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Infrastructure Investment in Indonesia
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Contents

Acknowledgements

xv

Preface

xix

Foreword

xxiii

Author biographies

xxix

Editors

xxix

Chapter Authors

xxx

1.

Infrastructure Investment in Indonesia — The Economic Context

1

C. F. Duffield, R. Duffield, and S. Wilson

1.0

Introduction to Indonesia

1

1.1

Government

2

1.1.1

National

2

1.1.2

Regional

2

1.2

Population

3

1.3

Economy

4

1.3.1

Investment

6

1.4

Infrastructure

6

References

10

2.

Infrastructure Planning, Challenges and Risks

15

C. F. Duffield, R. Duffield, and S. Wilson

2.0

Introduction

15

2.1

Infrastructure Plans

15

2.1.1

National Plans, Agencies and Institutions

15

2.1.1.1

Bappenas and Bappenda

16

2.1.1.2

Master Plan for the Acceleration and Expansion of Indonesian Economic Development 2011–2025 (MP3EI)

17

2.1.1.3

National Long-term Development Plan 2015–2025 (Rencana Pembangunan Jangka Panjang Nasional abbreviated to RPJPN)

19

2.1.1.4

Committee for Acceleration of Priority Infrastructure Delivery

21

2.1.1.5

Indonesian Maritime Doctrine 2014

24

2.1.2

International Plans

25

2.1.2.1

ASEAN (Association of Southeast Asian Nations) Connectivity Agenda

25

2.1.2.2

APEC (Asia-Pacific Economic Cooperation) Connectivity Blueprint 2015–2025

25

2.1.2.3

Master Plan of ASEAN Connectivity (MPAC) 2025

26

2.1.2.4

21st Century Maritime Silk Road Initiative

26

2.1.2.5

Indonesia-Malaysia-Thailand Growth Triangle Implementation Blueprint 2012–2016

27

2.2

Challenges, Risks and Issues Affecting Infrastructure Processes and Development in Indonesia

28

2.2.1

Issues and Risks

28

2.2.1.1

Corruption

34

2.2.1.2

Environmental Risks

35

2.2.1.3

Land Acquisition

35

2.2.1.4

Transaction law

37

2.2.1.5

Public Private Partnership (PPP) Process

37

2.2.1.6

Political Instability

39

2.2.1.7

Regulatory and Legal Uncertainty

39

2.2.1.8

Lack of Projects

40

2.2.1.9

Insufficient Human Capital

40

2.2.1.10

Bureaucracy

41

2.2.1.11

Economic Outlook

42

2.2.1.12

Foreign Currency

43

2.2.1.13

Dispute Resolution

43

2.2.2

Research into Barriers to Doing Business in Indonesia and Australia

43

References

47

3.

Funding and Financing Infrastructure: Indonesia and Australia

53

C. F. Duffield, R. Duffield, and S. Wilson

3.0

Introduction

53

3.1

Potential Sources of Infrastructure Financing

54

3.2

Discussion of the Specific Financing Scenarios

56

3.2.1

Direct Governmental Financing

56

3.2.1.1

Indonesia Infrastructure Guarantee Fund (IIGF)

58

3.2.1.2

P.T Sarana Multi Infrastruktur (Persero) (PT SMI)

59

3.2.1.3

Indonesia Infrastructure Finance (PT IIF)

59

3.2.1.4

Viability Gap Fund (VGF)

60

3.2.1.5

Land Funds

60

3.2.2

Direct Company Facilitation

60

3.2.3

Foreign Direct Investment (FDI)

61

3.2.4

Public Private Partnerships

64

3.2.5

Special Economic Zones or Preferential Concessional Loans

65

3.2.6

Asset Recycling

67

3.2.7

Discussion

69

3.3

The Market’s View as to How to Best Finance Port Infrastructure Projects: Indonesia and Australia

70

3.3.1

Introduction

70

3.3.2

Do the Current Government Policies Support and Facilitate Investment?

70

3.3.3

Is There Sufficient Finance to Meet the Development Demand in a Timely Manner?

71

3.3.4

Priority Areas Requiring Investment

72

3.3.5

Research Relevance to Funding and Finance

75

3.4

Concluding Remarks

80

References

82

4.

Efficient Facilitation of Major Infrastructure Projects

85

C. F. Duffield, F. K. P. Hui, and V. Behal

4.0

Background and Context

85

4.1

Risk Allocation and Management

89

4.2

Delivery of Infrastructure Projects: Indonesia

90

4.2.1

Jakarta Sewerage System (JSS)

91

4.2.2

West Semarang Drinking Water Supply

92

4.2.3

National Capital Integrated Coastal Development

94

4.2.4

Bontang Refinery

96

4.2.5

Umbulan Springs Drinking Water Supply Project

98

4.3

Delivery of Infrastructure Projects: Australia

99

4.3.1

Channel Deepening Project, Victoria

100

4.3.2

M.7 Motorway, New South Wales

101

4.4

Benchmark Practices

103

4.4.1

Comparative Analysis

106

4.4.2

Findings

109

References

109

5.

Port and Hinterlands

113

J. Black and V. Roso

5.0

Introduction

113

5.1

Methodology

116

5.2

Literature Review Intermodal Terminals — Concept of Dry Ports

117

5.3

Sydney’s Container Ports — History

119

5.4

Port Botany Container Terminals

122

5.5

Multi-modal Transport Access to Port Botany

128

5.6

Hinterland Intermodal Logistics Centres

133

5.6.1

Port Botany’s Inland Terminals Pre-2010

133

5.6.2

Chullora Intermodal Terminal

136

5.6.3

Macarthur Intermodal Shipping Terminal (MIST)

136

5.6.4

Cooks River Intermodal Terminal (St Peters)

137

5.6.5

Yennora Intermodal Terminal

137

5.6.6

Villawood Terminal (Leightonfield)

138

5.6.7

Enfield Intermodal Logistics Centre

138

5.7

Moorebank Intermodal Terminal — Detailed Case Study of Dry Port

139

5.8

Funding and Financing Port, Terminals and Transport Access

144

5.9

Conclusions

146

References

149

6.

Comparative Efficiency Analysis of Australian and Indonesian Ports

155

F. K. P. Hui, C. F. Duffield, A. Chin, and H. Huang

6.0

Introduction

155

6.1

Literature Review

157

6.1.1

Logistics and Port Efficiency

157

6.1.2

Indonesia

158

6.1.2.1

Port of Surabaya

158

6.1.2.2

Port of Jakarta

159

6.1.3

Australia

160

6.1.3.1

Port of Melbourne

160

6.1.3.2

Port of Botany, Sydney

161

6.1.3.3

Port of Fremantle

161

6.1.4

China

162

2.1.4.1

Port of Shanghai

162

6.1.5

Data Envelopment Analysis (DEA)

162

6.1.6

Private Sector Involvement

163

6.1.7

Current Knowledge Gap

163

6.2

Methodology

164

6.2.1

Data Envelopment Analysis (DEA)

164

6.2.2

Input and Output Variables

164

6.2.2.1

Crane Rate

164

6.2.2.2

Ship Rate

164

6.2.3

Mathematical Formulation of DEA

165

6.2.4

Returns to Scale Structure

166

6.2.5

Scale Efficiency

167

6.3

Results and Findings

167

6.3.1

Data Analysis

167

6.3.1.1

Port

167

6.3.1.2

Container Terminal

169

6.3.2

Efficiency Comparison Based on DEA Result

170

6.3.2.1

Port

170

6.3.2.2

Comparison of Container Terminals

172

6.4

Discussion

175

6.4.1

Indonesia

175

6.4.2

Australia

179

6.4.3

Opportunities for Future Research

181

6.5

Conclusion

181

References

182

7.

Innovation in Port Development

187

S. Wahyuni

7.0

Introduction

187

7.1

Port Strategic Development

189

7.2

Case Study TAMA (Japan)

192

7.2.1

Financial Resources

194

7.2.2

Five-year Action Plans

195

7.3

Conclusion

202

References

8.

Revealing Indonesian Port Competitiveness

205

S. Wahyuni, A. Azadi Taufik, F. K. P. Hui

8.0

Introduction

205

8.1

Literature Review

208

8.2

Methodology

212

8.2.1

Focus Group Discussions and In-Depth Interviews

213

8.3

Results and Discussion

213

8.4

Conclusions

223

References

224

9.

Initial Investigation into the Effectiveness of Australian Ports’ Governance and Management Structures

227

H. Al-Daghlas, F. K. P. Hui, and C. F. Duffield

9.0

Introduction

227

9.1

Literature Review

228

9.1.1

Australian Ports Reform

228

9.1.2

International Private Investment in Australia

230

9.1.3

Factors Influencing Asset Recycling in Australia

233

9.1.4

Typical Management Structure

234

9.2

Methodology, Results and Discussion

235

9.2.1

Factors Which Bring Improvement to Governance/Policy in Ports

235

9.2.2

Factors Acting as Obstacles to Governance/Policy in Ports

239

9.2.3

Factors Which Help Improve Management Structures in Ports

240

9.2.4

Factors Which Hindered Improvement of Management Structures in Ports

242

9.2.5

Significance and Future Research

243

9.3

Conclusion

243

References

244

10.

Alternative Ways to Finance Major Port Projects

247

W. W. Galih and R. Prijadi

10.0

Introduction

247

10.1

Literature Review

249

10.1.1

The Public Procurer Perspective: Public Private Partnerships vs. Traditional Procurement

249

10.1.2

The Private Sponsor Perspective: Corporate Finance vs. Project Finance

251

10.2

Research Methodology

255

10.3

Results and Case Study

257

10.3.1

Survey Results

257

10.3.2

Case Study of NPCT-1

262

10.3.2.1

The Existing Financing Arrangement Overview

264

10.3.2.2

Existing Scenario Simulation Under Different Per Rates And Capital Structures

266

10.3.2.3

Alternative Scenario Overview

269

10.3.2.4

Alternative Scenario Simulation Under Different Capital Structures

270

10.4

Discussion

272

10.4.1

Indonesian Domestic Banking Finance for Port Infrastructure Projects

273

10.4.2

Government Fiscal Support for Public Private Partnership Projects

275

10.4.2.1

Availability Payment

275

10.4.2.2

Viability Gap Fund

276

10.4.2.3

Government Guarantee

276

10.5

Conclusion

276

References

278

11.

The Critical Importance of Land Transport when Considering Port Development

281

D. Parikesit, S. Basalim, and W. W. Wibowo

11.0

Introduction

281

11.1

Land Transport and Port Access: International Literature

283

11.1.1

Regionalisation, Vertical Integration and Spatial Control of Commodities’ Flow

287

11.1.2

Intermodalities and Multi-Mode Operation of Ports: Organisational and Structural Linkage between a Port and its Hinterland

290

11.1.3

Traffic Congestion in and Around Ports

293

11.2

Case studies of Indonesian Ports

296

11.2.1

Case I: The Need to Manage Land Use and the Local-Through-Access Traffic Separation for Tanjung Priok Port in Jakarta

296

11.2.1.1

Congestion around the Port of Tanjung Priok and the Failure to Comply with Land-Use Regulations

298

11.2.1.2

Reactivation of Railway Access to Port Terminal

300

11.2.1.3

The Development of Dedicated Toll Access

300

11.2.1.4

Ensuring Control of Inbound and Outbound Traffic: Pelindo II Corporate Actions

302

11.2.2

Case II: Importance of Rail Traffic to Support Efficient Operation of Belawan Port, North Sumatera

305

11.2.2.1

Sei Mangkei Special Economic Zone (SEZ) and Connectivity to Belawan Port: Railway Experience

308

11.2.2.2

Belawan-Kuala Tanjung Port System and the Design of Access Traffic

310

11.2.3

Case III: Pelindo III Green Port Terminal of Teluk Lamong, Surabaya

311

11.2.3.1

The Design and Private Sector Initiative for Inter Terminal Freight Transport within Tanjung Perak Port

314

11.2.3.2

Competing Port Terminals and the Opportunity to Manage Container Traffic among Terminals

318

11.3

Lessons Learned from the Literature and Case Studies

318

11.3.1

Importance of Land Connectivity in Ensuring Lower Logistics’ Costs

318

11.3.2

Road versus Rail Connectivity to Ports, and the Role of Government Support for Commercial Rail Operations

320

11.3.3

Managing Land Uses around Ports

321

References

321

12.

Potential Infrastructure Enhancements for Ports and Cities

327

C. F. Duffield, S. Wahyuni, D. Parikesit, F.Hui, and S. Wilson

12.0

Overview and Conclusions

327

12.1

Future Research

336

12.2

Lessons Learnt and Policy Implications

338

Appendix

343

Research Methodology: Efficient Facilitation of Major Infrastructure Projects

343

1.0

Introduction and Methodology

343

1.1

Research Forum

344

1.2

Online Surveys

345

1.2.1

Development of the Online Surveys

345

1.2.2

Conduct of the Online Survey

346

1.3

Focus Group Discussions

347

1.4

In-Depth Interviews

348

1.5

Response Rates

349

1.5.1

Australia — Online survey

349

1.5.2

FGD — Australia

349

1.5.3

Indonesia — Online survey

349

1.5.4

FGD — Indonesia

350

1.5.5

In-Depth Interviews — Indonesia

350

List of Illustrations and Tables

351