Indonesia’s ambitious plans for the new port of Tanjung Sauh appear to overlook the fact that Singapore is far from ready to hand over its transshipment crown, least of all to a nearby competitor.Singapore’s relentless cargo growth of 5.7% last year, up to 31.6 million teu, indicates that it is still catering well to customers’ transshipment needs. The same applies to nearby Tanjung Pelepas. Although its traffic increased by only 2.1%, up to 7.7 million teu, this was preceded by 19.7% growth in 2011.
Indonesia’s plans to build a competing container terminal in nearby Tanjung Sauh with a capacity of 4 million teu is surprising to say the least, therefore, but it does have some local cargo arguments on its side.
Apart from the global economic meltdown of 2009, the emerging country’s economy grew by about 6% per annum between 2005-2012, helping to increase its container traffic from nearly 7 million teu to more than 12 million teu, which means that, regardless of its success as an international transshipment centre, the new port does have another big market to target.
This will be assisted by the fact that the world’s largest archipelago nation has approximately 2,000 ports to serve, ranging from wooden jetties to modern terminals, making transshipment essential. Only 18 ports are involved with containerised cargo and the largest, Tanjung Priok, handled nearly half of the country’s containerised cargo last year. However, being off the beaten track, Tanjung Priok attracts few direct services, which is why Tanjung Sauh is viewed so favourably. Singapore is only a stone’s throw away, so has no geographic advantage, added to which Tanjung Sauh also has deep-water.
Another factor in the favour of Tanjung Sauh is that Indonesia’s port utilisation has reached alarming levels. To maintain the growth in domestic and international container trade, container handling infrastructure desperately needs to be upgraded, so, apart from Tanjung Sauh, the Indonesian Government is planning the construction of several smaller container ports to spread the burden of container stuffing and unstuffing operations. For example, work on the Kalibaru Port project has also been started by Indonesian Port Corporation (IPC), known as Pelindo II, the sole developer of the project.
Tanjung Sauh, located between the islands of Batam and Bintan, involves an initial investment of $756 million. The first phase, which is expected to be completed by 2015, will have a 2 kilometre long wharf. A further 4.5 km of wharf is expected to be built during the later stage of development. The location already has good draught, so requires no dredging. The port will be connected to Batam via a bridge. There are several other hard and soft infrastructural plans to support the functioning of the proposed port.
On average, 50 million teu pass through the Strait of Malacca in a year, so only a small market share is targeted.
However, Indonesia’s track record does not bode well, including;
•    Past port projects being delayed and aborted. For example, the Indonesian Government recently tendered the development of a new terminal near Tanjung Priok, to which HPH responded, only to see the tender subsequently cancelled, and the management contract awarded to a state-owned company.
•    It has a habit of protecting state-owned interests, so attracting a good overseas terminal manager will be difficult. The presence of a global terminal operator will definitely be a threat to its state-run ports/terminals on other islands.
•    To this day, the Indonesian Government remains silent on the financial help it intends to offer Tanjung Sauh to overcome economies of scale provided by nearby Singapore. It will be difficult, if not impossible, for the new port to initially compete against Singapore’s tariff charges.
•    Indonesian ports are not renowned for efficiency, so shipping lines will need to be persuaded that poor port performance in other Indonesian ports will not be replicated at the new hub terminal.
It is not yet clear how the new port will fit into the country’s overall transport infrastructure. Creating port infrastructure alone will result in the terminal becoming isolated from the rest of the Indonesian archipelago if issues like connectivity, ease of custom operations etc. are not properly addressed. Indonesia was in a poor 59th position in the World Bank’s Logistics Performance Index (LPI), whereas Singapore is at the top.
Our View
Drewry remains apprehensive over the feasibility of the proposed hub terminal in Tanjung Sauh. However, if the Indonesian Government means what it says, the port can become a major transshipment centre for the main east-west trades, as well as being a more efficient hub for the rest of the Indonesian archipelago.
Source: Drewry