Infrastructure Investment in Indonesia: A Focus on Ports

Infrastructure Investment in Indonesia: A Focus on Ports Colin Duffield, Felix Kin Peng Hui, Sally Wilson (eds.)
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Infrastructure Investment in Indonesia: A Focus on Ports presents an important and original collation of current material investigating the efficient facilitation of major infrastructure projects in Indonesia and Australia, with an emphasis on infrastructure investment and a focus on port planning and development.

This interdisciplinary collection—spanning the disciplines of engineering, law and planning—draws helpfully on a range of practical and theoretical perspectives. It is the collaborative effort of leading experts in the fields of infrastructure project initiation and financing, and is based on international research conducted by the University of Melbourne, Universitas Indonesia and Universitas Gadjah Mada.

The volume opens with a macroscopic perspective, outlining the broader economic situations confronting Indonesia and Australia, before adopting a more microscopic perspective to closely examine the issues surrounding major infrastructure investment in both countries. Detailed case studies are provided, key challenges are identified, and evidence-based solutions are offered. These solutions respond to such topical issues as how to overcome delays in infrastructure project initiation; how to enhance project decision-making for the selection and evaluation of projects; how to improve overall efficiency in the arrangement of project finance and governance; and how to increase the return provided by investment in infrastructure. Special focus is given to proposed improvements to the portal cities of Indonesia in the areas of major infrastructure project governance, policies, engagement, operation and processes.

By rigorously investigating the economic, transport, finance and policy aspects of infrastructure investment, this book will be a valuable resource for policy makers and government officials in Indonesia and Australia, infrastructure investment organisations, and companies involved in exporting services between Indonesia and Australia. This book will also be of interest to researchers and students of infrastructure planning and financing, setting a solid foundation for subsequent investigations of financing options for large-scale infrastructure developments.


Infrastructure Investment in Indonesia: A Focus on Ports
Colin Duffield, Felix Kin Peng Hui, Sally Wilson (eds.) | November 2019
396 pp. | 103 color illustrations | 6.14" x 9.21" (234 x 156 mm)
ISBN Paperback: 9781783748211
ISBN Hardback: 9781783748228
ISBN Digital (PDF): 9781783748235
ISBN Digital ebook (epub): 9781783748242
ISBN Digital ebook (mobi): 9781783748259
ISBN Digital (XML): 9781783748266
DOI:10.11647/OBP.0189
Categories: BIC: KFFM (Investment and securities), TNFH (Harbours and ports), 1FMN (Indonesia), K (Economics, finance, business and management), RPT (Transport planning and policy); BISAC: BUS036000 (BUSINESS & ECONOMICS / Investments & Securities / General), BUS032000 (BUSINESS & ECONOMICS / Infrastructure), BUS013000 (BUSINESS & ECONOMICS / Commercial Policy).


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Acknowledgements
Preface
Foreword
Author biographies
  1. Infrastructure Investment in Indonesia — The Economic Context
    C. F. Duffield, R. Duffield, and S. Wilson
  2. Infrastructure Planning, Challenges and Risks
    C. F. Duffield, R. Duffield, and S. Wilson
  3. Funding and Financing Infrastructure: Indonesia and Australia
    C. F. Duffield, R. Duffield, and S. Wilson
  4. Efficient Facilitation of Major Infrastructure Projects
    C. F. Duffield, F. K. P. Hui, and V. Behal
  5. Port and Hinterlands
    J. Black and V. Roso
  6. Comparative Efficiency Analysis of Australian and Indonesian Ports
    F. K. P. Hui, C. F. Duffield, A. Chin, and H. Huang
  7. Innovation in Port Development
    S. Wahyuni
  8. Revealing Indonesian Port Competitiveness
    S. Wahyuni, A. Azadi Taufik, F. K. P. Hui
  9. Initial Investigation into the Effectiveness of Australian Ports’ Governance and Management Structures
    H. Al-Daghlas, F. K. P. Hui, and C. F. Duffield
  10. Alternative Ways to Finance Major Port Projects
    W. W. Galih and R. Prijadi
  11. The Critical Importance of Land Transport when Considering Port Development
    D. Parikesit, S. Basalim, and W. W. Wibowo
  12. Potential Infrastructure Enhancements for Ports and Cities
    C. F. Duffield, S. Wahyuni, D. Parikesit, F.Hui, and S. Wilson
Appendix
List of Illustrations and Tables
Haya Al-Daghlas is a PhD candidate in the Department of Infrastructure Engineering at the University of Melbourne. Haya obtained her B.Sc. In Civil Engineering from the University of Jordan in 2009. In 2016 Haya completed her Master’s degree in Engineering Project Management at the University of Melbourne/School of Engineering, with first-class honours. Haya has worked in the field of engineering project management for several years and she was recently appointed as a member of the Board of Directors at Melbourne Maritime Heritage Network.

Said Basalim is a PhD Candidate in the Civil Engineering Department, Transport Engineering at Universitas Gadjah Mada. Said is also a lecturer in the Faculty of Engineering at the University of Tanjungpura in West Kalimantan.

Vijayshree Behal is a Master of Engineering (Civil with Business) graduate from the Department of Infrastructure Engineering, The University of Melbourne, and was a student at the time of the project.

John Black was appointed as the Foundation Professor of Transport Engineering at the University of New South Wales (UNSW), Sydney in 1984 and is now an Emeritus Professor. Since 1968 his research has included all modes of transport and their economic, social and environmental impacts. He has an extensive record of the supervision of Indonesian higher degree students from 1974 to the present. Since 1978 he has worked as a researcher and consultant in Indonesia that includes: leading capacity building for Bina Marga on the 10-year Indonesian steel bridge replacement program funded by the Australian Government: co-director (with Professor Danang Parikesit) of reform in the transport sector and Public Private Partnerships funded by the Australian-Indonesian Governance Research Partnership; advisor to PT SMI on the Jakarta-airport rail link.

Andrew Chin is a Master of Engineering (Civil) graduate from the Department of Infrastructure Engineering, The University of Melbourne, and was a student at the time of the project.

Colin Duffield is Professor in Engineering Project Management and Deputy Head of the Department of Infrastructure Engineering at the University of Melbourne. He is also a fellow of the Law School and formerly a Director of Infrastructure Australia. Colin has extensive experience in the governance of long-term contracts and the interaction between policy, technical matters, risk management, financing and contractual arrangements as they apply to infrastructure. Colin has been involved in infrastructure delivery for public and private clients; an advisor to projects on risk and project structuring; and an independent reviewer and researcher of major engineering contracts.

Regina Duffield is a biomedicine graduate from the University of Melbourne and was a research assistant in the Department of Infrastructure Engineering at the University of Melbourne.

Waskitha Weninging Galih is a Master of Management student at Universitas Indonesia in the Faculty of Law.

Hanlong Huang is a Master of Engineering (Civil) graduate from the Department of Infrastructure Engineering, The University of Melbourne, and was a student at the time of the project.

Felix Kin Peng Hui is a Senior Lecturer and Academic Specialist in the Department of Infrastructure Engineering at the University of Melbourne, and he teaches engineering management and marketing management to engineers at postgraduate level. He has a diverse industry background having spent more than 25 years at senior levels in manufacturing of machine tools, precision engineering, semiconductors, and infrastructure. He has also consulted widely to organisations seeking continuous improvements to optimise their operational efficiency. His research interests are in the areas of operational process optimisation, operational efficiency, lean systems, organisational development, and change management for sustainability. Dr Hui is a registered professional engineer and is also Fellow of the Institute of Managers and Leaders, ANZ.

Danang Parikesit is a Professor of Transportation Engineering in the Department of Civil and Environmental Engineering at Universitas Gadjah Mada. Former policy advisor to the Minister of Public Works (2010–14), Professor Parikesit is currently appointed by the Government of Indonesia as the Head of the Indonesia Toll Road Authority. He is also a commissioner of the PT Pelni, an Indonesia state-owned shipping company.

Ruslan Prijadi is Associate Professor of corporate finance in the Department of Management, Faculty of Economics and Business, Universitas Indonesia.

Violeta Roso is an Associate Professor at Department of Technology Management and Economics, Chalmers University of Technology, Gothenburg, Sweden, where she is also Director of Doctoral studies. She has been researching dry ports since 2003 and today is the leading researcher within the subject with numerous highly cited publications. Violeta has acted as a visiting academic at the University of New South Wales (UNSW) in Sydney, Australia; and at the University of North Florida (UNF), Florida, USA. She supervises PhD and Master’s students, and teaches Master’s and postgraduate courses.

Alif Azadi Taufik was a student in the Department of Management, Faculty of Economics and Business, Universitas Indonesia.

Sari Wahyuni, Faculty of Economics and Business, Universitas Indonesia, is the founder of the South East Asian Journal of Management and currently serves as the President of the Indonesian Strategic Management Society. She was the Director of the University of Indonesia's Institute of Management and Associate Professor of International Business at Nottingham University, Malaysia Campus. Sari is also a consultant for many multinational companies and government bodies in Indonesia. Her research interests are in strategic management, especially on regional economic development, national competitiveness, international business strategy, strategic alliances, human resources, international negotiations.

Wiratno Wahyu Wibowo is a researcher in the Centre for Transportation and Logistics Studies (Pustral) at Universitas Gadjah Mada. Wiratno is an associate researcher of Professor Danang.

Sally Wilson is a Research Fellow in the Department of Infrastructure Engineering at the University of Melbourne working with Professor Colin Duffield and Dr Felix Hui on the study into infrastructure policy and finance as part of the Infrastructure Cluster Agenda of the Australia-Indonesia Centre. She is a consultant pharmacist with wide experience as a clinical pharmacist in the hospital and community sectors. She has worked as a Research Fellow in the Department of Epidemiology and Preventive Medicine at Monash University and on numerous interdisciplinary programs and projects in primary care. She has broad experience in healthcare service-based research and has recently been Project Manager on a National Health and Medical Research Council study. She has previously assisted on a major infrastructure study in the Department of Infrastructure Engineering at the University of Melbourne related to the Victorian Regional Rail Project.
Chapter 1: Infrastructure Investment in Indonesia – The Economic Context (Professor Colin F. Duffield, Regina Duffield, Dr Sally Wilson)

The first chapter sets the scene for infrastructure investment in Indonesia from an economic perspective. It takes into consideration the country’s geography, its government, its growing population, its economy, and its investment and infrastructure needs.

Chapter 2: Infrastructure Planning, Challenges and Risks (Professor Colin F. Duffield, Regina Duffield, Dr Sally Wilson)

The second chapter briefly outlines relevant national and international plans and initiatives to assist with infrastructure investment and development in Indonesia. It then presents and discusses the challenges, barriers, risks and issues associated with delivering the required infrastructure necessary to underpin the economic growth and reform strategies for Indonesia. The chapter then presents some results from a survey of port executives, government officials, financiers and consultants undertaken in both Indonesia and Australia into efficient facilitation of major infrastructure projects with a focus on port planning and development.

Chapter 3: Funding and Financing Infrastructure: Indonesia and Australia (Professor Colin F. Duffield, Regina Duffield, Dr Sally Wilson)

The third chapter explores the financing mechanisms available and funding required to support infrastructure investment in Indonesia. The Australian situation is also considered. A range of alternate investment approaches are explored as well as priority areas for investment in Indonesia and Australia. The relative effectiveness of various financing methods are explored from the perspective of Indonesian and Australian respondents to the port planning and development survey.

Chapter 4: Efficient Facilitation of Major Infrastructure Projects (Professor Colin F. Duffield, Dr Felix Kin Peng Hui, Vijayshree Behal)

The fourth chapter considers the processes involved in implementation of major infrastructure projects. It identifies the theoretical processes to instigate projects and compares them to the real-world practices that are being implemented in Indonesia and Australia with a focus on case study examples. A comparison with the Gateway review process undertaken for implementation of major infrastructure projects in Australia is presented.

Chapter 5: Port and Hinterlands: The Combined Infrastructure Costs of Seaports, Intermodal Terminals and Transport Access, Port Botany, Sydney (Emeritus Professor John Black, Associate Professor Violeta Roso)

The fifth chapter commences with a review of the literature on intermodal terminals (dry ports). It then examines the symbiotic relationships between port and hinterland, including investment costs (in current Australian dollars using an inflation calculator), with an historical case study that focuses on Port Botany in Sydney, Australia’s second largest container port. The historical backdrop is important for researchers to understand the social, economic and environmental effects of port locational decisions on its hinterland. Specifically, the development of Port Botany has been associated with environmental and social conflicts due to landside constraints and community action. The problem of increasing container volumes handled in seaports requires adequate land to be available nearby or in the immediate hinterland for port-associated functions with efficient inland multi-modal transport access. The relevance to Indonesian ports is discussed.

Chapter 6: Comparative Efficiency Analysis of Australian and Indonesian Ports (Dr Felix Kin Peng Hui, Professor Colin F. Duffield, Andrew Chin, Hanlong Huang)

A comparative analysis of Australian and Indonesian port efficiency is presented in the sixth chapter. The analysis utilises the Data Envelope Analysis model to quantify and measure the efficiency of ports, focusing on port and container cargoes. Ports included in the benchmarking included major Australian, Indonesian and Chinese international ports. International benchmarking of port facilities provides an opportunity to identify areas for improvement.

Chapter 7: Innovation in Port Development: The Quad Helix Model (Associate Professor Sari Wahyuni)

The seventh chapter presents a comprehensive case study from Japan on how an Academic-Business-Community-Government plus bank partnership can be nurtured to create innovation through various strategies, including engagement with key stakeholders for local industrial vitalization, analysis for new industries, support for creating an industrial vitalization plan, and support for collaboration with other regions.

Chapter 8: Revealing Indonesian Port Competitiveness: Challenge and Performance (Associate Professor Sari Wahyuni, Alif Azadi Taufik, Dr Felix Kin Peng Hui)

The eighth chapter considers Indonesian port competitiveness. It notes that the Indonesian government is in the midst of planning broad policies and strategies concerning maritime and port development and has recently provided a reform package to improve logistics in the country to improve the supply chain. Results from focus group meetings, a detailed questionnaire and in-depth interviews with key port industry stakeholders and financial bodies in Indonesia are presented. Problematic factors contributing to port problems were identified from the perspective of research participants. The chapter identifies important aspects of port competitiveness: government support, business support and operational performance. Despite general support towards the government policies in facilitating port investment, there seems to be a substantial gap between policy expectation and policy realisation.

Chapter 9: Initial Investigation into the Effectiveness of Australian Ports’ Governance and Management Structures (Haya Al-Daghlas, Dr Felix Kin Peng Hui, Professor Colin F. Duffield)

The ninth chapter considers effectiveness of port governance and management structures in Australia. It briefly reviews Australian port reform, before considering private, local and international investment in Australia; the make-up of investors in major city ports in Australia; and the need to carefully assess foreign investment in critical infrastructure. Asset recycling in Australia is discussed. Factors identified from focus group discussions (in Australia) with key port stakeholders that help improve or act as obstacles to governance/policy, and that help improve or hinder management structures in ports, are also presented.

Chapter 10: Alternative Ways to Finance Major Port Projects: Seaports in Indonesia (Waskitha W. Galih, Associate Professor Ruslan Prijadi)

Various alternatives of port infrastructure project financing are explored in the tenth chapter. The insights and perspectives of various Indonesian seaport industry stakeholders on financing of infrastructure projects are presented from findings from an online survey, focus group discussions and in-depth interviews conducted in Indonesia. A detailed case study of the New Priok Container Terminal One (NPCT-1) is used to illustrate how different scenarios of financing schemes would affect the project risks allocation, and the project value itself. The first scenario examines the project’s current financing structure – the contractual relationships between the project company, its sponsors, lenders and the government. The second scenario is built under a what-if assumption where the project is assumed to be financed under a Public Private Partnership (PPP) scheme with an annuity availability payments feature.

Chapter 11: The Critical Importance of Land Transport when Considering Port Development: the Case of Three Indonesian Ports (Professor Danang Parikesit, Said Basalim, Wiratno Wahyu Wibowo)

The eleventh chapter discusses the intricate relationship between ports and their hinterland and the critical importance of land transport when considering port development. The chapter considers the integration between a port and an industrial area. Multimodal operations of ports are discussed through a comprehensive review of the international literature which considers the following issues: regionalisation and spatial control, structural and organisation challenges of multi-mode port operation, and the disruption of land access to ports. Three Indonesian port case studies are then presented: Belawan Port in Medan, North Sumatera; Tanjung Priok Port in Jakarta; and Tanjung Perak/Teluk Lamong Port Terminal in Surabaya. The case studies touch on a variety of issues: traffic congestion in and around ports; control of inbound and outbound traffic at ports; empty trips; land-use management and local-through access traffic separation; dedicated toll access; the use of inland waterways as an alternative transport mode; dedicated rail service from an industrial area/ special economic zone; expansion of rail services; use of intermodal systems; IT solutions; the green port concept; inter terminal freight transport; infrastructure that can guarantee efficient freight movement. The chapter concludes with several policy recommendations.
 
Chapter 12: Potential Infrastructure Enhancements for Ports and Cities: Conclusions, Future Research and Policy Concepts (Professor Colin F Duffield, Associate Professor Sari Wahyuni, Professor Danang Parikesit, Dr Felix Kin Peng Hui, Dr Sally Wilson)

The final chapter of this research monograph draws together key points from each of the chapters. It summarises key findings from the research and poses questions that would benefit from future/further research.