Concessioning ports or terminals with economically viable vessel and cargo forecasts is comparatively simple for primary port locations as established traffic patterns allow for reliable evaluation of both private and public investments in infrastructure.<\/p>\n
But what about secondary ports? Those ports are often in the shadow of their bigger neighbours, who benefit from considerably more and regular traffic. That makes attracting private investment for their smaller cousins a challenging task.<\/p>\n
Indonesia is a case in point. The stated aim of the country\u00b4s new president Joko Widodo, known as Jokowi, is to lower the archipelago\u00b4s logistics costs. This will include the commercialisation of secondary ports through the tender of build, operate, transfer concessions to private parties. Under these contracts the investor has to construct and operate port infrastructure and take the market risk for cargo operations.<\/p>\n
Taking the example of Garongkong it becomes evident that the government set itself a huge task. Located in South Sulawesi, approximately 60 km to the North of Makassar, it features basic infrastructure. The port provides a quay of 200 x 20 m which is currently used for coal handling out of barges. Garongkong takes all non-food bulk cargoes out of Makassar. Can commercialisation work here given high barriers to market entry posed by incumbents and almost uncertain cargo forecasts?<\/p>\n
Putting secondary Indonesian ports on investors\u2019 radar screens is a huge task given the country\u00b4s skewed port industry structure. This is the view of bremenports based on a long-term involvement in the country\u00b4s ports industry. bremenports has been involved in human capacity development with ports to identify and develop the required competencies to manage these complex contracts.<\/p>\n<\/p>\n
Numbers game<\/strong><\/p>\n Indonesia currently has some 1,975 seaports. Only 110 of these are commercially managed by state-owned enterprises PT Pelabuhan Indonesia I \u2013 IV (Pelindos). Approximately 520 ports are non-commercial, secondary ports under the management of the Directorate of Shipping and Transportation through local port operator units.<\/p>\n If the prospective private investor-cum-operator does not bring its own traffic this port development plan appears doomed. There are two ways to potentially overcome this problem. First, the concession can be adapted to reflect a more landlord-type port concession. Tendering a landlord-concession means stripping the envisaged BOT-contract of its infrastructure investment obligations and replacing it with a requirement for the port authority to cater for the expensive port infrastructure. This reduces the investment burden of the private investor and makes the development task of the secondary port potentially viable. However, public funds are scarce, which may curtail the potential of this option.<\/p>\n Second, the geographical scope of the concession can be adjusted to include a mix of exploitation rights in primary and secondary ports. Further, as secondary ports do not require expensive movable equipment, concession terms can be limited to a maximum of 10 years. After such a brief \u2013 in concessioning terms \u2013 period, the landlord-type concession can be replaced and tendered as a BOT model reflecting, hopefully, increased traffic levels.<\/p>\n There is interest in financing secondary port projects in Indonesia: Pelindo II has sought to borrow $3bn from the World Bank to foster the development of non-commercial ports. However, in order to lower the country\u00b4s logistics costs new independent operators are needed with fresh perspectives. That said, foreign investors can only hold a 49% share. Only under a public-private partnership can the private share increase to 95%.<\/p>\n Privatisation and commercialisation is still high on the agenda of Jokowi\u00b4s government. Flexible concessions with a reasonable risk allocation between public and private partners must be the way forward, even if the private party has foreign roots. Pair a private partner with a commercially viable business case for secondary ports with competent staff on the ground and the concession can be handled on a level playing field.<\/p>\n Dr Lars Stemmler is head of international projects of bremenports. bremenports\u2019 Dr Lars Stemmler considers how secondary ports can reliably attract private investment<\/p>\n","protected":false},"author":8,"featured_media":4175,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25],"tags":[],"sponsor":[],"class_list":["post-4174","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asia"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/posts\/4174","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/comments?post=4174"}],"version-history":[{"count":1,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/posts\/4174\/revisions"}],"predecessor-version":[{"id":4176,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/posts\/4174\/revisions\/4176"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/media\/4175"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/media?parent=4174"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/categories?post=4174"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/tags?post=4174"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/coastlink\/wp-json\/wp\/v2\/sponsor?post=4174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"