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Indonesia needs to upgrade old vessels, open new export routes

Jakarta Globe - January 13, 2023

Jayanty Nada Shofa, Jakarta – Archipelagic Indonesia should upgrade thousands of its old vessels, and also open up new shipping routes for export, according to the country's board of trade.

The Indonesian Chamber of Commerce and Industry (Kadin) recently said that there is still much room for improvement in the country's maritime transport.

Indonesia has 80,000 vessels, almost half of them are fishing vessels, while about 20,000 to 30,000 are merchant ships. Despite the fairly large fleet, almost 50 percent of Indonesian vessels are older than 15 years old.

"Local players control almost a hundred percent of the domestic maritime transport. But we need to come up with ways to further develop maritime transport from a quality standpoint such as by modernizing our fleet," Nova Y Mugijanto, the head of the permanent committee for sea transport of Kadin Indonesia, told a presser in Jakarta on Thursday.

But revamping Indonesia's maritime transport would require hefty investments. For instance, a single merchant ship typically costs Rp 50 billion ($3.4 million) and can go up to Rp 100 billion, while vessels for international shipping can be larger in size and thus more costly, according to Nova.

"Maritime transport is highly capital-intensive. This poses a challenge for Indonesia's efforts in building a competitive maritime transport system," he said.

Ports are inseparable from maritime transport. Some of Indonesia's busiest ports include the Tanjung Priok Port, Tanjung Perak Port, and Patimban Port – all located on Java island. Indonesia has at least 2,000 registered ports, each only 40 kilometers apart from another. And there might be even more unofficial ports than those registered, Nova said.

"Our logistics are Java-centric. We have to come up with ways so logistics can be fairly distributed across the archipelago, among others, by having an integrated maritime transport with ships and ports that can keep up with the times," he told reporters.

Foreign vessels currently handle 90 percent of the export-import shipments in Indonesia. And over the past years, President Joko "Jokowi" Widodo has been pushing for greater exports. Nova said Indonesia "needs to find creative ways to open up new export routes amid a looming crisis in 2023."

Speaking of export, Nova revealed to the press that there was a demand for new direct routes connecting Indonesia with fellow BIMP-EAGA countries. BIMP-EAGA is the acronym for Brunei Darussalam – Indonesia – Malaysia – Philippines East ASEAN Growth Area. This special economic grouping primarily focuses on spurring development in the remote and less developed areas in the said four countries.

In Indonesia, BIMP-EAGA encompasses the provinces of Kalimantan, Sulawesi, the island chain of Maluku, and Papua.

"Despite the demand for direct shipping routes from Indonesia to the three other BIMP-EAGA countries, the trade volume is still not sizable. But if the trade volume goes up, there is a chance for a new shipping route to be opened," Nova said.

Indonesia will host the 2023 Maritime BIMP-EAGA conference this February.

According to Nova, the annual ports and shipping conference can pave the way for new export routes, while also bringing in investment into the country.

"Such as investment in ports. But this does not necessarily mean the construction of new ports. It can be an investment to increase the capacity of existing ports. Let's say there is a small-scale port that has huge export potential, we can try boosting their capacity rather than build a new one," Nova said.

"Hopefully, the conference can also help us find the solution to making Indonesia's maritime transport more modern and competitive."

Source: https://jakartaglobe.id/business/indonesia-needs-to-upgrade-old-vessels-open-new-export-route