REGIONAL PORTS INTERREGIONAL TRADE FLOWS OF (GRAIN) PRODUCTION OF INDONESIA

Nuzul AchjarIndonesian Maritime Center (IMC) and Department of Economics and Business, University of Indonesia

Grain Forum and Maritime Days in Odessa, May 25-28, 2016

As an archipelagic country, the existence of shipbuilding industry in

Indonesia is expected to play an important role in the development of

maritime-based economy.

National shipbuilding industries have been operating since some years ago.

At the first stage, its development faced some constraints, among others the

limitation of financial and technological supports Production did not

achieve economies of scale, the price of the ships were not competitive for

domestic and international market Users prefered to import used ships.

Today, there are some indications of the revitalization of shipbuilding.

INDONESIA IS AN ARCHIPELAGIC COUNTRY

• The declaration of Maritime Fulcrum (Maritime xis) under the government of President Joko Widodo signed positive signals of the revitalization of national shipping industry.

• In mid May 2016, Indonesia through PT PAL has been successful to export military vessel of Strategic Sealift Vessel (SSV) for the first time.

• The vessel was ordered by the Ministry of Defense of the Philippines. This provides greater confidence that Indonesia will be able to compete to produce medium size vessels internationally in terms of quality and delivery

REVITALIZATION OF SHIPBUILDING INDUSTRY

Source: LPEM-FEBUI (2016) , ERIA (2016)

EXPORT AND IMPORT VALUE THROUGH MAJOR PORTS OF INDONESIA

The Role of Sea Transportation in Export and Export of Indonesia

Source: ERIA, 2016

• The most dominant port in Indonesia, since more than 70% of imports are handled in

this port.

• Many reforms related to soft and hard infrastructures have been conducted in Tanjung

Priok.

• There are issues of overcapacity of land transport. Roads connecting the port tear out

easily due to high frequency of usage / overcapacity. No specific roads for cargo trucks.

Constructing train transport is considered inefficient (in already congested area).

• 24-hour services are only for documents handling (i.e. in customs).

Port of TanjungPriok

• Utilization is still low given the scale and improvement plan of this port. Bitungis designated as hub, included in ASEAN maritime connectivity plan.

• Competition between Bitungand other ports especially in eastern areas (i.e. Makassar and Balikpapan).

• International trade operation/handling is basically routed from and to TanjungPriok/TanjungPerak. Issues on export of food/agricultural products.

• Issues in attracting and maintaining international shipping line to include Bitungroute.

• No industrial zone in the mainland areas. Bitungis considered more suitable for transshipment hub.

• Road capacity from Bitung to Manado is still inadequate, although there is plan to develop toll and building new roads connecting the port.

Port of Bitung

• Port operation: Container terminals and customs office operate 24/7

in all major ports.

• Supporting facilities have not implemented 24/7 operation

(warehouse, facilities outside terminal)

• Some ports suffer from shallow berth depth (Makassar & Belawan)

(<12m).

• Most ports have implemented one-stop service for paperworks, IT-

based service, and electronic exchange of data. Except: Makassar

• Issues in dwelling time: mostly from pre-customs clearance

• Importers use terminal yard for storage to reduce cost

implementing progressive tariff of 400%-600%

PORT PERFORMANCE AND UTILIZATION

• Administrative process in Indonesian seaborne trade contributes a significant portion in inefficiency.

• There are about 18 government bodies and agencies related to the seaborne export / import activities, some of which have overlapping authorities with each other.

• The average benefit of reducing document handling process by one day ranges between142.2 – 1218.7 thousand Rupiah (10.8–90.3US$) per TEU.

• The estimate significantly increases for importing firms’ benefit, ranging between 725.2–3464.6 thousand Rupiah (53.7–256.6US$) per TEU.

BENEFIT FROM PORT IMPROVEMENT

• Planning on maritime connectivity in Indonesia is still in shape. No clear emphasis

on ASEAN maritime connectivity. Government's short-term objectives tend to focus

on handling domestic (logistics) issues.

• Regulatory coherency problems are latent, found at central government level and

on coordination between central and sub-national govs. Central government

coordination has not been optimal (i.e. on the issue of dwelling time). Lack of

coordination between central and sub-national govs especially on road

infrastructure and cases of industrial zone development.

• Efficiency and modernization still have issues. Reform on soft infrastructure is

fragmented; issue of no 24-hour operation. Port modernization is limited to handling

and yard expansion. Mixed used of ports in some regions - ports handle cargo as

well as passenger vessels, pomplaints from users as improvement in port

infrastructure translates to high handling costs.

• Capacity of stakeholders, since many reforms not only need cooperation of

governments but also other stakeholders (shipping line, logistic firms, etc.). Slow

adoption of IT modernization.

SOME ISSUES

• The existence of development of other ports. Development of Kuala Tanjung is still in initial phase, and similar to Bitung, it is planned to be the main hub in western area of Indonesia.

• There is also an issue of private port (the case of INALUM), in which its operation is viewed in some extent as disrupting the route and transport from existing port of Belawan.

• In Belawan Port, most ships are feeders to Tanjung Pelepas or Port Klang in Malaysia. But in general cargo, there are more flexible routes (i.e. route to Thailand).

Ports of Belawan and Kuala Tanjung

• The second main port after Tanjung Priok. There are only 2 ports in Indonesia (Tanjung Priok and Tanjung Perak) listed in 100 Top Container International.

• There has been improvement on soft infrastructure. There is already 24-hour operation service.

• Utilization is high, especially on domestic routes. There are 55 domestic routes from Port of Tanjung Perak (higher number of routes in comparison with Tanjung Priok).

Ports of Tanjung Perak

• On port utilization, the issue is on operational costs that are viewed as quite expensive.

• Limitation in port improvement as depth is limited (<12 m) and location in the city of Makassar.

• Some initiatives to improve soft infrastructure. INAPORTNET is expected to operate starting from October 1, 2015.

Ports of Makassar

CONDITION OF REGIONAL MAJOR PORTS

• Onaverage,the dwelling time is much less efficient than Malaysian international ports (2-3 days) and much more inferior compared to Singapore’s or HongKong’s (less than 1 day).

• Complicated and disorganized administration process is one of many aspects that cause longer dwelling time, particularly in pre-clearance process.

• The government as formulated some initiatives to shorten and simplify document-handling process in order to reduce the dwelling time up to 20percent.

QUALITY OF SERVICE (1)

QUALITY OF SERVICE (2)

Source: Customs (2015)

Note: BOR and YOR for Surabaya are for non-container and container terminals,

respectively

Source: ERIA, 2016

46 PORTS UNDER ASEAN TRANSPORT STRATEGIC PLAN (ATSP)

2015-2025

  2011 2015 2020

MAIN PORTS 33 39 49

FEEDER PORTS      

- Regional 249 235 225

- Local 741 726 704

COLLECTOR PORTS 217 240 262

TOTAL 1240 1240 1240

LOCATION OF MAIN AND FEEDER POTS OF INDONESIA

YEAR PLANTING AREA (Ha) HARVEST AREA (Ha)

PRODUCTIVITY (TON/Ha) PRODUKSI (Ton)

2015 4,244,976 4,019,360 5.05 20,313,731

2016 4,372,238 4,153,627 5.15 21,353,794

2017 4,470,435 4,246,914 5.27 22,360,000

2018 4,599,208 4,369,248 5.38 23,484,708

2019 4,744,526 4,507,299 5.48 24,700,000

PROJECTION OF CORN PRODUCTION 2015-2019

Soource: Ministry of Agriculture

Category 1 Category 2 Category 3 Category 4

4.3

2.5

3.5

4.5

2.4

4.4

1.8

2.8

2 2

3

5

Chart Title

Series 1 Series 2 Series 3

No. YEARHARVEST AREA PRODUCTIVITY PRODUCTION

Ha CHANGES 00KG/HA

CHANGES TON CHANGESHa % % Ton %

1 2004 3,356,914     33.44     11,225,243    2 2005 3,625,987 269,073 8.02 34.54 1.10 3.29 12,523,894 1,298,651 11.573 2006 3,345,805 (280,182) (7.73) 34.70 0.16 0.46 11,609,463 (914,431) (7.30)4 2007 3,630,324 284,519 8.50 36.60 1.90 5.48 13,287,527 1,678,064 14.455 2008 4,001,724 371,400 10.23 40.78 4.18 11.41 16,318,077 3,030,550 22.816 2009 4,160,659 158,935 3.97 42.37 1.59 3.91 17,629,748 1,311,671 8.04AV IN 5 YR (05-09) 3,752,900 160,749 4.60 37.80 1.79 4.91 14,273,742 1,280,901 9.917 2010 4,131,676 (28,983) (0.70) 44.36 1.99 4.69 18,327,636 697,888 3.968 2011 3,864,692 (266,984) (6.46) 45.65 1.29 2.92 17,643,250 (684,386) (3.73)9 2012 3,957,595 92,903 2.40 48.99 3.33 7.30 19,387,022 1,743,772 9.88

10 2013 3,821,504 (136,091) (3.44) 48.44 (0.55) (1.11) 18,511,853 (875,169) (4.51)11 2014 3,838,015 16,511 0.43 49.59 1.15 2.37 19,032,677 520,824 2.81AV IN 5 YR (10-14) 3,922,696 (64,529) (1.55) 47.41 1.44 3.23 18,580,488 280,586 1.68

AV IN 10 YR (05-14) 3,837,798 48,110 1.52 42.60 1.61 4.07 16,427,115 780,743 5.80

HARVEST AREA, PRODUCTION AND PRODUCTIVITY OF CORN

  2014 2015 A. PRODUCTION (DRY GRAIN) 19,032,677 20,313,729 B. DEMAND 19,974,076 20,291,618 - Seed (20 kg per ha) 81,860 104,900 - Direct Consumption 426,421 398,520 - Feed for livestock 13,769,816 14,750,393 - Poultry 7,649,045 8,250,000 - Local Husbandry 6,120,771 6,500,393 - Other food & non-food Ind 3,768,470 4,022,118 - Other losses 851,634 1,015,686 c. DEFICIT (941,399) 22,111 Number of Population 252,164,800 256,461,700 Av consumption per kapita 1.65 1.56

BALANCE OF SUPPLY AND DEMAND OF CORN

MAJOR ISLANDS 2014* 2015** GAP

1. SUMATERA 4,051,006 4,817,939

766,933

2. JAVA 10,151,190 9,911,933

(239,957)

3. BALI AND NUSA 1,465,834 1,627,655

161,821

4. KALIMANTAN 285,147 381,173

96,026

5. SULAWESI 3,127,178 3,207,045

79,867

6. MAL & PAPUA 46,354

54,255

7,901

INDONESIA 19,127,409 20,000,000

872,591MAJOR ISLANDS 2014* 2015**

1. SUMATERA 21.2 24.1 2. JAVA 53.1 49.6 3. BALI AND NUSA 7.7 8.1 4. KALIMANTAN 1.5 1.9 5. SULAWESI 16.3 16.0 6. MALUKU & PAPUA 0.2 0.3

INDONESIA 100 100

PRODUCTION OF CORN BY MAJOR ISLANDS