Indonesian Interisland Shipping: An Assessment of the Relationship of Government Policies and Quality of Shipping Services

Abstract

The specific aim of this study is to examine the quality of Indonesian interisland shipping in achieving national policy objectives as stated in the Five Year Development Plan. This examination includes an analysis of regularity of shipping services, frequency of sailing, shipping capacity, freight rates, and government policies. The results of data analysis indicate that excess capacity, irregularity, infrequent sailing, and low freight rates were deficiencies of interisland shipping services. The reasons for shipping deficiencies included: (1) frequent changes in shipping policies and regulations; (2) centralization of shipping capacity in certain growth centers; (3) route deviations and port omissions; (4) inter- and intra-modal competition; (5) insufficient volume of return cargoes; (6) poor port conditions and insufficient port facilities. Major findings of the study show that the relationship of government policies to shipping services is based on the concept that "the ship promotes the trade." However the contrary view that "the ship follows the trade" implies that interisland shipping will comply with government policies only if their interests of obtaining sufficient volume of cargoes can be guaranteed. Obviously, interisland ships always followed the trade rather than shipping policies and regulations. Deregulation would likely increase irregular shipping services, infrequent sailing, irregular distribution of basic commodities, centralization of trade, imbalance of economic development between east and west Indonesia, and number of lagging regions. As a result, the achievement of national policy objectives and the implementation of Wawasan Nusantara through interisland shipping are still far from reality. In order to achieve government policy objectives through interisland shipping, this study suggests that the government should provide interisland shipping with subsidies, encourage the formation of and regulate domestic shipping conferences, and extend economic decentralization to all Indonesian provinces. This study also indicates that interisland ships are capable of facilitating exchange processes toward the realization of vertical and horizontal homogeneity in sociopolitical and cultural conditions throughout the archipelago. This has strengthened the unity of the nation.