Jakarta port embarks on $3.1b expansion

It will help triple annual capacity and reduce dependence on Singapore

By Zubaidah Nazeer, The Straits Times, 14 May 2012

JAKARTA: Indonesia's largest port authority is pumping in more than US$2.5 billion (S$3.1 billion) to expand Tanjong Priok, the country's busiest port, which has long been constrained by a lack of berth space and an inability to serve large container vessels.

The expansion of Jakarta's port, first built by the Dutch in 1877, comes three years after a management overhaul ranked staff competency over seniority, and saw annual volume of cargo increase threefold to ride on the back of Indonesia's economic growth.

The expansion is expected to help triple the port's present annual capacity to more than 18 million TEUs - or twenty-foot equivalent units - when all phases are completed in 2023.

The first phase of development, which begins in July, involves the construction of three container terminals and two petroleum product terminals.

The first terminal will be completed by 2014, according to the chief executive officer of Indonesia Port Corporation (IPC), Mr Richard J. Lino, 59.

Indeed, the infrastructure overhaul is driven by the need for the overburdened port to keep up with the rapidly increasing volume of growth.

A long-term goal is to reduce dependence on Singapore's port. Currently, a lot of Indonesia-bound goods must pass through Singapore because the wharves at Tanjong Priok are not deep or large enough to accommodate large vessels.

Eventually, said Mr Lino, the port's improved capacity and facilities will enable ships to bypass Singapore and sail directly from Tanjong Priok to other destinations in the region.

'The cake is big enough for everyone in the region to share,' said Mr Lino, adding that he believes trading volume in the region will boom.

Last year, 18 per cent of the goods destined for Indonesia went through Singapore, compared with 65 per cent in 2008. Mr Lino intends to bring this down to '10 per cent or below'.

Mr Lino, who has about 30 years of experience in port management and has worked briefly in China, left Tanjong Priok port in 1990, as a senior port development manager, to set up his own business.

He recalled that when he returned to Tanjong Priok as its chief executive officer almost two decades later in 2009, he was shocked by how things seemed to have stood still.

'The port facilities were the same as when I left,' he said. 'This cannot be, things are moving so rapidly and there has been pressure to change.'

As a measure of how well a port is doing, the increase in the volume being handled should be three to four times the gross domestic product (GDP) growth rate, said Mr Lino.

In Tanjong Priok's case, the increase averaged about 5.8 per cent annually before 2008, or nearly the same rate as GDP growth. However, in 2010, the volume went up by 25 per cent, or four times GDP growth.

Besides poor infrastructure such as a poor network of roads and inadequate facilities, the port also suffered as a result of outmoded work practices.

Mr Lino instituted many changes, including replacing the erstwhile seniority-based promotion system with one based on merit and performance.

A new US$50 million staff training programme over three years will see staff trained in port management and related fields; 130 middle-management staff sent for master's programmes overseas, 15 in executive business master's courses and 200 being groomed for leadership posts.

When there was a vacancy for a senior position, Mr Lino encouraged staff who were interested to make a bid for it, instead of senior management selecting one. He eventually made his choice with the help of feedback from major clients.

To increase efficiency, IPC is working with telco company Telkom to implement a tracking system that allows traders to speedily check on the status of their goods, as is being done at major ports.

Despite the plans that have been set in motion, Mr Lino knows he still has his work cut out for him.

To convince potential investors and clients that Tanjong Priok is being transformed into a world-class port, he has been to several countries to meet major shipping companies and business investors and try to win them over.

Asked whether the countries included Singapore, he said: 'No, it is too sensitive.'

Some officials from both sides view each other as competitors, he said.

He feels that countries in the South-east Asian region should be working together to encourage more shipments to pass through their waterways.

'Business does not have boundaries,' he said. He wants more regional partners, but is limited by nationalist attitudes among some of his countrymen who would rather work with partners who are not from neighbouring countries.

'Why do I have to invite mainly the Western companies to work with us? Why not keep the benefits within the region?'

Coming up

FIRST PHASE
- Three container terminals to be completed between 2014 and 2016

- Two oil and gas terminals by 2017

- Cost: 22.66 trillion Indonesian rupiah (S$3.1 billion)

SECOND PHASE
- Three container terminals to begin construction in 2018 and completed by 2023

- Cost: Indonesia Port Corporation has not confirmed cost