Indonesia floats port expansion to boost faltering economy

JAKARTA — Container ships dot the horizon off the coast of Jakarta, as cranes and labourers work on an ambitious, economy-boosting project to expand the port network in the world’s largest archipelago nation.

New Priok will be Indonesia’s biggest port once completed, and is one of 24 ports planned to overhaul maritime connections in Southeast Asia’s top economy, which comprises more than 17,000 islands.

President Joko Widodo is leading efforts to improve dilapidated maritime infrastructure in a country where ships face lengthy delays before berthing and goods can get stuck for days as they run a gauntlet of government agency checks.

“This is no longer a wish, but a necessity,” Widodo recently said of improving ports after Indonesian growth hit a six-year low of 4.7 per cent in the first quarter, a blow for a leader who won power on a pledge to revive the economy.

The port plan is part of a broader scheme to improve infrastructure, from potholed roads to creaking train lines, as the country seeks to lure foreign investors and pull out of a long slowdown driven by falling prices of its key commodity exports.

Action is urgently needed — Indonesia’s infrastructure is so woeful that it is cheaper to transport goods from China to the country’s most populous island of Java than to bring them from the Indonesian part of Borneo, which is far closer, according to the World Bank.

Formidable challenges

Improving ports is particularly critical for a nation that straddles the Indian and Pacific oceans and is home to important shipping routes. 

As well as attracting new investment, the scheme could reduce the price of consumer goods through lower transport costs and help develop more remote parts of the archipelago.

Widodo, a former furniture exporter who knows well the problems of the country’s ports, is taking a personal interest in the project but it faces formidable challenges.

There are growing doubts his administration, which has been criticised over its failure to kick start major infrastructure projects, will be able to push through the plans due to a lack of organisation and a dysfunctional bureaucracy.

On a recent visit to Tanjung Priok port in Jakarta, which handles much of Indonesia’s international trade, Widodo’s frustration at slow progress was clear when he delivered an angry tirade over the failure to substantially cut the time it takes goods to move through the facility.

The target date to complete all the ports is 2019. But even if the target is met, which seems doubtful given many infrastructure projects in Indonesia suffer delays, experts say this alone will not solve the problem of red tape and graft that slows down processing of goods.

“Building hardware is a critical element in the wider scheme of things,” said Jayendu Krishna, a Singapore-based analyst with industry consultancy firm Drewry Maritime Services.

“An equally important element for success will be tackling bureaucracy and corruption, otherwise it might turn out to be much ado about nothing,” he added.

Nevertheless, industry players sense renewed momentum under the new president.

“I am very optimistic, we’ve got very strong support from the top,” Richard Lino, president director of state-owned port operator Pelindo II, which is developing the New Priok port, told AFP. “There is no reason not to be successful.”

Playing catch-up

The Jakarta project is one of five planned deep-sea ports, which can receive large cargo ships and will be dotted across the archipelago from western Sumatra Island to underdeveloped eastern Papua.

Tanjung Priok, currently Indonesia’s biggest port, handles 6.5 million containers a year.

To its east, the first stage of New Priok is taking shape, with labourers working on a container terminal, a wide stretch of concrete jutting out into the sea.

Construction of the new port, which consists of two phases, began in 2013 but people involved in the project say it has sped up in recent months.

Trial operations are due to begin on the first stage later this year but the entire project is not expected to be completed for some years.

The new port, which will share services with Tanjung Priok and whose first phase alone is expected to cost around $4.5 billion, will have capacity to handle 12.5 million containers of international freight a year.

Work has already started this year on ports in Kuala Tanjung on Sumatra and in Makassar on central Sulawesi Island.

Despite the optimism, Indonesia faces a long road to catch up with other Asian countries, such as more affluent Malaysia, which has more modern port facilities.

“We are still behind our neighbours, that is for sure,” said Pelindo II’s Lino. “It is a very big challenge.”