Debunking India-Indonesia Maritime Connectivity

Media recently reported new shipping connectivity between Belawan port on the coast of North Sumatra province and an Indian destination, to be commenced soon. Initiated by the Ministry of State-owned Enterprises, the plan involves Indonesia Port Corporation or Pelindo and DP World, as a follow up to last year’s investment commitment from the government of the UAE for Rp457 trillion (US$30,19 billion) in the context of which the port business is one area of interest.

 

Indonesia’s sovereign wealth fund, the "Indonesia Investment Authority" or INA, a new body set up by the Government of Indonesia to manage Dubai’s investment asset, will accordingly establish a joint company, perhaps in the form of a capital venture, with the international port operator responsible for handling the new connection. This new firm will also invest in the development of the existing container terminal, currently controlled by PT Prima Terminal Petikemas (locally dubbed Prima Petikemas), a subsidiary of PT Pelindo Petikemas, an affiliate of Pelindo.

 

What is being planned indicates that India and Indonesia maritime connectivity is flourishing or set to be. Is that so? Such a concern ensues because basically, at least in terms of media coverage, there are already exists shipping connectivity bridging the countries, specifically from the western part of the archipelago. We do not however know its progress to date, until the above-mentioned plan manifests. Of course, this development will not downgrade existing trade between India and Indonesia, accounting billions of dollars.

 

The Ministry-led program, in other words, contains loopholes that may doom it to a similar fate. And, the plan indeed has a couple of question marks; this article tries to expostulate on them. First, the Belawan-Cochin connection (DP World has quite a sizable operation here) has unfortunately not involved single shipping company - merely port operators. In many parts of the world, such a network is customarily arranged by a container liner, while the actual port operator only acts as a supporting element.

 

The issue could be feasibly settled by DP World, as a worldclass port operator, since it has an intensive shipping partners network. Still, as of this writing, there is no indication the company has been invited to join in the planned India-Indonesia maritime connectivity effort. It is even hard to see any notices about it in news report. The Indian embassy in Jakarta and DP World management have been contacted, in order to get their confirmation; until now, no connection can be established. It seems that the Ministry’s plan has come out of the blue.

 

Second, export-oriented container throughput at Prima Petikemas terminal, according to available data, records around 200,000 TEU per year, mostly destined for African countries. There is no information about shipment to Indian ports. If the new connection does succeed in actually starting up, it will be a Herculean task to generate cargo for ships serving the leg. The hinterland of the terminal, Medan city and its adjacent regions, are the home for massive numbers of rubber and oil palm plantations, mostly exported in raw form. Thus, the most suitable transportation mode to ship them out is bulker or general cargo vessel, not a boxship.

 

Significant cargo volume is the critical problem faced not only by the terminal operator but also by other players across the nation, with the exception of Java. Here they enjoy a lucrative throughput, thanks to high traffic of manufactured goods in import and export containers. Consequently, terminals in Jakarta port of Tanjung Priok and Tanjung Perak, Surabaya, East Java, for instance, book aggregately millions of TEU annually. In fact, DP World was a partner of PT Terminal Petikemas Surabaya (TPS) in Tanjung Perak port for several years, before terminating cooperation in 2019, after its proposal to continue the partnership was rejected by then Indonesia Port Corp or Pelindo III.

The island still showcases more container terminals are to be constructed, of which Patimban container terminal will commence operations in the very near future. Except for upcoming additional capacity, Java still be hosting several on the list, such as Gresik container terminal in East Java province, owned by Indonesian conglomerate Maspion Group, and Kendal in Central Java (this one to be funded by Singaporean investment). Oversupply and overcapacity is undoubtedly unavoidable but the Government is turning a blind eye to the situation and keeps issuing new terminal/port permits, especially to private entities.

 

Third, India-Indonesia maritime connectivity is currently stuck in a “do not talk each other” situation. The two countries’ export and import shipments are handled by the shipping lines, none of which are national flag carriers of the states in question. Even after seventy years of close cooperation, there is no "port sister agreement" signed by municipalities that happened to be the home of major ports in the countries. All maritime connectivity is conducted by a third party, via Singapore or Hong Kong among others. India and Indonesia just simply lack direct maritime connectivity, amid abundant volume of cargo.

 

Within the context, what is prepared by the Ministry of SOE should be lauded. Nevertheless, they need to look at the other aspects, rather than solely focusing on the new connectivity. There are several practical measures (geo-economy) to start with. For example, the two states should set up a shipping chamber to promote shipping cooperation as a part of an initiative to establish connectivity in the Indian Ocean. As a business-to-business entity, the chamber could either be a sub-unit of the existing trade and industry chamber of the two countries or a separate one. A couple of conferences as a prelude is worth convening for its establishment. The conferences are expected to come up with the scope of shipping cooperation between India and Indonesia.

 

Additionally, the two countries can order all coal and CPO exports to be transported by Indonesia-flagged vessels by 2020, and packaged to be fit in container. For liquid cargo transportation, India and Indonesia can cooperate to procure bigger bulker to ply the trade. This business model is completely legal under the United Nations Conventions of Code of Conduct for the liner conference 1975. The other practical measure is that embassies of the two countries could set up a transportation attaché office as a startup to the shipping chamber, to facilitate whatever the shipping players from India and Indonesia may initiate. To expedite its maritime quest, Indonesia may appoint a special envoy or ambassador at large, who would spearhead negotiations with the Indian counterpart. This person should be a well-known figure in the domestic and international maritime circle.

Dimuat dalam Independent Observer, Edisi Jumat, 24 Februari 2023