Erasmus University Rotterdam MSc in Maritime Economics and Logistics 2014/2015 Evaluation of Container Terminal Efficiency Performance in Indonesia : Future Investment by Dwi Sukmawati Syafaaruddin Copyright © Dwi Sukmawati Syafaaruddin Acknowledgments Finally, this is the answer to all doubt for the decision to study abroad. Alhamdulillah, my biggest thanks go to Almighty Allah for all of His bless, through His invisible hands guide me to find myself in this point where I’m realizing that everything happen for a reason. I gratefully acknowledge the support and guidance of the Maritime Economics and Logistics Office, Erasmus University Rotterdam, most particularly my thesis supervisor Dr. Simme Veldman. This thesis would never take shape without his deep encouragement and suggestions. I also extend my deepest thanks to my beloved parents, Ayah, and parents in law for their support during my study in Rotterdam since I believe I was able to pass through this hard moment because Allah listens to their pray for me. Special thanks go to my husband, Lendy, for sure, for his constant support, his patience for listening to all of my sad stories and his understanding when I’m in my labile emotion during my study. I will never be here without his endless self-sacrifice. Secondly special thanks are for you, my little baby boy, Dek Hisham, for being such a nice son. You never make me worry, always show your smile and your simple word reminds me to keep struggling and studying well here. My thanks also go out to my family for their love and their pray during my life in Rotterdam, Ika, Afi, Risky, Lutfi, Win, Lus, Putu and Lerdy. I feel that all of you are gifts from Allah for me. I owe special thanks to my Indonesian friends for their assistance and thoughtful comment on my thesis, Topik, for a long discussion we had in the Erasmus library, Kevin and Bagus for the STATA, Ferdhi, Luh and Clara for the “expert judgment” and all friends who helped me gathering the data. I would like to reserve my gratitude to my company, Pelindo III, for giving me opportunity and scholarship for my master program in Erasmus University Rotterdam. Last but not least, I would like to express my thanks to all of my friends in MEL Class 2014/2015. We have spend wonderful times in Rotterdam through the entire worse and best things in our course together. It means a lot. Dwi Sukmawati Syafaaruddin 20 August 2015 iii Abstract Indonesia is one of the biggest archipelagic countries in the world and its strategic location between the Indian Ocean and the Pacific Ocean makes maritime sector of great importance. It can be seen from the volume of containerized cargo, which is increasing gradually at the rate of around 7.7% each year. Implementation of domestic law No. 17/2008 on Shipping, eliminates the monopoly power of Pelindo as the main terminal operator and allows new-comers to compete in port business. However, in order to maintain its competitive position as the main terminal operator, Pelindo should maintain its efficiency as that is one of its key success factors. This research uses three types of analyses: demand analysis, efficiency measurement analysis, and supply analysis for 18 container terminals in Indonesia using both time series and cross section data. A demand analysis is conducted by a container throughput projection for every 5 years using a GDP multiplier method, which is based on container throughput and GRDP from 2009 to 2013. The efficiency measurement analysis utilizes a non-parametric method, called Data Envelopment Analysis (DEA) that is based on the conditions of 2014. The DEA Constant Return to Scale (CRS) model with input oriented version is used for the measurement of the efficiency performance applying Stata software. Seven input variables are taken namely container yard area, maximum draft, berth length, quay crane index, yard stacking index, vehicle, number of gate lanes and throughput as an output. A port is categorised as efficient, if the outcome equals 1 and inefficient, if it is less than 1. Container terminal supply is evaluated using berth capacity and yard capacity. Berth capacity in TEU/year is calculated by multiplying berth lenght (m) by berth capacity per meter length (TEU/m). Berth capacity per meter lenght is assessed by multiplying call size (moves) with the berth occupancy ratio of each port and Teu factor. Yard capacity in TEU/ year is quantified by multiplying container yard capacity (TEU) by yard maximum utilisation (%) divided by separation factor (%), peaking factor (%) and dwelling time (days). Both throughput as a demand and as a supply capacity will be combined to assess the time when the bottleneck condition occurs. The results show that total throughput projections for 2020, 2025, and 2030 are 23 million TEU/year, 37 million TEU/year, and 58 million TEU/year respectively. In this case, the biggest contributors are Tanjung Priok Port and JICT (23% and 26%). Moreover, by looking at its efficiency score which is equal to 1, it reveals that 7 out of 18 terminals are efficient, namely, Tanjung Priok, JICT, Tanjung Perak, TPS, BJTI, Makassar Port, and UTPM. Furthermore, by looking at their capacity, it appears that 12 out of 18 container terminals carry over 80% of the current demand. Surprisingly, Tanjung Perak has the highest ratio, followed by Tanjung Priok, JICT, KOJA, and TPS. Finally, supply and demand analysis assesses the appropriate time for investment as an indicator of congestion issues. It appears that 7 out of 18 container terminals are not only identified as efficient container terminals, but are also indicated as having the worst congestion conditions. Therefore, in the future, they should tackle the bottleneck issues and consider infrastructure investments to alleviate these congestion bottlenecks. v Table of Contents Acknowledgments .................................................................................................... iii Abstract .................................................................................................................... v Table of Contents .................................................................................................... vii List of Tables ........................................................................................................... ix List of Figures .......................................................................................................... xi List of Abbreviations ............................................................................................... xiii 1. INTRODUCTION ............................................................................................... 1 1.1. Background and Business Relevance ........................................................ 1 1.2. Research Question and Objective .............................................................. 3 1.3. Scope and Limitation of the Research ........................................................ 4 1.4. Research Methodology .............................................................................. 5 2. LITERATURE REVIEW ..................................................................................... 7 2.1. Investment and Efficiency Performance of the Container Terminal ............ 7 2.1.1. Port Investment Related Container Terminal ....................................... 7 2.1.2. Efficiency Performance in Container Terminal ..................................... 8 2.2. Efficiency Performance Measurement Indicators and Benchmarking ......... 9 2.3. DEA for Container Terminal Performance Measurement .......................... 12 2.3.1. DEA Linear Programming and Model Orientation .............................. 16 2.4. DEA Research for Container Terminals ................................................... 18 2.4.1. Worldwide DEA Research ................................................................. 18 2.4.2. Previous DEA Application Within Indonesian Ports ........................... 24 3. METHODOLOGY ............................................................................................ 27 3.1. Efficiency Performance Measurement ...................................................... 27 3.2. Demand Forecast Using GDP Multiplier ................................................... 29 3.3. Data and Collection .................................................................................. 30 3.3.1. Belawan Port Profile .......................................................................... 30 3.3.2. Belawan International Container Terminal (BICT) Profile .................. 31 3.3.3. Tanjung Priok Port Profile ................................................................. 31 3.3.4. Panjang Port Profile .......................................................................... 33 3.3.5. Palembang Port Profile ..................................................................... 33 3.3.6. Pontianak Port Profile ....................................................................... 34 3.3.7. Teluk Bayur Port Profile .................................................................... 34 vii 3.3.8. Jambi Port Profile ............................................................................. 35 3.3.9. Tanjung Perak Port Profile ................................................................ 35 3.3.10. Banjarmasin Port Profile ................................................................ 36 3.3.11. Terminal Petikemas Semarang (TPKS) Profile .............................. 36 3.3.12. Terminal Petikemas Surabaya (TPS)