Indonesian Ports: Current Trends and Future Requirements
Indonesian ports:
Current trends and
future requirements
Truong Bui, Project Manager
Jakarta, June 11&12, 2014
Todays agenda
A. Key industry trends
Page
3
B. Indonesia port sector
14
C. Main challenges for port and maritime industry
19
D. Vision for the port sector
26
E. Strategies for the future
29
This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may
not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completeness
and accuracy of the statements made in this document.
© Roland Berger Strategy Consultants
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A. Key industry trends
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Five key industry trends will underpin the short, medium and longer
term port and and shipping landscape
1
Sustained cargo traffic growth
2
Asia benefiting from maritime trade boom
3
Potential changes in shipping patterns
4
Larger container vessels
5
Regulation and cost efficiency drives technological trends
Source: Roland Berger
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1
Sustained cargo traffic growth
Global shipment demand has expanded by ~50% during the past
decade, bolstered by strong growth in containerized cargo
Global shipment demand, historical [2002-12, MT]
10Y-CAGR
+53.2%
5,642
2,552
5,936
2,666
6,333
2,754
6,711
2,851
7,171
2,975
7,578
7,655
8,016
3,082
3,154
3,001
2,972
8,644
+4.4%
3,410
+2.9%
7,305
3,056
3,170
8,285
3,166
3,268
3,389
3,465
3,615
+4.6%
+7.4%
3,027
2,295
2,372
2,556
2,739
795
898
1,023
1,121
1,223
1,352
1,419
1,277
1,461
1,552
1,620
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Liquid bulk
Dry bulk
1) Incl. general cargo
Source: UNCTAD, Roland Berger analysis
Containerized cargo1)
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2
Asia benefiting from maritime trade boom
Today Asia accounts for the largest proportion of global maritime
trade, recording steady growth in its market share
Total maritime trade by region [m Tons]
Share of world maritime trade [2012 - %]
Others
+11%
Africa
7,773
9%
Oceania
7,006
6%
39%
11%
Asia
Export
3,377
3,236
+13%
3,098
3,770
2006
4,396
2012
Asia
Exports
Europe
13%
-5%
3,512
1,576
2,088
1,522
1,424
2006
2012
America
23%
3,168
2,997
1,105
1,148
2,063
1,849
2006
2012
Europe
America
Africa Others
Oceania
1% 2%
Europe
4%
20%
Imports
57% Asia
16%
America
Imports
Source: Review of Maritime Transport 2013; UNCTAD; Roland Berger
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Asia benefiting from maritime trade boom
2
Asia not only contributes the most to the total maritime trade, but
has also shown a steady growth in its market share
Global maritime activity, 2006 - 2012
Maritime trade - North America
Million tones
Million tones
%
Maritime trade – Asia1)
Maritime trade - Europe
Million tones
%
%
8,000
50
8,000
50
8,000
50
7,000
45
7,000
45
7,000
45
40
6,000
35
40
6,000
35
40
6,000
35
5,000
30
5,000
30
5,000
30
4,000
25
4,000
25
4,000
25
3,000
20
3,000
20
3,000
20
15
2,000
10
15
2,000
10
15
2,000
10
1,000
5
1,000
5
1,000
5
0
0
0
0
0
0
06 07 08 09 10 11 12
Import
Export
% of world import
06 07 08 09 10 11 12
06 07 08 09 10 11 12
% of world export
1) Developing nations in Asia
Source: Review of Maritime Transport 2013, UNCTAD
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3
Potential changes in shipping patterns
While Singapore remains an important hub for east-west cargo flows,
alternative trade routes may potentially arise in the longer future
Cargo flows – East Asia
Breaking the ice
Tsugaru
Tianjin
Promising economic rise
Busan
The opening up of Myanmar's economy
could eventually open shorter East-West
routes bypassing the Straits of Melaka –
from Dawei to Bangkok, Ho Chi Minh
Yokohama
Korea
Ningbo
Shanghai
Shenzhen
Kaohsiung
Hong Kong
Hormuz
Dawei
Mumbai
Economic powerhouse
Colombo
in the making
Indonesia's rise as an economic
powerhouse could draw more
cargo through Jakarta on EastWest route
Main shipping lanes
Sources: UNCTAD, Roland Berger
South
China
Sea
Bangkok
Ho Chi Minh City
Melaka
Kota Kinabalu
Port
Klang
Belawan
PTP
Palembang
Sunda
Major ports
Tokyo
Bintulu
Singapore
Ujung Pandang
Tg Priok
Surabaya
Lombok
Melting Arctic ice could open
commercially viable trade routes for
European cargo heading towards North
East Asia
Torres
Singapore – The preeminent trade hub
> Situated along main EastWest trade route – 30% of
world trade passes through
the Straits of Melaka
> Natural mid-point between 2
key growth markets – India
& China
> Strong inter and intraregional trade flows in
ASEAN
> Crossroads for Middle East
– America west coast
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4
Larger container vessels
There is a clear and persistent trend towards larger container liner
sizes
Evolution of average container liner sizes [TEU]
Average ship
size [TEU]
4,000
3,500
Regina Maersk
7,400 TEU
Largest carrier in the mid 1990s,
other carriers followed suit
Emma Maersk
15,500 TEU
Largest carrier in the mid 2000s,
other carriers followed suit
Maersk Triple E
18,000 TEU
Largest carrier in 2013,
other carriers following suit
3,000
2,500
2,000
1,500
2000 2001 2002
2003 2004 2005 2006 2007 2008 2009 2010
2011 2012 2013 2014F 2015F
> Average size of container vessels has steadily grown over time
> When a market leader introduces a significantly larger vessel into the market, other players eventually follow suit
Source: Alphaliner; Drewry Maritime Advisors; Roland Berger
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4
Larger container vessels
Fleet profile of the future will feature a greater proportion of ULCVs,
- Implications on port planning, design and operations
Current fleet profile breakdown1) [TEU, %]
Majority of current container
vessels range between 4,00010,000 TEU 10.5
4.0
5.0
< 1,000 1,0001,499
5.9
1,5001,999
20.5
17.9
17.6
12.7
6.0
2,0002,999
3,0003,999
4,0005,099
5,1007,499
7,500- > 10,000
9,999
Orderbook fleet profile breakdown1) [TEU, %]
Majority of new build
orders are for container
vessels > 10,000 TEU
48.0
25.3
0.2
0.9
< 1,000 1,0001,499
2.1
2.5
5.9
9.7
1,5001,999
2,0002,999
3,0003,999
4,0005,099
5.6
5,1007,499
> Key implications:
– Port planning & operations
- Deeper drafts, longer berths,
wider channels etc.
- Higher gate pressure – needs
increased productivity, larger
capacity equipment, greater intermodal capacity
– Vessel cascading
- Vessel upsizing on corresponding
spoke routes
– Rationalization of shipping routes
- Re-drawing of hub and spoke
alignments; some hubs dropped
7,500- > 10,000
9,999
Note: ULCV – Ultra large container vessels > 10,000 TEU
1) Breakdown by total capacities in TEU. Based on data as on 1 March 2013.
Source: Alphaliner; Roland Berger
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4
Larger container vessels
The trend towards ultra-large container vessels drives the forming of
alliances among liner operators to achieve greater scale
Trends in alliances
Asia-North Europe capacity shares [%]
P3
Others
CKYH
16.0%
CKYH
18.0%
Maersk
24.0%
CMA CGM
10.0%
G6
21.0%
MSC
11.0%
> Pursuit of scale has led towards even
larger vessel sizes
> In order to fill the ships, reduce
operational risks – liners have entered
into operating, non-commercial alliances
with each other
> Since 2011, the trend towards alliancing
has intensified – there remains now only 3
major alliances controlling > 80% of market
share
> Others are under pressure to "join the
pack"
G6
Increased leverage of liner alliances
over port operators
Source: Drewry Maritime Advisors; Roland Berger
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4
Larger container vessels
As such, consolidation in the container shipping segment via
alliances or mergers is likely to accelerate…
It is likely that P3 would start its operations by end of
2014…
…and would pave the way for expansion or creation of
other alliances.
The world's three largest container liners - Maersk Line, CMA
CGM and MSC to establish the P3 Network, which is due to
start operations in mid-2014
Evergreen Line will join with members of the CKYH alliance -COSCO, “K” Line, Yang Ming and Hanjin -- in operating container
services to the United States East Coast.
It is estimated that Maersk Line put market control of such an
alliance at about 42% on the Asia to Europe route, 24% on the
transpacific routes, and 40-42% on the transatlantic route.
Evergreen, along with COSCO and Hanjin, has filed a vesselsharing agreement with the Federal Maritime Commission saying
they will cooperate on services between the Asia and the U.S.
Atlantic Coast
If approved, P3 will control up to 40% of total cargo moved in
containers from Asia to Europe, and across the Pacific and
Atlantic ocean. The P3 Network will operate a capacity of 2.6m
TEU (Twenty-foot Equivalent Units), with an initial combined fleet
of 255 vessels on 29 loops
Germany's Hapag-Lloyd has just merged with Chilean peer
Compania Sud Americana de Vapores SA, creating the world
fourth-largest container line and controling 4% of the Far eastEurope trade route
Source: Expert interviews, Roland Berger
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5
Regulation and cost efficiency drives technological trends
Changes in regulation and the continuous pursuit of cost efficiency
will drive future technological innovation
Technological trends
Regulation
Cost efficiency
> Historically, technology
adoption in the
maritime sector most
strongly influenced by
regulatory changes –
often as a consequence
of accidents/incidents
> Increased
implementation of
environmental
regulation will drive
research and innovation
in new emissions
control technologies
and advanced fuel
technologies
> The continuous pursuit
of greater cost
efficiency and savings
will drive innovation
> The maturity stage of
individual technologies
affects costs and its
subsequent adoption
> Increased drive for cost
efficiency will drive
research in advanced
fuel technologies due
to high fuel costs as
well as increased
adoption of automation
and ICT
Source: Roland Berger
Advanced fuel
technologies
Automation
Solar sails ship, low
carbon fuels e.g., LNG
ships, slow steaming,
electric ships
Increased automation of
port land and marine
operations
Environmental
technologies
Information
technology
Selective catalytic
reduction converters to
reduce NOx, low energy
ship design e.g., improved
hull design reduces drag
Ship voyage real time
tracking, voyage
optimization by using latest
ocean and weather data, eNavigation
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B. Indonesia port sector
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Growth in Indonesia
Indonesia is going through a period of unprecedented growth and
economic development
Brief economic snapshot of Indonesia
Sustained strong economic growth in
recent years and for foreseeable future
Analysts predict Indonesia to be among
top 10 largest economies by 2050 …
A young, growing population with rising
affluence will sustain growth
GDP Growth Rate, 2008 – 2012 [%]
World GDP Ranking, 2012 [USD bn]
Population Ranges '09-'12, [% total population]
20
15
10
5
United States
16, 245
2
China
8, 227
3
Japan
8, 227
4
Germany
3, 428
5
France
2, 613
10
India
1, 859
16
Indonesia
-5
2009
2010
2011
2012 2013e 2014f 2015f
30%
30%
30%
29%
65%
65%
65%
66%
5%
5%
5%
5%
2009
2010
2011
2012
878
Ages 0-14
1
China
52, 620
2
United States
34, 580
3
India
24, 980
4
Brazil
9, 710
71%
1%
28%
China
Singapore
5
Russia
8, 010
India
Indonesia
9
Indonesia
6, 040
2009
11
France
5, 360
Low income
Malaysia
1) Based on population of age 15+
Source: World Bank, IMF, Goldman Sachs, Roland Berger
Ages 15-64
Ages 65+
Population size per income segment1) [pax]
World GDP Ranking, 2050 [USD bn]
0
2008
1
62%
2%
36%
2010
59%
58%
39%
2%
40%
2%
2011
2012
Middle income
High income
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Major hurdles
However, existing infrastructure and operational hurdles may affect
the country's port and logistics development progress
Global Competitiveness Index Rankings1)
The quality of infrastructure is insufficient to support the country's target
to become a major logistics and maritime hub …
Quality of Overall Infrastructure
Quality of Roads
… and operational difficulties may
dampen interest of new investors
Number of Procedures to Start Business
1
Switzerland
1
United Arab Emirates
1
Canada
2
Hong Kong SAR
2
France
1
New Zealand
5
Singapore
7
Singapore
10
Malaysia
25
Malaysia
23
Malaysia
10
Singapore
61
Thailand
42
Thailand
20
Thailand
82
Indonesia
78
Indonesia
104 Indonesia
Quality of Port Infrastructure
Quality of Railroad Infrastructure
Burden of Customs Procedures
Japan
Switzerland
Singapore
Malaysia
1
2
3
23
Singapore
Finland
Hong Kong SAR
Malaysia
1
Netherlands
2
Singapore
3
Hong Kong SAR
24
Malaysia
1
2
10
18
56
Thailand
44
Indonesia
74
Indonesia
89
Indonesia
72
Thailand
80
Thailand
1) Ranked out of 148 countries
Source: World Economic Forum – Global Competitiveness Index 2013- 2014, Roland Berger
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Traffic growth in Indonesia
The total tonnage handled by these ports has experienced annual
growth of 4.2% to reach 565 m MT in 2013 from 405 m MT in 2005
CAGR 05-13 [%]
Port throughput evolution [m MT]
+36.9%
+4.2%
774
189
465
405
400
123
117
63
71
136
130
425
117
113
69
148
108
61
119
127
132
69
195
203
213
195
100
116
130
136
142
2009
2010
2011
2012
2013
93
2005
2006
2007
2008
Dry Bulk
0.2%
291
6.3%
194
7.2%
72
66
59
99
138
184
84
Liquid Bulk
565
175
81
Source: IPC I, II, III, IV
453
518
71
104
General Cargo
489
540
1.5%
2020
Container
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Traffic growth in Indonesia
Driven by favorable economic drivers, trade activity has been on a
rapid rise
Historical trade data by region, 2009 – 2013 [mil MT]
CAGR: +17.9%
31
25 27 28
16
2009
2013
79 80 86
66 68
2009
229
342 399 417
2009
2013
CAGR: +9.1%
93 111
CAGR: +36.2%
CAGR: +20.9%
CAGR: +7.1%
489
41
31 35
2013
7
14
6
2009
2013
2009
9
12
CAGR: +45.5%
15
10 10 10 10
2013
2
2009
2013
CAGR: -2.3%
128 131 132
2
2009
22
CAGR: +55.5%
2
2
1
2
2013
2009
2013
500km
Export
Source: Statistics Indonesia, Roland Berger
Import
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C. Main challenges for
port and maritime
industry
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Industry and regulatory developments
With the new shipping laws in place, port investment opportunities
for private players have been realised...
Evolution of port sector regulations
Eight National Port
Companies (NPC)
for port
management and
administration
Government
Regulation No. 1:
Port Management
Boards (PMB) to
manage public
ports
Categorisation of general and special
ports:
> PELINDO - ~70 commercial ports
> UPTs/ Regional Administrations – small
ports
> Owners – special ports
1960
1969
1992
1964
1983
Port Authorities to
handle operational
matters and NPCs
to handle
commercial
PMBs were restructured into
> Public Port Corporations (PELINDO) I–IV
for commercial ports
> Directorate General of Sea Transportation
for non-commercial ports
> National and Local Port Master
Plan,
> Port/ terminal development &
operational approvals
> Permits and tariffs
> Foreign-trading ports promotion
> Port information systems
2009
2008
Shipping and Port Act No. 17: PELINDO
removed as regulator only to act as
operator setting tariffs freely, subject to
local port authorities’ approval
Port sector privatization
Source: Roland Berger
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Sumatra
Belawan
> IDR 3 trn investment
> Dock and equipment addition being
done urgently
> Additional CY space, to be fully
ready by 2015
1
Kuala Tanjung
> IDR 6.5 trn investment
> Capacity of 1.5 m TEUs/ year
> With a 2.5 m ton/ year CPO
terminal
> Ready by 2015
2
3
4
> Investment in dock area, CY
space, container port terminal,
road access and also access within
the harbor
Dumai
> Investment of IDR 6 trn
> Yard storage, container, dry bulk, liquid and
passenger terminal including warehouse space
> Primarily serving commodities E.g. CPO
Pekanbaru
5
Sumatra
Teluk Bayur
> Procurement of equipments
and expansion of dock
> Projected cost of IDR 675 bn
> Capacity of 4k TEUs
Source: Roland Berger
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Java
Madura
Tanjung priok
> Privately developed industrial city
(Lamicitra Nusantara Tbk)
> 10k ha land as an integrated seaport
> USD 600 m/ project x 10 projects
> Development of new
Priok Port in North
Kalibaru adding an
additional capacity of 9
m TEUs by 2023
1
2
Java
Cilamaya
>
>
>
>
Proposed investment of USD 1.03 bn
Capacity of 10 m TEUs
Operators still to be chosen
Scheduled completion in 2019
Source: IPC II. Roland Berger
3
4
Gresik
> Increase the general cargo, liquid bulk, channel and
basin over two stages
> Scheduled final completion is 2014
> IPC III to jointly build an industrial estate and deep
water port with AKR of Gresik
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Kalimantan
Pontianak
> The proposed port would be
able to process up to 3 million
TEU pa as well as 15 million
tonnes of bulk cargo and over
20 million tonnes of liquids
1
Kalimantan
Banjarmasin
2
Source: IPC II. Roland Berger
> New channel built by private company
increasing throughput greatly
> Revenue earned by users on /MT basis
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments Eastern regions
Bitung
Ambon
> National strategic port under country
Masterplan (MP3EI)
> Incl. 500 ha industrial zone
> Road works to port is IDR 2 trn
> Would increase regions GDP to IDR
50 trn by 2025
>
>
>
>
Land reclamation
New dock
Quay extension
Increased container volume
~320k TEUs by 2025/ month
> Currently 36k TEUs per
month
> Expansion delayed due to
financial problems (gov't
budget)
1
2
Sulawesi
3
Papua
4
Makassar
Sorong
> IDR 7 trn investment
> Starting in 2014 with Pelindo IV
> Looking for private/ state run
companies to construct the port or
foreign entity
> IPC II would work on the
plan to build a new
Sorong to be one of the
hub in Eastern region of
Indonesia.
Source: Roland Berger
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Industry and regulatory developments
Despite new legislation and increased capital, there are general
concerns regarding the development progress of the port sector
Repercussions of changes in legislation
Concerns
Lack of coordination between different institutes within
the port sector
Widespread expansion of development
across the archipelago through:
Slow yielding projects – Port projects take significant
amount of investment and time to realize returns
> Competition in the development and
operation of ports thus breaking state
monopoly
New Port Authorities staff have poor expertise in port
sectors.
> Improvement in inter-island transports
connectivity
The overlap and ambiguity over the role of new Port
Authorities and Operators (especially the Pelindos)
> Reduction of transport costs
Multiple implementation of the law
Lack of clear master plan for the country’s port sector
Source: Roland Berger
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D. Vision for the port
sector
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26
The port vision should focus on the transport chain which has three
main segments
Supplier
Port of orgin
Transport to port
Port of destination
Transport to destination port
Customer
Transport to customer
Forwarder/3PL
Connectivity to port
Connectivity between port
Connectivity from port
> Road quality and capacity
> Train frequency, punctulity and
number of destinations
> Pipe size
> River width and draft
>
>
>
>
> Road quality and capacity
> Train frequency, punctulity and
number of destinations
> Pipe size
> River width and draft
Location to nearby sealane
aligned paperwork between ports
Aligned operations between ports
Relationship with shipping lines
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Port vision for Indonesia ports should contains solid plans to
increase port performance and connectivity and network expansion
Port strategy elements
1
Port performance
> Improve port facilities
> Improve the skills of port labours
> Improve master planning
2
1
Increase connectivity
> Road quality and capacity
> Train frequency, punctuality and number of
destinations
> Attract the industry
> Increase river width and draft
> Increase connectivity with associated ports
Performance
Port Vision
3
3
2
Network
Connectivity
Expanding the network
>
>
>
>
Follow the industry
Create the shipping corridor /shipping network
Create own network
Develop strategic parnerships with other port in
containers, energy, petrochemicals and dry bulk
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E. Strategies for the
future
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29
Strategies for the port and maritime industry
Key goals have been identified in order to further the nation's efforts
in developing its port industry
Key industry goals
1
Overcoming institutional challenges
2
Revising Java-centric economic initiatives and policies
3
Reducing reluctance to expand eastwards
4
Improving under investment in ports, particularly in the East
5
Developing logistics infrastructure in remote areas
6
Modernising commercial and internal traffic fleets
Source: Roland Berger
The process to establish and expand existing ports are still heavily bureaucratic
The nation is primarily focused in further developing the economy in Java
There is an existing lack of enthusiasm to tap into the growing potential of the port industry in the East
Investments are almost solely fixed on the Sumatera-Java-Kalimantan belt which excludes finances pouring into the East
Considering the isolated locations of some regions, there may be difficulty in establishing operations there
Dated fleets are hampering the growth of the shipping and logistics industry in Indonesia
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Strategies for the port and maritime industry
Three core strategies should serve as a guide to the development
initiatives of the Indonesian port sector
Core development strategies
1
Increase attractiveness to invest in the Indonesian port sector
> Process to establish and expand existing ports are still heavily bureaucratic
> Investment climate in recent years has not been encouraging
2
Shift and expand development focus from Java
> Existing initiatives and policies are heavily centred around development of the port industry in Java
> There is a lack of enthusiasm to tap into the growing potential within the East
> Investments are almost solely fixed on the Sumatera-Java-Kalimantan belt, excluding participants further east
> Disinterest in developing the logistics in the east
3
Revitalise existing ports and fleets
> Indonesian port infrastructure is ranked in the bottom half of global port rankings1)
> Dated fleets are hampering the growth of the shipping and logistics industry in Indonesia
Source: Roland Berger
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Truong Bui
Project Manager
Roland Berger Strategy Consultants Pte. Ltd.
50 Collyer Quay, #10-02 OUE Bayfront
Singapore 049321
Tel
+65 6597 4567
Mobile +65 8321 2170
Fax
+65 6597 4531
truong.bui@rolandberger.com
Current trends and
future requirements
Truong Bui, Project Manager
Jakarta, June 11&12, 2014
Todays agenda
A. Key industry trends
Page
3
B. Indonesia port sector
14
C. Main challenges for port and maritime industry
19
D. Vision for the port sector
26
E. Strategies for the future
29
This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may
not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completeness
and accuracy of the statements made in this document.
© Roland Berger Strategy Consultants
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2
A. Key industry trends
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3
Five key industry trends will underpin the short, medium and longer
term port and and shipping landscape
1
Sustained cargo traffic growth
2
Asia benefiting from maritime trade boom
3
Potential changes in shipping patterns
4
Larger container vessels
5
Regulation and cost efficiency drives technological trends
Source: Roland Berger
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4
1
Sustained cargo traffic growth
Global shipment demand has expanded by ~50% during the past
decade, bolstered by strong growth in containerized cargo
Global shipment demand, historical [2002-12, MT]
10Y-CAGR
+53.2%
5,642
2,552
5,936
2,666
6,333
2,754
6,711
2,851
7,171
2,975
7,578
7,655
8,016
3,082
3,154
3,001
2,972
8,644
+4.4%
3,410
+2.9%
7,305
3,056
3,170
8,285
3,166
3,268
3,389
3,465
3,615
+4.6%
+7.4%
3,027
2,295
2,372
2,556
2,739
795
898
1,023
1,121
1,223
1,352
1,419
1,277
1,461
1,552
1,620
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Liquid bulk
Dry bulk
1) Incl. general cargo
Source: UNCTAD, Roland Berger analysis
Containerized cargo1)
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5
2
Asia benefiting from maritime trade boom
Today Asia accounts for the largest proportion of global maritime
trade, recording steady growth in its market share
Total maritime trade by region [m Tons]
Share of world maritime trade [2012 - %]
Others
+11%
Africa
7,773
9%
Oceania
7,006
6%
39%
11%
Asia
Export
3,377
3,236
+13%
3,098
3,770
2006
4,396
2012
Asia
Exports
Europe
13%
-5%
3,512
1,576
2,088
1,522
1,424
2006
2012
America
23%
3,168
2,997
1,105
1,148
2,063
1,849
2006
2012
Europe
America
Africa Others
Oceania
1% 2%
Europe
4%
20%
Imports
57% Asia
16%
America
Imports
Source: Review of Maritime Transport 2013; UNCTAD; Roland Berger
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Asia benefiting from maritime trade boom
2
Asia not only contributes the most to the total maritime trade, but
has also shown a steady growth in its market share
Global maritime activity, 2006 - 2012
Maritime trade - North America
Million tones
Million tones
%
Maritime trade – Asia1)
Maritime trade - Europe
Million tones
%
%
8,000
50
8,000
50
8,000
50
7,000
45
7,000
45
7,000
45
40
6,000
35
40
6,000
35
40
6,000
35
5,000
30
5,000
30
5,000
30
4,000
25
4,000
25
4,000
25
3,000
20
3,000
20
3,000
20
15
2,000
10
15
2,000
10
15
2,000
10
1,000
5
1,000
5
1,000
5
0
0
0
0
0
0
06 07 08 09 10 11 12
Import
Export
% of world import
06 07 08 09 10 11 12
06 07 08 09 10 11 12
% of world export
1) Developing nations in Asia
Source: Review of Maritime Transport 2013, UNCTAD
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3
Potential changes in shipping patterns
While Singapore remains an important hub for east-west cargo flows,
alternative trade routes may potentially arise in the longer future
Cargo flows – East Asia
Breaking the ice
Tsugaru
Tianjin
Promising economic rise
Busan
The opening up of Myanmar's economy
could eventually open shorter East-West
routes bypassing the Straits of Melaka –
from Dawei to Bangkok, Ho Chi Minh
Yokohama
Korea
Ningbo
Shanghai
Shenzhen
Kaohsiung
Hong Kong
Hormuz
Dawei
Mumbai
Economic powerhouse
Colombo
in the making
Indonesia's rise as an economic
powerhouse could draw more
cargo through Jakarta on EastWest route
Main shipping lanes
Sources: UNCTAD, Roland Berger
South
China
Sea
Bangkok
Ho Chi Minh City
Melaka
Kota Kinabalu
Port
Klang
Belawan
PTP
Palembang
Sunda
Major ports
Tokyo
Bintulu
Singapore
Ujung Pandang
Tg Priok
Surabaya
Lombok
Melting Arctic ice could open
commercially viable trade routes for
European cargo heading towards North
East Asia
Torres
Singapore – The preeminent trade hub
> Situated along main EastWest trade route – 30% of
world trade passes through
the Straits of Melaka
> Natural mid-point between 2
key growth markets – India
& China
> Strong inter and intraregional trade flows in
ASEAN
> Crossroads for Middle East
– America west coast
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4
Larger container vessels
There is a clear and persistent trend towards larger container liner
sizes
Evolution of average container liner sizes [TEU]
Average ship
size [TEU]
4,000
3,500
Regina Maersk
7,400 TEU
Largest carrier in the mid 1990s,
other carriers followed suit
Emma Maersk
15,500 TEU
Largest carrier in the mid 2000s,
other carriers followed suit
Maersk Triple E
18,000 TEU
Largest carrier in 2013,
other carriers following suit
3,000
2,500
2,000
1,500
2000 2001 2002
2003 2004 2005 2006 2007 2008 2009 2010
2011 2012 2013 2014F 2015F
> Average size of container vessels has steadily grown over time
> When a market leader introduces a significantly larger vessel into the market, other players eventually follow suit
Source: Alphaliner; Drewry Maritime Advisors; Roland Berger
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4
Larger container vessels
Fleet profile of the future will feature a greater proportion of ULCVs,
- Implications on port planning, design and operations
Current fleet profile breakdown1) [TEU, %]
Majority of current container
vessels range between 4,00010,000 TEU 10.5
4.0
5.0
< 1,000 1,0001,499
5.9
1,5001,999
20.5
17.9
17.6
12.7
6.0
2,0002,999
3,0003,999
4,0005,099
5,1007,499
7,500- > 10,000
9,999
Orderbook fleet profile breakdown1) [TEU, %]
Majority of new build
orders are for container
vessels > 10,000 TEU
48.0
25.3
0.2
0.9
< 1,000 1,0001,499
2.1
2.5
5.9
9.7
1,5001,999
2,0002,999
3,0003,999
4,0005,099
5.6
5,1007,499
> Key implications:
– Port planning & operations
- Deeper drafts, longer berths,
wider channels etc.
- Higher gate pressure – needs
increased productivity, larger
capacity equipment, greater intermodal capacity
– Vessel cascading
- Vessel upsizing on corresponding
spoke routes
– Rationalization of shipping routes
- Re-drawing of hub and spoke
alignments; some hubs dropped
7,500- > 10,000
9,999
Note: ULCV – Ultra large container vessels > 10,000 TEU
1) Breakdown by total capacities in TEU. Based on data as on 1 March 2013.
Source: Alphaliner; Roland Berger
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4
Larger container vessels
The trend towards ultra-large container vessels drives the forming of
alliances among liner operators to achieve greater scale
Trends in alliances
Asia-North Europe capacity shares [%]
P3
Others
CKYH
16.0%
CKYH
18.0%
Maersk
24.0%
CMA CGM
10.0%
G6
21.0%
MSC
11.0%
> Pursuit of scale has led towards even
larger vessel sizes
> In order to fill the ships, reduce
operational risks – liners have entered
into operating, non-commercial alliances
with each other
> Since 2011, the trend towards alliancing
has intensified – there remains now only 3
major alliances controlling > 80% of market
share
> Others are under pressure to "join the
pack"
G6
Increased leverage of liner alliances
over port operators
Source: Drewry Maritime Advisors; Roland Berger
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4
Larger container vessels
As such, consolidation in the container shipping segment via
alliances or mergers is likely to accelerate…
It is likely that P3 would start its operations by end of
2014…
…and would pave the way for expansion or creation of
other alliances.
The world's three largest container liners - Maersk Line, CMA
CGM and MSC to establish the P3 Network, which is due to
start operations in mid-2014
Evergreen Line will join with members of the CKYH alliance -COSCO, “K” Line, Yang Ming and Hanjin -- in operating container
services to the United States East Coast.
It is estimated that Maersk Line put market control of such an
alliance at about 42% on the Asia to Europe route, 24% on the
transpacific routes, and 40-42% on the transatlantic route.
Evergreen, along with COSCO and Hanjin, has filed a vesselsharing agreement with the Federal Maritime Commission saying
they will cooperate on services between the Asia and the U.S.
Atlantic Coast
If approved, P3 will control up to 40% of total cargo moved in
containers from Asia to Europe, and across the Pacific and
Atlantic ocean. The P3 Network will operate a capacity of 2.6m
TEU (Twenty-foot Equivalent Units), with an initial combined fleet
of 255 vessels on 29 loops
Germany's Hapag-Lloyd has just merged with Chilean peer
Compania Sud Americana de Vapores SA, creating the world
fourth-largest container line and controling 4% of the Far eastEurope trade route
Source: Expert interviews, Roland Berger
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5
Regulation and cost efficiency drives technological trends
Changes in regulation and the continuous pursuit of cost efficiency
will drive future technological innovation
Technological trends
Regulation
Cost efficiency
> Historically, technology
adoption in the
maritime sector most
strongly influenced by
regulatory changes –
often as a consequence
of accidents/incidents
> Increased
implementation of
environmental
regulation will drive
research and innovation
in new emissions
control technologies
and advanced fuel
technologies
> The continuous pursuit
of greater cost
efficiency and savings
will drive innovation
> The maturity stage of
individual technologies
affects costs and its
subsequent adoption
> Increased drive for cost
efficiency will drive
research in advanced
fuel technologies due
to high fuel costs as
well as increased
adoption of automation
and ICT
Source: Roland Berger
Advanced fuel
technologies
Automation
Solar sails ship, low
carbon fuels e.g., LNG
ships, slow steaming,
electric ships
Increased automation of
port land and marine
operations
Environmental
technologies
Information
technology
Selective catalytic
reduction converters to
reduce NOx, low energy
ship design e.g., improved
hull design reduces drag
Ship voyage real time
tracking, voyage
optimization by using latest
ocean and weather data, eNavigation
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B. Indonesia port sector
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14
Growth in Indonesia
Indonesia is going through a period of unprecedented growth and
economic development
Brief economic snapshot of Indonesia
Sustained strong economic growth in
recent years and for foreseeable future
Analysts predict Indonesia to be among
top 10 largest economies by 2050 …
A young, growing population with rising
affluence will sustain growth
GDP Growth Rate, 2008 – 2012 [%]
World GDP Ranking, 2012 [USD bn]
Population Ranges '09-'12, [% total population]
20
15
10
5
United States
16, 245
2
China
8, 227
3
Japan
8, 227
4
Germany
3, 428
5
France
2, 613
10
India
1, 859
16
Indonesia
-5
2009
2010
2011
2012 2013e 2014f 2015f
30%
30%
30%
29%
65%
65%
65%
66%
5%
5%
5%
5%
2009
2010
2011
2012
878
Ages 0-14
1
China
52, 620
2
United States
34, 580
3
India
24, 980
4
Brazil
9, 710
71%
1%
28%
China
Singapore
5
Russia
8, 010
India
Indonesia
9
Indonesia
6, 040
2009
11
France
5, 360
Low income
Malaysia
1) Based on population of age 15+
Source: World Bank, IMF, Goldman Sachs, Roland Berger
Ages 15-64
Ages 65+
Population size per income segment1) [pax]
World GDP Ranking, 2050 [USD bn]
0
2008
1
62%
2%
36%
2010
59%
58%
39%
2%
40%
2%
2011
2012
Middle income
High income
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Major hurdles
However, existing infrastructure and operational hurdles may affect
the country's port and logistics development progress
Global Competitiveness Index Rankings1)
The quality of infrastructure is insufficient to support the country's target
to become a major logistics and maritime hub …
Quality of Overall Infrastructure
Quality of Roads
… and operational difficulties may
dampen interest of new investors
Number of Procedures to Start Business
1
Switzerland
1
United Arab Emirates
1
Canada
2
Hong Kong SAR
2
France
1
New Zealand
5
Singapore
7
Singapore
10
Malaysia
25
Malaysia
23
Malaysia
10
Singapore
61
Thailand
42
Thailand
20
Thailand
82
Indonesia
78
Indonesia
104 Indonesia
Quality of Port Infrastructure
Quality of Railroad Infrastructure
Burden of Customs Procedures
Japan
Switzerland
Singapore
Malaysia
1
2
3
23
Singapore
Finland
Hong Kong SAR
Malaysia
1
Netherlands
2
Singapore
3
Hong Kong SAR
24
Malaysia
1
2
10
18
56
Thailand
44
Indonesia
74
Indonesia
89
Indonesia
72
Thailand
80
Thailand
1) Ranked out of 148 countries
Source: World Economic Forum – Global Competitiveness Index 2013- 2014, Roland Berger
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Traffic growth in Indonesia
The total tonnage handled by these ports has experienced annual
growth of 4.2% to reach 565 m MT in 2013 from 405 m MT in 2005
CAGR 05-13 [%]
Port throughput evolution [m MT]
+36.9%
+4.2%
774
189
465
405
400
123
117
63
71
136
130
425
117
113
69
148
108
61
119
127
132
69
195
203
213
195
100
116
130
136
142
2009
2010
2011
2012
2013
93
2005
2006
2007
2008
Dry Bulk
0.2%
291
6.3%
194
7.2%
72
66
59
99
138
184
84
Liquid Bulk
565
175
81
Source: IPC I, II, III, IV
453
518
71
104
General Cargo
489
540
1.5%
2020
Container
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Traffic growth in Indonesia
Driven by favorable economic drivers, trade activity has been on a
rapid rise
Historical trade data by region, 2009 – 2013 [mil MT]
CAGR: +17.9%
31
25 27 28
16
2009
2013
79 80 86
66 68
2009
229
342 399 417
2009
2013
CAGR: +9.1%
93 111
CAGR: +36.2%
CAGR: +20.9%
CAGR: +7.1%
489
41
31 35
2013
7
14
6
2009
2013
2009
9
12
CAGR: +45.5%
15
10 10 10 10
2013
2
2009
2013
CAGR: -2.3%
128 131 132
2
2009
22
CAGR: +55.5%
2
2
1
2
2013
2009
2013
500km
Export
Source: Statistics Indonesia, Roland Berger
Import
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C. Main challenges for
port and maritime
industry
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Industry and regulatory developments
With the new shipping laws in place, port investment opportunities
for private players have been realised...
Evolution of port sector regulations
Eight National Port
Companies (NPC)
for port
management and
administration
Government
Regulation No. 1:
Port Management
Boards (PMB) to
manage public
ports
Categorisation of general and special
ports:
> PELINDO - ~70 commercial ports
> UPTs/ Regional Administrations – small
ports
> Owners – special ports
1960
1969
1992
1964
1983
Port Authorities to
handle operational
matters and NPCs
to handle
commercial
PMBs were restructured into
> Public Port Corporations (PELINDO) I–IV
for commercial ports
> Directorate General of Sea Transportation
for non-commercial ports
> National and Local Port Master
Plan,
> Port/ terminal development &
operational approvals
> Permits and tariffs
> Foreign-trading ports promotion
> Port information systems
2009
2008
Shipping and Port Act No. 17: PELINDO
removed as regulator only to act as
operator setting tariffs freely, subject to
local port authorities’ approval
Port sector privatization
Source: Roland Berger
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Sumatra
Belawan
> IDR 3 trn investment
> Dock and equipment addition being
done urgently
> Additional CY space, to be fully
ready by 2015
1
Kuala Tanjung
> IDR 6.5 trn investment
> Capacity of 1.5 m TEUs/ year
> With a 2.5 m ton/ year CPO
terminal
> Ready by 2015
2
3
4
> Investment in dock area, CY
space, container port terminal,
road access and also access within
the harbor
Dumai
> Investment of IDR 6 trn
> Yard storage, container, dry bulk, liquid and
passenger terminal including warehouse space
> Primarily serving commodities E.g. CPO
Pekanbaru
5
Sumatra
Teluk Bayur
> Procurement of equipments
and expansion of dock
> Projected cost of IDR 675 bn
> Capacity of 4k TEUs
Source: Roland Berger
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Java
Madura
Tanjung priok
> Privately developed industrial city
(Lamicitra Nusantara Tbk)
> 10k ha land as an integrated seaport
> USD 600 m/ project x 10 projects
> Development of new
Priok Port in North
Kalibaru adding an
additional capacity of 9
m TEUs by 2023
1
2
Java
Cilamaya
>
>
>
>
Proposed investment of USD 1.03 bn
Capacity of 10 m TEUs
Operators still to be chosen
Scheduled completion in 2019
Source: IPC II. Roland Berger
3
4
Gresik
> Increase the general cargo, liquid bulk, channel and
basin over two stages
> Scheduled final completion is 2014
> IPC III to jointly build an industrial estate and deep
water port with AKR of Gresik
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments in Kalimantan
Pontianak
> The proposed port would be
able to process up to 3 million
TEU pa as well as 15 million
tonnes of bulk cargo and over
20 million tonnes of liquids
1
Kalimantan
Banjarmasin
2
Source: IPC II. Roland Berger
> New channel built by private company
increasing throughput greatly
> Revenue earned by users on /MT basis
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Review of port development in Indonesia
... allowing an increase in influx of capital investment to further
development and expansion of the port industry
Summary of upcoming port developments & investments Eastern regions
Bitung
Ambon
> National strategic port under country
Masterplan (MP3EI)
> Incl. 500 ha industrial zone
> Road works to port is IDR 2 trn
> Would increase regions GDP to IDR
50 trn by 2025
>
>
>
>
Land reclamation
New dock
Quay extension
Increased container volume
~320k TEUs by 2025/ month
> Currently 36k TEUs per
month
> Expansion delayed due to
financial problems (gov't
budget)
1
2
Sulawesi
3
Papua
4
Makassar
Sorong
> IDR 7 trn investment
> Starting in 2014 with Pelindo IV
> Looking for private/ state run
companies to construct the port or
foreign entity
> IPC II would work on the
plan to build a new
Sorong to be one of the
hub in Eastern region of
Indonesia.
Source: Roland Berger
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24
Industry and regulatory developments
Despite new legislation and increased capital, there are general
concerns regarding the development progress of the port sector
Repercussions of changes in legislation
Concerns
Lack of coordination between different institutes within
the port sector
Widespread expansion of development
across the archipelago through:
Slow yielding projects – Port projects take significant
amount of investment and time to realize returns
> Competition in the development and
operation of ports thus breaking state
monopoly
New Port Authorities staff have poor expertise in port
sectors.
> Improvement in inter-island transports
connectivity
The overlap and ambiguity over the role of new Port
Authorities and Operators (especially the Pelindos)
> Reduction of transport costs
Multiple implementation of the law
Lack of clear master plan for the country’s port sector
Source: Roland Berger
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25
D. Vision for the port
sector
20140611_Indonesian Ports_vf.pptx
26
The port vision should focus on the transport chain which has three
main segments
Supplier
Port of orgin
Transport to port
Port of destination
Transport to destination port
Customer
Transport to customer
Forwarder/3PL
Connectivity to port
Connectivity between port
Connectivity from port
> Road quality and capacity
> Train frequency, punctulity and
number of destinations
> Pipe size
> River width and draft
>
>
>
>
> Road quality and capacity
> Train frequency, punctulity and
number of destinations
> Pipe size
> River width and draft
Location to nearby sealane
aligned paperwork between ports
Aligned operations between ports
Relationship with shipping lines
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27
Port vision for Indonesia ports should contains solid plans to
increase port performance and connectivity and network expansion
Port strategy elements
1
Port performance
> Improve port facilities
> Improve the skills of port labours
> Improve master planning
2
1
Increase connectivity
> Road quality and capacity
> Train frequency, punctuality and number of
destinations
> Attract the industry
> Increase river width and draft
> Increase connectivity with associated ports
Performance
Port Vision
3
3
2
Network
Connectivity
Expanding the network
>
>
>
>
Follow the industry
Create the shipping corridor /shipping network
Create own network
Develop strategic parnerships with other port in
containers, energy, petrochemicals and dry bulk
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28
E. Strategies for the
future
20140611_Indonesian Ports_vf.pptx
29
Strategies for the port and maritime industry
Key goals have been identified in order to further the nation's efforts
in developing its port industry
Key industry goals
1
Overcoming institutional challenges
2
Revising Java-centric economic initiatives and policies
3
Reducing reluctance to expand eastwards
4
Improving under investment in ports, particularly in the East
5
Developing logistics infrastructure in remote areas
6
Modernising commercial and internal traffic fleets
Source: Roland Berger
The process to establish and expand existing ports are still heavily bureaucratic
The nation is primarily focused in further developing the economy in Java
There is an existing lack of enthusiasm to tap into the growing potential of the port industry in the East
Investments are almost solely fixed on the Sumatera-Java-Kalimantan belt which excludes finances pouring into the East
Considering the isolated locations of some regions, there may be difficulty in establishing operations there
Dated fleets are hampering the growth of the shipping and logistics industry in Indonesia
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30
Strategies for the port and maritime industry
Three core strategies should serve as a guide to the development
initiatives of the Indonesian port sector
Core development strategies
1
Increase attractiveness to invest in the Indonesian port sector
> Process to establish and expand existing ports are still heavily bureaucratic
> Investment climate in recent years has not been encouraging
2
Shift and expand development focus from Java
> Existing initiatives and policies are heavily centred around development of the port industry in Java
> There is a lack of enthusiasm to tap into the growing potential within the East
> Investments are almost solely fixed on the Sumatera-Java-Kalimantan belt, excluding participants further east
> Disinterest in developing the logistics in the east
3
Revitalise existing ports and fleets
> Indonesian port infrastructure is ranked in the bottom half of global port rankings1)
> Dated fleets are hampering the growth of the shipping and logistics industry in Indonesia
Source: Roland Berger
20140611_Indonesian Ports_vf.pptx
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Truong Bui
Project Manager
Roland Berger Strategy Consultants Pte. Ltd.
50 Collyer Quay, #10-02 OUE Bayfront
Singapore 049321
Tel
+65 6597 4567
Mobile +65 8321 2170
Fax
+65 6597 4531
truong.bui@rolandberger.com