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Slideshow Sponsored Links Indonesia's clogged ports strain growth prospects Tweet Share this Email Print Related News Analysis: SE Asian governments gamble on making cheap labor less cheap Fri, Dec 7 2012 UPDATE 3-Brazil launches $26 bln drive to fix crowded ports Thu, Dec 6 2012 REFILE-EXCLUSIVE-UPDATE 1-Indonesia 2013 LNG exports to drop 13.8 pct Thu, Dec 6 2012 Three dead as cargo ship sinks off Dutch coast Wed, Dec 5 2012 Los Angeles port workers return to work after strike Wed, Dec 5 2012 Analysis & Opinion Get ready for more public toll bridges and roads Fashion forward Haiti Related Topics World » By Neil Chatterjee and Janeman Latul JAKARTA | Sun Dec 16, 2012 4:05pm EST JAKARTA (Reuters) - At Jakarta's infrastructure monitoring nerve center, live TV cameras track traffic flows on port access roads and highways, satellite images show cloud cover, and a Twitter feed allows officials to respond in real time to any public complaints. But the only movement comes from the flowing screen images, since there is no one working at the room's empty desks. Senior public works officials interviewed by Reuters said they do not know how to use the system. They cannot name a single infrastructure project to be finished in Indonesia's capital this year, despite their budget of $384 million. Only 35 percent of that money had been spent by early December. Indonesia's back-to-back years of economic growth above 6 percent and a youthful population of 240 million have made it a magnet for foreign investment, which jumped 22 percent in the third quarter to $5.9 billion. But until it can efficiently move goods across its 17,000 islands, Indonesia will struggle to live up to its potential. "If we don't sort out our problems then we're in trouble," said R.J. Lino, chief of Indonesian port firm Pelindo, as he surveyed cranes belching diesel smoke and moving containers onto ancient sagging trucks at the country's largest port. It can take seven days for containers to move through the port in Jakarta, which handles two-thirds of the surging trade flows in the G20 economy, the longest time in Southeast Asia and up from around five days a couple of years ago. The inefficiency at Indonesian ports means it is cheaper to send goods to China from Jakarta than to the edge of the archipelago, creating rising logistics costs and the risk of inflation as an Achilles heel for the economy. In neighboring Singapore, by comparison, technicians at the world's busiest port control electric cranes by joystick from an office, moving containers within one day onto cargo ships three times bigger than Jakarta can handle. Lino's state-owned PT Pelabuhan Indonesia II (Pelindo) is seeking to follow suit and modernize itself, from better use of yard space and a new IT system to plans for a whole new $2.5 billion Jakarta port by 2017. But it faces a race against time as the existing Jakarta port is already at full capacity. Firms such as Toyota Motor Corp, Caterpillar Inc and Unilever Indonesia Tbk are investing billions to boost manufacturing on the main Java island and are relying on the state to improve its port infrastructure. "The port is likely to be a growing constraint for the Indonesian economy and for the country's competitiveness," said Henry Sandee, trade specialist in Jakarta at the World Bank. SHAKE-UP Lino worked at Chinese ports before being picked by the government three years ago to try to improve the situation. Giving a pitch for the role, he lambasted the staid bureaucracy and corruption at state-run firms, in front of an audience of stunned ministers. They still gave him the job. In the past decade, container traffic growth in Indonesia grew 5.8 percent, only slightly above the country's average economic growth rate of 5.2 percent in the same period. "It should actually grow three times more compared to our economy. The problem is we don't have the capacity. We have a minimum of hard infrastructure and our productivity is bad. So we need to catch up," said Lino. Traffic at the Tanjung Priok port this year surged 26 percent to around 7.2 million twenty-foot equivalent units (TEUs), the standard measure for container shipping, up from around 5.7 million TEUs last year, as Lino reconfigurated the yard layout to create more container storage space by moving police and customs offices further away from the shore. Patches of tarmac still lie unused, where barefoot workers play football, though it is unclear if capacity can be increased much further before the first phase of Pelindo's new Kalibaru port brings another 4.5 million TEUs in 2017, at the earliest. State-controlled construction firm PT Pembangunan Perumahan Persero is building the port. Groundbreaking is expected to start in January, with the expansion partly funded by a bond issue and equity listing of a Pelindo logistics unit next year. Until Kalibaru, Lino is relying on improvements in soft infrastructure. He wants to bring in a better berthing schedule, and an integrated IT system that aims to links the port with customs, shippers and banking nationwide in the next couple of years. He's also spending $50 million on educating staff. One such motivated employee is Fajar Setyono, who has studied in Japan and hopes to study port management in Sweden. "If we can fix the IT, research shows we can reduce time by one day, with no infrastructure," said Setyono. "If we move the containers faster, capacity will rise without adding yards." LAND RUN Changing the soft infrastructure is no easy task. Jakarta's public works officials could only cite one road flyover, meant to be done this year, that might finish in 2013, according to interviews with the department's chief Ery Basworo and his deputies at their headquarters. That doesn't bode well for a critical toll road that is meant to link the port to Jakarta's ring road within a couple of years. There are also plans to build a railway from the port to a dry storage port near industrial estates, but no new railway has been built in Indonesia for more than 60 years. "These plans are much less advanced than the port itself," said the World Bank's Sandee. "There's a lack of bureaucratic capacity. Government agencies are not equipped to manage these large scale tenders." Local media reported on Friday that Indonesia's public works ministry planned to open bidding for 22,736 infrastructure contracts worth 73.41 trillion rupiah ($7.62 billion)in 2013. How many projects will actually be completed - or even started - is an open question. Officials cite land acquisition as the key problem to infrastructure, despite a long-awaited new land bill. "The reality is we still have a problem with the price of land," said public works official Yusmada Faisal, adding prices had risen 10 percent this year and negotiations took months, as landowners sought three times what they were willing to pay. ADVANTAGE CHINA These problems mean that, despite Lino's best efforts, the World Bank still sees the "dwell" time for a container to move through the Jakarta port rising to 10 or 11 days within five years. Having goods stuck at the port for a few extra days means a need for a few more days worth of inventory, an expensive problem for firms such as Toyota sourcing parts from multiple countries and using a just-in-time inventory system. It is not just the ports but jammed access roads and slow customs. Shipping goods from an industrial site near Jakarta onto a cargo ship costs around $700 per container, versus $420 from a similar site in Malaysia, Sandee said. Sending that container from Jakarta to China, Indonesia's top trade partner, costs up to $200 per TEU. It costs twice as much to ship it to Belawan, Indonesia's No.3 port near the city of Medan on western Sumatra island. To get it all the way to Sorong, in the easternmost Indonesian region of Papua, the bill soars to $2,000, Lino said. "If we don't do anything about this then it will be a big advantage for China," said Lino. (Additional reporting by Nilufar Rizki; Editing by Emily Kaiser) World Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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