EU ‐ ACTIVE PROJECT INDONESIAN PORTS INFRASTRUCTURE FINAL REPORT October 2012 PT GLENDALE PARTNERS Menara Global, 23rd Floor Jl. Gatot Subroto Kav 27, Jakarta 12950 Ph : +62 21 5270 426, + 62 5270 438 Fax ; +62 21 5270 433 EXECUTIVE SUMMARY A project funded by the EU has involved the study of a number of key sectors of the Indonesian economy. One of the sectors chosen for examination has been that of Indonesia’s maritime ports. The coordinator of the overall study has been the Indonesia Netherlands Association (INA), with the ports sector assigned to the British Chamber of Commerce in Indonesia (BritCham), which in turn engaged one of its member companies specialising in infrastructure to undertake a desk-study review of the ports sector in Indonesia. This report is the culmination of that study, which was carried out over the period February to September 2012 on a part-time basis. A short review is made of the impact of the major political changes that took place in the country following the Asian Economic Crash of 1998, which hit Indonesia hard, and of the economy, which recovered following this period to achieve the current growth rate of 6.0-6.5%. The point was made, however, that to sustain or surpass this level of economic growth in the future significant investment was required in infrastructure in all areas. That required for ports in the ensuing 5 year period is estimated to be in the order of US$40 billion, with a high level of private sector support required over that to be committed by government. This political and economic review was followed by an overview of the structure of the industry, particularly following the structural changes that emanated from the issuing of the new law for the ports and shipping sector in 2008, Law 17/2008. The hierarchy of the different ports across the country, of which there are some 1900 havens, is shown from the highest category of those publicly administered by the state-owned operating companies, down to fishing and special purpose ports with the main differences being addressed. The main roles of the Ministry, under its Directorate General of Sea Transport, Port Authorities and the 4 State-owned Port Operating companies, the Pelindos, and their interacting roles is briefly described before more detail is provided about each of the Pelindos, numbered I-IV, with each having jurisdictional responsibility for a segment of the archipelago. Pelindo I is responsible for Northern Sumatra, and Pelindo IV the eastern part of the country, with Pelindos II and III having charge of the segments in between. Pelindo II is the largest of the four, based on western Java, the centre of the industrial heartland of the country, and headquartered in the capital city of Jakarta. Its operation altogether amounts to almost the combined output of the other three i | Page operations put together. As part of its increasing international outlook, Pelindo II has been renamed as the Indonesian Ports Corporation. A major container port expansion is underway at Tanjung Priok, the Jakarta port, and this plus two other projects to upgrade container operations, albeit strictly outwith the jurisdictional area of the IPC, at Batam, off Singapore, and Sorong in Papua, are briefly described. Mention is also made of other work ongoing in the other Pelindos. Successful port operations require good hinterland connections, in particular roads. The study summarises the current status of both road and rail infrastructure across the country and the need for parallel investment to match that expected in ports. Logistical costs of transporting goods in Indonesia have been evaluated as among the highest if not the highest in Asia. The country’s standing worldwide, as measured in the World Bank’s Logistics Performance Index is relatively poor, particularly when compared with its peers. Most of this poor performance is directly related to the poor condition of much of the road network as well as the result of years of underinvestment in the ports sector along with underperfomance in operations. The different types of shipping trade, whether container, bulk or liquid or general cargo have been discussed, with the expansion over the past few years highlighted as well as that forecast for the years ahead. The shipping fleet, ferry transport and the fishing Industry all badly need to be upgraded and expanded, however, and offer opportunities for investment. In May 2011 the Government of Indonesia unveiled a detailed plan for the economic development of the archipelago, the MP3EI, or 6 Corridor Economic Development Plan. The objectives of this comprehensive approach to accelerate economic growth across the regions are stated and each of the 6 corridors is then briefly overviewed, with a particular focus on infrastructure and, in turn, that pertaining to ports and their importance in the delivery of the objectives of the MP3EI. Attention to this plan will be necessary when focusing on investment across the country. Finally, a short section is included on financing issues as well as a restatement of opportunities in summary. ii | Page Contents Page EXECUTIVE SUMMARY i 1.0. INTRODUCTION 1 2.0. THE EU ACTIVE PROJECT – PORTS AND SHIPPING 2 3.0 OBJECTIVES AND SCOPE OF THE STUDY 2 4.0 POLITICAL AND ECONOMIC OVERVIEW 3 5.0 THE STRUCTURE OF THE PORTS AND SHIPPING INDUSTRY 6 Port Master Plan 8 Port Hierarchy and Profile 8 Non-administered Public Ports 11 Special Purpose Ports 12 Coal Terminals 13 Secondary and Rural Fishing Harbours 14 6.0 CHANGES IN REGULATIONS FOR THE PORT SECTOR 16 7.0 PELINDO RESPONSIBILITIES 17 8.0 PORT AUTHORITIES 18 9.0 PROFILE OF PELINDOS 18 Pelindo I 18 Pelindo II 21 New Priok 24 Batam Transhipment 24 Sorong 25 Pelindo III 29 Pelindo IV 32 10.0 CONTAINER SHIPPING 35 11.0 GENERAL, DRY AND LIQUID BULK CARGOES 41 12.0 FERRY TRANSPORT 45 13.0 COLD STORAGE FACILITIES 47 iii | Page LOGISTICS & CONNECTING INFRASTRUCTURE – ROAD AND RAIL 48 14.0 GENERAL 48 14.1 ROADS 48 14.2 RAIL 53 14.3 LOGISTICAL ISSUES 55 THE 6 CORRIDOR ECONOMIC DEVELOPMENT PLAN – MP3EI 58 15.0 INTRODUCTION AND OBJECTIVES 58 15.1 THE MAIN ECONOMIC ACTIVITIES: PORTS HIGHLIGHT S 59 16.0 FINANCING ISSUES 71 17.0 SUMMARY, CONCLUDING REMARKS & OPPORTUNITIES 73 18.0 ACKNOWLEDGEMENTS 74 19.0 REFERENCES 75 APPENDICES 76 Appendix 1 1st Seminar Agenda 76 Appendix 2 2nd Seminar Agenda 77 Appendix 3 List of Identified Non-Administered Public Ports 78 Appendix 4 List of Identified Special Ports/Harbours 82 Appendix 5 Numbers of Fisheries Ports by Province 84 Appendix 6 Contact details for Ministry and Pelindo Offices 85 iv | Page List of Figures Page FIGURE 1.1 Main Ports of Indonesia 1 FIGURE 4.1 Current and Forecast Steady Expansion of the GDP Per-Capita, 2010 – 45 4 FIGURE 4.2 Indonesian Key Natural Resources 5 FIGURE 5.1 Jurisdictional Area of Each of the Pelindos 7 FIGURE 5.2 Six Non-Administered Public Ports 11 FIGURE 5.3 Special Purposes Ports 12 FIGURE 5.4 Coal Anchorages in Indonesia 13 FIGURE 5.5 Coal Production, Exports and Domestic Sales in Indonesia (2003 – 2010) 13 FIGURE 5.6 Indonesian Fisheries Ports 14 FIGURE 6.1 Changes in Regulations for the Port Sector 16 FIGURE 9.1 Jurisdictional Area of Pelindo 1 18 FIGURE 9.2 Pelindo I Ports 19 FIGURE 9.3 Belawan Port – Profile 20 FIGURE 9.4 Jurisdictional Area of Pelindo II 21 FIGURE 9.5 Pelindo II Ports 22 FIGURE 9.6 Tanjung Priok Port (Main Port of Pelindo II) - Profile 23 FIGURE 9.7 New Priok (Kalibaru) Port Master Plan 26 FIGURE 9.8 Transhipment Hub at Batam 27 FIGURE 9.9 Sorong Port Container Terminal 28 FIGURE 9.10 Jurisdictional area of Pelindo III 29 FIGURE 9.11 Pelindo III Ports 30 FIGURE 9.12 Tanjung Perak Port (Main Port of Pelindo III) Profile 31 FIGURE 9.13 Jurisdictional Area of Pelindo IV 32 FIGURE 9.14 Pelindo IV Ports 33 FIGURE 9.15 Makassar Port (Main Port of Pelindo IV) Profile 34 FIGURE 10.1 Port Ranking in the World Container Shipping Lanes 35 FIGURE 10.2 Indonesian Container Traffic Projections from 2010 to 2030 under Alternative Growth Scenarios 36 FIGURE 10.3 2009 Domestic Container Trade Flows in Indonesia 37 FIGURE 10.4 2009 International Container Trade Flows in Indonesia 38 v | Page FIGURE 10.5 Growth of Container Flows within Indonesian Ports Corporation I-IV 2006-2010 40 FIGURE 10.6 Growth in Number of Ships Calls within Pelindos I-IV, 2006-2010 41 FIGURE 11.1 Forecast of Total Indonesian Cargo Handled under Alternative Growth Scenarios 41 FIGURE 11.2 2009 Domestic General Cargo Trade Flows in Indonesia 42 FIGURE 11.3 2009 Domestic Dry Bulk Trade Flows in Indonesia 42 FIGURE 11.4 2009 Domestic Liquid Bulk Trade Flows in Indonesia 43 FIGURE 11.5 2009 International General Cargo Trade Flows in Indonesia 43 FIGURE 11.6 2009 International Dry Bulk Trade Flows in Indonesia 44 FIGURE 11.7 2009 International Liquid Bulk Trade Flows in Indonesia 44 FIGURE 12.1 Commercial Ferry Passengers (2006-2010) 45 FIGURE 12.2 Ferry Transport Vessels in Service (2006-2010) 46 FIGURE 13.1 Cold Storage Opportunities 47 FIGURE 14.1 Low Network Density 48 FIGURE 14.2 Nature of Road Network 49 FIGURE 14.3 Java Toll Roads Network 50 FIGURE 14.4 Jabodetabek Toll Roads Network 51 FIGURE 14.5 Condition of Road Network 52 FIGURE 14.6 Main Rail Nework of Java in 2010 54 FIGURE 14.7 World Scale for Logistics Performance 56 FIGURE 14.8 2010 Indonesia Infrastructure Quality 56 FIGURE 15.1 Connectivity of the 6 Economic Development Corridors 58 FIGURE 15.2 22 Main Economic Activities 59 FIGURE 15.3 MP3EI and National Port Master Plan (NPMP) 60 FIGURE 15.4 Corridor 1: Sumatra and Port Highlights 62 FIGURE 15.5 Corridor 2: Java and Port Highlights 64 FIGURE 15.6 Corridor 3: Kalimantan and Port Highlights 66 FIGURE 15.7 Sulawesi and Port Highlights 67 FIGURE 15.8 Corridor 5: Bali and Nusa Tenggara with Port Hightlights 69 FIGURE 15.9.