Infrastructure’s Role in Lowering Asia’s Trade Costs

Infrastructure’s Role in Lowering Asia’s Trade Costs

Building for Trade

ADBI series on Asian Economic Integration and Cooperation

Edited by Douglas H. Brooks and David Hummels

This book analyses and draws policy implications from infrastructure’s central role in lowering Asia’s trade costs.

Chapter 5: Port Competitiveness: A Case Study of Semarang and Surabaya, Indonesia

Arianto A. Patunru, Nanda Nurridzki and . Rivayani

Subjects: asian studies, asian development, development studies, asian development, development economics, economics and finance, development economics

Extract

1 Arianto A. Patunru, Nanda Nurridzki and Rivayani 1. INTRODUCTION Ports have a significant role in economic development, especially in the trade and distribution of goods. Almost 85 per cent of the world’s trade distribution relies on sea transportation. In the world’s largest archipelago, Indonesia, ports are one of the idiosyncratic keys that can boost economic growth, along with the more common determinants. According to the Ministry of Transportation, approximately 90 per cent of Indonesia’s external trade is transported via sea and only 10 per cent via land and air. It is already known that distribution efficiency is one factor that determines producer competitiveness, which in this case is influenced by port performance. The decision to use one particular port instead of other ports is determined on the basis of cost calculation on the producer side. Producers would choose a port that is consistent with minimum distribution cost. There are several factors that can influence this cost. They include inland transportation cost, cost of using a forwarder, costs inside ports, time effectiveness in port (including for administrative procedures), bureaucracy and regulations applied in the port. Moreover, additional cost or illegal cost sometimes appears in the process, resulting in a lower competitiveness in the port sector. In general, port-related competition can be defined on three different levels: inter-port competition, intra-port competition and intra-terminal competition. Inter-port competition arises when two or more ports or their terminals are competing for the same trade (World Bank, 2007)...

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