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