$270m spent in transshipment costs

Zakki P. Hakim, The Jakarta Post/Jakarta

Indonesia could have saved US$270 million in transshipment costs every year if its exporters and importers did not use Singapore as a hub for exports and imports, an Indonesian Exporters Association (GPEI) official says.

GPEI secretary-general Toto Dirgantoro said on Friday that currently 80 percent of Indonesia's total exports and imports went through Singapore. The city-state has the facilities to connect Indonesia with major trading partners across the globe.

"Indonesia could save hundreds of millions of dollars if the government materialized its plan to make Jakarta the country's national and international hub for direct shipment to other continents," he told reporters on Friday.

He added that transshipment costs eventually added to product prices, meaning the goods become less competitive on the global market.

Toto said domestic exporters and importers had no choice but to have their goods shipped through Singapore because Indonesia did not have adequate ports to accommodate direct long-haul shipments.

He went on to say that the government, through the Ministry of Transportation, had actually issued last year a ministerial decree to make Jakarta a national shipping hub. However, no significant development has been seen so far.

Toto, who is now a member of the government's special team on improving trade facilitation, blamed chaotic and poor port management for inefficiencies in Indonesian harbors.

The chaos, he said, originated from the government's attitude in perceiving ports as a source of revenue for the state budget.

The attitude has prompted port operators to reap maximum profits and neglect the development of necessary facilities in the ports, he said.

"In contrast, countries like Malaysia, Thailand and China literally pour state funds into ports as an investment to boost trade and attract containers from other countries, including from Indonesia, to stop by," Toto said.

He believed the government should take the same attitude, perceiving ports as an investment instead of a cash cow.

"When there is a will, there is a way," he said.

Indonesia exports and imports a total of 5.5 million TEUs (twenty-foot equivalent units) of containers annually, with 80 percent of them going through Singapore.

In Singapore, exporters and importers have to pay transshipment costs that includes unloading containers from vessels, renting space and loading them onto other vessels, before finally being shipped to their final destinations, Toto said.

The transshipment cost was on average $60 per TEU per year, and such cost does not include cargo piling and other fees, he added.