Korea Indonesia Port Study

Indonesian maritime infrastructure status
Indonesian maritime development plan & strategy
Indonesian port & logistics challenges
Current status of Indonesian port
Port sector cooperation between Korea and Indonesia

5.1. Korea’s case–port & logistics development strategy
5.2. Suggestion
1. Indonesian maritime infrastructure status
Table : Berth Facilities at Main Indonesian Ports,
2011 (meters)
Table presents information collected on container

and general cargo facilities at 22 main Indonesian
container ports.
The ports are grouped by region that corresponds to

economic development corridors used in the MP3EI.
There are 11 Indonesian ports that have specialized

container terminals with total berth length of 9.6 km.
Another 3.4 km of conventional berths are estimated

to be used at the main Indonesian container
Those ports also have conventional berths for

general cargo that total 26.3 km.
Tanjung Priok has the most berth facilities dedicated

to container operations at 3,308 m followed by
Tanjung Perak at 1,870 m. The ports of Belawan,
Makassar and Panjang each have approximately 860
m of berths of specialized container terminals.
4
Indonesia has 355,856 kilometers of roads, consisting of 36,4318 kilometers of national

roads 50,004 kilometers of provincial roads, 268,772 kilometers of municipal and city
roads, and 772 kilometers of toll roads by Guide to Doing Business in Indonesia report
by Lexmundi world ready.
Indonesia’s road network takes on the bulk for land transportation of both people and
goods, at 90% and 70% respectively making it the main focus of transport budget
spending.
The length of the national road network has grown from 391,009 km in 2005 to 476,337
km in 2009 (Statistics Indonesia). While the length of state, district, provincial and toll
roads have been increasing, it has failed to keep up with the number of automotives on
the road. From 2001 to 2009, road length increased by an average of around 2% while
private vehicle ownership has increased by 11-13% by University of Gadjah Mada.
5
The total length of the rail network is 8,529 kilometers, of which 4 327 kilometers is
classified by the Directorate of Land Transportation as mainline and 226 as branch line
in 2005.
As at 2009 Indonesia has 6,810 kilometers of railways of which 4,622 kilometers were in
operation.
For industry, around 90% of manufactured goods and natural resources such as coal
are transported on the railways in Java and Sumatra. Currently, only these two islands
have railway links for both cargo and passenger transport while the Ministry of
Transport has plans to develop lines over Kalimantan and Sulawesi.
Indonesia’s railways are operated under SOEs PT Kereta Api Indonesia (PT KAI) which
previously held the monopoly over the sector until 2007. Law No. 23/2007 signalled a
shift in attitude towards the nation’s railways to be part of national development by
making the sector more competitive in terms of service and pricing.
6
2. Indonesian maritime development plan & strategy
National Port Master Plan (NPMP)-2008

Indonesia’s port sector vision reflects the multidimensional role for the country’s ports:
An efficient, competitive, and responsive port system that fully supports international
domestic trade and promotes economic growth and regional development.
8
Pendulum Nusantara concept- 2012

There is a discrepancy between the West and East of Indonesia where; government, domestic, and international
trade atmosphere treat the Eastern part of Indonesia differently. Pelindo (Indonesia Port Corporation) introduced
the Pendulum Nusantara concept in 2012.
This network plan was designed to increase Indonesia container shipping flow from west to east and vice versa
functioning as a motorway of the sea concept. This would enable the Eastern part of Indonesia to gain the same
opportunity as the Western part prior to the initiation of the ASEAN single market by 2015.
One of the initiatives in order to lower the domestic logistics costs though national integration is the Pendulum
Nusantara concept, proposed by the Indonesian Port Cooperation (IPC). The Pendulum Nusantara proposes to
link six ports; Belawan, Batam, Tanjung Priok, Tanjung Perak, Makassar and Sorong in a “motorway of the sea
concept”.
Source: State of Logistics Indonesia 2015 (World bank)

9
Sea-highway Program (Maritime Axis)-2014

Investing a mammoth Rp 699 trillion (US$57.40 billion) for its sea-highway program in 2015-2019 in support of
President Joko “Jokowi” Widodo’s maritime-axis doctrine(‘Sea Toll Road’).
It includes Rp 243.6 trillion to develop a total of 24 commercial seaports , Rp 198 trillion to build 1,481 non-
commercial seaports and Rp 101.7 trillion to procure vessels.
Government had set a target of reducing the country’s logistics costs from the current 23.5 percent of GDP to 19.2
percent in 2019.
The 13 ports designed to expedite freighting in eastern Indonesia are
Tanjung Perak (Surabaya), Tenau (Kupang), Batulicin (Kotabaru) in
South Kalimantan, Bagendang(Sampit) and Bumiharjo (Kumai) in Central Kal
Figure: Location of 24 new seaport and 15 new airport imantan and Lembar (Mataram), in addition to the seven ports of
Bitung, Sorong, Makassar, Pare-Pare, Kendari, Pantoloan and Dede
Tolitoli, all within the Pelindo IV Makassar jurisdiction
The 11 seaports, which will be designed to

facilitate passenger traffic in eastern Indonesia,
are Tanjung Perak (Surabaya),Benoa (Bali),
Makassar, Bitung, Manado, Tarakan, Pare-
Pare, Sorong, Ambon, Biak and Ternate
Source: Indonesia’s Maritime Plans, 2015 (Bappenas) and Jakarta Post (2014.10.30) 10
MP3EI priority is to maximize utilization of Indonesia archipelagic sea lanes

It can begin by accelerating growth in various regions in Indonesia, improve a
maritime competitiveness, and enhance national security and economic
sovereignity of Indonesia.
It is expected to strengthen national connectivity that focuses on several

national development priorities related to physical connectivity such as the
development of ports, airports, railway, and roads in the transportation sector;
energy development; national logistics system and ICT development which
have been divided in each economic corridor.
Representative ports uala Tanjung, Makassar, Bitung for international trade will
be developed intensively.
11
Figure: Concepts of Gate Port and International Airport in The Future
Source: MEA, Master Plan Acceleration and Expansion of Indonesia Economic Development 2011-2025. 2010. p. 34.
12
MP3EI is a roadmap that is formulated as an attempt to transform the economy to

encourage economic activities as well as to accelerate economic growth to improve
competitiveness. The MP3EI aims to propel Indonesia into the top ten worldwide economies.
MP3EI is implemented to accelerate and expand economic development in Indonesia
through the development of 8 (eight) main programs that comprise of 22 main economic
activities located throughout Indonesia.
The main strategy is that the development of a 6 (six) Indonesia Economic Corridors and
strengthening the locally integrated and internationally connected national connectivity
Figure: Economic Corridors Map
Source: MEA, Master Plan Acceleration and Expansion of Indonesia Economic Development 2011-2025. 2010. p. 46-47 13
Total investment which is implemented to develop of logistics infrastructure will be

identified about 4,000 Trillion Rp.
Government will be contributed 10% of this cost for basic infrastructure such as port, road,
railway and etc., remaining will be provided from PPP(Public Private Partnership), private
sector or public-owned companies.
Figure : Quantum of Estimated Investments in Each Corridor (2011-2014)
Source: MEA, Master Plan Acceleration and Expansion of Indonesia Economic Development 2011-2025. 2010. p. 49 14
Table : Investment status of each corridor for Transportation infrastructure
Corridor Investment status

Development Center for Production and Processing of Natural Resources and As
Theme Nation’s Energy Reserves
◦ Total Investment: 473 Trillion Rp.
- Investment of each sector: Road(109Trillion Rp.), Port(9Trillion Rp.), Power Plant(76Trillion Rp.),
Airport(4Trillion Rp.), Railway(70Trillion Rp), Water Power Plant(0.1Trillion Rp.), ICT(50Trillion Rp.),
Other(5Trillion Rp.), JSS(150Trillion Rp.)
Sumatra ◦ Main Port Development Project(Government Lead Projects)

E.C. - Dumai Port Expansion: Total Investment value(1.25Trillion Rp.), Period(2012~2014)
- Lhokseumawe Port Expansion: Total Investment value(1.25Trillion Rp.), Period(2012~2014)
- Belawan Port Expansion: Total Investment value(0.83Trillion Rp ), Period(2012~2014)
- Bakaheuni Krib Port Estern-side Development: Total Investment value(0.55Trillion Rp.),
Period(2013~2014)
- Tanjung Api-Api Port Development: Total Investment value(0.516Trillion Rp.), Period(2012~2014)
- Bakaheuni Krib Port Western-side Development: Total Investment value(0.40Trillion Rp.),
Period(2013~2014)
- Panjang Port Expansion: Total Investment value(0.28Trillion Rp.), Period(2011~2013)
- Pekanbaru Port Expansion: Total Investment value(0.265Trillion Rp.), Period(2012~2014)
15
Table : Investment status of each corridor for Transportation infrastructure(Continue)

Development
Driver for National Industry and Service Provision
Theme

- Investment of each sector: Road(189Trillion Rp.), Port(45 Trillion Rp.), Power Plant(249Trillion Rp.),
Airport(16Trillion Rp.), Railway(105Trillion Rp.), Water Power Plant (24Trillion Rp.), ICT(32Trillion
Rp.), Other(138Trillion Rp.)
Java
E.C. ◦ Main Port Development Project(Government Lead Projects)
- Lamongan Port Expansion: Total Investment value(2.216Trillion Rp.), Period(2015~)
- Branta Port Expansion: Total Investment value(0.158Trillion Rp.), Period(2011~2014)
◦ Main Port Development Project(Public Owned Company Lead Projects)

- Tanjung Priok Port Expansion: Total Investment value(11.7Trillion Rp.), Period(2011~2014)
16

Development Center for Production and Processing of National Mining and Energy
Theme Reserves
◦ Total Investment: 128Trillion Rp.

Airport(3Trillion Rp.), Railway(35Trillion Rp.), Water Power Plan(0.3Trillion Rp.), ICT(19Trillion Rp.)
Kalimantan
E.C. ◦ Main Port Development Project(Government Lead Projects)
- Maloy Port Expansion: Total Investment value(4.8Trillion Rp.), Period(2011~2013)
- Pontianak Port Expansion: Total Investment value(0.116Trillion Rp.), Period(2015~)

- Banjarmasin Terminal Development: Total Investment value(0.35Trillion Rp.), Period(2011~2013)
17

Development Center for Production and Processing of National Agricultural, Plantation,
Theme Fishery, Oil & Gas, and Mining

Water Power Plant(0.1Trillion Rp.), ICT(34Trillion Rp.)
Sulawesi
E.C.
◦ Main Port Development Project(Government Lead Projects)
- Gorongkon Port Development: Total Investment value(0.217Trillion Rp.), Period(2011~2015)

- Makassar Port Expansion: Total Investment value(2.22Trillion Rp.), Period(2011~2014)
Development
Gateway for Tourism and National Food Support
Theme
Bali–Nusa
E.C.
- Investment of each sector: Road(19Trillion Rp.), Power Plant(4Trillion Rp.), Airport (3Trillion Rp.),
Railway(12Trillion Rp.), Water Power Plant(1Trillion Rp.), ICT(4Trillion Rp.), Other(1Trillion Rp.)
18

Development
Center for Development of Food, Fisheries, Energy and National Mining
Theme

Papua– Airport(0.2Trillion Rp.), Water Power Plant(2Trillion Rp.), ICT(32Trillion Rp.), Other(0.1Trillion Rp.)
Kepulauan
Maluku ◦ Main Port Development Project(Government Lead Projects)
E.C. - Serui Port Development: Total Investment value(0.567Trillion Rp.), Period(2011~2014)
◦ Main Port Development Project(Government and Public Owned Company Lead Projects)
- Jayapura Port Development: Total Investment value(43Trillion Rp.), Period(2011~2015)
- Merauke Port Development: Total Investment value(9Trillion Rp.), Period(2012~2015)
Source: GLN Trand Analysis Report, Analysis for Indonesia logistic business with relation to resource development, Korea Maritime Institute ,
2011, p. 59-69 and MEA, Master Plan Acceleration and Expansion of Indonesia Economic Development 2011-2025. 2010. p. 51-175 19
The 2010-2014 National Medium Term Development Plan (RPJM 2010-2014) has three
infrastructure development target:
- Improving the infrastructure provision based on the Minimum Standard of Services
- New infrastructure development to strengthen real sector competitiveness
- Support in infrastructure investment through PPP's.
PPP(Public Private Partnership) are expected to play an important role in the

implementation of MP3EI and projected to provide a substantial contribution to the
funding and capacity needs of the plan.
It is expected to strengthen national connectivity that focuses on several national

development priorities related to physical connectivity such as the development of
ports, airports, railway, and roads in the transportation sector; energy development,
national logistics system and ICT development which have been divided in each
economic corridor.
By supported Presidential Regulation No. 13/2010 revised from 67/2005
“National Development Planning Agency” under “Ministry of National Development

Planning” is entitled to implement this project.
About 100 development project s of Table : Number of PPP’s projects

logistics and infrastructure were selected Sector No. of Project
to implementation of improvement of Air 7
infrastructure.
Road 2
Shipping 11
99 projects are invested about US$47
Rail 9
billion (other 1 project is underway)
Toll Road 35
26 projects are developed by priority, Water resources 0
which are finished feasibility study on Supply of Fresh water 24
legal, technological, financial validity to
Waste 6
implement.
Communication Technology 0
Power Plant 5
Remaining 73 are potential project which
is only related to strategic plan. Oil and Gas 0
Total 99
Source: GLN Trand Analysis Report, Analysis for Indonesia logistic
business with relation to resource development, Korea Maritime
Institute , 2011, p. 71
Current condition of PPP
Indonesia is currently at Phase 2 , where government is developing supports to enhance PPP
Government
support
Time
phase 1 phase 2 phase 3 phase 4
Phase 1
Private sector carry most of the risk and financing of PPP projects.
Limited government support: Regulatory framework to support PPP project scheme (Presidential Regulation No. 67/2005)
Phase 2
Development of government support to enhance PPP project developments (Where Indonesia currently is)
Government support: Viability Gap Funding (VGF), partial construction, and government guarantee scheme.
Phase 3
Risk sharing between government and and private sector .
Government Support: Alternative funding scheme, including Performance Based Availability Scheme (PBAS)
Phase 4
Private investment in brownfield projects with proven traffic/revenue, as well as greenfield projects that are
part of existing infrastructure networks, such as additional line in a urban subway network.
Government support: Established institution to monitor and evaluate PPP projects, more regulatory support such as PPP law.
22
Source: Presentation materials by Wahyu Utomo, Challenges in PPP implementation and suggestions for viable international cooperation (2014)
Implementation of PPP scheme in Indonesia has not been encouraging so far, with only one PPP project reaching
construction stage.
Government of Indonesia has regulated the development of PPP through Presidential Regulation No. 67/2005.
The regulation has been revised twice (Presidential Regulations No. 13/2010 and No. 56/2011) in order to improve
the investment climate and attract private investors.
Despite the efforts to develop PPP scheme, and so many projects offered using PPP scheme, only ONE project,
Cikampek-Palimanan Toll Road, managed to reach construction stage.
Bappenas / Central Planning Agency publishes PPP Book annually, containing list of
infrastructure projects offered using PPP scheme.
Many projects that were initially offered using

PPP Scheme finally reached construction
stage, but using government budget, ODA
loan, or SOE assignment.
Projects implemented using govt budget/ODA loan:
- Manado-Bitung toll road (ODA loan)
- Kertajati airport (ODA loan and govt budget)
Projects implemented using SOE assignment:

- Trans Sumatra toll road Phase 1
(PT Hutama Karya)
- Tanjung Priok Port expansion project
(PT Pelindo II)
Source: PPP Infrastructure Projects Plan in Indonesia(2013) 23
PPP scheme development in Indonesia faces several difficulties and barriers, such as poor project preparation,
project bankability, land acquisition and permit issues, and institutional limitation.
Poor project preparation Project bankability
• Poor project preparation, such as poor quality Pre-FS • Low project bankability. Many public infrastructure
study that leads to project being unattractive to projects have low financial viability without
private sector to consider. government fiscal support/commitment, discouraging
private sector from investing without certain support
to increase project bankability .
Land acquisition Institutional limitation
• Land acquisition and permit problems that are • Absence of central agency to coordinate PPP
embedded in infrastructure project implementation projects Limited ins
in Indonesia hinder private investment due to high
uncertainty of project implementation. • Poor project appraisal that result in no investor
interested to participate in tender, unclear procedures
• Bappenas only coordinate project preparation and for government support (such as VGF) that delay
MOF only coordinate fiscal support without coordina- tender process. Institutional capacity to prepare
tion between two agencies projects to be brought to market.
Source: Presentation materials by Wahyu Utomo, Challenges in PPP implementation and suggestions for viable international cooperation (2014)
24
3. Indonesian Port & logistics challenges
3. Indonesian port & logistics challenges
Table : SWOT Analysis of Indonesia
Strengths Weaknesses
Approval of new laws to promote competition with the private sector Implementing regulations for new laws incomplete
Roads Roads
• Dominant mode (90% of passengers and freight and 80% of • 19% of national network in poor condition
passenger-km and 72% of ton-km) • 15% of national roads congested
• High competition in bus and trucking services • High cost of maintenance and construction with low output
• Network of 354,000 km (42,000 km of national road) growing because of MPW(Ministry of Public Works) policy (short life cycle)
at 3% per annum and corruption
• Doubling of asphalted roads in 20 years • Low PPP(public–private partnership) toll road projects
(55% for network and 71% national roads) • Road safety and overloading a major concern
• Neglect of subnational road network
Rail
• Strong potential for traffic growth in resource commodities in Sumatra Rail
and Kalimantan • Decline of freight market share in Java
• Stable demand for passenger services • Passenger service mainly sustained by PSO(public service operation)
• Insufficient revenue to cover replacement cost of equipment
Sea
• Container traffic (9.4 million teu) grown from year 2000 (2.9 million teu) Sea
• Good market penetration of national lines in domestic traffic • With low performance, commercial ports not competitive
• Ports requiring expensive dredging to meet new generation of
Aviation international ships
• Good air coverage of country • High interisland freight rates
• Dynamic competitive industry for airlines • Archaic handling methods at noncommercial ports
• Low-cost fares open air travel
• Expanding international connections Aviation
• Improvement of terminal and airport services needed in some major
Urban centers
• Established major BRT system in Jakarta • Air safety and airworthiness remain a problem
• Development of independent commuter rail service in Jakarta • Lack of private sector investment in terminal expansion
• Work under way to expand BRT in other cities
Urban
• No coordination at national level
• Lack of financial capacity of cities
26
Table : SWOT Analysis of Indonesia (Continued)
Opportunities Threats
Roads Roads
• Road sector traditionally receiving a large share of the government • Insufficient funding (public and private) to cover infrastructure deficits
budget and also traditionally favored by development partners for national and rural road network
• Measures to eliminate corruption and control maintenance costs in • Despite efforts, land acquisition remains a problem
place • Reform program running out of steam and corruption not eliminated
• Review of toll roads to improve conditions for private sector • Low response of private sector
investment and build more toll roads
Rail
Rail • Increased competition from road haulers make freight service in Java
• Private sector investment in South Sumatra and Kalimantan viable unviable
• Master plan to lay out strategic investment options for • Institutional problems delay or discourage private
government in infrastructure and possible future PSO(public service • Low-cost air services make long-distance rail passenger service
operation) uneconomical
Sea Sea
• Constructing new ports to meet demand • Restructuring Pelindo and bringing in private sector slow to be
• Productivity gains through efficient use of additional handling implemented
equipment • Ports slow to improve productivity and available draft to meet new
• Lower freight rates because of increased efficiency in ports and fleet generation of bulk and container vessels
• No funding to improve noncommercial ports in more remote
Air destinations
• New terminals to meet demand and improve customer service
• Improved navigation systems and airport services to improve safety Air
• Increased private investment in terminals • Funding not available to expand terminals in line with expanding
demand
Urban • Discount airlines unable to maintain fleets in good condition
• Strong growth in demand needs to be met leading to increased safety problems
• Potential for new operators • Monopolistic behavior of Angkasa Puras reduce or limit private sector
investment
Urban
• Low fares of private transport operators reduce incentive for upgrading
fleet quality
• Lack of viability for PPP(public–private partnership)
• High capital cost limits public investment
Source: Indonesia Transport Sector Assessment, Strategy and Road Map(ADB, 2012) 27
Infrastructure condition
111 of these are commercial ports while only 11 are container ports.
The shortage of large scale ports capable of receiving trans-oceanic vessels and the overcapacity
of current ports has given rise to a highly inefficient system.
Existing facilities are being overloaded with the main port in Jakarta, Tanjung Priok handling 70%
of Indonesia’s total import and export flow.
The congestion and resulting bottlenecks have made shipping costs in Indonesia the highest in
the ASEAN making up 15% of the final price of goods. As a result, much of Indonesia’s cargo has
to go through Malaysia and Singapore.
Such conditions make the price of inter island transport more expensive than that of international.
The price of shipping a standard container from West Sumatra to Jakarta is over three times the
cost of Jakarta to Singapore.
28
Infrastructure condition
Trucking costs a major contributor to the overall costs in the inter-island supply chain.
Indonesia is currently paying the high price for the inefficiencies in the inter-island supply chains.
In Case of Jakarta, worsening traffic congestion from the industrial area east of Jakarta to the port
of Tanjung Priok is the main issue.
Figure : Road cost major area in Indonesia
Source: State of Logistics Indonesia 2015 (World bank) 29

Logistic efficiency
Poor Infrastructure causes high logistics cost (27% of GDP)
Figure shows that Indonesia ranks behind Vietnam but just before India and the Philippines,
Malaysia, an upper middle income country, scores rather high with its 25th rank.
Figure : LPI Scours of ASEAN Countries
Source: State of Logistics Indonesia 2015 (World bank) 30

Logistic efficiency
Ineffective and inefficient sea transport connectivity has meant high logistics costs in Indonesia,
resulting in Indonesia‘s low sixth ranking among ASEAN countries in the logistics performance
index.
Table: Results of World Bank Survey on Trading Across Borders
2010 2011 2012 2013

Year
(from 139 Countries) (from 142 Countries) (from 144 Countries) (from 148 Countries)
Total 82 76 78 61
Road 84 83 90 78
Rail Road 56 52 51 44
Sea Port 96 103 104 89
Air Transport 69 80 89 68
Electric Power 69 80 89 68
Source: World Economics Forum, The Global Competitiveness Report

31
Logistic efficiency
Competitiveness of the industry is still left wanting, with importing and exporting companies
complaining congestion and poor services at Indonesian ports.
Table: Results of World Bank Survey on Trading Across Borders
Factors Indonesia Singapore Malaysia Thailand
Trading Across Border Rank 54 1 5 24
Cost to Export (USD per Container) 615 460 450 595
Cost to Import (USD per Container) 660 440 485 760
Documents to Export (No.) 4 3 4 5
Documents Import (No.) 8 3 4 5
Time to Export (Days) 17 6 11 14
Time to Import (Days) 23 4 8 13
Source: World Bank Doing Business Report 2014

32
4. Current status of Indonesian port
Sea transportation is a vital aspect of Indonesia’s trading infrastructure carrying over 90%
of internationally traded goods.
As the largest archipelago in the world, Indonesia has a total number of 17,508 islands, five
of which are major islands.
Indonesia sea are about 7,9 million sq km including an exclusive economic zone, four times
greater than its land area, which is about 1,9 million sq km.
Table : Size of the major island in Indonesia (Unit: sq km)
Sumatera Java/Madura Kalimantan Sulawesi Irian Jaya

473,606 132,107 539,460 189,216 421,981
Source: Reformed by author from Port Development in Indonesia, 2010 (http://www.apecpsn.org)
34
Based on Law no 17 of 2008, ports hierarchically divided into :

1. Main port
Primary function is to serve international and domestic trades in large volumes
(typically more than 3 million ton or 100,000 TEU)
Provide inter-provincial passenger and cargo services to a large national activity center or
economic center
Depth at least 11 m
2. Collector port
Primary function is to serve domestic trades in medium volumes
(typically more than 1 million ton or 250,000 TEU)
Provide inter-provincial passenger and cargo services a hinterland important to regional activity center
Depth at least 8 m
3. Feeder port (regional and local)

Primary function is to serve domestic trades in limited volumes (typically less than 3 million ton
or 25,000 TEU);
Provide intra-provincial passenger and cargo services to a local activity area;
Depth less than 8 m
35
Port authorities and port management units are established as operating units within
the Ministry of Transport.
In 1992, Indonesia had installed a system of state-owned enterprises (Pelindos) charged with the
development, administration, and operation of Indonesia’s ports
also changed the status of the Pelindos to port operators (port business entities). The port authorities
are charged with the development and regulation of Indonesia’s ports, but as entities holding civil
service status, do not reflect the wide span of autonomy normally accorded landlord port authorities.
The Shipping Law of 2008 introduced significant changes to the structure of port
administration in Indonesia.
Most notably the law removes the state-sector monopoly on ports and opens the door for new
participation by the private sector.
This could lead to the injection of much needed competition in the ports system, putting downward
pressure on prices and driving general improvements in port services.
Under the new law, the role of the IPC is limited to that of a port facilities operator and/or port services
provider, operating in competition with other service providers.
The port authorities are charged with the development and regulation of Indonesia’s ports, but as entities
holding civil service status, do not reflect the wide span of autonomy normally accorded landlord port
authorities.
36
The port system is organized into a hierarchic system of approximately 1700 ports.
There are 111 ports, including the 25 main ‘strategic’ ports, which are deemed as commercial ports
others are non commercial ports.
It is controlled by the four state owned Indonesian Port Corporations(IPCs) I, II, III and IV with
geographic (PA 1-Belawan, PA 2-Tanjung Priok, PA 3-Tanjung Perak and PA IV-Makassar)
Figure : Areas of Indonesia Port Corporation (IPC)
PT. PELINDO
I PT. PELINDO
IV
PT. PELINDO I
I PT. PELINDO III
Source: Reformed by author from ‘About Indonesia Port Corporations’(http://www.iaphbali2017.com/about-bali.html) 37

Four port corporations were established to administer the main commercial ports by Shipping
Law 21/1992.
The sector has been recently opened up to private sector and foreign involvement under the 2008
Shipping Law.
The key participants in the port system are identified as :
a. Port operators (Port authorities or port management units)
b. Port Business Entities.
Table : The division of the operational area
Port corporation Coverage (Provinces) Ports administered No. of Port

Belawan, Dumai, Lhokseumawe, Pekanbaru,
PT. PELINDO I Aceh, North Sumatera, Riau 26
Tanjung Pinang
Banten, Palembang, Panjang, Pontianak,
West Sumatera, Jambi, South
Tanjung Priok, Teluk Bayur, Jambi, Cirebon,
PT. PELINDO II Sumatera, Bengkulu, 29
Bengkulu, Pangkal Balam,Tanjung Pandan,
Lampung,Jakarta
Sunda Kelapa
Central Kalimantan,
South Kalimanatn, Banjarmasin, Benoa, Tenau, Tanjung Emas,
PT. PELINDO III 32
West Nusa, Tenggara, Tanjung Perak
East Nusa Tenggara
Sulawesi (S, SE, Central and Ambon, Balikpapan, Biak, Bitung, Jayapura,
PT. PELINDO IV 24
North), Maluku, Irian Jaya Makasar, Samarinda, Sorong
Source: OECD Reviews of Regulatory Reform INDONESIA (2012) and Port Development in Indonesia, 2010 (http://www.apecpsn.org) 38
Indonesia has become a member of several international organizations

a. International Maritime Organization (IMO)
b. International Association of Marine Aids to Navigate and Lighthouse Authorities (IALA)
c. Tokyo-Memorandum of Understanding on Port State Control (MOU)
d. World Trade Organization (WTO)
e. United Nations Commission for Asia and the Pacific (UNCTAD)
f. United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)
g. International Association of Ports and Harbour (IAPH)
The Regional Association :

a. ASEAN Ports Association (APA)
b. Federation of ASEAN Shipping Council (FASC)
c. Federation of ASEAN Ship Owners Association (FASA)
d. ASEAN Freight Forwarders Association (AFFA)
The bilateral agreements that have been signed between Indonesia and other countries including:
a. Indonesia - Australia :
signed on January, 30th 2008 regarding Capacity Building Assistance to Indonesia;
b. Indonesia - China, signed on June, 5th 2001 and ratified with Presidential Decree No 125 on 2001 regarding
Commercial Shipping;
c. Indonesia - Iran, signed on 1995 regarding Commercial Shipping;
d. Indonesia - Germany, signed on 1996 regarding Shipping;
e. Indonesia - Singapore, sign on September, 23th 2005 regarding Human Source Development in Shipping;
f. Indonesia - USA, signed on May, 7th 2002 regarding The Cooperation of Transportation;
g. Indonesia - Yordania, signed on 1996 regarding Commercial Shipping;
h. Indonesia - Turki, signed on June 2010 regarding Sea Transportation. 39
Figure shows that commodity composition of the various

Figure : Commodity composition of
cargo components is quite different.
Indonesia port traffic
International import
Liquid bulk cargoes — of which petroleum products account for
approximately 75% — comprise the largest commodity and
container cargoes rank second, while dry bulk cargoes comprise
less than 10% of the total.
International export
By contrast, over two-thirds are dry bulk — mainly coal, which
accounts for 63% of all international sea exports. Coal is also the
largest single commodity in the domestic trade, accounting for
nearly one-third of the total.
Domestic
However, minor dry bulks play a much larger role in the domestic
trade than they do in the international trade, accounting for 14% of
all domestic cargo moved by sea.
But the difference between the domestic and international

trades is the much greater prominence of non containerised
general cargo 65% of the general cargo travelling
internationally is containerised, compared with 20% of the
general cargo travelling on domestic routes.
This is likely to be, in part, a reflection of the rack of Source: Academic Paper to Support National Port Master Plan Decree
container-handling equipment at many domestic ports. (Indonesia Infrastructure Initiative, 2012)
40
Dry bulk cargo Table : Indonesian Port Traffic by 2009 (000’s tons)
Coal accounts for nearly 90 percent of the total dry
bulk foreign trade but only 56 percent of the domestic
dry bulk trade.
Other substantial volumes commodities shipped on
domestic trades include fertilizer (30.7 million tons),
cement (14.9 million tons), grains (2.3 million tons) and
other dry bulk products (60.1 million tons).
Samarinda is the top port in terms of dry bulk cargo due
to the 65.6 million tons of coal handled in 2009, followed
by Tanjung Bara that handled 41.0 million tons of dry bulk.
Liquid bulk cargoes

Virtually all of the 91.5 million tons of petroleum and
petroleum products handled at Indonesian ports was
for foreign trade and only 385 thousand tons were
reported as domestic shipments.
For CPO(crude palm oil), domestic shipments totaled
38.5 million tons, while 22.4 million tons of CPO was
Source: Academic Paper to Support National Port Master Plan Decree
shipped as exports.
(Indonesia Infrastructure Initiative, 2012)
41
Table : Port Volumes (tonnes, 2009)

The scale and character of Indonesia's ports varies
widely. They range from major international ports
handling tens of millions of tonnes annually to small
ports serving local communities that handle a few
thousand tonnes.
Over three-quarters of the total volume in Indonesia's

ports moves through the thirty largest ports.
This applies to both international (79.5%) and domestic

cargoes (75.1%)
Source: OECD Reviews of Regulatory Reform INDONESIA (2012) from Nathan Associates, 2011 42
Figure : Cargo composition of major ports

Figure shows the commodity composition at each of the
thirty largest ports.
At most of the large volumes, the cargo base is

dominated by bulk commodities
- dry bulk: Adang Bay, Samarinda and etc.
- liquid bulk: Satui, Kuaro and etc.
In almost all of these cases, a single commodity —

usually coal, petroleum, or CPO(crude palm oil) -
comprises the vast majority of the port's throughput.
Source: OECD Reviews of Regulatory Reform INDONESIA (2012) from

Nathan Associates, 2011 43
Table : Container volumes through

Indonesian ports (TEU) The international container business is concentrated in
a handful of ports.
Approximately 94% of the national total is handled

through just five ports.
① Tanjung Priok
② Tanjumg Perak
③ Belawan
④ Tanjung Emas
⑤ Panjang
The same five ports also account for nearly 85% of

container movements in the domestic trade.
Source: OECD Reviews of Regulatory Reform INDONESIA (2012) from

Nathan Associates, 2011 44
Table : Indonesian Main Ports for Containers,

Selected Years, 1990-2009 (TEU) A longer perspective on the growth of container traffic
at Indonesian ports is presented in Table for the period
of 1990 to 2009.
During this period, container traffic in Indonesia

increased nearly nine-fold from 1.0 million TEU in 1990
to 8.9 million TEU in 2009
Figure : Indonesian Main Ports for Containers,

1990-2009 (TEU)
Source: Academic Paper to Support National Port Master Plan Decree(Indonesia Infrastructure Initiative, 2012) 45
5. Port sector cooperation between Korea & Indonesia
5.1. Korea’s case- port & logistics development strategy
5.2. Suggestion
Background Port Logistics Complex in Hinterland of Busan Port

As ports perform more various functions and start to provide added value services, ports were
expanded in space to create the hinterland complexes which have both direct and indirect
relations with ports
The supply chain that connects from supply of raw materials to the sales of the products should
be established in order to build up a low-cost production network or production base. Ports have
never become more important in this matter
Therefore, the platform is being created in and around the ports

for all the international transaction activities such as
procurement, production, sales and consumption
47
Current status of Busan port hinterland complex
Figure : Business model and Tax Incentives and Benefits
Source : Busan Port Authority 2015. 48

Effects of creating a port hinterland complex

Busan Port achieved the freight target as planned in 2013 for the hinterland complex - the transit
cargo volume increased by 37.3% from the previous year and has tripled from 2010.
Development of the Busan Port Hinterland Complex has many ripple effects throughout the local
economy including sparking 5.298 trillion won worth of production and 2.188 trillion won worth of
added value and creating about 39,437 jobs.
908,211
661,254
507,210
320,246
2010 2011 2012 2013

Source : Ministry of Oceans and Fisheries, 2014
Jebel Ali Free Zone (Dubai) houses 6,400 businesses from 120 countries and
creates the employment effects of 160,000.
Rotterdam Port Hinterland houses 2,950 businesses, creating added value.
49
Implications and policy suggestion
Port hinterland complex must be created along with the port

development as it creates cargo volume and port added values and
strengthens port competitiveness
As the ports perform various functions and started to provide

various added value services, the necessity of port hinterland
complex increases, which has direct and indirect relations with
the ports as it expands the space of ports
The port users consider not only port’s cargo handling capacities but
also the diversity and possibility of added values provided by the ports
as an important element in choosing a port
50
Background of Port Development Master Plan

The Korean central government establishes 10 years port development master plan for
timely port development and reviews its validity to revise the plans every 5 years
The central-government-led master plan prevents overlapping investment that originates
from excessive and irrational desire for development and too much competition among
domestic ports. The government-led balanced port development helps to improve
competitiveness of the national port and logistics industries
Effects of Port Development Master Plan

Increased competitiveness with the timely expansion of port infrastructure
Secure external price competitiveness of import and export goods (reduce port
congestion and cost)
Table : Tax Incentives and Benefits
Div. 2006 2010

Ship demurrage rate (over 12 hours) 5.38% 2.92%
Port demurrage, congestion cost 714.1 bil. won 399.3 bil. won
Source : Ministry of Land, Transport and Maritime Affairs, 2011
51
Implications and policy suggestion
The establishment of the port development master plan will support vibrant
import and export with increased trade volume and will have the ports to be
prepared for the chronic lack of port facilities and increasing port demands
It is significant to attract private capital for the port development for

diversity. However, the government-led port development is necessary as
it is difficult to achieve the timely development and the higher security of
port facilities only with private capitals
It is hard for the central government to reflect each port’s special conditions
or potentials on the port master plan. Therefore it is necessary to gather
local community opinions when establishing local port plans
52
5.1. Korea’s case- port & logistics development strategy
5.2. Suggestion
For an archipelago nation like Indonesia, maritime transportation is pivotal
Logistics costs in Indonesia account for 24~27% of national GDP, relatively higher than Singapore
(7~8%), Thailand (15~18%) and Vietnam (24~25%)
High cost at ports is partly attributable to insufficient infrastructure which allows port service
providers to decide prices. Another reason can be found from the absence of competition
As the Indonesian economy grows, cargoes for container transportation is expected to increase
fast rather than bulk transportation.
Main reason of economy grow is fluent natural resources, especially total productivity of mineral
resource is about 10% of GDP.
Indonesia recognize the improvement of logistic infrastructure for countries economy

development and implement various investment project for more efficient logistics function.
It can be opportunity to secure to invest Indonesia’s development project by Korean
logistics companies.
54
Several forecasts and analyses for Sea Transportation

and Ports in 2030:
The largest port throughput will be in Kalimantan.

Port traffic in Kalimantan will be mainly dominated by coal
distribution.
Container traffic will be concentrated in Java.
Petroleum distribution will be dispatched mostly from ports
in Java and Sumatra.
Ports in Sumatra will handle most of CPO(Crude Palm Oil)
distribution.
Java will need an additional 1,139 Ha of land for its port
expansion needs.
Potential locations for strategic ports in Indonesia is as
below figure.
Source: Source: National Port Master Plan: Vision 2030, DGST, 2010 55
Selection Method
Cargo carried out in Indonesia port is mainly bulk, it leads that bulk cargo will be focused
on investing logistic functions to Indonesia.
Ports for dealing with bulk cargo such as mainly coal and oil are invested and developed
by private participants who owning mine or oilfield, also they are dedicated user of these
port terminals.
Need to strategic approach to invest and develop to maritime sector, especially port
industry, in this region. Joint with resource and infrastructure development is potential
business model.
As per ‘Study on identifying required improvement areas in ASEAN network port

performance and capacity, 2010’, 10 of investable maritime businesses are selected, which
is by comprehensive analysis of PPP project, development region on the Master Plan and
present logistic condition in Indonesia and etc.
Need to consider competition with existing logistic facilities to avoid overlapped

investment.
Source: Korea Maritime Institute(2011), An analysis of Indonesian logistics business relating to natural resource development. 56
Investable business region
Table : 10 investable projects

Oil & Minaral PPP Master
Project Coal Score
Gas Resource Project Plan
Development of Bulk Terminal(Kuala Enok Port), Riau √ √ 2
Expansion of Kumai Port, Kotawaringin Barat Regency,

√ √ √ 3
Central Kalimantan
Expansion of Lupak Dalam Port, Kapuas Regency,

√ √ √ 3
Central Kalimantan
Expansion of Teluk Sigintung Port, Seruyan Regency,

√ √ √ 3
Central Kalimantan
Expansion of Anjir Kelampan and Anjir Serampan Canal,

√ √ √ 3
Central Kalimantan
Development of Pelaihari Port, South Kalimantan √ √ √ 3

Development of Maloy International Port, East
√ √ √ √ √ 5
Kalimantan
Belawan Port expansion √ √ √ √ 4
Pontianak Port expansion (55 Km) √ √ √ 3
Bitung seaport facilities development, North Sulawesi √ √ 2
Source: Korea Maritime Institute(2011), An analysis of Indonesian logistics business relating to natural resource development.
57
Investable business region
Figure : 10 investable projects

PPP Land Business Area
PPP Maritime Business Area
--- PPP Railway Business Area

Coal Mine
Oil & Gas Mine
Exgisting Port Area
Logistic Hub development Area
Investable business Area
Source: Korea Maritime Institute(2011), An analysis of Indonesian logistics business relating to natural resource development.
58
Selected investable business region

Potential business fields among 10 development projects are 2 projects
- Expansion of Belawan Port, North Sumatra
- Development of Maloy International Port, East Kalimantan
Figure : Location of Belawan and Maloy Port
Belawan Port
Maloy International Port
Source: By author 59
Figure: Container Terminal of Belawan Port
1) Belawan Port
General status of Belawan Port
Located on the east coast of North Sumatra province and
approximately 12 km from the center of Medan city.
The largest port the Sumatra provinces and as such will be an
essential facility for sea transport by PT. Pelindo I.
The port is able to support all container types, Ro-Ro, bulk,
break bulk cargo and passenger.
The port is broken up into three operating areas; Belawan Port,
Belawan International Container Terminal and Belawan Source : Presentation report(BELAWAN PORT DEVEL- OP
MENT PROJECT. PT PERSERO I
Logistics Centre.
Table: Berthing Specifications of Belawan Port

Operator Dock No. and Yard(㎡) Length(m) Draft(m) Max. Ship Size Others
Belawan Lama 688 7 4,000DWT -
General Cargo, RoRo, bulk
Ujung Baru 1,554 9.5 30,000DWT
PelindoⅠ Cargo, Passenger terminal
Ferry Wharf 17 (47,178) 115 8.5 200DWT -
(Conventional
Berth) Citra Wharf 625 7 20,000DWT -
IKD Wharf 150 7 - -
IKD 2 Wharf 150 7 - -
BICT Container Terminal 4 (188,090) 850 11 900TEUs Gantry Crane: 6(M/C 2)
Total - 4,132 - - -
Source : Study on identifying required improvement areas in ASEAN network port performance and capacity, 2010, by MLTM of Korea 60
Terminal location of Belawan Port

Figure: Belawan Port Area
Passenger Terminal Pertamina Jetty
Ujung Baru
Container Terminal
Belawan Lama
Citra
Source : Presentation report, 2008 (BELAWAN PORT DEVELOPMENT PROJECT. PT PERSERO I) 61

Expansion plans for Belawan Port

Present condition of Belawan Port
SHORT TERM (2008-2012)
MEDIUM TERM (2013-2022) - To be developed hub port in Sumatra region.
LONG TERM (2023-2032) - Invested worth IDR3trn (US$318m).
HUB PORT SCENARIO - In the first phase, a 700m-long jetty was
constructed at the Belawan International Container
Terminal. (Planned to complete until 2015).
- Under the next phase, the jetty will be extended
by an additional 950m, with an increase in capacity
to 2mn TEUs from 1.3mn TEUs annually.
35,000,000 3,500,000
30,000,000 3,000,000
25,000,000 2,500,000
Teus
20,000,000 2,000,000
Tonnage
15,000,000 1,500,000
10,000,000 1,000,000
5,000,000 500,000
0 0
2008 2012 2022 2032
Multipurpose(Tonnage) 13,845,800 16,829,820 22,305,400 27,610,200
Container (Teus) 769,861 1,067,289 1,872,526 2,887,820
Source : Presentation report, 2008 (BELAWAN PORT DEVELOPMENT PROJECT. PT PERSERO I) 62

2) Maloy International Port

Maloy International Port
Maloy has industrial investment prospect, agro-industry, mineral, fishing, and shipyard. Maloy is also the
agriculture based on industrial development in East Kalimantan Province.
Maloy Port area is operated mainly designated terminal companies by KIPI Maloy which developing and
trading resources.
The Federal Port Authority has designated the Maloy International Industrial Port Area, which is
proposed by the Government to be a new industrial zone in East Kalimantan focused on the development
of the northern portion of East Kalimantan. This includes the Maloy Port, Coal terminals, a container,
palm oil, industrial port at Teluk Golok.
Source: Website of MBCT (http://www.mbct.co.id/index.php) 63

Development project of Maloy International Port

Government of East Kalimantan currently proposing Maloy Industrial Zone and International Port to be
Special Economic Zone with total area of 32,800Ha.
For supporting infrastructure of Maloy Trans Kalimantan Economic Zone (MTKEZ), Development of
port facility named “Maloy International Seaport Development ” was planned by Kalimantan government.
Maloy International Port designed to become an international port of CPO(Crude Palm Oil), which will be
the main gate of the CPO downstream product distribution in the middle part of Indonesia as well as for
coal, containers and general cargo.
Figure: Special Economic Zone Proposed Area for MTKEZ
Source: Report of East Kalimantan Infrastructure digest by Kalimantan Provincial Government Agency (2013) 64

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Indonesian maritime infrastructure status

Indonesian maritime development plan & strategy

Indonesian port & logistics challenges

Current status of Indonesian port

Port sector cooperation between Korea and Indonesia

Table presents information collected on container

The ports are grouped by region that corresponds to

There are 11 Indonesian ports that have specialized

Another 3.4 km of conventional berths are estimated

Those ports also have conventional berths for

Tanjung Priok has the most berth facilities dedicated

Indonesia has 355,856 kilometers of roads, consisting of 36,4318 kilometers of national

National Port Master Plan (NPMP)-2008

Pendulum Nusantara concept- 2012

Source: State of Logistics Indonesia 2015 (World bank)

Sea-highway Program (Maritime Axis)-2014

The 11 seaports, which will be designed to

MP3EI priority is to maximize utilization of Indonesia archipelagic sea lanes

It is expected to strengthen national connectivity that focuses on several

Figure: Concepts of Gate Port and International Airport in The Future

MP3EI is a roadmap that is formulated as an attempt to transform the economy to

Figure: Economic Corridors Map

Total investment which is implemented to develop of logistics infrastructure will be

Figure : Quantum of Estimated Investments in Each Corridor (2011-2014)

Table : Investment status of each corridor for Transportation infrastructure

Corridor Investment status

Sumatra ◦ Main Port Development Project(Government Lead Projects)

Table : Investment status of each corridor for Transportation infrastructure(Continue)

Corridor Investment status

◦ Total Investment: 799 Trillion Rp.

◦ Main Port Development Project(Public Owned Company Lead Projects)

Table : Investment status of each corridor for Transportation infrastructure(Continue)

Corridor Investment status

◦ Total Investment: 128Trillion Rp.

◦ Main Port Development Project(Public Owned Company Lead Projects)

Table : Investment status of each corridor for Transportation infrastructure(Continue)

Corridor Investment status

◦ Total Investment: 69 Trillion Rp.

◦ Main Port Development Project(Public Owned Company Lead Projects)

Table : Investment status of each corridor for Transportation infrastructure(Continue)

Corridor Investment status

◦ Total Investment: 162 Trillion Rp.

PPP(Public Private Partnership) are expected to play an important role in the

It is expected to strengthen national connectivity that focuses on several national

By supported Presidential Regulation No. 13/2010 revised from 67/2005

“National Development Planning Agency” under “Ministry of National Development

About 100 development project s of Table : Number of PPP’s projects

Many projects that were initially offered using

Projects implemented using SOE assignment:

Poor project preparation Project bankability

Land acquisition Institutional limitation

Figure : Road cost major area in Indonesia

Source: State of Logistics Indonesia 2015 (World bank) 29

Figure : LPI Scours of ASEAN Countries

Source: State of Logistics Indonesia 2015 (World bank) 30

Table: Results of World Bank Survey on Trading Across Borders

2010 2011 2012 2013

Sea Port 96 103 104 89

Source: World Economics Forum, The Global Competitiveness Report

Table: Results of World Bank Survey on Trading Across Borders

Factors Indonesia Singapore Malaysia Thailand

Trading Across Border Rank 54 1 5 24

Cost to Export (USD per Container) 615 460 450 595