Haryanto's protectionism
Minister of Transportation Haryanto Dhanutirto's decision to close Indonesia, except Batam island near Singapore, to international cargo jets may stifle the future growth of the air freight industry. That would be a big disadvantage to the economy because as the economy steadily expands, air freight services will play an increasingly vital role in quickly and efficiently expediting goods across the far-flung islands and to the international market.
The protectionist measure may discourage many new investment projects. In the current era of increasing economic globalization, the fast, efficient flow of goods is crucial for market competitiveness and air cargo services play a very important role in that matter. Express cargo services have also become more vital now because many manufacturing plants operate like global factories which source their components or parts from various countries that offer the most competitive products.
We are doubtful that the rule would be effective in forcing international cargo jets to reroute their services to the remote, unknown and poorly equipped Hang Nadim Airport in Batam. The airport -- only about 25 kilometers southeast of the most modern, well-equipped and efficient Changi International Airport in Singapore -- is still short of cargo handling equipment, including such facilities as insulated boxes, refrigerated containers, testing laboratories, reicing equipment and other kinds of storage facilities. Neither does it have links to many international points. Moreover, feeder services to Batam have yet to be developed. In fact, the first scheduled domestic air cargo service was launched only early this week by Garuda, using a Boeing 737-200 plane.
Lower landing fees and cheaper aviation fuel offered at Hang Nadim may provide some advantages to air freighters, but not to cargo owners, who only value quick and efficient flow of their goods to their final destinations.
The measure is obviously designed to optimize the utilization of Hang Nadim Airport, which has taken up a big chunk of government investments to expand its capacity to handle airplanes up to the 747-400 size. Besides, the government, apparently irked over the current dominance by foreign shipping companies of the international sea cargo service to the country, wants to protect domestic air freighters early on from foreign competition.
It is now futile to reopen debates on the economic viability of the huge investment already made in Hang Nadim Airport. The facility should be utilized to prevent waste and further losses. Since the government apparently foresees great difficulties in attracting foreign passenger airliners to make transit stops at Hang Nadim, due to its numerous disadvantages compared to the nearby Changi airport, it is now turning to air cargo services to help optimize the airport's utilization.
Nonetheless, the measure to optimize the utilization of the airport and to protect domestic airliners may exact a bigger cost on the economy as a whole. The protectionist ruling is especially detrimental to the future development of much-needed air freighter services, because most air cargo currently transported to and from the country is still carried in the holds of passenger aircraft. Korean Air is now the only foreign cargo carrier that serves Indonesia regularly. Several express air cargo service companies such as Federal Express, UPS, DHL and TNT, which are planning to link their global networks to Indonesia, may altogether scrap their plans.