Tanjung Priok port managed by Indonesia Port Corporation.

JAKARTA (TheInsiderStories) – Economies of scale are vitally important in the maritime transportation business; sharing of investment among port operators is becoming a norm. Investments are expected to upgrade operations and make them more efficient.

The Ministry of State-Owned Enterprises (SOEs) has put in motion a plan to establish a parent company or holding body in 2018, for ports, ships and industrial estates. The establishment of a maritime holding organ for SOEs is considered necessary to cut the cost of logistics in Indonesia while imposing closer regulations on inter-port, shipping and industrial areas.

In preparation, on March 10, 2017, the Ministry issued decree number 48/MBU/03/2017 on the establishment of a Project Management Office (PMO) Maritime Sector Holding.  This Holding will involve four state-owned Indonesian port operators, namely, PT Pelabuhan Indonesia (Pelindo) I, II, III and IV, PT Pelayaran Nasional Indonesia, PT Bahtera Adhiguna, PT Djakarta Lloyd, PT ASDP Ferry Indonesia, PT Varuna Tirta Prakasya, PT Bhanda Ghara Reksa, PT PAL, PT Industri Kapal Indonesia, PT Dok Perkapalan Surabaya, and PT Dok Kodja Bahari.

The formation of a holding structure is useful for the synergy in developing strategic and investment plans, asset utilization, service and operations, capacity building and efficiency, since it benefits from economies of scale and competitiveness.

President Director of Pelindo II Elvyn G. Masassya mentioned that there are at least four stages to achieve a final deal on the establishment of a holding company. For the first stage, SOEs will verify that their business sector can integrate activities among companies and evaluate the amount of investment.

For the second phase, the companies will conclude an agreement related to the process of standardization of operations, systems and business processes. This stage, said Masassya, is expected to be done in 2018.

Later, the third and the final stage will cover the legal aspects and establishment of subsidiaries.

Currently, the four state-owned seaports operate in accordance with the division of work area. Pelindo I operates in western Indonesia, Pelindo II or IPC operates in parts of Sumatra, West Kalimantan, Banten, Jakarta, and West Java.

Further, Pelindo III operates from Central Java, Central Kalimantan, South Kalimantan, East Java, Bali and Nusa Tenggara. Meanwhile, Pelindo IV has the largest working area, covering Kalimantan and all provinces in Sulawesi, Maluku and Papua.

He said that the scope of business is currently limited to each of Pelindo’s areas. Thus, with the realization of a holding, the scope of business will cover the entire nation.

Interestingly, Pelindo I and Pelindo II have set a plan in motion to establish a joint venture company to develop and manage ports in Indonesia. The cooperation has been concluded through their subsidiaries, PT Prima Indonesia Logistik, a subsidiary of Pelindo I and PT IPC Terminal Petikemas (IPC TPK), a subsidiary of Pelindo II.

IPC TPK, a subsidiary of Pelindo II, also known as Indonesia Port Corporation, engages in the management of terminals, facilities, and other port services in supporting the implementation of loading and unloading of goods and containers. Meanwhile, PT Prima Indonesia Logistik manages a container and logistics depot.

The new venture is aimed at expediting the development, management and operation of container terminals in Batu Ampar, Batam.

M. Aji, President Director of IPC TPK said the company plans to add one more Container Service Facility at Indonesian Ports that operates professionally and reliably, so as to strengthen our domestic and international trade connectivity network, which in turn can boost economic growth and speed up national logistics.

Recently, Pelindo II also launched PT Pelabuhan Indonesia Investama (PII), a new subsidiary specializing in investment. PII is the first investment company in Indonesia that focuses specifically on the port business. The establishment of the company is expected toanswer needs apart from managing the funding of existing subsidiaries, as well as supporting business development, capacity building, strengthening, risk management and investment.

PII is projected to form assets of Rp11.7 trillion by 2021, with Return on Equity (ROE) of 16 per cent. Meanwhile, Pelindo III will issue global bonds worth US$1 billion to fund several development projects, including the construction of the overpass to the Teluk Lamong terminal in Surabaya, the deepening of Benoa port in Denpasar, Bali, and the construction of the Gili Mas quay at Lembar port in Lombok, West Nusa Tenggara.

The company decided to raise its investment funds through bond issuance after it cancelled a planned initial public offering of its subsidiary, PT Berlian Jasa Terminal Indonesia.

Share Swap

As the initial action leverage, the assets of holding port operator Pelindo II offered shares of its subsidiary, PT Jasa Armada Indonesia (JAI) to the capital market through an Initial Public Offering (IPO) last year.

Recently, President Director of Pelindo III Ari Askhara said that the company, together with Pelindo I and Pelindo IV, has also absorbed shares of Fleet Services during the IPO.  With the share swap, Pelindo III can exploit the opportunity to take on other projects beyond their working areas, such as Kuala Tanjung Port and Makassar New Port projects.

He explained that Pelindo II also offers an opportunity for swapping shares with Pelindo I and IV as part of a capital synergy. Such an option is raised because Pelindo III plans to reacquire a 49 per cent share of PT Terminal Petikemas Surabaya from DP World.

Written by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com