Work on a new deepwater port for container ships on an island between Batam and Bintan is set to begin next year, creating a potential rival to Singapore's port.
The port, on Tanjung Sauh, aims to be a major transshipment center for Indonesia, and is part of the country's overhaul of its transport infrastructure to cope with growing domestic demand.
It also looks set to be a direct competitor to Singapore's port, as it aims to capture shipping to and from East Asia.
'They should not just be a centre for transshipment cargo to Indonesia but to other regions, and it will be good if they can keep costs low,' said Wijaya Surya, managing director of Hong Kong-based shipping advisory and consultancy company Aptus Maritime.
As an alternative to Singapore, Wijaya said, 'turnaround time will be a key factor'.
Indonesia Port Corporation (IPC) chief executive Richard J. Lino said the Tanjung Sauh port will more likely 'complement' Singapore.
Container traffic to and from Indonesia is also set to pick up, he said, adding that Singapore 'will also reap the benefits' from a more vibrant Batam.
Lino told said that the port's initial 2km of wharves will target handling four million TEUs - twenty-foot equivalent units, the size of a container - when ready around 2015. He projects the new facility will require an initial investment of seven trillion rupiah (S$967 million).
It will be part of a 'sea corridor' that will also see the ports of Medan, Jakarta, Surabaya, Makassar and Sorong form six large ports that can serve as transit points for smaller feeder ports all across the archipelago.
Vice-minister for Transport Bambang Susantono said this corridor is a private undertaking that will reshape how goods are moved in the region.
For example, smaller ports across the archipelago may see more frequent services to the nearest hubs like Batam and Medan.
Mr Lino sees Tanjung Sauh as an ideal location as almost no dredging or reclamation is needed. And it will have room to grow, being across the island from the existing port at Batu Ampar.
Batam officials back the project, which they hope will revive the island's moribund economy. The island is already a special economic zone.
The move also comes as Jakarta's port, Tanjung Priok, will see more than US$2.5 billion (S$3.2 billion) pumped in to triple its present annual capacity to over 18 million TEUs by 2023.
Still, some wonder whether the Batam project will take off on time, given the country's history of delayed and aborted projects.
French company CMA-CGM won a tender to develop a smaller-scale container terminal at Batu Ampar in 2005, but the deal fell through.
Teo Siong Seng, managing director of Pacific International Lines, said Singapore's ports will always face competition from ports in the region, with shippers weighing cost against quality.
Shipowners will want to go to the ports with the best facilities, he said. 'Competition should be welcomed,' he added. 'It will only push us to be more efficient.'