Protracted legal uncertainty awaits seaport investors
Protracted legal uncertainty awaits seaport investors
Rendi A. Witular, The Jakarta Post, Jakarta
Indonesia has long dreamt of having its own seaports that are large enough to function as a hub port -- unlike the present situation in which most of the products shipped in or out of the nation have to be pooled first in much larger ports in Singapore or Malaysia.
The condition has not only made the cost of shipment for the goods more expensive but it has also turned the country to be heavily dependent on foreign vessels, leaving the local shipping industry underdeveloped.
The Ministry of Transportation has estimated that 80 percent of the country's export and import activities have to go via Singapore or Malaysia, causing a potential loss of more than US$2 billion per annum for local businesses.
The government has actually realized the problem, but no concrete action has ever been taken until now.
Worst still, state-owned seaport operators, supposed to be front-runners in developing ports, often find themselves in legal disputes, notably with local administrations over the management of ports in regions, while the central government is turning a blind eye over the issue.
The most recent disputes with pit operator PT Pelindo II and the Jakarta administration over the construction of Jakarta New Port, which is worth about Rp 5 trillion ($555 million). The operator is also in a dispute with the Cilegon administration in Banten over the management of Ciwandan port in the province.
The center of the disputes is similar; both administrations are claiming the legitimacy over the management of ports in their respective areas. They based their arguments on the autonomy law, which contradicts other laws that gives Pelindo the sole beneficiaries in managing ports.
The local governments' rejection to Pelindo's role should also be attributed in part to the poor management and services provided by Pelindo in running the ports, which have caused complaints from foreign vessels and local businessmen as their inefficiency in assessing goods' clearance makes the process costly, as well as time-consuming.
All those problems have led to calls to give access to private participation in managing ports. It means to strip state port operator Pelindo I, II, III and IV that operates across the country of its monopoly rights.
It is these sort of challenges that the government has to face in today's Infrastructure Summit -- as to whether it is willing to issue new regulations to help resolve both the legal dispute between Pelindo and regions, as well as revoke the facilities given to Pelindo, thus allowing it to compete with private players.
Fair competition would then lead to improvement in services in the ports and eventually help lower shipment costs.
The ministry estimates it will need some Rp 4 trillion ($444 million) this year only to improve infrastructure facilities in large several top ports alone; Tanjung Priok Port in Jakarta, Bojonegara Port in Banten, Tanjung Perak Port in East Java and Balikpapan Port in East Kalimantan.
The funds are expected to mostly come from the private sector.
The four ports are set to become a hub port for other areas in Indonesia. Shipment from these ports will directly go to other countries without having to transit in Singapore or Malaysia.
Funding sources for infrastructure projects (For the next five
years in trillions of rupiah)
Source Ports Power Roads Telecom Water
State budget 9,5 38,0 90,3 14,3 23,8
Donor 19,0 33,3 14,3 0,0 23,8
Private 133,0 90,3 61,8 123,5 114,0
Total 161,5 161,6 166,4 137,8 161,6
Source: Ministry of Finance