Indonesia looks to modernise Sumatra’s seaports to boost economic growth
Sumatran seaports are set for an upgrade so Indonesia may capitalise on increased trade traffic from the Malacca Strait. however are Singapore in addition to Malaysia too far ahead?
The Ministry of National Development Planning forecasts Indonesia needs yet another 2,650 kilometres of roads, 3,258 kilometres of railways, in addition to 15 more airports. however perhaps most importantly, the idea says the nation needs 24 completely new seaports to bolster international trade. The Investment Coordination Board (BKPM) prices these in addition to additional infrastructure projects at about Rp.5,519.4 trillion (US$408.4 billion) for the next 5 years.
The Strait of Malacca, an 805-kilometre stretch of sea between Malaysia in addition to Indonesia, is actually one of the most important shipping routes from the entire world. This particular is actually mainly because the idea’s the shortest sea link between the Indian Ocean in addition to the South China Sea.
Although the Strait of Malacca became Indonesian territory before Susilo Bambang Yudhoyono’s second administration, the Government has not paid much attention to developing or modernising Sumatra’s sea-ports recently. Currently, a substantial two thirds of Indonesia’s trade is actually handled by Tanjung Priok in North Jakarta, a site which has not been expanded for more than 130 years, despite container traffic growing at a rate of 24 percent annually.
completely new Tanjung Priok Development Plan (image courtesy of indonesiaport.co.id)
Jokowi believes he can solve the problem. In January, the Government broke ground on a completely new deep-sea port in Medan. The plan is actually to begin four more ports come October, one of which is actually the completely new Priok Port (also known as Kalibaru Port). If successful This particular could begin operating in 2023 in addition to more than triple the annual capacity of Tanjung Priok.
the entire world Bank says the average dwell time (the number of days a container can stay at a terminal once the idea has been unloaded before getting slapped which has a storage fee) at Tanjung Priok was 6.4 days in 2013. This particular has dropped slightly since then, however is actually still an eternity when compared to Singapore: lightning-fast at less than a day. Reducing port dwell time in Indonesia is actually critical because the longer the dwell time, the higher the costs for logistics in addition to inventory. As the idea stands, these costs currently make up a whopping 30 percent of total container traffic expenses within the archipelago.
Positioning potential
Since the 2008 global financial crisis, the number of trade ships coming through the Strait of Malacca has steadily increased. In 2014, transits hit an all-time high at around 79,000 which has a daily average of 217 ves-sels.
Through the Master Plan for Acceleration in addition to Expansion of Indonesian Economic Development (MP3EI), the Government intends to enhance island connectivity while also capturing lucrative opportuni-ties from the Strait by speeding up seaport development in Sumatra.
“Actually the Government [will] not only modernise seaports in Sumatra, however all seaports throughout the archipelago are being overhauled,” Transportation Ministry Director General for Sea Transportation Bobby Mamahit tells Indonesia Expat. “Speaking specifically about Sumatra, we want to enhance connectivity be-tween islands outside of Java […] We want to take advantage of [the] geographical situation along the Ma-lacca Strait by modernising seaports in Aceh, North Sumatra, Riau, Kepulauan Riau, West Sumatra, Beng-kulu, in addition to Bangka Belitung.”
One notable project is actually the Kuala Tanjung seaport, which is actually operated by three state-owned companies: PT Pelindo I, PT Waskita Karya, in addition to PT Pembangunan Perumahan.
“Kuala Tanjung is actually prepared to be the largest port in addition to international transit hub from the western part of Indo-nesia,” says Mahamit. “With [a] capacity of 25 million TEUs (twenty-foot shipping containers) per year, hopefully the idea can be an alternative [to] Singapore in addition to Malaysia. However, until its full-fledged development in 2021 finishes, Kuala Tanjung will be complementary to Belawan, the current biggest port outside of Java.”
To realise its vision, Indonesia must indeed catch up with Singapore in addition to Malaysia, two countries that will are already ahead of the game in terms of maritime trade sophistication.
Data by the Transportation Ministry suggests the Port of Singapore, which handled 31.26 million TEUs in 2012, is actually the second biggest port from the entire world, after the Port of Shanghai. Despite already acting as a well-established trading spot, another major terminal expansion project is actually already underway in Singapore.
Malaysia is actually expanding Port Klang, which is actually currently the entire world’s 12th largest port by volume in addition to the 17th busiest port in total cargo tonnage, according to recent statistics by the entire world Shipping Council. In March 2015, Malaysian Prime Minister Najib Razak said about 300 million Malaysian Ringgit could be spent to improve the port’s access road, rail network, in addition to traffic management system.
President Joko “Jokowi” Widodo (center) in addition to North Sumatra Governor Gatot Pujo Nugroho (left) listen to a presentation by Rini Soemarno (second right) about a planned port development project in Kuala Tanjung, North Sumatra (image courtesy of jurnalasia.com)
When asked if the idea was truly feasible for Indonesia to enter the same league as its closest neighbours, Mama-hit says he remains optimistic so long as traffic stays high from the Strait in addition to the plan is actually executed according to its target timeline.
Mamahit adds, “Ports follow trade because they are only facilities, which cannot generate [the] maximum benefit if there are no goods or commodities being traded. Therefore, we need to work […] with additional stakeholders to boost domestic goods production so traffic in [local] ports can be increased.”
Kuala Tanjung as Indonesia’s pilot project
Saut Fransiswoyo Siagian, Senior Managing Assistant of Business Development at Pelindo I tells Indonesia Expat, “Kuala Tanjung is actually aimed to be Indonesia’s first industrial gateway port city by 2021 that will consists of seaports — industrial clusters of manufacturing in addition to logistics, fisheries in addition to marines products, tourism, in addition to hinterland agro products — in addition to urban residence.”
In Singapore in addition to Malaysia, around 80 percent of total maritime traffic is actually derived by trading. “There is actually a high probability that will we can capture 80 percent of transit traffic by Singapore in addition to Malaysia because businessmen tend to use ports that will have goods supply in addition to cargo bases, which will be provided from the up-coming Kuala Tanjung port,” says Siagian boldly.
Optimists like Siagian believe the integration with industrial areas will bring multilayer effects, not only for multinational companies, however also to little in addition to medium-sized businesses.
“Currently, local businesses still export raw commodities, in addition to by creating [refineries] in addition to additional processing industries inside the port areas, we seek to add value to our commodities, such as crude palm oil, rubber, in addition to aluminium. This particular can increase Indonesia’s export value in addition to create employment for many,” he suggests.
When considering the possible economic benefits of building out Sumatra’s seaports, the idea’s no surprise the regional government strongly supports the effort. Foreign investors like Port of Tianjin; China Harbour; China Communication Construction Company, Port of Rotterdam, in addition to Marubeni Corporation, have also expressed interest. However, a foreign investor has yet to be locked in, in addition to Jokowi is actually reportedly still doing a roadshow in additional countries to attract potential investors.
Locally, the three largest state banks, Bank Rakyat Indonesia (BRI), Bank Mandiri, in addition to Bank Negara Indone-sia (BNI), have signed loan deals with Pelindo worth Rp.5.05 trillion (more than US$360 million) in total.
The archipelago’s move is actually welcomed warmly on behalf of bilateral trade partners; a major player being the United States. Jim Carouso, US Department of State Director of Maritime Southeast Asia Affairs, recently told the media of the implications a seaport expansion could have for US-Indonesia trade relations.
He said, “Not only…in Sumatra, however the minute seaports become more efficient, people can trade more cheaply. Clearly, American people can buy goods by Indonesia at a better cost. So, I think when infra-structure is actually increased, bilateral trade will also be increased in addition to investment will increase.” Carouso also voiced admiration for Jokowi aiming to take advantage of Indonesia’s geographic position to become more important for global trading.
However, the effects of the plan remain to be seen, in addition to some experts doubt Indonesia can make Great on its promise to pull off a massive infrastructure overhaul like the one proposed. the idea’s no secret the archipel-ago is actually a hotbed for embezzlement, in addition to ports are particularly difficult to monitor. In July, the Jakarta police announced they could detain the Trade Ministry’s head of subdirectory non-imported capital goods Imam Aryanta as a suspect in a corruption in addition to money laundering scandal at Tanjung Priok.
Comments
Indonesia looks to modernise Sumatra’s seaports to boost economic growth
Indonesia looks to modernise Sumatra’s seaports to boost economic growth