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Improving Indonesia’s port infrastructure

Interview - April 25, 2014
In the huge Indonesian archipelago of over 13,000 islands, sea transportation is an absolutely essential way of connecting its growing population. In an interview with United World, Director General for Sea Transportation at the country’s Ministry of Transport Captain Bobby R. Mamahit discusses the need to improve Indonesia’s port infrastructure in order to link remote parts of the country as well as boost trade
Has the growth of the Indonesian economy over recent years generated additional responsibilities for the Directorate General of Sea Transportation?

Yes, in fact there are a number of challenges the Directorate General of Sea Transportation is currently facing. As a result of our growing population and relatively strong economy our sea transportation needs to be improved.

The main challenge is how to manage connectivity within Indonesia and how the most developed regions of the country can be linked to the most remote areas. The MP3EI-plan (Masterplan for Acceleration and Expansion of Indonesia Economic Development) is the foundation for this. It lays the groundwork for Indonesia to become an increasingly well-linked nation that guarantees better logistics services. In accordance with this, logistics needs to be streamlined across all regions of Indonesia.

It is important to consider the numerous challenges related to the infrastructure of ports. By and large, they are unable to develop to the level needed to handle market demand. For example, there have been constant efforts to improve the port of Tanjung Priok in Jakarta. In this case, the construction of the new Priok port will strenghten the logistics chain, where overcapacity can be tackled and waiting times can be reduced, which ultimately will lower the high costs involved. Other examples of port development are the Port of Belawan, where the capacity of docks and containers is enhanced. It is also expected that the Teluk Lamong terminal, which is part of the expansion of the Tanjung Perak Port in Surabaya, will be operational this year. Another example is Makassar, where they are constructing Makassar New Port. Next to these ports there are other ports that need development and improvement quickly in order to keep up with the economic development of Indonesia.

The growing demand by consumers for goods involves growing exports and imports, meaning the country needs improved transportation and logistics services to guarantee the distribution of goods.

What is the importance of the Strait of Malacca to the country’s maritime sector and how does regulating and protecting this body of water fit into your mandate?

The Strait of Malacca is one of the world’s busiest and most important shipping lanes, which connects the Pacific Ocean to the east with the Indian Ocean in the west. The burden of such a high volume of shipping traffic weighs heavily on this shipping lane.

The importance of the Straits of Malacca to Indonesia is not only related to our naval or trade interests, but also to the strategic interests of the international community. Thus, one of our major challenges is ensuring the safety and security of shipping in the Straits of Malacca. This responsibility falls to 3 countries, Malaysia, Singapore and Indonesia. An example of combined responsibility is the marine electric highway, which is a tool that detects pollution from ships that pass the Straits of Malacca.

In addition to providing maritime safety, another key challenge is how Indonesia can best utilize the Straits. One way is through a policy related to MP3EI, whereby we are developing the Kuala Tanjung Port as an international hub port. This would make it possible to add more trade capacity to the Malacca Straits.

Besides the Straits of Malacca, Indonesia has designated archipelagic sea lanes or Alur Laut Kepulauan Indonesia (ALKI) through which foreign vessels can pass. These ALKI’s under the responsibility of Indonesia are the following: The Sunda Strait (ALKI 1), the Straits of Lombok and Makassar Straits (ALKI 2) and the Strait of Ombai Wetar (ALKI 3).

: In line with developing better maritime infrastructure what are the opportunities for international operators in offshore construction, dredging and salvage operations in Indonesia?

It is the responsibility of the Director General for Sea Transport to build and develop the ports in Indonesia. This also involves dredging, the development of shipping lanes, the clearing of shipwrecks as well as the installation of telecommunication cables or submarine pipelines in the depths of the sea.

At the moment there are several foreign dredging companies who operate in Indonesia. Most of the companies are from the Netherlands such as Van Oord and Boskalis, and China. Because Indonesia has limited dredging vessels and because of the lack of technology, we hope that companies from other countries can work together with Indonesia local company so that, improving local capacity to conduct dredging activities. This includes investing in the development of local capacity in the underwater activities previously mentioned. This would enable Indonesians to carry out more work in this sub-sector.

There are not only many opportunities for foreign investors in the field of dredging and salvage, but also in the development of ports. We hope that foreign investors as well as local investors can help with the funding of these activities through Private Public Partnerships.

An example of foreign investment in this area can be seen with the Netherlands. The Minister of Trade from the Netherlands recently has visited Indonesia to discuss Private Public Partnerships in the field of port development. Discussion has been conducted with the port of Rotterdam, the Netherlands, for the possible further cooperation in development of Kuala Tanjung Port. Actually three months ago the Ambassador of the Republic of Indonesia in the Netherlands came to the Directorate General of Sea Transportation to discuss matters related to the visit of the Dutch Minister of Trade and further development of Kuala Tanjung Port.

How has the cabotage principle effected the sea transport sector in Indonesia?

With the sea comprising two-thirds of our country’s total territory, our interest in the sea is self-evident. That is why we need to guarantee our autonomy, including the security and sovereignty of our territory.

Commercial vessels are not only to carry and transport goods, but they also to carry out the function of preserving state sovereignity. In 2005, fifty percent of the vessels operating in Indonesian waters sailed with foreign flags. To boost the national shipping industry and for the development of Indonesia, the government through Presidential Instruction No. 5 Year 2005 introduced the cabotage principle in 2005, which required all vessels operating within Indonesian waters to be domestically owned, meaning only vessels sailing with Indonesian flags are now allowed to load and unload cargo and passengers within the area of Indonesia. This policy was later strengthened by Law No. 17 Year 2008 regarding Shipping.

There are some exceptions, especially in the oil and gas sector, where Indonesia does not have sufficient Indonesian flagged vessel yet, hence foreign vessels may be used to carry out certain activities. These include offshore activities (specifically with drilling units), activities with heavy lift cranes, and also the installation of the telecommunication cables and pipes in the sea, because it involves passing international waters as well.

The cabotage principle has certainly benefited local players. At the moment 99 percent of the vessels sailing within Indonesian waters are domestically owned.

What is the effect of the cabotage principle for human resources in the sector?

The need for human resources in the shipping sector is related to the availibility of seafarers, including the workers onshore.

After the implementation of the cabotage principle in 2005, the number of national-flagged vessels operating in domestic waters has increased inmensely, which has lead to a high demand for human resources in the domestic shipping industry.

One of the ways to increase the capacity of seafarers in Indonesia is through education. The number of schools for maritime training in Indonesia is increasing and we maintain international standards for the competences of our people. This works to ensure they are ready to operate within Indonesian waters and international waters as well.

Another challenge is the shortage of sailors across the world. Western countries and also Asian countries such Korea and Japan as well as the Arab countries have a high demand for seafarers. Culture has changed in these countries and there is little interest these days to work at sea. That is why the IMO (International Marine Organization) has launched a campaign “Go To Sea!”. It attract entrants to the shipping industry.

We also have to work hard to keep our graduates in the shipping sector in Indonesia, because they also have opportunities to work abroad as well.

The highest number of sailors in the world actually comes from the Philipines, second in the ranking is China, number three is India, and Indonesia is number four. We currently have 300,000 seafarers sailing around the world.

What is the effect of the 2008 Shipping Law on the industry?

This law supports the cabotage principle, that is also contained in the law. The underlying philosophy of no.17/2008 Shipping Law is to eliminate port operation monopoly, create more opportunity for port investment, create competition within port and between ports, accommodate regional autonomy and separate the function of ports as a regulator and an operator. Under the Shipping Law the Government (through the Port Authority) will act as a regulator and license the private sector as well as state owned enterprises, such as Pelindo, to operate and manage ports.

The effect of No.17/2008 Shipping Law is significant. Looking at the recent developments, many things have changed in regards to efficiency and the reduction of costs in sea transport.

What are your thoughts about the negative investment list and the potential for more private ownership specifically in ports?

In the past international investors that wanted to invest in the development of ports had to cooperate with Pelindo. Nowadays international investors are allowed to invest directly into new ports by setting-up a Port Business Entity, but with a concession agreement between the Port Authority (representing the government) with the private investor, stated also in no.17/2008 Shipping Law, where 95 percent foreign investment is allowed and 5 percent for domestic investment. Ownership is only granted for the period of the concession agreement. When the concession agreement has ended, the whole ownership returns to the government.

Foreign investors are very welcome to invest in Indonesia, specifically for the development of ports infrastructure, including sea transport. We at the Directorate General for Sea Transport of the Ministry of Transportation will fully support the foreign investors that wish to invest in Indonesia.