minimum amount of resources that the improvements, Indonesia ranked 63rd out of 160 producer has. Thus, to achieve efficient condition of countries in 2016. ports, the determinants of port performance should also be efficient. Hence, knowing seaports is an important factor that affect the distribution of goods, especially for When the port is more efficient than before, it will Indonesia, it is such motivation for the author to con- be caused the transportation cost to decline also duct this research in order to examine the factors leads to the ability of facilitating the imports and that might influence performance of port in Indone- exports of a country. Likewise, a previous study by sia. This research will use 4 main ports in Indonesia Clarke, Dollar & Micco (2004) also shows that ineffi- as the sample. Additionally, this research will also cient ports might lead to increasing handling cost as examine the current conditions of ports in Indone- well. The findings by Clarke, Dollar & Micco (2004) sia, whether it is already in an efficient state and comes from data on maritime transport costs, value how they have changed in the 10 years 2005–2015. and volume of imports, and shipping characteris- tics based on the U.S. Import Waterborne Data- bank (U.S. Department of Transportation) for the 1Inadequate infrastructure leads to increasing logistics cost since it will be more time consuming to move the goods to years 1996, 1998, and 2000. Hence, port efficiency destination and also more cost consuming (e.g. oil expense, means generating goods’ movement using the min- worker fee) https://www.pressreader.com/indonesia/the-jakarta- post/20150318/281951721299936/TextView. imum amount of fund in as little time as possible. Economics and Finance in Indonesia Vol. 63 No. 2, December 2017 178 AQMARINA, A. & ACHJAR, N./DETERMINANTS OF PORT PERFORMANCE... 2.2. Indicators of Port Performance sion making in medium- term planning and control. The operational indicators show how the opera- Performance indicators are needed in order to mea- tional aspect of the port authority and takes into sure the performance and grasp the operations of account the time needed for ships to distribute the ports in a country. By using indicators, port super- goods from containers and how bureaucracy affects visors can assess how equipment is being used the time taken to process the containers. The opera- by the port authority and how good the manage- tional indicators are more specific to time measure- ment is in terms of operational performance and ment whereas financial indicators more towards the the cost needed. The determinants to measure the cost needed and how efficient the port is in using port performance varies throughout several litera- the funds. tures. There are several findings that argue about the indicators used to measure port performance. According to theory adopted by Rajasekar & Mal- However, most of the findings take into account abika (2014), in this findings, the performance of operational and financial indicators. Furthermore, port is affected by several variables. The variables United Nations also stated that there are two most that expected to have impact on port performance important indicators used to measure port perfor- are Turnaround Time, Idle Time, Berth of Occu- mance, which are financial indicators and opera- pancy Rate, Operating Surplus per Ton, Rate of tional indicators (Figure 1). Return, Number of Employee, Cargo Equipment Financial indicators measure the use of funds and and Operating Expense. capital the port authorities have compared to the Several previous studies shows that efficiency of performance of ports. It refers to the cost used by port performance plays significant role in economy the port to distribute the goods and how the alloca- activity influenced by several factors. Sanchez et tion of funds by the port to support the operational al. (2003) examined transports costs in Seaports of system in the port area. The allocation of cost itself Latin America by applying survey data on port per- is varies amongst the countries since it depends formance. The survey conducted mostly focused on on the structure and condition of

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