Future Development of Indonesian Port Institution

Transcription

1 Future Development of Indonesian Port Institution Harun Al-Rasyid S. LUBIS Associate Professor Transportation Research Group Faculty of Civil and Environmental Engineering, Institute of Technology, Bandung (ITB) Jl. Ganesha 10, Bandung 40132, Indonesia Tel./Facs Rudi HERMAWAN K Associate Professor Transportation Research Group Faculty of Civil and Environmental Engineering,Gedung Lab.Tek. I Lantai.2 Jl. Ganesha 10 Bandung Indonesia Tel/fax: hermawan@si.itb.ac.id Hokbyan R.S. ANGKAT Doctorate Student Post Graduate Civil Engineering Institut Teknologi Bandung Gedung Lab.Tek. I Lantai.2 Jl. Ganesha 10 Bandung Indonesia Tel/fax: byan31@yahoo.com WIDIARTO Associate Professor School of Architecture and Planning Institut Teknologi Bandung Gedung Lab.Tek. I Lantai.2 Jl. Ganesha 10 Bandung Indonesia Tel/fax: widiarto@pl.itb.ac.id Abstract: Marine transportation is important for archipelagic country like Indonesia. Ports as the element of marine transportation system and key elements of the logistics chain play very important role in stimulating and supporting regional economic development. Legalization of new Law No. 17 of 2008 on Shipping caused elementary change in structure and management of Indonesian port. Some key element of the port reform are dissociation function of port regulator and port operator, introducing port authority and confirmation the involvements of local government and the private sector participation in developing port industry in the country. This paper reports the recent developments of Indonesian port reform, together with the opportunities and constrain reported. As the practice of multi-operators is envisaged in the future private sector participation in the port sector, the necessary changes in the institutional set up for Indonesian port are also discussed. Key Word: Port Reform, Port Institution, Port Authority, Privatization 1. INTRODUCTION Indonesia is the largest archipelago in the world composed of islands. It stretches from the western farthest end in the island of Sumatera to the eastern border in the island of Papua. Therefore sea transportation playing significant role not only as a bridge from one island to another, reduce isolation and maintain national unity, but also promoting the economic growth of the nation. Ports as part of the sea transportation system and key elements of the logistics chain play very important role in stimulating and supporting regional economic development. Due to the nature geographic of the country, ports also function as the gateways to nation. According to BAPPENAS (2003), between the years 1996 and 2001 average 99% of export volume and 98% of import volume goes through ports.

2 In accordance with Shipping Law No. 21 of 1992, the Indonesian ports are categorized as two type, public port and special port. The public ports are dedicated for public use, while the special ports are dedicated for specific user to support certain activity such as manufacturing, forestry, mining and other sectors. The public ports are further subdivided into commercial and non commercial ports. Non commercial ports are smaller port with limited capacities, handle relative small cargo volume and have almost no cargo handling equipment, which are operated by Technical Operating Unit (Unit Pelaksana Teknis/UPT). UPT belongs to the Government (Local Government) and usually subsidized by government. Meanwhile, commercial ports are control and operate by Port Administrator Office (ADPEL) and Port Corporation (PT (Persero) Pelabuhan Indonesia/PELINDO I-IV). Until 2005 Indonesia has 2060 ports, that are 111 port operated commercially by PT (Persero) PELINDO, 614 ports operated non-commercially by UPT and 1162 special ports. ADPEL in commercial port belongs to the Ministry of Communication (Directorate General of Sea Communication/DGSC). Jurisdiction of the ADPEL is limited to subjects concerning ship safety matter in port (sea traffic, ship safeguard and rescue). ADPEL does not have a regulator power and not able to obstruct fair competition by the private sector PELINDO, which is managed and operated commercial ports, is a State Own Enterprise (SOW) under jurisdiction of Ministry of State Own Enterprise (MSOE). Government Regulation No of 1999 stipulates the establishment of PELINDO as a single body which operate commercial port. Since then, PELINDO, as port operator, has monopoly the port operation and gets revenue from the ship servicing, cargo servicing and other servicing such as land rental, office space rental, warehousing rental, telecommunication, electricity, etc. System and structure of Indonesia port institution pushed PELINDO act as port operator, contracting authority and port regulator. As a consequence, the performance of port was marked by monopoly and centralistic induced inefficiency, low productivity, high cost and uncompetitive. Another problem rise when Regional Autonomy Law No. 31 of 2004 was passed. In accordance with this law, Province (local) Government demanded for reformation of port management using decentralization program. Legalization of new Law No. 17 of 2008 on Shipping cause elementary change in structure and management of Indonesian port. Some key element of the port reform are dissociation function of port regulator and port operator, introducing port authority and confirmation the involvements of local government and the private sector participation in developing port industry in the country. Based on this background, the purpose of this study is to analyses port management model from international perspective and then develop an adoption institution port model which appropriate and applicable with Indonesian condition.

3 2. INDONESIAN PORT SYSTEM 2.1. Present Port Organization (Law No. 21 of 1992 on Shipping) Figure 1 shows the present Indonesian ports institutional arrangement and structure according to Law No. 21 of 1992 on Shipping. The role of government was to provide strategy and policy. Two ministers were appointed to supervise the port activities in the country, Ministry of State Own Enterprise as financial and business auditor and Ministry of Communications who mainly responsible for the technical matter and norms. Indonesia Government (Strategy and Policy Maker) Ministry of State-owned Enterprises (Financial Audit) Ministry of Communication (Technical Audit) Other Government Institutions PELINDO/SOE Business Unit (Services provider) ADPEL Port Services Custom, Immigration, Quarantine Private Operators Figure 1 Port institutional framework under Law Number 21 of 1992 on Shipping Under this port institutional framework, the role of PELINDO is dominant. PELINDO can provide port services alone or trough cooperation with private sector. Some cooperation which has been done by PELINDO for instance: 1. In 1998 using joint operation management scheme, PELINDO II sold percent share to PT Ocean Terminal Petikemas Joint operation to develop and operate container terminal KOJA at Port of Tanjung Priok Jakarta. 2. In 1999, under the government s privatization program, PELINDO II sold 51 percent of PT. Jakarta International Container Terminal (JICT) shares to Hutchison Port Holding using joint venture agreement. JICT was formed to operate Container Terminals 1 and 2 at the Port of Tanjung Priok Jakarta. 3. Another privatization had done by PELINDO III at Port of Tanjung Perak Surabaya. PELINDO III incorporated PT. Terminal Petikemas Surabaya (TPS) and sold 49 percent of TPS share to P&O Australia Ports Ltd. 4. Terminal operator scheme, allowing private company provide terminal handling services for non-container cargo

4 2.2. Reform On Port organization (Law No. 17 of 2008 in Shipping) The recent enactment of Law Number 17 0f 2008 on Shipping supersedes the Law Number 21 of 1992 on Shipping. There are some elementary changes which have been made. First, dissociation function of port regulator and port operator and the introducing of port authority institution. Second, the confirmation of local goverment involvement and the private sector participation in developing pot industry. This law has abandoned the monopoly of PT Pelabuhan Indonesia (Persero) as the sole service provider of Indonesian port were managed commercially. As the monopoly privilege of PT Pelabuhan Indonesia (Persero) has been discarded, other business entities including private sectors are then welcomed to be involved in the port sector in the country. Analysis the existing structure of Indonesia port public institution model (Figure 1), it is necessary to reform port institution framework. Since port produces multi services that provide by different institution (government agencies, private organizations), each showing diverse interest and possessing specific capabilities, than the minimal disadvantage of absence port authority (regulator) would then be the lack of coordination, organization and control (laws and regulations) on port planning and operation as a whole. 3. PORT MANAGEMENT MODELS Increased commercialization and growth of international trade has led to considerable pressure on the operating environment of the existing port infrastructure, forcing it to adapt new, improved and more reliable technology. Governments all over the world are finding it increasingly difficult to finance the investment required to sustain the growth of port infrastructure. On the other hand, globalization has given birth to multinational corporations and alliances that have the willingness, financial strength and technical know-how to operate and manage the port. The restructuring on port industry with a growing involvement of private sector operators needs institutions reforms. The specific objectives of port restructuring and increasing private involvement vary greatly. According to ADB (2000) there are some specific objectives for port institutional reform: Increase operational efficiency Promote competition among ports and terminal Accelerate growth of traffic Provide private financing of public infrastructure Improve the quality and capacity of infrastructure reduce operating subsidies reduce the national deficit Downsize government bureaucracy There are a number of potential ways of structuring element of port institution. Traditionally, in terms of ownership and operating structures of port, port institutional has been distinguished as landlord port, tool port and services port. Landlord port refers to port authority that provides land, constructs and maintenance infrastructure, where as the superstructure and all port business are constructed and operated by private companies. In tool port, the port authority provides infrastructure and superstructure, and operates some port

5 services, the remaining port services are operated by the private sector. The service port refers to the port authority that responsible and provides all port services as a whole (Trujillo and Numbela, 2000) This paper focuses in particular on port management/administration model proposed by World Bank, Baird and Baltazar and Brooks World Bank Model The World Bank (2001) offered a framework of private sector participation in managing port as shown in table 1. The choice of model adopted in each country is influenced by the way port are organized, structure and managed. Table 1 Basic Port Management Model Type Infrastructure Superstructure Port Labour Other functions Public service port Public Public Public Majority public Tool port Public Public Private Public/Private Landlord port Public Private Private Public/Private Private service port Private Private Private Majority private Source: World Bank Port Reform Tool Kit, module 3, Box 6, p. 21 The four management models in the World Bank model are the Public Service Port, the Tool Port, the Landlord Port and the Private Service Port. These models are distinguished by whether the services are provided by public sector, private sector or mixed (public and private sector), the port orientation (local, regional or global), who owns the infrastructure, who owns the superstructure and equipment and who provides dock labour and management. (A) Public service port In this model public character has predominantly. Public via port authority is responsible for the port as a whole. Port authority owns, maintains the infrastructures and superstructures, operates every available asset (fixed and mobile) and also hires employees to provide services directly. (B) Tool port In this model, the port authority owns, maintains the port infrastructure, superstructure and the equipment such as quay cranes, forklift trucks, etc. Private operator, which contracted by the shipping agents or other principal licensed by the port authority, provide cargo handling services by renting port assets. (C) Landlord port In this model, the port authority owns the port infrastructure. Private operators provide port service and maintain their own assets such as superstructure (offices, sheds, warehouses, Container Freight Stations, workshops) and all equipment as required by their business. (D) Private service port This model is contrary with public service port. In this model private is responsible for the port as a whole. There is no public involvement and policy interest in the port sector.

6 3.2. Baird Model Another model proposed by Baird (1995) offered a framework of private sector participation in managing port based on port function as shown in table 2. Table 2. Port Administration Model Port Function Models Landowner Regulator Utility Pure public sector Public sector Public sector Public sector PUBLIC/private Public sector Public sector Private sector PRIVATE/public Private sector Public sector Private sector Pure private sector Private sector Private sector Private sector Source: Baird (1995), Table 1, p. 136 According to Baird (1995) there are three element of port which may be privatized either individual or collectively. These elements are: the utility cargo-handling function within the port the regulatory function within the port the land ownership within the port The utility function is concerned with the physical transfer of goods and passengers between sea and land. This includes activities such as cargo-handling service, warehousing, ship towage, equipment maintenance, waste disposal and security. The regulatory function is regarded as the primary role of port authority and generally involves statutory powers being given to a port s management. The landowner function include managing and developing the port state, conceiving and implementing port policies and development strategies, supervising major civil engineering works, coordinating port marketing and promotional activities, providing and maintenance channels, breakwaters, berths, wharves, lock and basins, and providing or arranging road and rail access to the port facilities. Based on these three elements, there are four possibilities to ascertain the extent of privatization in port administration. The first models called Pure Public Sector, in which all three elements landowner, regulator and operator are the responsibility of the public sector. The second model called PUBLIC/private, in which one element of port (port utility) transferred to the private sector. In this model the cargo-handling function is controlled by the private sector within port areas owned by the public sector. The public sector also retains control over regulatory matters. The third model called PRIVATE/public, in which two element of port (port utility and port landowner) transferred to the private sector. In this model the private sector is dominant, with the public sector retaining only control of regulatory meters. The fourth model called Pure Private Sector, in which all three elements landowner, regulator and operator are transferred and become responsibility of the private sector. In this model no involvement of public sector in the port.

7 3.3. Baltazar and Brooks Model Baltazar and Brooks model (2001) basically is re-classification from Baird model (1995). Using devolution approach, Baltazar and Brooks classification port related activities into regulator, landlord and operator activities as shown in table 3. According table 3, the regulator function have been locked out of port functions which consist of landlord and operator function. Specifically this model use operational approach rather than utilities at Baird s model. Generally, in a public port, all regulator and landlord functions belongs to the public sector, although none, some, or all operator functions may be undertaken under contract by the private sector; control of the conditions of operation remain with the government. In mixed public/private port, some operator and/or landlord functions are privatized, usually with the public sector retaining full control of the regulator function. In private port, all of the operator and landlord functions are transferred from the public to the private sector. Baltazar dan Brooks approach gives wide possibility for government to adopt several of port institution models which in line with government s strategic purposes Table 3 Baltazar and Brooks port devolution matrix Governance Regulator functions Port functions Landlord Public Mixed public/ private Private Licensing, permitting Vessel traffic safety Customs and immigration Port monitoring Emergency services Protection of public interest on behalf of the community Determining port policy and environmental policies applicable Waterside maintenance (e.g. dredging) Marketing of location, development strategies, planning Maintenance of port access Port security Land acquisition, disposal Operator Cargo and passenger handling Pilotage and towage Line handling Facilities security, maintenance, and repair Marketing of operations Waste disposal Landside and berth capital investment 4. ANALYSIS PORT MODEL 4.1. Applying Model A. World Bank Model - Applying model Private Service Port to Indonesian ports, which bring port infrastructure, superstructure, port labour and other functions under control of private sector, is highly risky. With respect to the port business, the government will lose its ability to execute a long term economic development policy. - Applying model Landlord Port to Indonesian port, which bring port superstructure and port labour under control of private sector. Under this model the port authority acts as regulatory body and as landlord, while port operations are carried out by private. Adopting

8 this model will allow the government (port authority) to withdraw form port operation. Moreover, the private operator will upgrade the port facilities to increase efficiency. - Applying model Tool Port to Indonesian ports, which bring port labour under control of private sector. Under this model, the port authority still involve in port operation and jointly share the cargo handling service with private sector, which leading to conflicting situation. According to Indonesian port condition this model would be preferable in the transition phase, which government plan to introduce the port authority and port regulator. B. Baird Model - Applying model Pure Private Sector to Indonesian ports, which bring port landowner, port regulator and port utility under control of private sector, is highly risky. With respect to the port business, the government will lose its ability to execute a long term economic development policy. - Applying model PRIVATE/public to Indonesian port, which bring port landowner and port utility under control of private sector. Under this model the port authority acts as regulatory body with no involvement (holding share) in port operation. It is not a good strategic choice for the government to adopt this model. - Applying model PUBLIC/private to Indonesian ports, which bring port utility under control of private sector. Under this model the port authority acts as regulatory body and as landowner, while port operations are carried out by private. Adopting this model will allow the government (port authority) to withdraw form port operation. Moreover, the private operator will upgrade the port facilities to increase efficiency. C. Baltazar and Brooks Model - Applying model Public to Indonesian ports, which bring all regulator and landlord function belongs to port authority. If some or all operator function undertaken under contract by the private sector, control of the condition of operation remain with government. According to Indonesian port condition this model would be preferable in small port and non-commercial port. - Applying model Mixed public/private to Indonesian port, will bring some operator and/or landlord function transfer to the private sector. Meanwhile port regulator remains with government. Adopting this model will allow government to withdraw from port operation activity step by step (by strategies) without losing control on port operation. Despitefully, model will give broader opportunity to private sector to provide port service and get involve in port operation and development. According to Indonesian port condition this model would be preferable in medium to large port and managed commercially. - Applying model Private to Indonesian ports will bring the entire operator and landlord functions are transferred from the public to the private sector. Under this model the government roles remain as regulatory body with no involvement in port function. From above analysis, the best model to be adoption as approach of port institution framework development which is running commercially is: 1. World Bank s model : Landlord port 2. Baird model : Publik/private port 3. Baltazar and Brooks s model : Mixed public/private port 4.2. Port Authority and Regulator The definition of port authorities role in Indonesia remains somewhat in grey area. Theoretically, the idea of separating the port management from port operation in redefining

9 the role of the port authority has been long discussed and accepted. In practice, however, the implementation of such a separation remains difficult. According to World Bank (20001) the term of port authority has been used widely to indicate port authority, port management or port administration. Commission of the European Union defined a port authority as a "State, municipal, public or private body, which is largely responsible for the tasks of construction, administration and sometimes the operation of port facilities and, in certain circumstances, for security. The UNCTAD Handbook for Port Planners in Developing Countries lists the statutory powers of a National Port Authority as follows (on the assumption that operational decisions will be taken locally) (World Bank, 2001): 1. Investment: Power to approve proposals for port investments in amounts above a certain figure. The criterion for approval would be that the proposal was broadly in accordance with a national plan, which the authority would maintain; 2. Financial policy: Power to set common financial objectives for ports (for example, required return on investment defined on a common basis), with a common policy on what infrastructure will be funded centrally versus locally; advising the Government on loan applications; 3. Tariff policy: Power to regulate rates and charges as required to protect the public interest; 4. Labor policy: Power to set common recruitment standards, a common wage structure and common qualification for promotion; power to approve common labor union procedures; 5. Licensing: When appropriate, power to establish principles for licensing of port employees, agents, etc.; 6. Information and research: Power to collect, collate, analyze and disseminate statistical information on port activity for general use, and to sponsor research into port matters as required; and 7. Legal: Power to act as legal advisor to local port authorities. In general, the role of port authority is as port coordinator to ensure the proper use of common facilities and take care of safety and general design of port facilities. However, if there is no port regulator, port authority will perform many other tasks such as (Trujillo and Nombela, 2000): 1. provision of infrastructure for maritime access 2. provision of infrastructure within the port area 3. strategic port planning 4. promotion and marketing 5. regulation and control of safety within the port 6. managing port assets (infra and superstructure) According to Baird (1999), typically a port regulatory duties and responsibilities such as: 1. maintaining the conservancy function, 2. providing pilotage services and vessel traffic management, 3. enforcing applicable laws and regulations, 4. licensing port works, 5. safeguarding port users' interests against the risk of monopoly formation and the controlling of natural monopolies - the port authority is expected to operate in a fair and even handed way towards all port users.

10 5. PROPOSED INSTITUTION PORT MODEL 5.1 Basic Concept As mention before, there are elementary changes in port institutional framework which caused by legalization of new Law Number 17 of 2008 on Shipping. For instance dissociation function of port regulator and port operator, introducing port authority and confirmation the involvements of local government and the private sector participation in developing port industry in the country. According to Law Number 17 of 2008, port authority is central government agency under the control of Ministry of Communication and act as authority executing the regulation, control and supervision on port activity which is running commercially. Port authority will play a central role in the port operation, management and development with function as a landlord, port regulator, contracting authorities and services provider. Figure 2 shows the future Indonesian ports institutional arrangement and structure according to Law No. 17 of 2008 on Shipping. This hierarchy gives much power to the Port Authority acting on behalf of the central government. However this structure implies that the central government has still influenced the management, operations and development of port. In comparison with the previous port institutional framework (Fig.1), functionally not to different but power transferring from PELINDO to new institution Port Authority. This port institutional framework will lead to some problems, include: 1. Higher level conflict of interest 2. Bureaucracy barrier the port investment development and port operational 3. Potentially discouraged competition Further, this situation will remain a barrier to the future of development of national port industry. Ministry of Communication Port Authority 1. Port development 2. Port concessions authority 3. Port regulator 4. Port services provider State/local Own Enterprise, Private Company Port operational, management and services Figure 2 Port institutional frameworks under Law Number. 17 of 2008 on Shipping Potential of conflict and resistance can emerge from concessions authority and services provider function. There is a necessity for policies to separate the roles of the government in port industry. Another consideration is the opportunity for provincial/local government to participate both in port management and port operator (decentralization concept).

11 Figure 3 describes the current government policy suggestion under the Coordinating Ministry of Economics and Industry. Four entities are suggested to include strategy and policy maker i.e. the government, independent regulatory body, contracting authority that provide concessions to operators, and the service provider or companies. Policy and Strategy (Government) (Facilitator/Motivator) Independent Regulatory Body (Regulator) Contracting Agency Service Providers (State/Local Owned Company, Private Company) Figure 3 Port institutional frameworks Note : 1. Contracting Agency is required when new port/terminal operator and port services operation open for the private sectors or province/local governments initiatives. The involvement of the private sector or province/local governments requires the contract admission process or concession awards from the central government. In order to avoid a complication between the government s role with the other role as regulator and policy maker through the Ministry of Communication (Directorate General of Sea Communication/DGSC) therefore the role of concession/contract provider must be performed by a separate institution which is in this case a contracting agency. 2. The existing cooperation between PELINDO and private sector will lease new concession (joint venture firm or independent) from contracting agency after ending of cooperation. 3. Post concession issues including the economic regulations matters during the operation period are managed and supervised by the independent regulatory body. 5.2 Model Propose First of all we need to define government role in port management and operational, such as: 1. Strategy formulation 2. National port planning 3. Infrastructure investment 4. Ownership of assets 5. Financial autonomy 6. Port planning/development 7. Port concessions authority 8. Landlord function 9. Regulator function 10. Operational management 11. Services provider

12 Base on Baltazar and Brooks approach, table 4 describes cluster of government role to regulator, landlord and operator function Table 4 Government role cluster Government Role Regulator Landlord Operator (State) 1. Strategy formulation + 2. National port planning + 3. Infrastructure investment Ownership of assets Financial autonomy Port planning/development Port concessions authority Landlord function + 9. Regulator function Operational management Services provider + Next step, we distribute this government role to two government institution namely Ministry of Communication (Directorate General of Sea Communication/DGSC) and Port Authority. Figure 4 describe distribution propose of governmental role which is resemble with port institutional framework under Law Number 17 of 2008 on Shipping Government 1. Strategic formulation 2. National port planning 3. Infrastructure investment 4. Ownership of assets 5. Financial autonomy 6. Port planning/development 7. Port concessions authority 8. Landlord function 9. Regulator function 10. Operational management 11. Services provider Ministry of Communication 1. Strategic formulation 2. National port planning 3. Infrastructure investment 4. Ownership of assets 5. Financial autonomy Port Authority 1. Regulator function, 2. Landlord function, 3. Port planning/development 4. concessions authority 5. operational management 6. services provider Figure 4 Government role & Functions Base on distribution model propose above, several port model institutions then set up, such as: 5.1 Public port approach Base on public approach the characteristic of port authority in port which is running commercially are: 1. Under central government ( viz. MOC) 2. Port management and development

13 3. Port authority will leased terminal from central government (MOC) as the real owner of port asset without payment and then rent out to terminal operator in return for payment 4. The objective of port authority narrowly focused on finances and operation 5. Port Authority will used the full recovery of all port-related costs including capital costs plus an adequate return on capital as a minimum financial objective to guarantee the sustainability of port development Ministry of Communication Strategic formulation National port planning Infrastructure investment Ownership of assets Financial autonomy Port Authority regulator, landlord, port development concessions authority port operational management Terminal operational, management and services (State/Local Owned Enterprise, Private Company) Figure 5 Port institutional model: public approach Another model from this approach can apply when central government transferred the owner of the public port to provincial or municipal government (fig. 6). The characteristic of this model are: 1. Province or municipal government owned the public port 2. Central government (MOC) and the relevant transportation department at the provincial or municipal level are responsible for strategic planning and formulation relevant policies and regulations for the development of the port network system at the level of the whole country and the province. 3. To guarantees that the strategic planning conducted by province or local government will not contradict the overall strategic plan that is formulated by central government need to be approved by central government (MOC). 4. Some of port authority (national) will transfer to local port authority. 5. The former of local port authority can be either an independent provincial or municipal body or part of provincial or municipal transportation department 6. Any qualified investor can apply to invest in port construction and/or operation on joint venture firm or independent basis. The investor can negotiate and conclude commercial deals with province or municipal government.

14 7. To prevent private monopolies emerging in the absence of intra port competition and over capacity (miss timing and location) the cooperation need to be approved from port authority (national) Proposed Strategic Planning Approved Ministry of Communication 1. Strategy formulation 2. National port planning 3. Financial autonomy Port Authority (National) 1. Regulator 2. Concessions authority Coordination Provincial/Municipal Government 1. Local port planning 2. Infrastructure investment 3. Ownership of assets 4. Financial autonomy 5. Land allocation 6. Urban and regional planning Local Port Authority 1. Regulator function 2. Landlord function 3. Port development 4. Port operational management Terminal operational, management and services (State/Local Owned Enterprise, Private Company) Figure 6 Port institutional model: decentralization public port approach 5.2 Semi public port approach Base on semi public approach the port authority will have commercialized statutory. The government retains ownership and control of ports but introduces commercial principles in the way the port manages its business. The port authority will work independently from political interference and to develop rapid response to customers need. The characteristic of port institution which is running commercially are (fig. 7): 1. Port authority more autonomous and has much power to acting on behalf of the government 2. Port authority will manage, operate and supervise the operational of port 3. To prevent private monopolies emerging in the absence of intra port competition and conflict of interest it is necessary to set up independent regulatory body which is act as port regulator

15 Ministry of Communication 1. Strategic formulation 2. National port planning 3. Infrastructure investment 4. Financial autonomy National Policy and Strategy (adoption inter-department policy) Policy recomendation Port Authority (Commercialized) 1. Autonomous (management and financial) 2. Owner of asset 3. Landlord, 4. Port planning/development 5. Concessions authority 6. Port operational management Independen Regulator Port regulator Terminal operational, management and services (State/Local Owned Enterprise, Private Company) Figure 7 Port institutional model: semi public (corporation) approach The choice of which model should adopt depends on the objectives of port institution reform. The reformation on port institution should implement gradually to give government and others policy makers time to make and implement policy reform and to build support as necessary. 6. CONCLUSION This paper has attempted to provide an adaptable framework of port institution in addressing port developments proper to Indonesia. A brief historical account has been given to show the background of existing structure of Indonesian port institutions. The theoretical framework also introduced World Bank management port model, Baird port administration model and Baltazar and Brooks government devolution, in showing precisely how the institutions of ports have changed following policy directions in order to give more space for private sector involvement in port operation or management. Using public port and semi public (corporation) approach three models of port institution have proposed and mainly differ in how the port authority s role may be defined. First option on public port approach put port authority as a central government agency. Second option on public port approach adopt when central government transfer the owner of port public to province or municipal government. In this model we set up local port authority which is a province or municipal government level, meanwhile port authority (central) still as a regulator and concession authority. Third option on semi public (commercialized) approach put port authority more autonomous and has much power to acting on behalf of the government. In

16 this model we need to set up new institution namely independent regulatory body which is acting as regulator to prevent private monopolies emerging in the absence of intra port competition and conflict of interest Finally, the reform on port institution should be implemented gradually to allow time for all stakeholders prepare and implement the policy reform. REFERENCES ADB. (2000) Developing best practices for promoting private sector investment in infrastructure: Port. ADB. Baird, A. (1999), Privatization defined: is it the universal panacea? Napier University. Baird, A.J. (1995), Privatization of trust ports in the United Kingdom: Review and analysis of the first sales. Journal of Transport Policy, Vol. 2, No 2, Baltazar, R. and M.R. Brooks. (2001) The Governance of Port Devolution: A Tale of Two Countries, World Conference on Transport Research, Seoul, Korea, July BAPPENAS. (2003) Infrastruktur Indonesia: Sebelum, Selama dan Pasca Krisis. BAPPENAS, Jakarta Indonesia Government Regulation No. 56, 57, 58 and 59 of 1991 about establishment of PELINDO I IV. Indonesia Government Regulation No. 69 of 2001 about Port Indonesia Shipping Law No. 21 of 1992 Indonesia Shipping Law No. 17 of 2008 JICA. (2003), STRAMINDO, Draft Final Report Trujillo, L and Nombela, G. (2000) Seaport. In A. Estache and G. de Rus (edt), Privatization and Regulation of Transport Infrastructure: Guideline for Policymakers and Regulators.The World Bank, Washington, D.C. UNCTAD. (1998) Guidelines for port authorities and government on the privatization of port facilities. UNCTAD secretariat World Bank. (2001) WB Port Reform Tool Kit, electronic format at