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Maritime
EIBN Sector Reports
2017
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EIBN Sector Reports: Maritime
Contents List of figures and tables.................................................................................................................................4
Methodology .................................................................................................................................................5
Executive Summary ........................................................................................................................................6
I. Introduction ................................................................................................................................................7
II. Indonesia in the context of ASEAN ..............................................................................................................8
III. The Maritime Sector in Indonesia ............................................................................................................ 12
3.1 The Global Maritime Axis .............................................................................................................................. 13
3.1.1 Inter-insular pendulum (2012) ............................................................................................................... 14
3.2.2 Sea Toll “Tol Laut”, or the “Maritime Expressway” ................................................................................ 14
3.2 Existing Infrastructure ................................................................................................................................... 15
3.3 Main Players .................................................................................................................................................. 16
3.3.1 Pelindo I Project ...................................................................................................................................... 21
3.3.2 Pelindo II Project ..................................................................................................................................... 23
3.3.3 Pelindo III Project.................................................................................................................................... 26
3.3.4 Pelindo IV Project ................................................................................................................................... 28
3.4 Passenger transportation .............................................................................................................................. 29
3.5 Shipbuilding ................................................................................................................................................... 31
3.5.1 Main Locations for Indonesian Shipbuilding .......................................................................................... 33
3.5.2 Strengths and challenges in the Indonesian Shipbuilding Sector ........................................................... 35
IV. National policies and relevant regulations ............................................................................................... 37
4.1 “Cabotage” .................................................................................................................................................... 37
4.1.1 Presidential Regulation Nr 5/2005 on the strengthening of national shipping ..................................... 37
4.1.2 Law on Shipping Nr. 17/2008 ................................................................................................................. 37
4.1.3 Government Regulation Nr. 20/2010, Nr. 22/2011 and 48/2011 .......................................................... 38
4.1.4 Ministerial Regulations Nr 10/2014, Nr 200/2015 and Nr 100/2016..................................................... 39
4.2 Port Management ......................................................................................................................................... 40
4.2.1 Maritime Shipping Law 17/2008 ............................................................................................................ 40
4.2.2 Presidential Decree Nr 44/2016 (Negative List of Investment).............................................................. 40
V. Opportunities for European companies in the Indonesian maritime sector ................................................ 42
Relevant Contacts ........................................................................................................................................ 42
Trade Fairs in Indonesia ............................................................................................................................... 45
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EIBN Sector Reports: Maritime
Bibliography ................................................................................................................................................ 46
Abbreviations .............................................................................................................................................. 52
About EIBN .................................................................................................................................................. 53
Disclaimer .................................................................................................................................................... 53
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List of figures and tables Table 1: Selected Basic ASEAN indicators as of August 2016 ...................................................................................8
Table 2 "Ease of Doing Business" in selected ASEAN countries ...............................................................................8
Table 3 "Global Competitiveness Index" of selected ASEAN countries ................................................................ 10
Table 4: Container Port Throughput of Selected ASEAN Countries ...................................................................... 10
Table 5: Volume Growth in Selected ASEAN Countries ......................................................................................... 11
Table 6 Comparative of costs for TEU in selected countries ................................................................................. 16
Table 7 Strategic ports managed by each Pelindo ................................................................................................. 18
Table 8 Cargo performance in selected Strategic Ports managed by Pelindo in 2015 (in 1000s Ton) ................. 18
Table 9 Cargo Composition in the Indonesian Ports (2011) .................................................................................. 19
Table 10 Container Throughput in Pelindo I-IV (Million TEU) ............................................................................... 20
Table 11 Container Throughput in Tanjung Priok and Tanjung Perak .................................................................. 20
Table 12 Major Port Upgrades for the "Tol Laut" .................................................................................................. 21
Table 13 Main features of Pelindo I ....................................................................................................................... 22
Table 14 Main features of Pelindo II ...................................................................................................................... 23
Table 15 Development of New Priok Port ............................................................................................................. 24
Table 16 Development projects by Pelindo II as part of the "Tol Laut" ............................................................... 25
Table 17 Main Features of Pelindo III .................................................................................................................... 27
Table 18 Main features of Pelindo IV ..................................................................................................................... 29
Table 19 Passenger Statistics in Selected Indonesian Ports 2014-15 .................................................................... 29
Table 20 Top 25 Shipbuilding Countries by GT ...................................................................................................... 33
Table 21 Bilateral trade regarding ships, boats and floating structures ............................................................... 36
Table 22 Total trade for ships, boats and floating structures ............................................................................... 37
Figure 1: Indonesia’s the Global Maritime Axis ..................................................................................................... 13
Figure 2: Indonesia’s Sea Toll ................................................................................................................................. 14
Figure 3 Shipping Industry after the "Cabotage" Law ........................................................................................... 31
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EIBN Sector Reports: Maritime
Methodology
This sector report aims to highlight the potential of the Maritime sector in Indonesia. It is an overview of the
business opportunities for European companies and comprises the characteristics of the sector, the structure of
the market, the key players, future trends and existing challenges.
In the preparation of this report, EIBN made use of a variety of sources and methods, which are briefly explained
herein. General information regarding the Maritime sector was retrieved from publicly available sources, such as
the World Bank, the Indonesian Statistics Centre (BPS), the Indonesian Investment Coordinating Board (BKPM),
the Ministry of Trade and Industry of the Republic of Indonesia and the World Trade Organization.
When the latest official data was not yet publicly available, we reverted to the latest data on hand. For example,
for data and figures still unavailable for 2016 and 2017, the data and figures for 2014 and 2015 were used.
Moreover, any data included has been specifically mentioned in the report. Other information provided was
gathered from trade publications.
This report has been developed using data available up to the third quarter of 2017.
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EIBN Sector Reports: Maritime
Executive Summary
The purpose of the following report is to present an overview of the Maritime Sector in Indonesia and to highlight
potential opportunities for European businesses. The maritime market is a complex but incontrovertibly relevant
industry in the Indonesian economy. This important role is reflected in the sector’s substantial contribution to the
economy in terms of employment and GDP, which are intrinsically related to the country’s large population and
its ongoing growth.
Indonesia has over 16,000 islands1, making it the largest archipelago in the world, and two of the most important
maritime trade routes pass through its waters, while most of its domestic and international trade is also handled
via sea routes.
President Joko “Jokowi” Widodo has made a strong commitment into turning Indonesia into the “Global Maritime
Axis,” given the country’s strategic position in global sea trade. Moreover, his administration has pledged to boost
the maritime sector by enhancing east-west connectivity, prioritizing maritime infrastructure, defending
Indonesia’s national sovereignty and strengthening the country’s navy and by maximizing profits from all
economic activities related to the sea, including shipbuilding and fishing.
Indonesia’s high logistics costs, which account for over 24 percent of its GDP, have caused stagnation in its
economy by increasing production costs to an unsustainable rate. According to the World Bank, if Indonesia
manages to reduce its logistics costs to 16 per cent of its GDP that would save its economy over USD 70 billion a
year.
Maritime development has become even more crucial since Indonesia joined the ASEAN Economic Community,
which will only be profitable if Indonesian products can remain competitive in the regional sphere. This can only
be achieved if maritime infrastructure is improved and the merchant fleet is renewed.
Plenty of opportunities will arise for European companies in the next few years, with major port upgrades opening
up the way for Public-Private-Partnerships involving foreign companies, but also through the transfer of
technology in shipbuilding and/or establishing shipyards in the country. A thrilling few years await.
1 Bempah, R.T., Indonesia Daftarkan 16,056 Pulau ke PBB, August 2017, Retrieved from :
http://regional.kompas.com/read/2017/08/21/19455111/indonesia-daftarkan-16.056-pulau-ke-pbb
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I. Introduction
Living in a global and interconnected world, with fast growing markets and the threat of newly developing
competitors, companies have had little choice other than to adapt in order to survive. Many of them, therefore,
have been looking for new business opportunities overseas, especially in emerging markets that display important
growth potential regarding economy, population, infrastructure and skilled workforce. As international trade
grows year by year, maritime transport is its backbone. Around 70 per cent of global trade by value and 80 per
cent by volume are carried by sea, being handled in ports worldwide2, which highlights the importance of having
a well-developed and functioning maritime sector.
Indonesia is the biggest archipelago in the world with over 13,000 islands, 908 of which are inhabited, and a
coastline of 54,716 kilometres, the second longest in the world3. Therefore the maritime sector became a core
focus of newly elected president Joko “Jokowi” Widodo’s agenda, with his vision to make Indonesia a Global
Maritime Axis, given the country’s strategic position in global sea trade, situated as it is on a crossroads between
the Pacific and Indian Oceans, bridging two continents: Asia and Oceania.
Current estimates put the total population at over 260 million, the world’s fourth largest, 74 million of whom
belong to the Middle-Class and Affluent Consumer (MAC) socioeconomic category in 2013. However, this figure
is expected to increase dramatically to approximately 141 million people by 20204, opening up market
opportunities for European companies, especially in view of an annual average of a 5.29 per cent of GDP growth
during the past 17 years.
In this respect, the main objective of this sector report is to present the Maritime Sector, while highlighting the
market opportunities and challenges for European companies.
2 United Nations Conference on Trade and Development, Review of Maritime Transport 2015. Retrieved from :
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1374 3 Central Intelligence Agency, The CIA World Factbook: Coastline. Retrieved from:
https://www.cia.gov/library/publications/the-world-factbook/fields/2060.html 4 Boston Consulting Group, Indonesia’s Rising Middle-Class and Affluent Consumers, 2013, Retrieved from:
https://www.bcgperspectives.com/content/articles/center_consumer_customer_insight_consumer_products_indonesias_r
ising_middle_class_affluent_consumers/
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II. Indonesia in the context of ASEAN
The Association of Southeast Asian Nations (ASEAN) was established in 1967 and is now composed of 10 member
states: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand
and Vietnam. Its stated goal is to encompass “One Vision, One Identity, One Community”.
Table 1. Selected Basic ASEAN indicators as of August 2016
Indicators Unit 2012 2013 2014 2015
Total land area km2 4,435,617 4,435,618 4,435,618 4,488,839
Total population thousand 605,801 613,571 621,006 628,937
GDP at current prices US$ million 2,383,403 2,493,421 2,519,416 2,431,969
GDP Growth (ASEAN figure is
estimated using country growth rates and
country share of world GDP valuated in
PPP$ from the IMF WEO Database April
2015)
percent 6.1 5.2 4.7 4.7
GDP per capita at current prices US$ 3,934 4,064 4,057 3,867
International merchandise trade US$ million 2,472,300 2,511,500 2,528,616 2,269,859
Export US$ million 1,253,400 1,271,100 1,292,400 1,181,889
Import US$ million 1,218,900 1,240,400 1,236,216 1,087,970
Foreign direct investments inflow US$ million 117,099 124,865 129,995 119,975
Visitor arrivals thousand 89,225 101,055 105,083 108,846
Source: (ASEANStats, 2016)
As of 2017, the ASEAN economy has a share of 3.3 per cent of the Global Gross Domestic Product at current
prices5, with the world’s 3rd largest population and a 7.6 per cent of the world’s total trade6, accounting for US$2.3
trillion. At US$120 billion, it is the fourth largest recipient of Foreign Direct Investment, 6.6 per cent of the total
worth.7
A cornerstone of this regional integration was the creation of the ASEAN Economic Community (AEC) by the end
of 2015, intended to create a single market and production base where people, capital, investment, goods,
services and skilled labour could flow freely, thus creating a more competitive and resilient ASEAN in the global
market.
5 ASEAN Secretariat, ASEAN Economy Chartbook 2016, October 2016, p. 2. Retrieved from : http://www.aseanstats.org/wp-
content/uploads/2016/11/AEC-Chartbook-2016-1.pdf 6 Ibid p. 5 7 Ibid p. 6
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Table 2. "Ease of Doing Business" in selected ASEAN countries
"Ease of Doing Business" Index
Country 2014-15 2015-16 2016-17
Singapore 1 1 2
Malaysia 18 18 23
Thailand 26 49 46
Vietnam 78 90 82
Indonesia 104 109 91
Philippines 103 95 99
Source: (World Bank Group, 2017)
As seen in Table 2, starting a business in the ASEAN countries (except in Singapore and Malaysia) is a challenging
task, which first and foremost is related to poor infrastructure, complex bureaucracy and widespread corruption,
which has hindered Indonesia’s economy for a long time8. However, with President Jokowi, tackling corruption
has become a major priority, introducing government regulations in lieu of the law 01/2017 on access to financial
information for taxation processes9. This zero tolerance against corruption has already reaped benefits, with
Indonesia seeing a major improvement in the “Ease of Doing Business” ranking.
On the other hand, regional connectivity has been at the top of the agenda to achieve the AEC, so in 2010 a Master
Plan of ASEAN Connectivity was drafted to connect ASEAN through a three-pronged strategy: institutional
connectivity, people-to-people connectivity and physical connectivity through physical infrastructure
development. This third prong includes improved maritime and port infrastructure, which calls for the upgrading
of existing infrastructure and the construction of new infrastructure and logistics facilities amongst ASEAN
countries. The Master Plan, also named the ASEAN Single Shipping Market, is one way to contribute towards the
realization of a single market and production base within the region10. Although this economic integration has not
yet been completed as of 2017, some steps have been taken in order to accelerate and deepen the
Implementation of Trade Facilitation Measures11.
ASEAN has designated 47 ports (14 alone in Indonesia) as the main ports in the trans-ASEAN transport network.
However, these designated ports face numerous challenges, given the varying levels of port infrastructure
development amongst ASEAN countries, such as handling cargo capacity, transport and logistics capacity and
customs and administrative clearance procedures. Indonesia, as the world’s largest archipelago, will be the
country most affected by improved maritime regional connectivity and therefore has the most to gain.
8 Department for External Trade, Doing Business in Indonesia : Indonesia trade and export guide, August 2016. Retrieved
from : https://www.gov.uk/government/publications/exporting-to-indonesia/exporting-to-indonesia 9 Budiman, A. Jokowi: Indonesia’s competitiveness ruined by corruption. August 2017. Retrieved from:
https://en.tempo.co/read/news/2017/08/16/056900517/Jokowi-Indonesias-Competitiveness-Ruined-by-Corruption 10 ASEAN Secretariat, Master Plan on ASEAN Connectivity, December 2010, p. 13. Retrieved from:
http://www.asean.org/storage/images/ASEAN_RTK_2014/4_Master_Plan_on_ASEAN_Connectivity.pdf 11 ASEAN Secretariat, ASEAN Economic Community Blueprint 2025, p 59. Available at :
http://www.asean.org/wp-content/uploads/images/2015/November/aec-page/AEC-Blueprint-2025-FINAL.pdf
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The ASEAN region is a natural transit zone situated at the crossroads of West (India/Europe), East
(Pacific/America), North Asia (China, Japan and Korea) and South Asia (Australia and New Zealand) with nearly
15 % of international container flows and, as of 2016, 8 ports amongst the 50 largest in the world.12
The port of Singapore, ranked second worldwide after Shanghai for its quality port infrastructure and widely
recognized as a maritime hub is facing increasing competition from Malaysian, Thai, Vietnamese and Indonesian
ports.13
Table 3. "Global Competitiveness Index" of selected ASEAN countries
Global Competitiveness Index
Country Overall Score Quality of Port Infrastructure
2015-16 2016-17 2015-16 2016-17
Singapore 5.68 (2) 5.72 (2) 6.7 (2) 6.7 (2)
Malaysia 5.23 (18) 5.16 (25) 5.6 (16) 5.4 (17)
Thailand 4.64 (32) 4.64 (34) 4.5 (52) 4.2 (65)
Indonesia 4.52 (37) 4.52 (41) 3.8 (82) 3.9 (75)
Vietnam 4.30 (56) 4.31 (60) 3.9 (76) 3.8 (77)
Philippines 4.39 (47) 4.36 (57) 3.2 (103) 2.9 (113)
Sources: (Schwab, 2016), (Schwab, 2015)
Remarks: 1= extremely under-developed. 7= efficient according to international standards
Overall Ranking in brackets
ASEAN countries have implemented some port development strategies, yet they face many obstacles. Most of
their maritime infrastructures are still deficient, although a work in progress. As mentioned above, Indonesia
ranked 75th (2016) in port infrastructure, while the Philippines ranked 113th (2016). In this context, Indonesian
and Philippine ports experience bottleneck issues as the rise of living standards indicates an increase in demand
for imported goods, and economic globalisation allows export figures to rise. The latest figures available, as of
November 2016, indicate an increase of 10.8% in the figure of global trade for the ASEAN countries in the period
2014-15.14
Table 4. Container Port Throughput of Selected ASEAN Countries
Country Container Port Throughput (Million TEU) Ranking (2014)
2008 2009 2010 2011 2012 2013 2014 ASEAN Worldwide
Singapore 30.89 26.59 29.18 30.73 32.50 33.52 34.83 1 3
Malaysia 16.09 15.92 18.27 20.14 20.87 21.17 22.72 2 5
Indonesia 7.40 7.26 8.48 8.97 9.64 11.27 11.90 3 12
Vietnam 4.39 4.94 5.58 6.93 7.55 9.14 9.53 4 17
12 World Shipping Council, Top 50 World Container Ports, 2016. Retrieved from : http://www.worldshipping.org/about-the-
industry/global-trade/top-50-world-container-ports 13 World Economic Forum, Global Competitiveness Report 2016-17, 2016, p.250-362 14 ASEAN Secretariat, ASEAN Trade 2014-15, November 2016, p 1. Retrieved from :
http://asean.org/storage/2016/11/Table17_as-of-6-dec-2016.pdf
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Thailand 6.73 5.90 6.65 7.17 7.47 7.70 8.28 5 20
Philippines 4.47 4.31 4.95 5.29 5.69 5.86 5.87 6 26
Source: (United Nations Conference on Trade and Development, 2015)
The port of Jakarta, Tanjung Priok, which handles 70% of total imports and exports, has been seriously overloaded
since 2011, exceeding its maximum capacity of 5 million TEUs per year, including the handling of 7.2 million TEUs
as of 2012, according to FinanceAsia15. However, the new Priok Port is being constructed, which will increase
Jakarta’s existing capacity to 18 million TEUs when the third construction phase will be finished. 16
Table 5. Volume Growth in Selected ASEAN Countries
Country Volume Growth 2008-2014
(% of Million TEU) Average Annual Growth
2008-2014 (%)
Singapore 12.75 2.32
Malaysia 41.21 6.05
Indonesia 60.81 8.44
Vietnam 117.08 13.99
Thailand 23.03 3.83
Philippines 31.32 4.81
Source: (United Nations Conference on Trade and Development, 2015)
As seen above, the potential of ASEAN ports to continue with its growth is still enormous if some investment is
made to improve their facilities.
As seen above, the potential of ASEAN ports to continue their growth is still enormous if some investment is made
to improve their facilities.
In addition, through ATIGA (ASEAN Trade In Goods Agreement), the ASEAN-6 (namely Singapore, Malaysia,
Indonesia, Thailand, Philippines and Brunei) have removed import duties on 99.65 per cent of their tariff lines.
Moreover, Vietnam, Myanmar, Lao PDR and Cambodia have decreased their import duties to less than 5 per cent
on 98.86 per cent of their tariff lines17. This means that Indonesia could be the gateway to a market of over 630
million people, of which 400 million will be categorised as middle class in 2020.18
15 Oxford Business Group, The Report Indonesia 2017, p 163 16 Ibid 17 Invest ASEAN, available at : http://investasean.asean.org/index.php/page/view/asean-free-trade-area-
agreements/view/757/newsid/872/asean-trade-in-goods-agreement.html 18 Nielsen, ASEAN 2015: Seeing around the corner in a new Asian landscape, 2015. Available at:
http://investasean.asean.org/index.php/page/view/asean-free-trade-area-agreements/view/757/newsid/872/asean-trade-
in-goods-agreement.html
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III. The Maritime Sector in Indonesia
Being the world’s largest archipelago, about 45 per cent of global maritime trade by volume is shipped via one of
the maritime routes situated in close range to the Indonesian islands. The busiest of those passes through the
Strait of Malacca, which is only 2.8 km wide at its narrowest point, and hosts two of the world’s busiest sea ports:
Singapore and Port Klang in Malaysia. It connects the Indian and Pacific Oceans, stretching from the Andaman
Sea all the way to Singapore, linking the Indian Subcontinent with Indonesia, the South China Sea, Australia and
the Korean Peninsula. Up to 80,000 ships pass through the Strait every year.19
Despite its maritime economy contributing 20 per cent of its GDP, Indonesia’s main problem remains the lack of
connectivity between its islands, especially those situated on the periphery of the archipelago, such as Papua or
the Moluccas. Yet logistic costs still constitute a heavy burden for Indonesia’s economy, accounting for 26 per cent
of its USD 861 billion economy, compared to Malaysia’s 14 per cent or Singapore’s 9 per cent.20According to the
World Bank’s “Logistics Performance Index 2016”, Indonesia achieved the 63rd position in the ranking, performing
poorly compared to neighbouring countries such as Thailand (45th), or Malaysia (32nd). Notwithstanding that, the
country needs over USD 500 billion invested in its infrastructure over the next 5 years in order to continue growing
at over 5 per cent per annum, which opens the door for private investment, since the government can only cover
under 35 per cent of that sum.21
For example, the cost of a kg of broiler eggs in Papua is IDR 32,000, compared to IDR 14,000-20,000 in Java or
Sumatra. Transportation from either Java or Sumatra to less populated islands remains a challenge, and high
logistics costs are to blame for the low degree of competitiveness of local products, where 15 per cent of operating
costs can be attributed to distribution, consequently increasing prices for the consumer. Hence imported products
can be much cheaper due to bottlenecks and security issues.22
Since Susilo Bambang Yudhoyono’s term of office, one of the top priorities on the political agenda has been to
improve Indonesia’s logistical situation, thus creating the MP3EI, the Masterplan for Acceleration and Expansion
of Indonesia’s Economic Development. The Masterplan (MP3EI) was launched in 2011 after Indonesia slipped
from 43rd to 75th place in the Logistics Performance Index by the World Bank between 2007 and 2010. This was
the foundation from which the Global Maritime Axis envisaged by President Joko Widodo was launched. The
MP3EI established the maritime sector as one of 8 key sectors to be prioritised, with more than USD 12 billion
allocated for the construction and modernisation of ports23.
19 EKONID, Zielmarktanalyse Indonesien 2017: Schiffbau und meerestechnische Industrie 2017, January 2017, Jakarta, p24 20 Diela, T. Indonesia logistics costs can match Asian peers in two decades: Roland Berger, March 2016. Retrieved from:
http://jakartaglobe.id/business/indonesia-logistics-costs-can-match-asian-peers-two-decades-roland-berger/ 21 Diela, T. Indonesia needs $500 bn spent in infrastructure: World Bank President, July 2017. Retrieved from :
http://jakartaglobe.id/business/indonesia-needs-500-billion-spent-infrastructure-world-bank-president/ 22 Susanty, F. & Ribka, S. : RI losing logistics battle, July 2016. Retrieved from:
http://www.thejakartapost.com/news/2016/07/01/ri-losing-logistics-battle.html 23 Coordinating Ministry of Economic Affairs, Masterplan. Acceleration and Expansion of Indonesia Economic Develoment
2011-2025, 2011, Jakarta.
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3.1 The Global Maritime Axis
After the election of 2014, the newly elected President Joko “Jokowi” Widodo quickly underscored the importance
of the Indonesian maritime sector to his administration’s agenda, viewing the sector as a key driver of
development and a crucial opportunity for Indonesia. He announced his intention to develop Indonesia into a
global maritime axis and established a new Coordinating Ministry of Maritime Affairs. According to this vision,
Indonesia should become a hub in the global maritime trade, with more direct access to the busiest shipping trade
routes.
Once elected, Jokowi changed both this vision and the priorities regarding the maritime sector. Some points in
the 2011’s Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) established
by the previous administration were modified in order to re-allocate budget resources and prioritise projects
differently. For instance, the planned Sunda Strait Bridge project connecting Java and Sumatra was placed on the
backburner.24 Instead, Jokowi set infrastructure development and maritime connectivity as the top priorities of
his agenda, to stimulate the economy across the country, expanding the domestic shipbuilding industry and also
reducing logistic costs. Deepwater ports were to be constructed, strengthening logistics, the shipping industry and
tourism activities. One key objective was to enhance inter-island connectivity and upgrade port infrastructure
within the Indonesian Archipelago, particularly in the east, which lags behind in terms of economic development
compared to the west.
At the top of the agenda, there was also to be expansion of the Navy, which was too small for the extensive
Indonesian waters, enabling it to protect the country’s Exclusive Economic Zone (EEZ), as well as preventing border
violations, illegal fishing and human trafficking. Public ferries and the cargo fleet were also to be enlarged, in order
to increase national shipping provision.
Figure 1. Indonesia’s the Global Maritime Axis
Source: (RI President's Office, 2015)
24 Indonesia Investment, Joko Widodo: Construction of Sunda Strait Bridge is no priority, November 2014. Retrieved from:
http://www.indonesia-investments.com/news/todays-headlines/joko-widodo-construction-sunda-strait-bridge-is-no-
priority/item2583
Pillars of the Global Maritime
Axis
Rebuild Indonesia's
maritime culture
Improve Indonesia's
management of ocean resources
Prioritise maritime
infrastructure and connectivity Defend
Indonesia's maritime
sovereignity
Develope maritime defenses
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EIBN Sector Reports: Maritime
3.1.1 Inter-insular pendulum (2012)
In 2012, the Indonesian Government realised that many large vessels were only transiting through Indonesian
waters before docking at major hubs in Singapore, Australia or Japan. Connectivity from the far west of the country
to the east was not fully developed. In order to change that, before President Jokowi took office, the
Transportation Ministry had developed the concept of the “Inter-insular Pendulum,” which later became the
“Maritime Expressway.” It consisted of a West-East axis from Belawan to Sorong, with a sea corridor linking
Belawan, Batam, Tanjung Priok, Tanjung Perak, Makassar and Sorong, thus cutting logistics costs by up to 30 per
cent25. A total of 11 major and feeder ports were to be renovated in order to process the increased passenger
traffic between western and eastern parts of Indonesia. The remaining 13 ports were designed to handle cargo.
These investments were considered an incentive for industrial clustering to be established close to these ports.26.
However, that was never fully developed.
3.2.2 Sea Toll “Tol Laut”, or the “Maritime Expressway”
Source: Representation from (Kementerian Koordinator Bidang Kemaritiman Republik Indonesia, 2016)
President Jokowi’s concept also relies on the idea of developing an East-West axis for large ships, connecting both
extremes of the archipelago. It is based on 5 large deep-water ports, namely: Belawan, Tanjung Priok, Tanjung
Perak, Makassar and Sorong, which are currently being renovated. These main ports are to be supported by 19
feeder ports currently being built or upgraded. The aim of this project is to build a high-capacity, low unit cost
container shipping network that will connect the east and west of the country27. This will lead to improved
connectivity between the islands and a big reduction in the huge costs of domestic freight transport. As of 2017,
25Lady, I. New pendulum plan aims to improve Indonesia’s ports. June 2012. Retrieved from:
http://jakartaglobe.id/archive/new-pendulum-plan-aims-to-improve-indonesias-ports/ 26 Coordinating Ministry for Economic Affairs, Master Plan for Acceleration and Expansion of Indonesia Economic Development
2011-2015, 2011 27 Mooney, T. Indonesia port would give alternative to Tanjung Priok, June 2017. Retrieved from :
https://www.joc.com/international-trade-news/infrastructure-news/asia-infrastructure-news/indonesia-port-planned-
bypass-tanjung-priok-congestion_20170622.html
Figure 2: Jokowi’s “Tol Laut”
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IDR 380 billion have already been allocated by the Government for the Sea Toll Program28. This would allow
Indonesia to enter into a competition with Singapore and Malaysia to be the dominant hub in Southeast Asia,
reviving the country’s role in international trade and speeding up the shipment of goods and commodities.
As of September 2016, some of the positive effects by the “Maritime Expressway” were already being seen;
according to the President’s Office29:
• The number of developed maritime routes has increased significantly: from 84 in 2014 to 96 in 2016. Of
these 96, 54 are used by public and 42 by private ships. An additional route is exclusively set aside for the
transport of cattle.
• Prices for goods decreased significantly in outer regions, by 3% - rice and cement - and by 49% - chicken.
By May 2016, however, these prices were evident only in the vicinity of the ports, while the hinterland
had not yet benefited from the changes. Important improvements to the infrastructure in the hinterland
remain to be made here.
• Export routes have been markedly shortened. Thus the shipment time of commodities to China has been
reduced from 24 to 16 days, to Japan from 28 days to 16, and finally from 26 to 17 days to Korea.
• The average dwelling time has been reduced from 6.33 to 3.6 days as of 201730.
The estimated total expenditure on the “Maritime Expressway” is estimated to be about five to USD 6 billion,
which does not include the USD 12 billion that the World Bank has already secured for funding maritime logistics
and connectivity projects for the period 2015-2019. In addition, the Coordinating Ministry for the Economy and
the Indonesian Shipowners’ Association calculate that over IDR 1,600 trillion (USD 120 billion) is needed in order
to achieve a maritime-based economy31.
3.2 Existing Infrastructure
According to the Sea Transportation Directorate General, there are over 2,000 ports in Indonesia, which are
classified into 6 different categories32. Some 108 of them are commercial ports33, and 400 of the total are currently
not being used34.
28 Steffan,B and Wisnu, A. Sorotan Volume XXVI, Maritime Express, p 20. 29 http://kerjanyata.id.kilatstorage.com/pdf/topik_khusus_poros_maritim.pdf 30 The Jakarta Post, Dwell time at ports worsens to 3.5 days, July 2017. Retrieved from:
http://www.thejakartapost.com/news/2017/07/17/dwell-time-at-ports-worsens-to-3-5-days-official.html 31 World Bank, The Tale of Two Ports in Indonesia, May 2015. Retrieved from:
http://www.worldbank.org/en/news/feature/2015/05/26/the-tale-of-two-ports-in-indonesia 32 Ministry of Transportation, Rancangan Kriteria Klasifikasi Pelayanan Pelabuhan. Retrieved from:
http://elibrary.dephub.go.id/elibrary/media/catalog/0010-091500000000003/swf/579/RANC-KRIT_1.pdf 33 Menteri Perhubungan, Statistik Perhubungan 2016 Buku I, May 2017, Jakarta, p 2-9 34 Kabupaten Natuna, Jenis-Jenis Pelabuhan. Retrieved from:
http://dishubkominfo.natunakab.go.id/index.php?option=com_content&view=article&id=104:jenis-jenis-
pelabuhan&catid=1:berita&Itemid=14
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The Ministry of Transportation states that the four national port operators, which are four different state-owned
enterprises named Pelindo (i.e. Pelabuhan Indonesia) I-IV, operated 81 ports at the end of 2016, compared to 70
in the year 201235. The total number of ports managed by the Government accounts for 899, but, as of August
2016, the national Government was planning to hand them over to the four Pelindo, raising concerns among
independent port operators that this will create a monopoly36.
Despite Indonesia having 108 commercial ports, only a small number of those are able to accommodate large
vessels, such as Tanjung Priok (Jakarta) and Tanjung Perak (Surabaya) in Java, Belawan (Medan) in North Sumatra,
Makassar Port in South Sulawesi or the Batam Port (Batam Free Trade Zone) in the Riau Islands37.
Since the island of Java is the main economic hub of the country, two of its ports rank high in the top 100 ports
worldwide compiled by Lloyd’s List Intelligence, namely Tanjung Priok, which handled over 5.2 million TEU during
2015 (27th globally) and Tanjung Perak, with over 3.1 million TEU during the same period of time (46th in the world).
These figures make Jakarta’s port the largest container port in the Southern Hemisphere38.
Table 6. Comparative of costs for TEU in selected countries
Costs/Container Jakarta Surabaya Indonesia Malaysia Singapore East Asia & Pacific
Export costs (USD)
380 437 393 366 372 532
Import costs (USD)
544 556 547 381 266 564
Export Time (Days)
4.50 5.75 4.75 2.42 0.58 5.42
Import time (Days)
8.83 12.67 9.67 3.42 1.58 5.92
Source: (International Bank for Reconstruction and Development / The World Bank, 2017)
Remark: Both time and monetary costs include border compliance and documentary compliance.
As of 2017, Tanjung Priok is able to handle vessels carrying up to 8,238 TEU39, although this is not the norm. The
most recent statistics show that only 11 ports in Indonesia are container ports40 , and most of them are unable to
handle larger container ships. That explains why larger container ships usually transfer their cargos to smaller
ships in Singapore rather than taking them directly to Indonesian ports.
35 Menteri Perhubungan, Statistik Perhubungan 2016 Buku I, May 2017, Jakarta, p 2-7 36 Ships & Ports Ltd., Indonesian Port Operators Association fears Pelindo monopoly, August 2016. Retrieved from:
http://shipsandports.com.ng/indonesian-port-operators-association-fear-pelindo-monopoly/ 37 Germany Trade and Invest, Neuer Präsident Indonesiens plant "maritime Autobahn", October 2014. Retrieved
from:http://www.gtai.de/GTAI/Navigation/DE/Trade/Maerkte/suche,t=neuer-praesident-indonesiens-plant-maritime-
autobahn,did=1104968.html?view=renderPrint 38 World Shipping Council, Top 50 World Container Ports 2015, 2016. Retrieved from: http://www.worldshipping.org/about-
the-industry/global-trade/top-50-world-container-ports 39 Ribka, Stefani, First Jakarta-Los Angeles route launched in Tanjung Priok, The Jakarta Post, April 2017. Retrieved from:
http://www.thejakartapost.com/news/2017/04/23/first-jakarta-los-angeles-cargo-route-launched-in-tanjung-priok.html 40 http://opentoexport.com/article/ports-sector-in-indonesia/
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Regarding the logistics performance of Indonesian ports, the situation has improved in recent years, but it is still
a heavy burden on the country’s economy. While in Singapore the handling of a container can take less than 24
hours, in some major Indonesian ports, they still have dwelling times of more than 3 days. For instance, taking
into account all Indonesian ports, the average waiting time in July 2017 was 3.5 days, with some big ports
averaging six to seven days41. However, in the two major ports, Tanjung Priok and Tanjung Perak, waiting time
stood at 3.2 days in August 2017 due to 24 hour operations by Pelindo II and Pelindo III in these two ports,
improving significantly from the 4.95 days needed in December 201542.
On a general basis, the waiting time at check-in and customs clearance in Indonesian ports takes longer than in
comparable ports abroad, mainly due to the absence of 24 hour working, a lack of tracking systems and deficient
planning. However, the World Bank proposed to improve the country’s main ports with new terminals, where
large ships would unload their containers for distribution, more efficiently, to smaller ports, reducing significantly
the handling time. However, this idea never came to fruition, although Transportation Minister Budi Karya Sumadi
said in September 2016 that the government plan was to transform the entirety of Indonesia’s port system into a
hub-and model, in which some of Indonesia’s large ports, like Tanjung Priok, Tanjung Perak, Belawan, or Makassar
would act as hubs, strengthening Tanjung Priok’s role as a domestic and international hub port, and thus allowing
for an improvement in dwell43.
3.3 Main Players
Indonesia Port Operators
Four state port operators, Pelindo I to IV (nominally Pelabuhan Indonesia) are responsible for the maintenance
and operation of 81 ports, including cargo and container services, in Indonesia, but also for embarkation and
disembarkation of passengers on domestic and international voyages. The individual companies are responsible
for various regions. In most important ports, the Indonesian Port Corporations are both operators and port
authorities, exercising sole control over the most important port services, such as cargo services, towing services,
facilities for cargo handling, electricity and water supply, and the administration of the port area. According to the
“Presidential Regulation of the Republic of Indonesia Number 44 of the year 2016,” all activities related to ports
are subject to a foreign investment limit of 49%44. For instance, the container terminal of the Port of Surabaya is
49% owned by DP World (Dubai Port operator) and 51% by Pelindo III 45.
41 The Jakarta Post, Tanjung Priok sets dwell time benchmark, September 2016, retrieved from:
http://www.thejakartapost.com/news/2016/09/18/tanjung-priok-port-sets-dwell-time-benchmark.html 42 Retrieved from http://dwelling.pelindo.co.id/ and accessed in August 2017 43 Amindoni, Ayomi, Govt to transform port system to hub-and-spoke, The Jakarta Post, September 2016. Retrieved from
http://www.thejakartapost.com/news/2016/09/13/govt-to-transform-port-system-to-hub-and-spoke.html 44 Presidential Regulation of the Republic of Indonesia number 44 of the year 2016 45 http://web.dpworld.com/our-business/marine-terminals/asia-pacific-indian-subcontinent/indonesia-surabaya/
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The four state port operators are limited-liability profit-making corporations, and the central government retains
control of port tariffs. Subject to that authority the major Indonesian seaports run 24 hours a day, seven days a
week, including ship docking, customs and immigration activities.
Table 7. Strategic ports managed by each Pelindo
Port Authority Provinces managed Strategic Ports
Pelindo I Aceh, North Sumatra, Riau and Riau
Islands
Lhokseumawe, Belawan, Dumai, Pekanbaru, Tanjung Pinang and
Batam
Pelindo II
Bangka Belitung, Banten, Bengkulu, Jakarta, Jambi, Lampung, South
Sumatra, West Java, West Kalimantan, West Sumatra
Banten, Tanjung Priok, Panjang, Palembang, Pontianak, Teluk Bayur
Pelindo III Bali, Central Java, Central Kalimantan,
East-Nusa Tenggara, South Kalimantan, West-Nusa Tenggara
Benoa, Tanjung Perak, Tenau, Banjamarsin, Tanjung Emas
Pelindo IV
Central Sulawesi, East Kalimantan, Gorontalo, Maluku, North Kalimantan,
North Sulawesi, Papua, South Sulawesi, South-East Sulawesi, West
Papua, West Sulawesi
Bitung, Makassar, Ambon, Sorong, Jayapura, Biak, Balikpapan,
Samarinda
Source: (Subdirektorat Statistik Transportasi, 2016)
Most of the port activities are conducted in one of the 25 designated strategic ports (mentioned above), which
are located in 21 different provinces. They represent 47.69% and 24.18% of the whole country’s unloading and
loading of domestic cargo, while this percentage reaches 61.70% and 44.82% in respect of international cargo. As
a common denominator, all of them are managed by one of the four Pelindos.
Selected Statistics
Table 8. Cargo performance in selected Strategic Ports managed by Pelindo in 2015 (in 1000s Ton)
Strategic Port Province Domestic Voyage International Voyage
Loading Unloading Loading Unloading
Teluk Bayur West Sumatra 4,246 3,410 3,118 664
Dumai Riau 9,348 3,118 9,113 414
Panjang Lampung 5,684 2,720 6,720 2,870
Tanjung Priok DKI Jakarta 14,553 14,688 3,364 16,359
Banten Banten 6,447 30,791 2,022 20,266
Banjamarsin South
Kalimantan 3,656 51,581 62,129 114
Balikpapan East Kalimantan 17,033 5,884 16,160 3,609
Samarinda East Kalimantan 653 2,753 38,875 33
Belawan North Sumatra 231 3,712 3,403 2,389
Tanjung Perak East Java 1,257 3,806 466 7,772
Makassar South Sulawesi 1,004 876 220 1,353
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Selected Strategic Ports 64,112 123,339 145,590 55,843
Total of All Ports 294,309 296,336 340,001 98,858
Source: (Subdirektorat Statistik Transportasi, 2016)
Indonesia is the world’s biggest archipelago, yet its economic activity is concentrated in the four main islands:
Java, Kalimantan, Sumatra and Sulawesi. Despite recent statistics being difficult to obtain, the most recent reliable
data shows that container traffic only represents a small fraction of all Indonesian trade. It should be noted that
dry bulk constitutes the biggest share of the cargo loaded, especially in Kalimantan and Sumatra, where coal and
timber are produced, but also due to the major oil industries centred in and around South and East Kalimantan.
Table 9. Cargo Composition in the Indonesian Ports (2011)
Source: (OECD , 2012)
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Container Traffic
Table 10. Container Throughput in Pelindo I-IV (Million TEU)
Sources: (PT. Pelabuhan Indonesia I (Persero), 2014), (PT. Pelabuhan Indonesia II (Persero), 2015), (PT.
Pelabuhan Indonesia II (Persero), 2014), (PT. Pelabuhan Indonesia II, 2011), (PT. Pelabuhan Indonesia IV
(Persero), 2010) , (PT. Pelabuhan Indonesia IV (Persero), 2015)
Tanjung Priok and Tanjung Perak are amongst the world’s leading ports in terms of container through-put, and
they represent 87 per cent and 70 per cent respectively of Pelindo II and Pelindo III container traffic, being the
flagships of both enterprises.
Table 11. Container Throughput in Tanjung Priok and Tanjung Perak
Strategic Port Province IPC Volume (Million TEU)
2014 2015
Tanjung Priok DKI Jakarta Pelindo II 5.90 5.20
Tanjung Perak East Java Pelindo III 3.10 3.12
Source: (Lloyd's List, 2016)
Ongoing and Upcoming Projects
By 2019, the east-west axis for large ships, the “maritime expressway” or “Tol Laut” is expected to link the entire
archipelago. In order to achieve such connectivity, both the government and the four Indonesian Port
Corporations (Pelindos) are in the middle of a major upgrade, constructing or modernising 24 major seaports
across the country46. The aforementioned improvements are connected to the current government’s commitment
to improve the country’s maritime infrastructure, which will increase both domestic and external trade.
46 Oxford Business Group, The Report : Indonesia 2017, p. 163
1.11 1.28 1.30 1.34 1.32 1.20
5.11
5.93
6.45 6.59 6.44
5.94
3.24 3.59
3.94 4.13
4.34 4.36
1.27 1.35 1.59 1.71 1.79 1.76
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2010 2011 2012 2013 2014 2015
Pelindo I
Pelindo II
Pelindo III
Pelindo IV
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Considering 60 percent of the Indonesian population lives on the Indonesian coasts, but only 20 per cent of its
Gross Domestic Product comes from the maritime sector, there is a massive potential to be tapped. For
comparison, in Japan this figure accounts for 48.5 percent
Table 12. Major Port Upgrades for the "Tol Laut"
Strategic Port Island(s) Earmarked construction
project in IDR Trillion
Banda Aceh Sumatra 1
Belawan Sumatra 3
Dumai Sumatra 1.5
Kuala Tanjung Sumatra 3
Batam Sumatra 3
Padang Sumatra 1.5
Pangkal Pinang Sumatra 1.5
Panjang Sumatra 1.5
Tanjung Priok Java 1.5
Cilacap Java 1.5
Tanjung Perak Java 1.5
Lombok Lombok 1.5
Kupang Timor 1.5
Pontianak Kalimantan 1.5
Palangkaraya Kalimantan 1
Banjamarsin Kalimantan 1.5
Maloy Kalimantan 1
Makassar Sulawesi 1.5
Bitung Sulawesi 3
Halmahera Moluccas 1.5
Ambon Moluccas 1
Sorong New Guinea 1.5
Jayapura New Guinea 1
Merauke New Guinea 1.5
Source: (EKONID, 2017)
3.3.1 Pelindo I Project
The state-owned port corporation, PT Pelabuhan Indonesia I has assets in 4 provinces in the western part of Indonesia, namely: Riau, Riau Islands, Aceh and North Sumatra, and has its headquarters in Medan, North Sumatra.
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Based on its financial statement for 2016, the company had an attributable profit of IDR 726.41 billion, which represents a 1.54 per cent increase compared to IDR 715.33 billion in 2015. This came after posting a profit before tax of IDR 995.84 billion in 2016, after its IDR 846.26 billion profit in 2015. It holds assets worth IDR 7.3 trillion in 2016, which is an increase from IDR 5.49, and as of December 31st 2016, the company’s equity position stood at IDR 4.3 trillion, up from IDR 3.64 trillion registered in 201547.
Table 13. Main features of Pelindo I
Input Unit Year
2013 2014 2015 2016
Total length of Berth m 8,704 8,704 8,806 8,853
Warehouse Storage Facilities square m 135,286 120,284 120,284 120,284
Open Storage Facilities square m 383,350 170,244 170,244 170,244
Cargo Handling Equipment Unit 69 61 61 62
Ship Arrivals Unit 65,016 59,018 70,258 65,626
GT 147,197,227 138,290,131 161,401,955 176,820,002
Containers Handled TEU 1,335,139 1,421,251 1,196,891 1,151,942
Anchoring Services 1000s GT 51,373 47,546 NA NA
Stockpiling services Warehouse 1000s Ton 2,524 2,915 745 1,021
Stockpiling services Open Area 1000s Ton 1,963 1,576 1,864 2,490
Passengers Person 5345594 5,121,332 5,218,553 5,440,151
Source: (Kementerian Koordinator Bidang Kemaritiman Republik Indonesia, 2016)
One of the most ambitious projects undertaken by Pelindo I is the extension of the port of Kuala Tanjung in North
Sumatra, with the aim of making it an international shipping hub and one of the largest ports in the world.
Strategically located on the Strait of Malacca, on the opposite shore from the Malaysian port of Port Klang, it is to
be developed into a gate-way for the adjacent industrial area, with an investment worth USD 1.2 billion.
The 4 phases in which the project is divided are the following:
1- Building of a multipurpose terminal (2015-2017)
2- Building of 3,000 hectares of industrial area (2016-2018)
3- Building of a dedicated terminal, becoming a hub port (2017-2019)
4- Integration of the industrial estate (2021-2023)
The first phase started in January 2015, and should have been completed by the end of 2016. However, it only
started operations in August 2017. As of April 201748, construction progress was already up to 90 per cent. By the
47Tempo News, Laba bersih Pelindo I naik tipis. March 2017 Available at:
https://bisnis.tempo.co/read/news/2017/03/31/090861423/laba-bersih-pelindo-i-naik-tipis 48 News Desk, Kuala Tanjung Port to start operations in July, April 2017, The Jakarta Post . Retrieved from:
http://www.thejakartapost.com/news/2017/04/12/kuala-tanjung-port-to-start-operations-in-july.html
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time it is finished, the multipurpose terminal’s total capacity will take 3.5 million tons of palm oil, 4,000 TEUs of
cargo and 1 million tons of dry bulk49.
Kuala Tanjung port has the potential to become a transit hub for shipments of palm oil and aluminium to Europe.
With regards to its strategic location, Kuala Tanjung could also compete with Singapore in the near future. In order
to accelerate the infrastructure development of Kuala Tanjung, Pelindo I signed a Memorandum of Understanding
(MoU) as well as a Cooperation Agreement with the Port of Rotterdam Authority regarding Port Management
Services in developing the Port of Kuala Tanjung.50
3.3.2 Pelindo II Project
Pelindo II is the biggest and most important of the four Indonesian Port Corporations. More than 70 per cent of
all Indonesian imports and exports go through the port of Tanjung Priok (Jakarta), which was built in the 19th
century by the Dutch colonial power. It is the main hub in the country, meaning that Tanjung Priok receives and
sends goods from/to all over the archipelago. As mentioned before, it had a container throughput of 5.2 million
TEU in 2015, making it one of the largest shipping ports in the world, and also being able to handle vessels carrying
up to 18,000 TEU, although so far the biggest one ever to have docked in the port was only 8,238 TEU51
Table 14. Main features of Pelindo II
Input Unit Year
2013 2014 2015 2016
Total length of Berth m 24,959 26,350 25,931 14,714
Wareohouse Storage Facilities square m 149,098 206,102 127,555 193,513
Open Storage Facilities square m 1,631,330 2,172,041 1,810,468 1,812,480
Cargo Handling Equipment Unit 554 516 501 508
Ship Arrivals Unit 53,366 52,491 43,847 33,370
GT 220,116,560 220,116,560 201,729,502 173,468,382
Containers Handled TEU 6,589,982 6,442,018 5,935,330 6,222,798
Anchoring Services 1000s GT 242,130 223,100 156,246 NA
Stockpiling services Warehouse 1000s Ton 11,686 4,806 3,321 2,906
Stockpiling services Open Area 1000s Ton 25,018 14,890 12,577 7,303
Passengers Person 1,447,013 1,245,541 816,735 707,033
49 Khoirul, Amin. Pelindo has high hopes for Kuala Tanjung. The Jakarta Post, January 2015. Available at:
http://www.thejakartapost.com/news/2015/01/22/pelindo-has-high-hopes-kuala-tanjung.html 50 PT Pelindo I Official Press Release, Kembangkan Pelabuhan Kuala Tanjung, Pelindo I Gandeng Port Of Rotterdam,
Oct 22 2014. Available at:
http://bumn.go.id/pelindo1/berita/8528/Kembangkan.Pelabuhan.Kuala.Tanjung,.Pelindo.I.Gandeng.Port.Of.Rotterdam. 51 Ribka, Stefani, First Jakarta-Los Angeles route launched in Tanjung Priok, The Jakarta Post, April 2017. Retrieved
from:http://www.thejakartapost.com/news/2017/04/23/first-jakarta-los-angeles-cargo-route-launched-in-tanjung-
priok.html
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Source: (Kementerian Koordinator Bidang Kemaritiman Republik Indonesia, 2016)
Tanjung Priok is the flagship of Pelindo II, and, as such, receives much of its investments, the most relevant of
which relates to the opening of the new Kalibaru Port terminal to expand Tanjung Priok in Jakarta. It is an
ambitious project that started in in April 2012 through a Presidential Decree, aimed to reduce the staggering costs
of logistics in Indonesia.
The project consists of two phases:
1. In the first phase, three new terminals will be constructed. The first one, a new USD 912 million container
terminal built by Mitsui & Co, is expected to increase the Tanjung Priok’s capacity in 1.5 million TEU per
year, bypassing its current over-capacity. President Jokowi inaugurated it in September 2017, although it
has been operational since 2016. Two new Petroleum Product Terminals will be constructed as well.
a. Key Features of terminal 1:
i. Indonesia’s largest port terminal
ii. Biggest port infrastructure project at the moment
iii. Terminal capacity: 1.5 million TEU
iv. Project value IDR 12 trillion (USD 912 million)
v. Land area: 32 hectares
vi. Dock length: 450 meters
vii. Draft: 16 meters
viii. Handling of vessels of 150,000 DWT consisting of 15,000 TEUs.
2. In the second phase, expected to be completed by 2027, four new terminals will be added, increasing the
port capacity to 17.5 million TEUs, and being able to accommodate vessels up to 18,000 TEU. The second
phase estimated cost is around USD 1.5 billion.
II 2018-2027
Container Terminal 4
1,5 Mio. TEUs/ year 16m
1.000m
Container Terminal 5
1,5 Mio. TEUs/ year 16m
1.000m
Container Terminal 6
1,5 Mio. TEUs/ year 16m
1.000m
Table 15. Development of New Priok Port
Phase Construction Terminals TEU/ year Draft Docklength Anmerkungen
I 2013-2019
Container Terminal 1
1,5 Mio. TEUs/ year 16m
850m
Terminal 1 is operational since 2016
Container Terminal 2
1,5 Mio. TEUs /year 16m
800m
Container Terminal 3
1,5 Mio. TEUs/ year 16m
800m
Terminal for Petroleum 1
5 Mio. m3/ year 16m
800m
Terminal for Petroleum 2
5 Mio. m3/ year 19m
800m
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Container Terminal 7
1,5 Mio. TEUs/ year 16m
1.000m
10,5 Mio. TEU plus 10 Mio. m3
8.050 m
Source: (PT. Pelabuhan Indonesia II (Persero), 2015)
Other relevant developments by Pelindo are presented below.
Table 16. Development projects by Pelindo II as part of the "Tol Laut"
Port (Region)
Plan Planned
completion Extension Status
Port Kijing (West-Kalimantan)
Construction of a deep sea port with 16m water depth as a hub for the western Indonesian islands; 2016 planned for the design Construction of a special economic zone
2021
Container terminal (1.95 Mio. TEU/year)
Terminal for liquid goods (11.5 Mio. TEU/year)
Terminal for dry goods (11.5 Mio. TEU/year)
Terminal for diverse purposes
(1 Mio. TEU/year)
Feasibility study finished 2015
Sorong (West-Papua)
Extension into a deep sea port as eastern link of Tol Laut; Construction of a special economic zone;
2035 N.N. 2015 in the stage of licensing and discussion of design
Cirebon (West-Java)
126.8 ha land acquisition; creation of a 10m deep entrance lane and construction of a port
2017-2020 2015: preparation of a feasibility study
Tanjung Carat (South-Sumatra)
Construction of a deep sea port
2018-2025
Coal terminal (50 Mio. t/year -15.4m)
Container terminal (500,000 TEU/year, -15.0m)
Multi purpose terminall (-15.0m)
CPO-terminal (15 Mio. t/Jahr, -15.2m)
2015 feasibility study completed; Currently at the stage of licensing; 2016 start of planning phase
Tanjung Lesung (West-Java)
Construction of a cruise ship terminal and a sailing portin the special economic zone Tanjung Lesung (Banten)
N.N.
Expansion of the special economic zone into an international tourism resort with cruise ship terminal; begin of construction planned for early 2016, however no progress made until November 2016
Cikarang-Bekasi (West-Java)
Construction of a 24km channel as linkage between Tanjung Priok and the industrial area Cikarang
2017-2019 Start of planning 2016
Musi-Lematang (South-Sumatra)
Expansion of the Musi and the Lematang rivers into a 280m long channel as a linkage between coal mines in Muara Enim and the city of Palembang
2018-2025 Feasibility study completed in 2015;
Kalibaru (Jakarta)
Creation of an access lane to the Kalibaru port and expansion of the highway linking Cilincing and Cibitung
2018-2021
2015: Creation of a feaibility study under planning; currently the first terminal has been launched
Source: Sorotan Volume XXVI
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The other major project currently handled by Pelindo II is the construction of the Patimban Port, located just 70
km from Jakarta. It offers easy access to various industrial estates in the area, such as Cikarang and Karawang,
only 70 km away, where many Japanese industrial firms are located52. For this USD 751 million project, Japan and
Indonesia signed a bilateral agreement to boost the port’s development. Once the first phase is completed, the
port capacity is expected to reach 1.5 million TEUs in 2019, which will increase to 7.5 million TEU by the time the
second construction phase is finished in 202353. By the time the project is completed, it is expected that it will
alleviate congestion at Tanjung Priok, which currently handles 70 per cent of the country’s imports and exports54.
3.3.3 Pelindo III Project
Along with Tanjung Priok (Jakarta), Belawan (Medan), Makassar (South Sulawesi), and Bitung (North Sulawesi),
Tanjung Perak (Surabaya, East Java) is one of the five main ports that comprise the “Tol Laut” program. With 3.12
million TEU handled in 2015, the port consistently ranks among the busiest 50 Ports in the world (47th) in terms of
containers handled. It is a strategic hub for domestic transport of goods to the eastern Indonesian islands, mainly
Kalimantan and Papua. Surabaya is also where Pelindo III headquarters is located.
Tanjung Perak is situated in Surabaya, the capital of East Java Province. Tanjung Perak is Pelindo III’s largest site
and home to new port development projects, such as Teluk Lamong Terminal and JIIPE / Manyar terminal. With
its strategic position, Tanjung Perak is considered as a gateway to central and eastern Indonesia, due to the port’s
strong maritime connectivity. Currently, Tanjung Perak hosts 13 international shipping lines and 29 domestic
shipping lines, considerably more than Tanjung Priok in Jakarta with its 20 domestic shipping lines.55
Because the population of eastern Indonesia relies on food, clothing and materials that originate from Java,
Tanjung Perak plays an important role in the regional and national economy. Developing the port’s capacity is
essential to revive the trade between Java and the rest of Indonesia, since Tanjung Perak handles not only
containers, but also passengers. The improvement of the port’s facilities is also going to be crucial with regard to
Indonesia’s participation in the AEC and the AFTA.56
52 The Jakarta Post, New Patimban Port to partially operate in 2019. June 2017. Retrieved from :
http://www.thejakartapost.com/news/2017/06/10/patimban-port-to-partially-operate-in-2019.html 53 The Jakarta Post, Japan ready to sign loan agreement for Patimban Port. July 2017. Retrived from :
http://www.thejakartapost.com/news/2017/07/25/japan-ready-to-sign-loan-agreement-for-patimban-port.html 54Reuters, Indonesia port strike hits biggest port operator, August 2017. Retrieved from :
https://www.reuters.com/article/indonesia-port-strike/jakartas-port-strike-hits-biggest-terminal-operator-idUSL4N1KQ1WI 55 Joko Noerhudha, Pelindo III Initiatives: Future Ports Development Project, 2015. Available at :
http://indonesia.nlembassy.org/binaries/content/assets/postenweb/i/indonesie/nederlandse-ambassade-in-
jakarta/import/de_ambassade/afdelingen/economie/building-a-global-maritime-nexus/presentation-joko-noerhuda-
pelindo-iii.pdf. 56 Oxford Business Group. The Report: Indonesia 2014. p. 83. Available at:
http://www.oxfordbusinessgroup.com/indonesia-2014.
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Layout of Tanjung Perak Port Development
Source: Joko Noerhudha, Pelindo III Planning & Progress – Development along Madura Strait, 2014
Teluk Lamong terminal began its first construction phase early in 2010, which consisted of a 500 sq. meter
international yard, a 450 sq. meter domestic yard, a 10-ha dry bulk yard and a 15.86-ha container storage yard.
Pelindo III started operations at the Teluk Lamong Port in East Java in March 2015, featuring some major
improvements like the Automated Stacking Crane and an automatic docking system, provided by the French
logistics company Gaussin Manugistique. Teluk Lamong boasts a capacity of 1.6 million TEUs and 10.3 million tons
of dry bulk, making it amongst the most significant ports in the eastern part of Indonesia57.
Table 17. Main Features of Pelindo III
Input Unit Year
2013 2014 2015 2016
Total length of Berth m 31,905 35,341 35,950 36,167
Wareohouse Storage Facilities square m 172,994 200,722 243,346 252,316
Open Storage Facilities square m 1,287,662 1,564,757 1,506,745 1,542,970
Cargo Handling Equipment Unit 599 696 1,102 1,148
Ship Arrivals Unit 78,189 78,778 66,923 62,091
GT 298,607,157 302,594,028 257,425,419 176,820,002
57 Osman, N. http://www.thejakartapost.com/news/2015/02/06/teluk-lamongs-international-terminal-operate-next-
month.html
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Containers Handled TEU 4,130,874 4,337,555 4,360,669 4,611,262
Anchoring Services 1000s GT 348,629 386,283 249,779 NA
Stockpiling services Warehouse 1000s Ton 4,336 4,496 4,604 5,339
Stockpiling services Open Area 1000s Ton 7,458 7,495 10,054 6,800
Passengers Person 3,365,271 3,408,599 3,238,315 2,920,636
Source: (Kementerian Koordinator Bidang Kemaritiman Republik Indonesia, 2016)
Not only one of the the largest, Teluk Lamong is also designed to be the most advanced port in Indonesia. For
instance, the whole process of lifting containers is managed by a tool called the Ship-To-Shore crane (STS). STS
cranes are connected to the Terminal Operating System (TOS), which identifies each container’s status
information in real time in order to prevent gaps and therefore increase productivity during the clearing process
of the vessels. In addition to the increased capacity, state-owned operator Pelindo III has recently purchased
electrically powered loading and unloading equipment from Finland-based manufacturer Konecranes. This
advanced type of crane includes the latest technology, offering the customer maximum productivity.58
Besides the port expansion project in Surabaya, another development can be witnessed in the neighbouring city
of Gresik. Pelindo III got involved in the construction and development of Java Integrated Industrial and Ports
Estate (JIIPE). With a budget of USD 900 million, the industrial estate will feature a 400-ha deep sea port and the
ability to handle 18,000 TEU vessels. The port is connected directly to an 18000 ha industrial area as well as 800
ha residential estate. Land acquisition is still in progress with 3000 ha already been secured. The development of
Indonesia’s integrated industrial estate system that will be completed in 2023, represents a step to ease the
logistics bottlenecks in East Java and eastern parts of Indonesia.59
3.3.4 Pelindo IV Project
The capacity of the port of Makassar, in South Sulawesi, is 700,000 TEUs. However, this is not sufficient to
accommodate and ship all needed containers to Singapore and other neighboring countries. This makes Surabaya
and Jakarta more attractive hubs whence to export cargo from the eastern islands. This is expected to change with
the expansion of the Makassar Port starting in 2015, which will make the city both a domestic and international
hub, getting back some of its rightful share from the two biggest ports. The project, which is divided into two
phases, was in its first phase in 2015 and had been 20 per cent completed by April 2016. By the year 2030, the
port will have a shipping capacity of 4.2 million TEUs, 2,850m of docks and a storage area of 171 ha60.
58 The Jakarta Post, Pelindo III gets $ US 121m to equip new terminal, Nov 27 2013. Available at:
http://www.thejakartapost.com/news/2013/11/27/pelindo-iii-gets-121m-equip-new-terminal.html. 59 Oxford Business Group, Linking up: Connectivity plans are coming to fruition in East Java, n.d. Available at :
http://www.oxfordbusinessgroup.com/analysis/linking-connectivity-plans-are-coming-fruition-east-java. 60 Marintec Indonesia, Megaproyek Makassar new port dikebut, April 2016. Retrieved from:
http://marintecindonesia.com/megaproyek-makassar-new-port-dikebut/
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Table 18. Main features of Pelindo IV
Input Unit Year
2013 2014 2015 2016
Total length of Berth m 12,696 12,595 11,281 11,281
Wareohouse Storage Facilities
square m 67,964 56,154 56,154 56,154
Open Storage Facilities square
m 523,553 640,976 689,115 682,614
Cargo Handling Equipment Unit 371 400 417 436
Ship Arrivals Unit 76,209 74,047 66,639 54,815
GT 374,403,264 379,400,16
8 318,373,67
5 304,531,35
4
Containers Handled TEU 1,733,207 1,793,574 1,756,422 1,846,420
Anchoring Services 1000s
GT 288,330 285,048 169,307 NA
Stockpiling services Warehouse
1000s Ton 1,447 924 708 297
Stockpiling services Open Area
1000s Ton 3,258 3,079 3,066 3,051
Passengers Person 5,969,047 6,095,979 6,176,783 5,341,925
Source: (Kementerian Koordinator Bidang Kemaritiman Republik Indonesia, 2016)
3.4 Passenger transportation
Passenger transportation in Indonesia is dominated by a state-owned enterprise, PT Pelayaran Nasional Indonesia
(PELNI), which is the national shipping company of Indonesia, and currently holds a monopoly on most passenger
routes. Currently the company operates 28 passenger ships, classified by their capacity (pax): those carrying 3000
pax, 2000 pax, 1000 pax, 500 pax, a Ro-Ro (roll-on roll-off) type and one fast ferry, with a total capacity of 36,913
passengers. In addition, PT Pelni also operates a cargo fleet (4 units) with a total deadweight of 1,200 tons.
According to the regulation of 5th April, 2006 AT55/I/8/DJPL-06, the company operates routes between 91
designated ports, having 47 different branches and approximately 300 travel agents throughout Indonesia61.
Table 19. Passenger Statistics in Selected Indonesian Ports 2014-15
Strategic Port Province Debarked Embarked
2014 2015 2014 2015
Dumai Riau 207,876 208,328 225,820 241,500
Tanjung Pinang Riau Islands 927,127 751,591 989,929 756,843
Batam Riau Islands 3,966,459 4,403,888 3,922,700 4,353,896
Tanjung Priok DKI Jakarta 174,345 158,255 141,904 129,456
Tanjung Emas Central Java 288,684 202,578 304,232 210,199
61 https://www.pelni.co.id/profile/show/11
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Tanjung Perak East Java 384,116 334,417 353,322 321,571
Benoa Bali 255,798 333,964 251,794 334,541
Balikpapan East Kalimantan 162,427 213,320 190,989 201,527
Samarinda East Kalimantan 40,463 85,239 103,057 211,962
Makassar South Sulawesi 442,831 373,519 610,831 482,177
Ambon Maluku 204,142 371,256 215,771 220,838
Sorong West Papua 157,744 175,070 145,989 217,941
Selected Strategic Ports 7,212,012 7,611,425 7,456,338 7,682,451
Total of All Ports 21,998,217 21,831,674 22,377,120 22,285,729
Source: (Subdirektorat Statistik Transportasi, 2016)
Despite some promising statistics and a theoretically great potential for development, the Indonesian passenger
market is not easily accessible to foreign companies. In addition to the monopoly exercised by PELNI, few
initiatives have lived up to their potential. For instance, in April 2017 a Ro-Ro (Roll-on/Roll-off) service was
started between the Philippines city of Davao-General Santos and Bitung in Indonesia with the aim of increasing
passenger and goods trade between the two countries62. The shipping time between the two regions was to be
reduced 50 per cent, boosting imports and exports between the two most populous countries in ASEAN.
However, with a capacity of 500 TEU, it was reported to have become dormant after only two months of service,
having failed to load more than 1 per cent of its intended cargo load63
Merak-Bakauheni route
It is operated by a state-owned enterprise, PT Ferry Transport. The 24km-long ferry connects the 145 million
people living in the island of Java with the 50 million population of Sumatra through the Sunda Strait, and it is
the busiest passenger route within Indonesia64. The waterway is crossed by over 70,000 vessels every year, both
for domestic and international trade65, and since there is no traffic separation scheme, long queues happen at
the busiest times of the year. During Ramadan in 2016, 896,000 people crossed the strait by ferry, and 192,000
cars66.
Batam-Singapore route
Batam is the busiest passenger port in Indonesia, mainly due to its proximity to Singapore and Malaysia. It takes
only 50 minutes to travel to Singapore and 90 minutes to Johor Bahru in Malaysia. However, the most transited
62 http://www.thejakartapost.com/news/2017/03/15/new-ro-ro-route-expected-to-boost-indonesia-philippines-trade.html 63 http://www.mindanews.com/top-stories/2017/07/roro-vessel-to-indonesia-dormant-for-2-months-after-launching/ 64 Nurwahyudik, A. Identification of safety issues in domestic ferry operation based on accident investigation reports on ferry
involved accidents in Indonesian waters, 2003-2013, World Maritime University, 2014 65 Soeriaatmadja, W. Indonesia plans traffic system for busy Sunda Strait, The Straits Times, August 2016. Retrived from:
http://www.straitstimes.com/asia/se-asia/indonesia-plans-traffic-system-for-busy-sunda-strait 66 Sandra Desfika,T. Almost 1m opt for ferry travel across Sunda Strait this holiday season. Jakarta Globe, July 20016. Retrieved
from : http://www.jakartaglobe.beritasatu.com/business/almost-1m-opt-ferry-travel-across-sunda-strait-holiday-season/
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ferry is the one that goes to Singapore. Out of the 1.43 million foreign tourists that visited Batam, over 800,000
came from Singapore, mostly using the existing passenger ferry67.
3.5 Shipbuilding
With the implementation of “Cabotage” law in 2005, and its subsequent revisions, requiring vessels doing business
in Indonesia to sail under the Indonesian flag, the number of Indonesian ships has increased by more than 300 per
cent, while, in the same period, imported vessels have “only” increased by 90 per cent, due to the strengthening
of local shipyards . However, Indonesian shipyards have long been dominated by foreign ownership, especially
those situated in Batam, which are mostly linked to Singaporean companies.
Figure 3. Shipping Industry after the "Cabotage" Law
Source: (Logam, 2017)
67 Badan Pengusahaan Batam, Kunjungan Wisatawan Ke Batam 2016, 2017. Retrieved from:
http://datin.bpbatam.go.id/?p=661
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According to IPERINDO, Indonesia’s commercial fleet is aging, with over 60 per cent of its vessels being older than
10 years old, 30 per cent being more than 20 years old68. In order to counter this, President Jokowi decided that
all government and state-owned-enterprises’ (SOE) vessels procurement would have to be built locally69. Since
strengthening local manufacturers is very high in President Jokowi’s priorities, the Ministry of Transportation has
already ordered more than 150 coastal and transfer ships, while at the same time, the Coordinating Ministry of
Maritime Affairs and the Ministry of Fisheries have already ordered more than 1,000 fishing vessels in 2017.
However, the number of ships ordered by SOEs still remains insignificant70. Moreover, the Ministry of Maritime
Affairs and Fisheries is making important efforts to boost local shipyards’ production, and in order to achieve this,
they have ordered 5,000 fishing boats, which will require expenditure of IDR 4.6 trillion. Moreover, there is an
order for a IDR 600 billion aircraft carrier for the Indonesian Navy from the Ministry of Defense71
According to the Yusof Ishak Institute, there are approximately 250 shipyards in Indonesia, 115 of which are
established in Batam72. Capacity in the domestic shipbuilding industry was 800,000 DWT for ship production, and
about 10,000,000 DWT for ship repairs, in 201473. However, by 2015 that capacity had increased considerably,
and local shipyards were already capable of building 900,000 DWT yearly, with a repair volume of 12,000,000 DWT
a year74.
Despite attempts at developing a national supply industry, shipbuilding processes in Indonesia are still largely
dependent on imports, while design and production are usually done locally. However, between 65 per cent and
80 per cent of components are imported, essentially engines, generators, pumps or navigational systems. Local
components are steel plates, insulation or paint, and one of Indonesia’s main assets is the relatively cheap labor75.
Notwithstanding the lack of a supplier industry, the country remains competitive in the global rankings of
shipbuilding countries.
68 Logam, E K. Challenges and Opportunities in the Indonesian Shipbuilding and Maritime Sector. February 2017. Retrieved
from:http://indonesien.ahk.de/fileadmin/ahk_indonesien/Business_Delegations/maritim/01_IPERINDO_Challenges_and_O
pportunities_in_the_Indonesian_Shipbuilding_and_Maritime_Sector.pdf 69 World Maritime News, Indonesia to ban ordering ships from foreign shipyards. Retrived from :
http://worldmaritimenews.com/archives/164366/indonesia-to-ban-ordering-ships-from-foreign-shipyards/ 70 Ribka, Stefani. State firms urged to buy more locally made ships. March 2017. Retrived from :
http://www.thejakartapost.com/news/2017/03/29/state-firms-urged-to-buy-more-locally-made-ships.html 71 Logam, E K. Challenges and Opportunities in the Indonesian Shipbuilding and Maritime Sector. February 2017. Retrieved
from:http://indonesien.ahk.de/fileadmin/ahk_indonesien/Business_Delegations/maritim/01_IPERINDO_Challenges_and_O
pportunities_in_the_Indonesian_Shipbuilding_and_Maritime_Sector.pdf 72 Negara, S. D. Can the Decline of Batam’s Shipbuilding Industry be Reversed? ISEAS-Yusof Ishak Institue, February 2017. P.4 73 Global Business Guide: Indonesia, Indonesia’s Shipping and Shipyard Industry, 2014. Retrieved from:
http://www.gbgindonesia.com/en/services/article/2014/indonesia_s_shipping_andamp_shipyard_industry.php 74 Marintec Indonesia, Strengthening the potential of the shipyard industry as the main force or Indonesia’s maritime sector,
September 2017Retrived from: http://marintecindonesia.com/strengthening-the-potential-of-the-shipyard-industry-as-the-
main-force-indoneisas-maritime-sector/ 75 Chandra, S. K, Shipbuilding in Indonesia, EIBN
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Table 20. Top 25 Shipbuilding Countries by GT
Position Year 2014 2015 2016
1 Korea, Republic of 21,871,925 23,798,845 25,265,934
2 China 22,851,302 25,007,518 22,178,672
3 Japan 13,392,130 12,794,220 13,348,773
4 Philippines 1,864,658 1,846,418 1,168,357
5 Romania 329,061 402,025 822,010
6 China, Taiwan Province of 574,208 NA 468,038
7 Viet Nam 335,862 552,373 419,189
8 Italy 303,951 219,218 415,711
9 Germany 499,217 383,215 404,996
10 United States 212,113 353,699 344,557
11 France 483 2,444 227,862
12 Brazil 237,708 339,318 218,764
13 Netherlands 130,754 121,748 175,933
14 Norway 248,654 159,284 161,594
15 Finland 101,546 115,054 108,085
16 Turkey 140,240 119226 105645
17 Singapore 79,834 46,830 59,530
18 Spain 31,376 12,815 53,233
19 Russian Federation 44,916 47,238 52,336
20 Indonesia 66,941 91,709 51,439
21 Croatia 37,687 68,247 41,683
b22 Poland 54,822 15,833 36,674
23 India 93,984 27,916 32,184
24 Malaysia 57,513 51,822 29,117
25 Denmark 233 NA 24,937
Source: (UNCTAD, 2017)
3.5.1 Main Locations for Indonesian Shipbuilding
Batam
As of 2017, 115 shipyards are located in Batam, the majority of which are both foreign owned and managed. The
region benefits from a Free Trade Zone scheme, although for goods sold domestically the usual taxation system
applies. Moreover, the following benefits only apply to goods that are re-exported:
Free import duty for goods
No VAT for products sold abroad
No sales tax on luxury goods
Simplified Immigration Procedures
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This makes Batam a heavily export-orientated zone, designed not to compete with other national shipyards or
industrial areas. However, as export markets have been shrinking and the domestic market is closed, most of the
shipyards are facing difficulties. On the other hand, its close proximity with Singapore, just 20 km, makes it
competitive for Singaporean companies willing to reduce costs.
As with most of the domestic shipyards, Batam’s shipbuilders rely heavily on imported components for its vessels,
especially for machinery, electronics and navigation systems, but they are able to remain competitive since they
do not have to pay any import duty. The Singaporean-based Yusof Ishak Institute estimates that more than 70 per
cent of the components are imported76, placing a heavy burden on the local industries that have to compete with
neighbouring countries, like Vietnam or the Philippines. Yet, in a complicated economic context, local shipyards
are facing a worrying problem, with the minimum wage in Batam having more than doubled in the past 8 years.
However, the local force remains, in general, low-skilled and poorly-trained77.
On the other side, Batam benefits from very good infrastructure, including an airport, four international terminals
for passenger ferries, four freight ports, two marina ports and a technical university. Batam is able to ship its
products quickly and efficiently.
Java
As with most economic indicators, Java remains the centre of national shipbuilding for domestic sales, under the
powerful umbrella of IPERINDO, Indonesia’s Shipbuilding and Offshore Industries Association, which lobbies in its
favour78. They benefit greatly from the “Cabotage” principle and Jokowi’s Global Maritime Axis, since Batam is an
export-oriented zone designed not to compete with them79. As an indicator, about 20-25% of national production
takes place in East Java80, which benefits from having Tanjung Perak (Port of Surabaya) as its main logistic hub.
The most significant Indonesian shipyard is state-owned PT PAL, which, according to their own statement, is the
largest shipyard in South East Asia, where they can produce ships of up to 50,000 DWT and repair over 600,000
DWT yearly81. They are based in Surabaya, East Java, where they produce both civilian and military vessels, some
of which they have successfully exported to other countries. For instance, in 2012 the company was awarded the
contract for the construction of two landing platform docks for the Philippines Navy, worth USD 90 million, the
first of which was handed over in 2016 and the second one in 201782. Moreover, they also produce civilian ships,
76 Negara, S. D. Can the Decline of Batam’s Shipbuilding Industry be Reversed? ISEAS-Yusof Ishak Institue, February 2017. P.8 77 Ibid P. 9 78 Logam, E K. Challenges and Opportunities in the Indonesian Shipbuilding and Maritime Sector. February 2017. Retrieved
from:http://indonesien.ahk.de/fileadmin/ahk_indonesien/Business_Delegations/maritim/01_IPERINDO_Challenges_and_O
pportunities_in_the_Indonesian_Shipbuilding_and_Maritime_Sector.pdf 79 Negara, S. D. Can the Decline of Batam’s Shipbuilding Industry be Reversed? ISEAS-Yusof Ishak Institue, February 2017. P.9 80 Hamdani Noer, C. Kebangkitan industry galangan kapal dari timur. Feburary 2015 Retrieved from:
http://www.antarajatim.com/lihat/berita/151210/kebangkitan-industri-galangan-kapal-dari-timur 81 PT. PAL Indonesia (PERSERO), Shipbuilding Industry and General Engineering. Company Profile 82 News Desk, PT PAL receives orders from ASEAN and African countries. The Jakarta Post. July 2017. Retrieved from:
http://www.thejakartapost.com/news/2017/07/14/shipbuilder-pt-pal-receives-orders-from-asean-african-countries.html
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including passenger ships, tankers, bulk carriers or container ships, and even power plant vessels. The state-owned
oil company, Pertamina PT, is one of their major clients. Among other vessels, they can produce83:
Bulk Carrier Ships of up to 50,000 DWT
Container Vessels of up to 2,600 TEUs
Tankers of up to 30,000 DWT
Passenger Vessels to carry up to 500 people
Chemical Tankers up to 30,000 DWT
LPG Carriers up to 5,500 DWT
Following the success of their delivery to the Philippines Navy, PT PAL has received orders for their warships, which
include84:
2 x 60-meter long missile-armed ships (KCR-60) for the Philippines
1 x Strategic Sealift Vessel for Nigeria
1 x Landing Platform Dock for Malaysia
Undisclosed number of KCR-60 ships for Gabon, Senegal and Guinea Bissau
The other main location for shipbuilding is Jakarta’s Special Region, which boasts over 35 shipyards, and uses
Tanjung Priok (Port of Jakarta) as its main base of operations. The leading company in the area is the state-owned
PT Dok dan Perkapalan Kodja Bahari (Persero), which specializes in both shipbuilding and ship repairs.
3.5.2 Strengths and challenges in the Indonesian Shipbuilding Sector
Indonesia has a tremendous potential for its shipbuilding industry, starting with the huge local market and the
strong initiatives taken by the current government to boost Indonesia’s maritime industry. Following president
Jokowi’s vision of making Indonesia the World’s Maritime Axis, an ambitious doctrine has been brought up to
improve domestic connectivity. Thus, the government has shown its commitment to purchase only domestic built
vessels for its state-owned enterprises and ministries, while also enforcing the “Cabotage” regulations.
Furthermore, the number of Indonesian-flagged vessels has increased dramatically, reaching an all-time high in
2016 with over 25,000. Moreover, 50 per cent of them are older than 20 years old, which will mean more orders
for local shipyards, especially in the Oil and Gas Section and the Armed Forces. This will only be possible due to
the massive amount of trainable work forces in the country, 25 million of which are under 29 years old.
83 Embassy of the Republic of Indonesia in Dhaka (Bangladesh), Shipbuilding Industries, Retrieved from:
http://www.indonesia-dhaka.org/shipbuilding-industries/ 84 Ibid
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Table 21. Bilateral trade regarding ships, boats and floating structures
Product code and label Indonesia's imports from EU
'89: Ships, boats and floating structures 2012 2013 2014 2015 2016
Indonesia's imports from EU
105,915,000
93,120,000
63,154,000
180,433,000
169,652,000
% Indonesia's imports from EU
5.86
8.23
5.21
16.29
17.13
Indonesia's imports from Korea
26,369,050
41,319,606
119,323,895
52,383,547
25,498,146
% Indonesia's imports from Korea
1.46
3.65
9.84
4.73
2.57
Indonesia's imports from Japan
192,871,132
71,777,023
170,708,402
135,493,718
183,757,737
% Indonesia's imports from Japan
10.67
6.35
14.08
12.23
18.55
Indonesia's imports from Singapore
508,858,492
312,748,113
327,044,159
359,195,391
278,793,445
% Indonesia's imports from Singapore
28.15
27.65
26.97
32.43
28.15
Indonesia's imports from China
376,221,585
414,330,494
319,759,073
182,488,232
196,875,495
% Indonesia's imports from China
20.81
36.63
26.37
16.48
19.88
Indonesia's imports from the World
1,807,631,000
1,131,030,000
1,212,744,000
1,107,534,000
990,342,000
Source: (United Nations Statistical Comission, 2017)
As seen in the table above, the European share of imports has steadily grown since 2012, accounting for over 17
per cent of all ship imports from Indonesia, which amounted to almost USD 1 billion. European shipbuilders will
have to compete with Singaporean, Japanese and Chinese shipyards, but according to the latest trends, there is
still an important market for them.
However, as noted in the table below, Indonesia’s imports have declined almost 50 per cent from their all-time
high in 2012, mainly due to the improvements in their local shipyards and the implementation of the “Cabotage”
rules. Exports have decreased as well, which can be explained through a steady growth in local demand, fuelled
by the policy in place by which all state-owned vessels have to be built locally85. This opens the door for foreign
shipbuilders to establish shipyards in Indonesia to make up the requirements, taking advantage of Indonesia’s
strategic location and its relatively cheap labour.
85 Logam, E K. Challenges and Opportunities in the Indonesian Shipbuilding and Maritime Sector. February 2017. Retrieved
from:http://indonesien.ahk.de/fileadmin/ahk_indonesien/Business_Delegations/maritim/01_IPERINDO_Challenges_and_O
pportunities_in_the_Indonesian_Shipbuilding_and_Maritime_Sector.pdf
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Table 22. Total trade for ships, boats and floating structures
'89: Ships, boats and floating structures 2012 2013 2014 2015 2016
Indonesia's exports to the World
818,577,342
942,474,406
714,460,834
375,307,498
492,294,853
Indonesia's imports from the World
1,807,631,000
1,131,030,000
1,212,744,000
1,107,534,000
990,342,000
Total trade
2,626,208,342
2,073,504,406
1,927,204,834
1,482,841,498
1,482,636,853
Source: (United Nations Statistical Comission, 2017)
On the other hand, there are a few issues that need to be sorted out for the industry to really take off, especially
regarding the tax policy, with high import duty and corporate income taxes, especially outside the Free Trade
Zones, mainly considering that most equipment needs to be imported86.
Interest loans at 12-14 percent without a competitive interest rate make it difficult for local companies to find
suitable long-term financing, which is still a non-solved challenge87.
IV. National policies and relevant regulations
4.1 “Cabotage”
4.1.1 Presidential Regulation Nr 5/2005 on the strengthening of national shipping
It establishes that all naval activities in the country’s waters are subject to the jurisdiction of the State, entitling
the relevant authorities to restrict the activities of foreign ships in its waters. It introduces the notion of “cabotage”
for the first time, which implies that only ships under the Indonesian flag and manned by an Indonesian crew are
allowed to perform shipping activities in national waters. Moreover, only national shipping companies are allowed
to operate within Indonesian waters88.
4.1.2 Law on Shipping Nr. 17/2008
Although the Maritime Law nr 17/2008 was passed in 2008, it was only put into effect in May 2011. In fact, Article
8 strengtens the restrictions imposed in the Presidential Regulation 05/2005 by stipulating:
1. Domestic sea freight activity must be carried out by national sea transportation companies using
Indonesian-flagged vessels and manned by a crew of Indonesian nationality.
86 Ibid 87 Negara, S. D. Can the Decline of Batam’s Shipbuilding Industry be Reversed? ISEAS-Yusof Ishak Institue, February 2017. P.9 88 The President of the Republic of Indonesia, Instruksi President Republik Indonesia Nomor 5 Tahun 2005 Tentang
Pemberdayaan Industri Pelayaran Nasional, May 2005
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2. Foreign vessels are prohibited from transporting passengers and/or goods between islands or between
ports in Indonesian waters
In the same mold, Article 29 states:
1. In order to obtain a Sea Transportation Business License, an Indonesian corporation must have at least
one Indonesian-flagged vessel of at least 175 GT.
2. An individual Indonesian citizen or business entity may cooperate with a foreign sea transportation
business or foreign individual to form a Joint Venture only if the resulting Joint Venture owns at least one
self-propelled vessel greater than 5,000 GT.
The shipping law leaves considerable scope for interpretation, as the term “ship” is defined only loosely. However,
relevant authorities include all floating structures within the meaning of the term, including storage units, mobile
ocean drilling units or the floating structures that provide technical and repair services at sea. All these floating
structures are also subordinated to the “cabotage” principle, even if not engaged in domestic shipping activities.
As a result of this law, all operators of these structures need to establish an “Indonesia Sea Transportation
Company” located in Indonesia, and with a maximum of 49% ownership for foreign investors. However,
exceptions needed to be made in strategic sectors, especially in the offshore oil and gas sector89.
4.1.3 Government Regulation Nr. 20/2010, Nr. 22/2011 and 48/2011
Since the law 07/2008 proved to be too strict in its regulations against foreign companies’ involvement in the
maritime sector, the Government of Indonesia issued Regulations Nr. 20/201090 and Nr. 22/201191 in order to
ease some of the restrictions laid down in the previous law of 2008 regarding “cabotage”.
Regarding the composition of crews sailing in Indonesian waters, however, the law provides exceptions, under
which Sea Masters and chief engineers may be foreigners, but the rest of the crew must be Indonesian, including
all seafarers.
In addition, the Government Regulation 22/2011 provides an exception for transportation services involving the
offshore oil and gas industry, which still depends on global companies92.
Besides passenger and goods transportation, foreign-flagged ships within Indonesian waters may still carry out
activities which cannot be served by ships or structures travelling under the Indonesian flag. However, these ships
89 The President of the Republic of Indonesia, Undang-Undang Republik Indonesia Nomor 17 Tahun 2008 tentang Pelayaran,
May 2008 90 The President of the Republic of Indonesia, Peraturan Pemerintah Repubik Indonesia Nomor 20 Tahun 2010 tentang
Angkutan di Perairan, February 2010 91 The President of the Republic of Indonesia, Peraturan Pemerintah Republik Indonesia Nomor 22 Tahun 2011 tentang
Perubahan atas Peraturan Pemerintah Nomor 20 Tahun 2010 Tentang Angkutan di Perairan, April 2011 92 Global Business Guide Indonesia, Indonesia’s shipping and shipyard industry, 2014. Retrieved from:
http://www.gbgindonesia.com/en/services/article/2014/indonesia_s_shipping_andamp_shipyard_industry.phpticle/2014/i
ndonesia_s_shipping_andamp_shipyard_industry.php
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require special authorization by the Ministry of Transportation prior to beginning such activities. Some activities
granted exemptions are:
Oil and Gas development
Drilling
Offshore construction and its support
Rescue and underwater construction
4.1.4 Ministerial Regulations Nr 10/2014, Nr 200/2015 and Nr 100/2016
In March 2014 another revision of Law 17/2008 took place, since the “cabotage” was proving to be too ambitious
in certain areas of the maritime sector. Ministerial regulation No 10/2014 further extended the deadlines for
foreign-flagged vessels and floating structures, again regarding the offshore oil and gas industry, which could not
yet be undertaken by national operators. However, a deadline was set for foreign-flagged vessels, namely
December 201593.
Again, in December 2015, another Ministerial Regulation, Nr 200/2015, was issued to extend the operation time
for foreign vessels until the end of 2016, as long as those activities could not be carried out by ships under the
Indonesian flag94.
In November 2016, Ministerial Regulation Nr 100/2016 was adopted. Procedures and requirements are to be
further clarified in order to obtain permits for the use of ships sailing under foreign flags in Indonesian waters,
including those for freight transportation of people or goods. This includes activities in the fields of oil and gas,
drilling and dredging, offshore construction, mining and underwater work. Existing exceptions will be extended
until December 2017. Foreign ships can still carry out offshore activities in Indonesian waters, essentially under
the following conditions95:
Indonesian-flagged vessels are not available for the intended work.
Ships are operated by an Indonesian shipping company with an appropriate valid Sea Transportation
License.
The project is in the national interest.
Ships may only be used for a limited period of time.
93 Minster of Transportation of the Republic of Indonesia, Peraturan Menteri Perhubungan Republik Indonesia Nomor PM 10
Tahun 2014 tentang Tata Cara dan Persyaratan Pemberian Izin Penggunaan Kapal Asing, March 2014 94 Watson Farley & Williams, Ownership, cabotage and flag issues relating to Indonesian maritime assets (Part I), September
2016. Retrieved from: http://www.wfw.com/wp-content/uploads/2016/09/WFW-Indonesia-1.pdf 95 HFW, Indonesia extends the timeline for foreign vessels to operate in its waters , November 2016. Retrieved from:
http://www.hfw.com/Indonesia-extends-the-timeline-for-foreign-vessels-to-operate-in-its-waters-November-2016
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4.2 Port Management
4.2.1 Maritime Shipping Law 17/2008
Law No. 17 of 200896 simplifies regulations on business licenses and port management with the aim of encouraging
competition and private investment. Each of the 355 articles answers questions regarding shipping, navigation,
environmental protection, welfare for seafarers or the coast guard. However, one of its most relevant points is
that it ends the monopoly of the state port operators, Pelindo I-IV, opening the door for private port operators
and service providers to get into the Indonesian market, albeit with a few regulations and under the negative
investment list.
With the passing of this law, the government is thereby represented by the Port Authority, which regulates basic
port infrastructure and its use. However, it became possible for private port enterprises to become Port
Operators, either through concessions or long-term contracts97.
4.2.2 Presidential Decree Nr 44/2016 (Negative List of Investment)
The negative list is essentially a list of sectors that are closed to foreign investment or are restricted to a limited
extend, which is usually 49%. The latest version of this list dates from May 201698, and is basically an updated
version of the corresponding Presidential Regulation of 2014.
Port Management had already been open to foreign investors and operators, since foreign companies were
allowed to operate port facilities for the duration of a concession. However, now, only within the framework of a
PPP, foreign investors are allowed to own up to 95% of the companies, up from the 49% that was previously
allowed.
This new regulation regarding PPP includes buildings, terminals for containers and bulk cargo and Ro-Ro terminals.
However, outside of PPP, the 49% cap remains. Another remarkable feature to attract foreign investment was the
increase in the cap for handling services, up from 49% to 67%, and investors of fellow ASEAN countries are given
further incentives99.
96 The President of the Republic of Indonesia, Undang-Undang Republik Indonesia Nomor 17 Tahun 2008 tentang Pelayaran,
May 2008 97 Ray, David. Indonesian Port Sector reform and the 2008 Shipping Law. Published by USAID in August 2008 and retrieved
from: http://pdf.usaid.gov/pdf_docs/Pnadn188.pdf 98 President of the Republic of Indonesia, Presidential Regulation 44/2016, May 2016. Retrieved from:
http://www.bkpm.go.id/images/uploads/prosedur_investasi/file_upload/Perpres_44_2016.pdf 99 BKPM, List of Business fields closed to investment and Business fields open, with condition, to investment. September 2016.
Retrieved from: http://www.pma-
japan.or.id/bundles/bsibkpm/download/20160906%20-%20Negative%20List%20Revision%20-%20JICA%20-%20Vers%202_
8.pdf
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Finally, some sectors, like rescue services and underwater work, are now fully open to foreign investors and are
no longer subject to the “cabotage” restriction nor to the 49% foreign investment limit. However, they still require
a special license from the Ministry of Transportation.
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V. Opportunities for European companies in the Indonesian maritime sector
Indonesia is the 4th largest populated country in the world, and with over 120 million Indonesians projected to
enter into the rising middle class, its market size can provide countless opportunities for those who actively seek
them. Its stable political situation, steady growth of over 5 per cent a year, massive natural resources and a large
domestic market, make for a good starting point for those companies who might be hesitant about getting into
the Indonesian market. Entering into the Indonesian market can be the gateway to the bigger ASEAN Economic
Community, where most tariffs have been removed, and which has over 600 million potential consumer.
Overall, the current administration led by President Jokowi has established the maritime sector as a priority
pillar in its economic policy, with major investments already committed and many more still to come, especially
for infrastructure development and acquisition of ships.
Due to the strengthening of local shipyards along with the “Cabotage” regulation, and with the present inability
of the local supplier industry to provide the more advanced supplies needed for shipbuilding, European
companies can tap into the market by exporting their components, since the local industry is highly dependent
on foreign imports.
In spite of having a stable political situation, foreign companies should be aware of the ongoing approval of
protectionist policies that might discourage foreign suppliers and investors. However, this provides a good
platform for those companies willing to establish a subsidiary in the country. At the same time, the huge local
demand will benefit the local shipbuilding industry.
With Jokowi’s “Global Maritime Axis”, the Indonesian Navy is looking to establish itself as a regional power, so
national defence projects are being prioritised. The Indonesian government is engaged in the pursuit of
technology transfer measures, opening the doors for European shipyards to sell their ships and their expertise.
As an example of this, the development of the Martadinata Class frigates of the Indonesian Navy was a joint
project between Schelde Naval Shipbuilding from the Netherlands and the state-owned company PT PAL.
The weakening of the Indonesian Rupiah will further lower wage costs for those European companies willing to
produce in the country, but, at the same time, will lead to more expensive imports, which might discourage local
producers.
According to IPERINDO, the standard of infrastructure in the country is hindering development in the eastern
parts of the country, increasing the logistics costs for all projects outside the main islands of Java and Sumatra.
European shipping companies face a challenging task unless infrastructure is further developed. On the other
hand, port upgrades and the construction of new sea ports open the door for successful Private-Public-
Partnerships between European and Indonesian companies in both port construction and port management.
Finally, there are some challenges ahead that must be overcome. Corruption is widespread, which, along with
the complex processes involved in entering the market, is one of the main burdens for the economy. European
companies should note that the most successful way to enter the country is to team up with local companies or
distributors.
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Relevant Contacts
INDONESIAN NATIONAL SHIPOWNERS ASSOCIATION (INSA) Adress: Jl. Tanah Abang III No. 10, Jakarta Pusat
Tel.: +62 21 385 0993
Fax: +62 21 344 7149
E-mail: [email protected]
Website: www.insa.or.id/
IPERINDO - Ikatan Perusahaan Industri Kapal dan Sarana Lepas Pantai Indonesia (Indonesia
Shipbuilding & Offshore Industries Association) Adress: Komplek Griya Inti Sentosa
Jl.Griya Agung No.77
DKI Jakarta 14350 Indonesia
Tel.: +62 21 640 4253
Fax: +62 21 640 4253
E-mail: [email protected]
Website: https://dppiperindo.wordpress.com/about/
Coordinating Ministry for Maritime Affairs Adress : Gedung BPPT I Lt. 3
Jl. MH Thamrin no. 8,
Jakarta 10340
Tel.: +62 21 316 8111
Fax.: +62 21 314 1790
Email: [email protected] Website: www.maritim.go.id
Ministry of Tourism Adress: JL. Medan Merdeka Barat, No. 27,
10110, Indonesia
Tel.: +62 21 383 8102
Website: www.kemenpar.go.id
Ministry of Transportation – Directorate General of Sea Transportation
Adress: JI. Medan Merdeka Barat
No. 8 Gd. Karsa Lt.4,
Jakarta Pusat 10110
Tel.: +62 21 384 2440 Ext.1104
Fax. +62 21 384 5430
Website: www.dephub.go.id
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Indonesia Investment Coordinating Board – BKPM Indonesia’s Investment Coordinating Board (BKPM) is an important government agency acting as the primary
interface between foreign companies interested in investing in Indonesia and the national government. BKPM has
been assigned with a ministerial status, reports directly to the President of the Republic of Indonesia and is
mandated to boost domestic and foreign investment by creating a conducive investment climate. The agency also
plays a crucial role as a matchmaker for investors.
Prior to investing in Indonesia or partnering with an local company, any foreign business must apply for a
registration approval from BKPM, and inform the agency of the nature of the intended investment (investment
source, line of business of the Target Company, production capacity, etc.).
Adress: Jl. Jenderal Gatot Subroto No. 44
Jakarta 12190
Tel.: +62 21 525 2008
Fax.: +62 21 526 4211
Email: [email protected]
Website: www.bkpm.go.id/
KADIN – Indonesian Chamber of Commerce and Industry
Adress : Menara Kadin Indonesia Lt 29
Jalan HR Rasuna Said X-5 Kav 2-3
Jakarta 12950
Tel.: +62 21 527 4484
Fax : +62 21 527 4331 – 527 4332
Email : [email protected]
Website : http://www.kadin-indonesia.or.id
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Trade Fairs in Indonesia
Indonesia Maritime Expo IME 2017 Venue: Jakarta International Expo
Date: 10-12 October 2017
Website : http://www.maritimexpo.co.id/
Indonesia Marine and Offshore Expo 2018 Venue : Batam (Riau) Date: August 2018
Website : http://www.worldmaritimenews.com/
Marintec Indonesia 2017 Venue: Jakarta International Expo Date: 13-16 September 2017
Website : http://marintecindonesia.com/
INAMARINE 2018 Venue: Jakarta International Expo Date: August 2018
Website : http://www.inamarine-exhibition.net
Indonesia Yachts Show 2018 Venue: Jakarta (to be confirmed) Date: 7-8 July 2018
Website : http://www.yachtsexpoasia.com/
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Abbreviations AEC ASEAN Economic Community
ASEAN Association of South-East Asian Nations
ATIGA ASEAN Trade In Goods Agreement
BAPPENAS Badan Perencanaan dan Pembagunan Nasional
(National Development Planning Agency)
BKPM Badan Koordinasi Penanaman Modal
(Indonesian Investment Coordinating Board)
Bn Billion
DWT Dead Weight Tonnage
EU European Union
FDI Foreign Direct Investment
FTZ Free Trade Zone
GDP Gross Domestic Product
IDR Indonesian Rupiah
INSA Indonesian National Ship Owners Association
IPC Indonesian Port Corporation (Pelindo)
IPERINDO Indonesia Shipbuilding & Offshore Industries Association
(Ikatan Perusahaan Industri Kapal dan Sarana Lepas Pantai Indonesia)
MP3EI Masterplan for Acceleration and Expansion of Indonesia’s Economic
Developmen
Pelindo Pelabuhan Indonesia (Indonesian Port Cooperation)
PPP Public Private Partnership
PT Private Limited (Perseroan Terbatas)
SEZ Special Economic Zone
TEU Twenty-foot Equivalent Unit
tn Trillion
UNCTAD United Nations Conference on Trade and Development
USD United Stated Dollar
2017
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About EIBN The EIBN is a partnership project between five European bilateral chambers of commerce in Indonesia
(BritCham, EKONID, EuroCham, IFCCI, INA) and two counterparts in Europe (EUROCHAMBRES, CCI
Barcelona). The EIBN’s aim is to promote Indonesia and ASEAN as high potential trade and investment
destinations among companies from allEU28 member states – especially SMEs – and support them in their
endeavor to explore the full market potential in Indonesia. The project was initiated and co-founded by
the EU.
Disclaimer
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Although due care was taken in the preparation of this publication, EIBN makes no warranty as to its
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