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local palm oil business group has demanded that the government build new seaports to cope with increasing commodity shipments and cut extra-costs that total US$300 million stemming from port
inefficiencies.

Indonesian Vegetable Oil Refiners Association (GIMNI) spokesperson Sahat Sinaga said on Tuesday in Jakarta that apart from modernizing existing seaports, the government would need to set up at least three seaports equipped with special terminals for palm oil exports to boost efficiency and anticipate future export volumes.

'€œHandling costs at our existing seaports is expensive, particularly due to high demurrage, which according to our exporters'€™ cost discrepancies with overseas ports such as Port Klang [in Malaysia] could range to between $15 and $20 per tons of exports,'€ Sahat told reporters after conveying the intention to Industry Minister MS Hidayat. Sahat pointed to the poor condition of Belawan Port in Medan, North Sumatra, a key departure point for palm oil shipments, where a vessel could queue for up to two weeks, resulting in high fees to compensate for extra days of storage.

Poor infrastructure is a long-unresolved problem in Indonesia that economists say can drag down the country'€™s growth. At present, only several seaports are serving shipments of commodities, including palm oil. Among the few is Dumai Port in Dumai, Riau, which last year delivered around 6.3 million tons of crude palm oil (CPO) and its products overseas. Another seaport in Riau has been built by Wilmar Group in its Dumai Industrial Park with a palm oil bulking terminal of 270,000 tons per year.

Sahat said if the ports were to be built, they would be potentially located in Mandailing Natal, North Sumatra; Pontianak, West Kalimantan; and Bitung, North Sulawesi, to transport palm oil output on each island.

Mandailing Natal is home to a significant coverage of oil palm plantations and when it operates a seaport, the transportation costs can be lowered by $8 per ton from those at Belawan Port, according to Sahat.

In addition, Bitung is also strategic due to its proximity to markets in northern regions outside the country, including Japan, the Philippines, Russia and the US.

Indonesia, the world'€™s top palm oil producer, is anticipating its export of the commodity to increase mildly by 4.4 percent to 19 million tons this year, partly due to a slight rise in production and weak
overseas demand.

For years, the government has garnered a sizeable amount of export taxes from annual palm oil exports, a measure it has took to spur growth in the downstream industry. Business players have long voiced concerns that the benefits from taxes should be returned to the industry in the forms of infrastructure development. However, progress has been slow.

State-owned port operator Pelindo I has revealed its plan to build Kuala Tanjung Port in North Sumatra, seen as an alternative to the overloaded Belawan Port, in 2014, which will also comprise a special terminal for palm oil to cater to the needs of state-owned plantation firm PT Perkebunan Nusantara IV.

Recently, following the delivery of CPO by land at the Indonesia-Malaysia Nanga Badau border checkpoint in Kapuas Hulu, West Kalimantan, Deputy Trade Minister Bayu Krisnamurthi said the government was considering building the much needed infrastructure, including roads and seaports, to facilitate exports in Kalimantan, which is also a center of palm oil production. The pledge received a positive response from West Kalimantan Governor Cornelis, who supported the proposal.