INDONESIA FACES FUNDING CHALLENGES
Country aims to shake off reputation for inefficiency, congestion with US$2.5b upgrade
WITH its towering new cranes and wharves that can handle some of the world’s biggest ships, Indonesia’s main international port has been shaking off its reputation for inefficiency and congestion with a US$2.5 billion (RM10.72 billion) upgrade.
But the revamp is just the first step in an ambitious drive to overhaul shipping in the country, with experts warning that a scheme to dot the sprawling archipelago with a string of new harbours over the next few years could be heading for choppy waters as it still needs billions of dollars in financing.
President Joko Widodo wants Indonesia to become a “global maritime axis”, looking to slash logistics costs as the nation competes with neighbours Vietnam and Thailand to be a major regional manufacturing base for automotive and electronics companies including Toyota Motor Corp and Samsung Electronics.
“In terms of challenges, locating adequate funding is clearly one of the biggest,” said Turloch Mooney, senior editor for global ports at IHS Markit.
Indonesia ranked 63rd out of 160 countries last year on the World Bank’s Logistics Performance Index, which measures the ease of trade including the timeliness of shipments, customs performance and infrastructure quality.
The costs of moving goods across one of the world’s most populous countries stood at 27 per cent of gross domestic product, according to a 2013 study by the World Bank. That compared with 13 per cent in Malaysia and eight per cent in Singapore.
Indonesia has an ambitious plan to build or expand a total of 24 ports, though it is unclear what the overall cost would be, with the work largely divvied up between four state-controlled port operators that have their own fundraising plans.
PT Pelabuhan Indonesia II (Pelindo 2), which runs Jakarta’s revamped Tanjung Priok port, needs 40 trillion to 50 trillion rupiah (RM12.8 billion to RM16.09 billion) over the next three years to build at least three new ports and other infrastructure, said president director Elvyn G. Masassya.
Pelindo 2, which issued US$1.6 billion worth of bonds two years ago, is now in talks with potential investors from China and other countries, Masassya said, adding that he was confident the company could raise enough money.
Another port operator, PT Pelabuhan Indonesia III (Pelindo 3), is planning to raise up to 5.5 trillion rupiah from a bond issue this year.
Fitch Ratings said in April that Pelindo 3’s estimated cash flow from operations of 14 trillion rupiah over 2017-2020 would not cover forecast capital expenditure of 22 trillion rupiah.
Pelindo 3 CEO Ari Askhara this week said the spending plan was “still an estimation” and that any shortage of funds could be filled by tapping capital markets or getting bank loans.
While the dwell time — how long it takes cargo to move through a port — has dropped to around three days at Jakarta’s port over the last few years, experts estimate that it still takes eight days or more at Indonesia’s secondary ports. Reuters