WB sees increasing new rules in RI sea transport

JAKARTA (JP): The World Bank sees a new wave of regulations in sea transport and raises concerns over port delays and the reimposition of restrictive rulings on ship imports in its 1997 report on Indonesia.

"Complaints are already on the rise concerning port delays attributed to the customs service," the World Bank points out in its report.

The report, Indonesia sustaining high growth with equity, says addressing these issues would go a long way toward reducing costs, sustaining high growth and raising living standards well into the next decade.

The following are excerpts on maritime transport taken from the report which will be discussed at the next annual meeting of the Consultative Group on Indonesia creditor consortium in Tokyo in the middle of next month:

Maritime transport is vital to Indonesia's inter-island and international trade. The major deregulations of the 1980s resulted in significant improvements in service and reductions in rates on the trunk domestic routes. They also provided a foundation for improved efficiency and competitiveness in the subsector, but significant constraints remain and there are signs creeping reregulation.

Domestic shippings generally highly competitive. However, restriction on vessels imports coupled with bureaucratic impediments to the leasing/chartering of foreign vessels have constrained the ability of private national lines to compete with regional carriers and created strong pressures for reregulation in some quarters. Levels of investment in modern capacity have been modest due to the constraints mentioned above.

Indonesia's main public ports are operated by the four state- owned port corporations (Pelindo I-IV), while the smaller ports are still managed by DGSC (companies are permitted to own and operate special industrial ports to serve the movement of their own raw materials and products). The private sector has long been involved in ports operations, notably in the general cargo stevedoring business.

More recently, the ministry of transportation has approved several unsolicited private proposals to develop new container terminals in major ports (Tanjung Priok, Tanjung Perak) and to construct major new public ports (notably new deep-water facilities in the Merak/Cilegon area).

Port productivity remains well below best practice international levels. Congestion/slow turn-around continues to raise costs, hurting both non-oil exports from Java and shipping to the Eastern Islands.

Pre-shipment

The discontinuation of the pre-shipment inspections in April could increase greatly port congestion and shipping cost, and will need close monitoring. A similar threat is posed by proposals for new private container handling facilities at Batam.

Indonesia banned the importation of vessels (including fishing vessels) for many years, in an effort to foster shipbuilding. This tended to increase the costs of inter-island shipping and the fishing industry. This import ban on vessels reduced national efficiency and raised costs, in particular, raising price to the Eastern Island of goods they buy elsewhere, and lowering the prices that Eastern Island exporters receive.

Higher cost are part of the reason fish production is still below potential and foreign vessels poach in Indonesian waters. Indonesia's fishing industry has the potential to expand beyond its present level, with benefit for nutrition, export earnings and employment, especially in the Outer islands.

Recorded fish production was worth only $1.4 billion in 1995, compared with a sustainable harvest of about four times this much according to Government assessments. (However, this estimate of sustainable harvest may be high, as there is evidence that some parts may already be over-fished.

Nonetheless, to be internationally competitive and expand, the transport and fishing industries need access to vessels at the lowest cost possible, and this means free access to imports. Similarly, lower cost ships would help integrate markets within Indonesia, thereby increasing efficiency and benefiting the eastern islands.

In mid-1996, the ban on vessels imports was replaced by an import licensing system. When first announced, this appeared to be a conventional use-linked import licensing arrangement and hence a significant improvement over the import ban.

However, subsequent refinements prohibit leasing after 1999 and suggest that fishery operators may have to purchase a certain number of local vessels for each one imported. As the system is not yet fully operative, it is still unclear whether this change will reduce the implicit tax on users.

The new system could actually increase costs in the transport and fishing industries, which would further hamper competitiveness and limit production. (13/vin)