Pelindo II’s endeavour to create integrated maritime logistics-

With more than 10,000 islands in Indonesia, sea transportation is considered vital to connect with other trading partners. However, the maritime logistics and connectivity has been a huge challenge for Indonesia. In this regard,  PT Pelabuhan Indonesia II is taking a number of initiatives to create new infrastructure as well as improve services at existing ports. Recently, it has signed memorandums of understanding (MoUs) with other port operators and state-owned enterprises to strengthen the maritime network and develop port infrastructure in Indonesia. This can be considered a major step towards creating an integrated maritime logistics network in the country.

Operational performance

The Indonesia Port Corporations or PT Pelabuhan Indonesia are the state corporations responsible for the governance, regulation, maintenance and operation of ports and harbours in Indonesia. Pelindo II is one of eight state-owned enterprises set up in 1960, and manages port operations across the country. It operates 12 commercial ports in 10 Indonesian provinces. Its seaport services include vessel services, goods services, equipment concessions, terminal services, and container terminal services.

The total traffic handled at the ports under Pelindo II increased slightly by 0.3 per cent to 145.66 million tonnes (mt) in 2014-15. However, there was a decline of over 2 per cent in the number of containers handled by Pelindo II in 2014-15. Pelindo II-operated Tanjung Priok port handles over 50 per cent of cargo traffic in Indonesia. The port handled 5.7 million twenty-foot equivalent unit (TEU) of container traffic in 2014-15.

Expansion plans

Currently, Pelindo II is planning to build three new ports: Kalibaru Utara (Jakarta), Sorong (West Papua) and Kijing port (West Kalimanthan). The annual processing capacity of Kalibaru Utara port, now called New Priok port, will be expanded to 13 million TEUs in two stages. In the first stage, scheduled to be completed in 2017, three container terminals with a capacity of 4.5 million TEUs and two liquid bulk terminals with a capacity of 10 million cubic metres will be built. The second stage of development is planned over 2018-23 and involves the development of four container terminals with a total capacity of 8 million TEUs per year.

Besides, Pelindo II is also planning to build two new ports in Sorong, West Papua, and in Kijing, West Kalimantan. Pelindo II is expected to invest Rp 3 trillion in the development of Sorong port and Rp 4.2 trillion for Kijing port. Kijing port will be developed into a modern port with a capacity of 1 million TEUs while Sorong port will be built with a capacity of 15 mt. As of December 2015, the land acquisition for both the ports was under progress.

Pelindo II is also undertaking various technological initiatives to improve port efficiency. It  implemented an information technology (IT)-based terminal operating system at Tanjung Priok port in order to support the operation of the container terminal. Further, it also adopted an IT-based operating system at the PT Indonesia Kendaraan Terminal.

Agreements to reduce logistics cost

In March 2016, Pelindo II signed agreements with eight other state-owned companies engaged in the maritime sector to accelerate the projects on national connectivity. The Indonesian government requires that the partnerships demonstrate progress within three months of the signing of these agreements. The MoUs will not be extended if there is no development taking place.

The following are the cooperation agreements signed:

  •  Agreement between Pelindo II and Pelindo I on the planned cooperation to develop ports in western Indonesia.
  • Agreement between Pelindo II and Pelindo IV on the planned cooperation to develop ports in eastern Indonesia.
  •  MoU between Pelindo II and PT Krakatau Steel to utilise and operate PT Krakatau Bandar Samudera port.
  • MoU between Pelindo II and PT ANTAM (Persero) Tbk and PT Indonesia Asahan Aluminium Persero to develop Kijing International Port in West Kalimantan to support smelter grade alumina (SGA) refinery projects in the province. The port is planned to be built in Sungai Kunyit district and will be located 6 km from the SGA refinery.
  • MoU between Pelindo II and PT Perusahaan Listrik Negara (PLN). According to the MoU, the port operator and PLN will cooperate to develop and operate the power plant and other supporting facilities in Baai Island, Port of Bengkulu.
  •  MoU between Pelindo II and PT Semen Padang to develop and operate bulk storage facilities at Pulau Baai, Port of Bengkulu.
  • MoU between Pelindo II and PT Waskita Karya Tbk to develop the Cimanggis-Cibitung and Cibitung-Cilincing toll roads.

The agreements with the fellow state operators are expected to improve connectivity between state ports. It will further help in standardising the facilities and services across the country. The agreements concern not only the port sector but also the industrial, logistics, infrastructure and power sectors.

On the other hand, the cooperation with Waskita Karya is expected to ease transportation to Tanjung Priok port in Jakarta through the development of the Cimanggis-Cibitung (26.3 km) and Cibitung-Cilincing (34 km) toll roads. According to the MoU, Waskita Karya and Pelindo II will together make an investment of  Rp 10 trillion ($750 million) to develop the toll roads. The port authority is contributing to develop the toll roads because they will be needed for the smooth operation of Tanjung Priok and Kalibaru ports when they are commissioned.

Issues and the way forward

The shortcomings in maritime logistics and infrastructure in Indonesia have resulted in poor connectivity between the islands, undermining Indonesia’s trade and competitiveness. It has also led to the country’s dependence on Singapore and Malaysia as transhipment hubs. While stand-alone efforts from Pelindo II are expected to fuel growth in the sector, the overall state of the sector will improve only when the government makes concerted efforts to formulate supportive policies.

According to the Global Competitive Index Report, 2015-16, World Economic Forum, Indonesia ranks 82nd among 144 countries in terms of port infrastructure. The World Bank in its Logistics Performance Index (LPI) 2014 ranked Indonesia 53rd with a score of 3.08, far below its fellow Association of Southeast Asian Nations (ASEAN) members, such as Singapore, Malaysia and Thailand that ranked 5th, 25th and 35th respectively. In 2014, logistics accounted for 23.5 per cent of the country’s gross domestic product (GDP). Due to the high logistics costs, it will be difficult for Indonesian industries to compete with their ASEAN peers, especially when the common market agreement comes into effect in the region.

Therefore, Indonesia plans to reduce its logistics costs through various initiatives, with the maritime highway programme launched in 2014 being a key one. The goal of the programme is to reduce logistics costs from 23.5 per cent of GDP to 19.2 per cent by 2019. In order to achieve this goal, Indonesia not only needs to focus on developing its port infrastructure, it also needs to look at the entire supply chain, underlying operational constraints and port-hinterland connections. The agreements signed by Pelindo II can be considered a positive step towards achieving these targets. The agreements are expected to make ports in Indonesia more efficient as well as address Indonesia’s maritime logistics and connectivity challenges in a holistic way. It will also help in strengthening Pelindo II’s relationship with other state-owned port operators and improve the efficiency of the Indonesian ports.