WB sees increasing new rules in RI sea transport

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)