Paving the Way for Sustainable Freight Transport

Qatar National Convention Centre / Auditorium 3

Doha, 25 April 2012 - 15.00–18.00

«Sustainable Freight Transport Policy in Indonesia»

H.E. Bambang SUSANTONO, Ph.D.

Vice Minister for Transportation

Republic of Indonesia

SUSTAINABLE FREIGHT TRANSPORT POLICY IN INDONESIA

Presented at:

Side Event: Paving the Way for Sustainable Freight Transport

UNCTAD XIII Conference

Doha, 25 April 2012

Bambang Susantono, Ph.D.

Vice Minister for Transportation

Republic of Indonesia

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Indonesia: How to connect a vast archipelago

► Indonesia has incorporated intercity transport in the MP3EI (Master Plan on Acceleration and Expansion of Indonesia Economic Development)

► The MP3EI consists of 3 main pillars: (1) development of Indonesia Economic Corridors; (2) strengthening domestic connectivity; (3) acceleration of reliable ICT development

► The estimated need of infrastructure investment for these 6 corridors reaches USD 210 billion.

► Indonesia is the world’s largest archipelago with over 17,000 islands. The area of its waters is about 80% of the total area of the country.

► Therefore, intercity transport in Indonesia must consider interisland sea transportation as well.

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Growing Country, Growing Needs of (Freight) Transport

Transport sector requires an investment of USD 90.4 billion, comprising USD 37,298 million for road infrastructure, USD 13,080 million for port infrastructure, USD 3,577 million for airport infrastructure, and USD 36,445 million for railway infrastructure. With a GDP per capita of USD 3,469 and growing middle class, it is estimated that the number of trips will grow quite significantly in the near future

One of the most dominant factors in trip generation in a country is the economic growth. With a population of 238m (In 2015, Indonesia's Population is expected to be 250m) Indonesia is Southeast Asia’s fastest-growing major economy clocking growth at more than 6% in 2011. Citigroup estimates Indonesia’s GDP growth to reach 6.3 percent in 2012 and 6.5 percent in 2013—good for third-best in the region.

USD

37,298

million

USD

13,080

million

USD

3,577

million

USD

36,445

million

A Glance at Indonesia’s Current Transport System

► There were 15.7 billion tons of freight and 6.9 billion of person trips traveling in 2011. Earlier in 2006, there were 9,4 billion tons of freight and 2,3 billion of person trips.

► All transport modes play a role in Indonesia's transport system and are generally complementary rather than competitive. Road transport is the predominant mode, accounting for about 70 percent of freight ton-km and 82 percent of passenger km.

► The dominant use of road transport results in congestion, frequent road damages and increase traffic accident. It becomes inefficient to use road transport especially for long distance trips

9.4

2.3

15.7

6.9

Freight (billion tons) Person (billion trips)

Trips Growth Comparison

2006 201167%

300%

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National CO2 Emissions and Oil Consumption

In Indonesia, CO2 emission contributed by the transportation sector reaches 23% of the national total emission. The emission of land transportation comprises 89% of the transportation sector’s emission. In fact, the transportation sector in Indonesia uses the biggest share of the oil consumption at 51%. It is triggered by the increasing number of fleets and the low price of petroleum directed for transportation use (due to subsidies by the government).

Source: MoT 2011

Indonesia’s Transport Related CO2

Emissions Indonesia’s Oil Consumption

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Government Policy to Reduce Transport Burden on Roads

► While road has a lower cost function for short distances, its cost function climbs faster than rail and maritime cost functions. At a distance D1 (500-750 km), it becomes more profitable to use rail transport than road transport while from a distance D2 (near 1,500 km), maritime transport becomes more advantageous.

► The Government of Indonesia is introducing policies that aims to reduce the transport burden on roads. The burden is to be shifted and balanced by other modes of transport, i.e. railways and short-sea shipping

Short-Sea Shipping

Railway Development

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Java Double Track Project

• Transport movement in Java is still dominated by road transport. To balance this, there is an urgent need to strengthen the railway transport, through the completion of Java Double Track project.

• 263 km Java Double Track Project connects two most important cities in Indoesia, Jakarta & Surabaya. Jakarta is home to 21 million inhabitants, while Surabaya has 7 million of population.

• BANDUNG

Jawa Barat

JAKARTA

SERANG

SURABAYA

SEMARANG

DKI

Banten

Jawa TengahJawa Timur

YOGYAKARTADIY

Merak

Bogor

Sukabumi

Cikampek

PadalarangCirebon

Banjar

Kroya

Tegal

Purwokerto

Pekalongan

Solo

Madiun Kertosono

Blitar

Malang

Bangil

Sidoarjo

Bojonegoro

Jember

Banyuwangi

Bojonegoro

Gambringan

Bojonegoro

Gundih

Prupuk

Kutoarjo

BANDUNG

Jawa Barat

JAKARTA

SERANG

SURABAYA

SEMARANG

DKI

Banten

Jawa TengahJawa Timur

YOGYAKARTADIY

Merak

Bogor

Sukabumi

Cikampek

PadalarangCirebon

Banjar

Kroya

Tegal

Purwokerto

Pekalongan

Solo

Madiun Kertosono

Blitar

Malang

Bangil

Sidoarjo

Bojonegoro

Jember

Banyuwangi

Bojonegoro

Gambringan

Bojonegoro

Gundih

Prupuk

Kutoarjo

North Java Double Track

South Java Double Track

The double track will increase the frequency and capacity of railways by 200-300%

Illustration on potential energy saving at the completion of double track:

• The frequency of existing railway container from Jakarta to Surabaya is 5 trips per day, carrying 160 TEUs per day.

• With the double track, the frequency can be tripled to 15 trips per day, carrying 500 TEUs per day.

• Therefore, fuel saving resulted from shifting the 340 TEUs from road to railway may reach 115 kiloliter per day and CO2 emission may be reduced by 350 ton CO2 per day.

• In one year, a significant amount of fuel will be saved and it also contributes considerably to CO2 emission reduction, at 42,000 kiloliter of fuel and 128,000 ton CO2 respectively.

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Muara Wahau – Bengalon Railway Development, East

Kalimantan

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• It is the first private rail freight in Indonesia by Middle Easy Company (MEC) Coal.

• The length of the railway is approximately 130km, connecting aluminum and coal mines to a special purpose port.

• The estimated value of investment is USD 1.5 billion.

• This rail freight is the first train in Indonesia with 3 locomotives and 120 wagons with a length of approximately 2 km.

Bukit Asam Coal Railway Development

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Sei Mangke Railway Development

• Sei Mangkei Industrial Area is a CPO-based industrial area occupying a land of 2,003 ha.

• There is a palm kernel oil processing plant with a capacity of 400 tons per day

• To enhance its logistics, a 25-km railway plan connecting the industrial area to Kuala Tanjung

Port is currently being developed.

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City Logistics

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Rail-based city logistics in

Jakarta are currently

being developed in order

to relieve traffic

congestion caused by

freight movements.

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Marine Highways: Trans Maluku

► Trans-Maluku is an integrated transport network system combining road transport and ferry Ro-Ro service which connect islands through urban centers in those islands.

► The combination of road transport and ferry Ro-RO service is designed to shorten distance and travel time, as to increase freight capacity. The Trans-Maluku network will use ferries to connect the islands, functioning as “movable bridges”.

The plans include building 1,015 km of

roads and 40 ports, which will be served

by 24 ships.

In medium term, Trans-Maluku network will

be developed to connect Maluku with its

surrounding regions including North

Maluku islands and Nusa Tenggara.

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Acceleration of Transport Infrastructure Development

MP3EI Transport Infrastructure

No Infrastructure Investment Need (USD Million)

Est. # of Projects

1 Ports and Inland Waterways

13,080 92

2 Airports 3,577 14

3 Railways 36,445 25

Total 53,102 131

Public

Infrastructure

Private Infrastructure

(Private Purpose)

Non -Cost Recovery Project

Cost Recovery Project

PPP

SOE Special Asssignment

•State Budget •Local Budget

Tender / Right To Match •Law 23/2007 on Railway •Law 17/2008 on Shipping •Law1/2009 on Aviation •GR 67/05 •GR 13/10 •GR 56/11

Presidential Regulation on SOE Special Assignment

•Special Airports •Special Ports, Special Terminals •Special Railways

Licencing

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Three Ways of Private Sectors Involvement in Transport

Infrastructure Development

Investments in Transport Sector

Special Purpose Transport Infrastructure

SEZ/FTZ Transport Infrastructure

Public / Commercial Transport Infrastructure

• Infrastructure specially developed for the

purpose of a business entity and may

operate exclusively for the business

entity.

• Usually unsolicited, i.e. initially proposed

by the business entity (private sector)

• Ministry of Transportation reviews the

feasibility study and other technical

matters, including safety issues

• The investment procedure for the special

purpose transport is done through the

LICENCING (business licence, location

licence, construction licence, and

operation licence).

• Infrastructure to be used by

public and commercially

oriented (tariff applied)

• May be solicited (proposed

by the GoI) or unsolicited

• Ministry of Transport prepares

the project documents and

tender documents, including

feasibility study

• The business entity is chosen

through TENDER (in

accordance to Presidential

Regulation No. 56/2011)

• Infrastructure is located in the

Special Economic Zones (SEZ)

or in Free Trade Zones (FTZ)

• Several incentives such as

reduced tax rates

• More relaxed restrictions

(compared to the Negative

Investment List)

• More incentives and exceptions

for the projects in the Bounded

Zones (Kawasan Berikat)

• The investment procedure is

through simplified LICENCING

from the FTZ/SEZ administrators

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Government Support for PPP Infrastructure Projects

Project

Company

GCA (Government

Contracting

Agency

IIGF (Indonesia

Infrastructure

Guarantee

Fund)

Banks

IIFF

Private Equity

Institutional

Investors

Other investors

Financiers

1

3

2

4

1

3

2

4

Concession

Agreement

Guarantee

Agreement

Regress

Agreement

Financing

Agreement

Indonesia

Infrastructure Fund

THANK YOU

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