After three years of deliberation, lawmakers endorsed Tuesday a revised shipping bill that will end decades of state monopoly on port ownership.
The bill, however, has led thousands of state port workers to threaten strikes in the coming days.
The bill will allow foreign and domestic private entities to operate ports in Indonesia without having to partner or seek the aid of state port operators PT Pelindo I, II and III, which partly function as port regulators, as well.
"With the arrival of the private sector, Pelindo will no longer be the sole port operator. It will be treated similar to the private entities in a bid to create healthy competition," Transportation Minister Jusman Syafii Djamal said.
Pelindo's monopoly rights have been blamed by many port stakeholders as the main culprit behind the country's messy port management, leading to a protracted inefficiency in the transport chain.
Under Pelindo's management, Indonesia has yet to have an international port capable of serving direct shipments of Indonesian goods to overseas destinations.
Most Indonesian goods have to stop over in Singapore or Malaysia for collection before being shipped onto final destinations, costing exporters extra shipment fees.
"We expect top-notch international port operators to invest in Indonesia and compete with Pelindo. Eventually, Pelindo will be driven to improve its services in order to survive. This is good for stakeholders," said Jusman.
The bill contains 22 chapters and 355 articles, with eight new chapters regulating, among other things, mortgages and loans, maritime safety and security, the harbor master and the establishment of a sea and coast guard.
Another crucial issue in the bill relates to the "cabotage principle", allowing only locally registered vessels to ship domestic commodities between ports in Indonesian waters.
Jusman said the regulation would help boost demand for services from local shipping firms and create more orders for local shipyards.
According to the ministry of transportation, Indonesian flag vessels last year carried 148.7 million tons of domestic cargo, or 65.3 percent of the total cargo, while the remainder was served by foreign shipping companies.
The bill also provides a legal basis for the industry to put up vessels as collateral for loans. Local banks have long been reluctant to provide loans to the industry due to a lack of collateral.
Last year, the banking sector disbursed Rp 9.8 trillion in loans to the shipping industry, just a small portion of the sector's total lending of Rp 1,000.8 trillion.
The ministry of transportation previously revealed the financial needs of more than Rp 34 trillion (US$3.7 billion) to expand local fleets and shipyard capacity through 2010.
In response to the bill, Pelindo's worker unions have pledged to stage more rallies in the coming days, and may aim a strike at the country's 112 ports.
"We are considering holding a strike, demanding the government and the lawmakers return the function of Pelindo," said chairman of the Pelindo workers union Sudjarwo, adding the workers were concerned Pelindo would respond with massive layoffs as part of efficiency measures to prepare for open competition.
Some key articles in the shipping bill
1. Article 8 (cabotage principle): Activities in domestic sea transportation by national flag vessels. Point 1: Foreign vessels are prohibited from transporting passengers and cargo between islands and ports in Indonesian waters.
2. Article 60 (on mortgages): A more detailed regulation than article 49 in the 1992 shipping law, the article includes provisions for using vessels as collateral.
3. Article 81: Port managers comprise of port authorities for commercial ports, and a port operator for noncommercial use.
4. Article 207: A regulation calling for the presence of a harbor master as a government official who is appointed by a minister and has the highest authority over a port.
5. Article 276: The establishment of a sea and coast guard, an institution set up for supervision and law enforcement at sea and along coasts.
6. Article 344, Point 3: (Pelindo) will remain managing existing activities at ports already under its management.