Haryanto's protectionism

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.