Indonesia's challenge and the challenge of Indonesia
 Textile dealers have always said Indonesia's shipping system slows growth of imports and exports alike, from incoming raw materials to outgoing finished products.
But with Jakarta's plans to make the world's fourth most populous country, with its 261 million people, a key player in tomorrow's intra-Asia trade, there are many ambitious plans afoot. A vital spinoff is trimming Indonesia's sky-high transport costs, and in the process, adding value to its exports as well as playing a central role in regional and global e-commerce, which in turns means vastly increasing re-export volumes.
But today, Indonesia still ranks 63rd out of 160 countries on last year's World Bank's Logistics Performance Index, measuring ease of trade, transit times, customs clearance and state of infrastructure.
Costs of shipping goods across the country stands at 27 per cent of GDP, according to a 2013 World Bank study compared with 13 per cent in Malaysia and eight per cent for Singapore.
Nonetheless Indonesia has big plans to build or expand 24 ports, though financing remains a problem, with the task divided between four state-run port operators with their own fundraising plans.
Indonesian President Joko Widodo also wants his country to become a "global maritime axis", effectively rivalling Vietnam and Thailand in terms of cost, quality and volume of production, thus becoming a major regional manufacturing base for automotive and electronics with hopes of attracting Toyota and Samsung.
"In terms of challenges, locating adequate funding is clearly one of the biggest," said Turloch Mooney, senior editor for global ports at research provider IHS Markit, Reuters reports.
Anne Patricia Sutanto, a senior executive at garment maker PT Pan Brothers, said there were not enough shipping lines out of Semarang, a port city on the north of Java island, which it uses for 70 per cent of its exports.
Pan Brothers says on its website that its clients include Germany's Adidas and Japan's Uniqlo, owned by Fast Retailing.
With its towering new cranes and wharves that can handle the world's bigger ships, Indonesia's main international port still suffers from inefficiency and congestion despite its US$2.5 billion upgrade.
The upgrade is the first step to overhaul shipping in the country, though experts say the scheme to dot the sprawling archipelago with ports within a few years faces a shortfall of billions of dollars in financing.
"While these companies are capable of developing and operating ports, their capacity is limited in financing," said Tusk Advisory consultancy CEO Raj Kannan.
PT Pelabuhan Indonesia II (Pelindo 2), which runs Jakarta's revamped Tanjung Priok port, needs IDR40 trillion to IDR 50 trillion (US$3 billion-$3.75 billion) over the next three years to build at least three new ports and other infrastructure, said company president Elvy Masassya.
Pelindo 2, which issued US$1.6 billion worth of bonds two years ago, is now in talks with potential investors from China and other countries, Mr Masassya said, adding that he was confident the company could raise enough money.
Another state-run port operator, PT Pelabuhan Indonesia III (Pelindo 3), is planning to raise up to IDR5.5 trillion from a bond issue this year.
Fitch Ratings said in April that Pelindo 3's estimated cash flow from operations of IDR14 trillion over 2017-2020 would not cover forecast capital expenditure of IDR22 trillion.
Pelindo 3 CEO Ari Askhara has said the spending plan was "still an estimation" and that any shortage of funds could be filled by tapping capital markets or getting bank loans.
While the dwell time has fallen to three days at Jakarta in last few years, experts estimate that it still takes eight days or more at Indonesia's secondary ports. Dwell time in Singapore is one day.
Yet some analysts are hopeful of the long-term prospects for the overhaul of shipping in Indonesia, with the improvements at Tanjung Priok seen as a good starting point.
"The goals are highly ambitious, but also very important to the future economic fortunes of the country, and therefore have support within the highest levels of the administration," said IHS Markit's man, Mr Mooney.
Another factor impacting port development is the growth of ecommerce in Indonesia, reports Bloomberg.
Wider mobile phone coverage means more consumers are starting to shop online so the Chinese e-commerce giant, JD.com Inc, has been tracking the erection of cell phone towers to decide where the market for its webstore is going, and where to set up distribution and delivery warehouses.
Staffing is now at 400, up nearly threefold in the last 12 months. Within five years, the Beijing company plans to have reefer trucks delivering fresh and frozen goods to homes.
"E-commerce is a no-brainer and it's going to happen," said Zhang Li, JD.com's country manager.
Also in the market, is Lazada, an Alibaba unit. The game is to gain market share of 261 million wallets in one of the world's biggest economies on the cusp of accelerated growth.
Building a delivery network covering 13,000 islands is not going to be cheap but it does not take much imagination to see that if rapidly accelerating demand is there, port financing will certainly follow.
As JD.com's Mr Li said: "It's a no-brainer."
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