Ferry Transport in Indonesia: An Overview

In Indonesia, Land Transport directorate general in MOT is responsible for road traffic and transportation, and ferry and inland waterways transport, and Road infrastructure is the responsibility of MPW. Bus terminal, car parks, vehicle testing centers, weightbridges, and automatic traffic control fall under land transport, and are the responsibility of local government. Road traffic and transport does not come under Perpres 67/2005).
However, ferry port infrastructure does.
Ferry and inland waterway transport covers berthing and terminal infrastructure. Seven ports have been designated as international ports (ferry links to Singapore, Malaysia, Only nine local governments have stated readiness to carry out the task the Philippines, East Timor and Australia), but only two operate as international ports.
Currently there are 172 ferry routes in Indonesia, many of them are subsidized as a form of pioneer service to remote places in the eastern region and outer islands.
Sector Framework The blueprint Cetak Biru Pembangunan Perhubungan tahun 2000 – 2024 defines the long-term policy for four transportation sub-sectors (airport, seaport, railways and land transport). The vision is to accomplish reliable and competitive transport services and to create a favorable environment for PSP in the provision of transport infrastructure and services.
Four missions are stated in the blue print. The first is at least to maintain the existing transportation infrastructure, as the quality had been declining since the crisis. The MOT realizes that the GOI must rely on the private provision of infrastructure.
The second is to reform institutions and enforce regulations. It seems that the MOT also recognizes that the current institution arrangement is not favorable for PSP. However, it is not clear from the blueprint what form the new institutional arrangement should be.
The third mission is to improve accessibility.
Intermodal transportation is required to access many places in Indonesia. Therefore, the MOT needs to better integrate transportation planning and programming between the various directorates-general.
The last mission is to improve transport operation and quality of service. The MOT recognizes that many operators (SOE and private) are not efficient. One way to improve efficiency is through fair competition and curtailing the SOEs’ monopoly.
In the RPJM, many PSP issues are addressed and form the basis for transport developments in the medium term. For example, it refers to the need for a re-alignment of the operator, owner, and regulatory function.
The RPJM recognizes that infrastructure required long term and enormous amount of investment. To attract private investor, full cost recovery on investment is a must. Through efficiency, an affordable tariff and full cost recovery might be achieved. Transparency in the cost structure, minimizing economic rent, and abolishing unnecessary fees should be part of the MOT policy to attract private sector investment.
The RPJM also states that the government needs to intervene as a regulator, as many forms of transport constitute a natural monopoly. The monopoly power enjoyed by operators permit them to charge economic rent, far in excess of the cost of provision.
This excess could act as a barrier to market entry and lead to fewer capital investments.
Clearly, PSP is a strong policy directive in the RPJM for the transport sector overall. The rationale for this is (a) a need for private finance, and (b) efficiency gains from better technology and management skills imported from the private sector. However, in order to achieve this goal, reform is needed. This calls for more competition, institutional realignment of certain functions, a freer basis for PSP than the current joint-venture model practiced.
The vehicle for reform is obviously the draft law for the rail, port and airport sectors already submitted to Parliament for deliberation. While removing the joint-venture restriction is a step in the right direction, more is required, such as unbundling the SOEs concerned by realigning their functions. A key to this process is the establishment of a functionally independent sector regulator.
The governing sector legislation for PSP ferry infrastructure is the same as for sea transport, Law 21/1992 on Shipping and PP 70/1996 on Port.
At present there is no regulatory body for the ferry sub-sector and no provision in the draft law for the establishment of one. Under a more competitive market, when ASDP and the UPTs are required to compete with the private sector in the provision of port services, a regulator separate from the port operator and contracting agency would be expected by the private investor to ensure transparency and level playing field, and minimize conflict of interest.
The current institutional arrangement does not correspond to the ideal, as the DGLT is the regulator, contracting agency and policy maker.

Source: KKPPI, Sector Review 2006