The Jakarta Post
The Indonesian National Shipowners Association (INSA) and an industry expert have called on the government to reevaluate the subsidized "Tol Laut" (maritime highway) program to avoid market disruption and unfair business practices.
The maritime highway, launched in 2015, is a subsidized shipping program for distributing basic and major consumer goods, as well as steel and cement, to remote regions of the archipelago.
Transportation Minister Budi Karya Sumadi said that the maritime highway program aimed to reduce price disparities across the country, especially in eastern Indonesia, generally due to shipping and logistics costs.
“We are planning to transform the Seba seaport in Kupang into the logistics hub for [East Nusa Tenggara],” Budi said on Aug. 24 during a webinar the ministry held in collaboration with Detik.com.
Despite the minister’s optimism, INSA chair Carmelita Hartoto criticized the program during the webinar that it was undermining fair competition for private shipping companies.
“Private shipping lines are currently experiencing unfair competition because the Tol Laut program is being used to ship nonessential goods [at much lower prices],” she said.
Carmelita has called on the government to comply with Presidential Regulation (Perpres) No. 70/2017 on the public service obligation (PSO) of shipping freight in outlying regions, which revised Perpres No.106/2015 on the PSO of shipping companies under the maritime highway program.
Perpres No. 70 limits government intervention in sea freight, allowing it to apply the PSO scheme only to staple, industrial and other essential goods.
Carmelita added that private companies were losing out on the type of load they could transport "on routes that intersect with the subsidized Tol Laut program".
"We don’t want to compete with the government,” she stressed.
She also urged the government to reallocate a portion of the subsidy for developing regional port services to increase outbound logistics and improve shipping revenue.
The Transportation Ministry has allocated Rp 436 billion (US$29.7 million) to subsidize the maritime highway program this year, up Rp 136 billion from last year to accommodate seven additional routes from 19 in 2019 to total 26 routes today.
Echoing Carmelita, maritime economist Raja Oloan Saut Gurning of the 10 November Institute of Technology said that the government should use the subsidy program only for establishing new shipping lanes. Once the new lane was economically viable, it should exit the program.
“Theoretically speaking, the subsidy program should be used only as a temporary measure until the operation is handed over [sic] to the market mechanism. Government intervention through the subsidy [program] should not disrupt the market,” he said.
Saut also urged the government to integrate existing and future shipping lanes to prevent overlap between private shipping companies and Tol Laut freighters. It should also streamline the shipping licensing procedure to increase private-sector participation in the domestic marine freight industry.
“We still need to synergize several [lanes] to ensure business sustainability,” he added.
Morotai Island regency in North Maluku, which is a targeted beneficiary of the Tol Laut program, had only experience a fractional decline in the prices of staple and essential goods since the program was implemented, regent Benny Laos said at Monday's webinar.
“We thank the government for the Tol Laut program, as it helps our [regency's] economy. However, to be frank, the prices have only decreased around 5 to 15 percent,” he said.
Despite its shortcomings, Benny said that the program had increased the price of Morotai Island’s tuna from Rp 25,000 to Rp 38,000 per kilogram because of the refrigerated containers it provided, which enabled local fishers to ship fresh tuna directly to Surabaya instead of indirectly through middlemen in Bitung.
“Morotai has been able to increase direct shipments of local products to Surabaya, such as tuna [...]. We do feel the impacts of the program, which has increased the income of the Morotai people,” he said.