«Sustainable Freight Transport Policy in Indonesia» H.E. Bambang SUSANTONO, Ph.D.
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1 Paving the Way for Sustainable Freight Transport Qatar National Convention Centre / Auditorium 3 Doha, 25 April «Sustainable Freight Transport Policy in Indonesia» H.E. Bambang SUSANTONO, Ph.D. Vice Minister for Transportation Republic of Indonesia
2 SUSTAINABLE FREIGHT TRANSPORT POLICY IN INDONESIA Presented at: Side Event: Paving the Way for Sustainable Freight Transport UNCTAD XIII Conference Doha, 25 April 2012 Bambang Susantono, Ph.D. Vice Minister for Transportation Republic of Indonesia
3 Indonesia: How to connect a vast archipelago Indonesia is the world s largest archipelago with over 17,000 islands. The area of its waters is about 80% of the total area of the country. Therefore, intercity transport in Indonesia must consider interisland sea transportation as well. Indonesia has incorporated intercity transport in the MP3EI (Master Plan on Acceleration and Expansion of Indonesia Economic Development) The MP3EI consists of 3 main pillars: (1) development of Indonesia Economic Corridors; (2) strengthening domestic connectivity; (3) acceleration of reliable ICT development The estimated need of infrastructure investment for these 6 corridors reaches USD 210 billion. 3
4 Growing Country, Growing Needs of (Freight) Transport One of the most dominant factors in trip generation in a country is the economic growth. With a population of 238m (In 2015, Indonesia's Population is expected to be 250m) Indonesia is Southeast Asia s fastest-growing major economy clocking growth at more than 6% in Transport sector requires an investment of USD 90.4 billion, comprising USD 37,298 million for road infrastructure, USD 13,080 million for port infrastructure, USD 3,577 million for airport infrastructure, and USD 36,445 million for railway infrastructure. With a GDP per capita of USD 3,469 and growing middle class, it is estimated that the number of trips will grow quite significantly in the near future USD 37,298 million Citigroup estimates Indonesia s GDP growth to reach 6.3 percent in 2012 and 6.5 percent in 2013 good for third-best in the region. USD 13,080 million USD 3,577 million USD 36,445 million 4
5 A Glance at Indonesia s Current Transport System There were 15.7 billion tons of freight and 6.9 billion of person trips traveling in Earlier in 2006, there were 9,4 billion tons of freight and 2,3 billion of person trips. All transport modes play a role in Indonesia's transport system and are generally complementary rather than competitive. Road transport is the predominant mode, accounting for about 70 percent of freight ton-km and 82 percent of passenger km. The dominant use of road transport results in congestion, frequent road damages and increase traffic accident. It becomes inefficient to use road transport especially for long distance trips Trips Growth Comparison 67% % Freight (billion tons) Person (billion trips) 5
6 National CO2 Emissions and Oil Consumption In Indonesia, CO2 emission contributed by the transportation sector reaches 23% of the national total emission. The emission of land transportation comprises 89% of the transportation sector s emission. In fact, the transportation sector in Indonesia uses the biggest share of the oil consumption at 51%. It is triggered by the increasing number of fleets and the low price of petroleum directed for transportation use (due to subsidies by the government). Indonesia s Transport Related CO2 Emissions Indonesia s Oil Consumption Source: MoT
7 Government Policy to Reduce Transport Burden on Roads While road has a lower cost function for short distances, its cost function climbs faster than rail and maritime cost functions. At a distance D1 ( km), it becomes more profitable to use rail transport than road transport while from a distance D2 (near 1,500 km), maritime transport becomes more advantageous. The Government of Indonesia is introducing policies that aims to reduce the transport burden on roads. The burden is to be shifted and balanced by other modes of transport, i.e. railways and short-sea shipping Railway Development Short-Sea Shipping 7
8 Java Double Track Project Transport movement in Java is still dominated by road transport. To balance this, there is an urgent need to strengthen the railway transport, through the completion of Java Double Track project. 263 km Java Double Track Project connects two most important cities in Indoesia, Jakarta & Surabaya. Jakarta is home to 21 million inhabitants, while Surabaya has 7 million of population. Merak SERANG DKI JAKARTA Cikampek Bojonegoro North Java Double Track South Java Double Track Banten Bogor Padalarang Sukabumi BANDUNG Jawa Barat Banjar Cirebon Tegal Pekalongan Kroya Prupuk Jawa Tengah Purwokerto Kutoarjo Bojonegoro SEMARANG Gambringan Bojonegoro Gundih Jawa Timur Madiun Kertosono Solo Bangil YOGYAKARTA DIY Malang Blitar SURABAYA Sidoarjo Banyuwangi Jember The double track will increase the frequency and capacity of railways by % Illustration on potential energy saving at the completion of double track: The frequency of existing railway container from Jakarta to Surabaya is 5 trips per day, carrying 160 TEUs per day. With the double track, the frequency can be tripled to 15 trips per day, carrying 500 TEUs per day. Therefore, fuel saving resulted from shifting the 340 TEUs from road to railway may reach 115 kiloliter per day and CO2 emission may be reduced by 350 ton CO2 per day. In one year, a significant amount of fuel will be saved and it also contributes considerably to CO2 emission reduction, at 42,000 kiloliter of 8 fuel and 128,000 ton CO2 respectively.
9 Muara Wahau Bengalon Railway Development, East Kalimantan It is the first private rail freight in Indonesia by Middle Easy Company (MEC) Coal. The length of the railway is approximately 130km, connecting aluminum and coal mines to a special purpose port. The estimated value of investment is USD 1.5 billion. This rail freight is the first train in Indonesia with 3 locomotives and 120 wagons with a length of approximately 2 km. 9
10 Bukit Asam Coal Railway Development 10
11 Sei Mangke Railway Development Sei Mangkei Industrial Area is a CPO-based industrial area occupying a land of 2,003 ha. There is a palm kernel oil processing plant with a capacity of 400 tons per day To enhance its logistics, a 25-km railway plan connecting the industrial area to Kuala Tanjung Port is currently being developed. 11
12 City Logistics Rail-based city logistics in Jakarta are currently being developed in order to relieve traffic congestion caused by freight movements. 12
13 Marine Highways: Trans Maluku Trans-Maluku is an integrated transport network system combining road transport and ferry Ro- Ro service which connect islands through urban centers in those islands. The combination of road transport and ferry Ro-RO service is designed to shorten distance and travel time, as to increase freight capacity. The Trans-Maluku network will use ferries to connect the islands, functioning as movable bridges. The plans include building 1,015 km of roads and 40 ports, which will be served by 24 ships. In medium term, Trans-Maluku network will be developed to connect Maluku with its surrounding regions including North Maluku islands and Nusa Tenggara. 13
14 Acceleration of Transport Infrastructure Development MP3EI Transport Infrastructure No Infrastructure Investment Need (USD Million) 1 Ports and Inland Waterways Est. # of Projects 13, Airports 3, Railways 36, Total 53, Public Infrastructure Private Infrastructure (Private Purpose) Non -Cost Recovery Project Cost Recovery Project PPP SOE Special Asssignment State Budget Local Budget Tender / Right To Match Law 23/2007 on Railway Law 17/2008 on Shipping Law1/2009 on Aviation GR 67/05 GR 13/10 GR 56/11 Presidential Regulation on SOE Special Assignment Licencing Special Airports Special Ports, Special Terminals Special Railways 14
15 Three Ways of Private Sectors Involvement in Transport Infrastructure Development Investments in Transport Sector Special Purpose Transport Infrastructure SEZ/FTZ Transport Infrastructure Public / Commercial Transport Infrastructure Infrastructure specially developed for the purpose of a business entity and may operate exclusively for the business entity. Usually unsolicited, i.e. initially proposed by the business entity (private sector) Ministry of Transportation reviews the feasibility study and other technical matters, including safety issues The investment procedure for the special purpose transport is done through the LICENCING (business licence, location licence, construction licence, and operation licence). Infrastructure is located in the Special Economic Zones (SEZ) or in Free Trade Zones (FTZ) Several incentives such as reduced tax rates More relaxed restrictions (compared to the Negative Investment List) More incentives and exceptions for the projects in the Bounded Zones (Kawasan Berikat) The investment procedure is through simplified LICENCING from the FTZ/SEZ administrators Infrastructure to be used by public and commercially oriented (tariff applied) May be solicited (proposed by the GoI) or unsolicited Ministry of Transport prepares the project documents and tender documents, including feasibility study The business entity is chosen through TENDER (in accordance to Presidential Regulation No. 56/2011) 15
16 Government Support for PPP Infrastructure Projects GCA (Government Contracting Agency 1 Financiers Banks Indonesia Infrastructure Fund 1 Concession Agreement 3 Project Company 4 IIFF Private Equity 2 3 Guarantee Agreement Regress Agreement Institutional Investors 4 Financing Agreement IIGF (Indonesia Infrastructure Guarantee Fund) 2 Other investors 16
17 THANK YOU 17
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