A vision to turn Indonesia into a global maritime axis

Under the Jokowi administration, a visionary five-year plan is propelling Indonesia’s ambitions as a maritime superpower that rivals the position of its neighbor, Singapore.
Tanjung Priok
01 August 2019 •

At the Port of Tanjung Priok in North Jakarta — Indonesia’s largest and busiest seaport — the long lines of vessels waiting to load or unload their cargo used to be a common sighting.

Due to years of under-investment, bottlenecks and long handling times were par for the course. A container used to be parked at the terminal for up to one week before being loaded onto a ship.

But things have improved since 2014 when President Joko Widodo, one of the world's most popular elected leaders, took office for his first term.

Dwell time at Tanjung Priok has been cut to between 3.2 and 3.7 days, with further reductions planned. Besides easing port congestion and boosting productivity, shorter dwell time is also a boon for cargo owners, allowing them to save on storage charges imposed by port authorities.

Under Widodo’s charge, infrastructural improvements, including an overhaul of Tanjung Priok, have been a key priority.

“We have seen an enormous expansion of infrastructure. Six ports have been expanded, 7,000 kilometers of rail have been laid, and 15 local airports are being built," said Vincent Yong, President Director of DHL Global Forwarding Indonesia.

Speaking at the 2016 opening of the New Priok Container Terminal 1 in Kalibaru, Widodo said: “We cannot delay the development of modern ports any longer. This supports trade flows and investment in this country.” It was the first of five phases for the port expansion project that is slated for completion this year.

“If we're slow, we'll be left behind,” he emphasized.

Clogged by inefficiency and congestion

Located between the Indian and the Pacific Oceans, Indonesia holds a geostrategic location as an important port of call and even boasts a rich seafaring tradition dating back to the second century.

The country’s and Widodo’s vision today is to reinstate itself as a global maritime superpower in its own right — to become a “Global Maritime Fulcrum”.

One of the first few initiatives rolled out by the Widodo administration was a five-year, 700 trillion rupiah (€436.8 billion) plan to build up the maritime sector.

Port of Tanjung Priok, North Jakarta
Port of Tanjung Priok, North Jakarta

Of this, 243 trillion rupiah was set aside for developing 24 “strategic ports”, with the goal of establishing Indonesia as Asia’s foremost maritime hub. And this means displacing the region’s top shipping stalwart: Singapore.

The Port of Singapore has long held the title as the world’s top transshipment port – a “layover” point for cargo on its way to another destination.

As the second-busiest port globally after Shanghai, Singapore accounts for almost one-seventh of total global container transshipment volumes. The country’s port operator handled 36.3 million Twenty-foot Equivalent Units (TEUs) worth of cargo in 2018, up 8.9 percent from a year ago.

On the other hand, Indonesia’s Tanjung Priok, the main gateway for the bulk of the country’s international shipments, handled 6.1 million TEUs of cargo in 2017.

Even with over 1,200 ports spread across its 17,000 islands, a dearth of maritime infrastructure means most of these facilities are often ill-suited to accommodate large ships.

According to a World Bank study of 18 Indonesian ports in 2018, the country was found to be lagging due to a “critical infrastructure gap”.

It added that the quality of the ports’ infrastructure across Indonesia affects the country’s overall competitiveness.

Taking a slice of the transshipment market

In recent years, however, Indonesia has been changing course.

It is building new ports and revamping old ones as the country aims for a slice of the transshipment market to challenge Singapore’s dominance.

Central to this effort is the expansion of Tanjung Priok. As an “integrated chain port”, it aims to bring home a large share of transshipment business via a state-of-the-art maritime logistics management system that can integrate and manage cargo flows efficiently from different ports across the country.

This will help Indonesia slash its notoriously high logistics costs that make up almost 24 percent of its gross domestic product, according to the World Bank.

So far, the government’s attempt to transform Tanjung Priok into a primary domestic and international hub port is yielding results. Volumes jumped 10.4 percent in 2017, compared to the year before, and industry watchers expect this growth to continue, possibly even hitting 30 million TEUs in 2030.

Perhaps the most ambitious project is the Java Integrated Industrial and Ports Estate (JIIPE), aimed at capturing a larger share of transshipment business related to domestic cargo.

Due to be completed in 2030, the expansive industrial center on the eastern edge of Java will serve as a trading and manufacturing hub for both Indonesia and the wider Asia Pacific region.

A key feature of the JIIPE is the deep-sea port, which is designed to accommodate large vessels and handle a variety of cargo, from dry bulk to oil and petrochemicals.

Beyond laying the physical groundwork, Indonesia is also building an ecosystem around port activities.

In 2016, the government promised to open more bonded logistics centers (BLCs) — facilities that serve as temporary holding areas for clients to store their cargo without having to pay duties and taxes until they officially import the goods into Indonesia.

At present, imports account for around 65 percent of DHL Global Forwarding’s business in the country, Yong shared.

The company is among three logistics providers that operate bonded warehouses in Indonesia, with facilities in Jakarta, Balikpapan, Semarang, Sorong, and Surabaya.

Apart from helping clients avoid huge demurrage fees in the port, BLCs also play a critical role in cash flow management, as duty and tax are paid only when the cargo leaves the site. BLCs also provide basic services like labeling, blending, and assembling that ease the workload for clients.

It appears that the country’s massive reforms are paying off, with the economy expanding at the fastest pace in half a decade, growing 6.6 percent last year.

The country also rose sharply in the ranks of the World Bank’s latest Logistics Performance Index, coming in at 46th place in 2018, up from the 63rd position in 2016.

As Indonesia aims to become Asia’s leading port, it is fast emerging as a worthy challenger to Singapore, and a potential game-changer in the global maritime order.

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