Saturday, September 5, 2009

A Conceptual Framework for Growth Strategy of a Port System: A Case Study of Aceh, Indonesia

By Muhammad Subhan
(Paper presented at the ICIS 2008)


In the last few decades, the world has witnessed a rapid changing of global trade movement and remarkable growing of goods demands or the so-called globalizing market place (Robinson 2002) or globalization of port logistics (UNCTAD 2007, 2008). This reality is triggered by a towering growth of the world population, commodities, and the increasing economic prosperity as well as the new inventions in maritime and shipping technology.

Port and shipping industries have experienced great transformations to support the innovation and development in maritime industry sectors with necessity infrastructures and services. One of the major and important changes that have been brought to the port and shipping industries is the use of containerization in the way of how goods are transported (Notteboom 2004, Peng & Xueyue 2003, Fung 1994). Containerization has enabled the physical transfer of goods from one mode to another easily into one single system. Many developed and developing countries have relied very much upon the container system for their international trade especially through ocean liner. For instance, at least 85 per cent of China foreign trades (Peng & Xueyue 2003) and 89.6 per cent of global trades (UNCTAD 2008) were transported using the ocean transportation.

In responding to these trends, studies and researches on design, size, and capacity of the containerships have been carrying out continuously to produce larger and faster vessels. Design and making of ultra large and modern containerships is becoming a never-ending competition. At this time, mega containerships of 9,000-11,000 TEU are already in operation. For instance, Emma Maersk of A.P. Moller-Maersk Group is the biggest containership ever built so far with capacity of 11,000 TEU and the ship has 397 meters length, 56 meters breadth and 14 meters draft (Maersk 2008). Samsung Heavy Industries (SHI) in Korea has been successfully developed containerships double in terms of its capacity only in 7 or 8 years. SHI developed a containership of 6,200 TEU in 1999 and 9,600 TEU in 2003 and they are in progress of developing eight ships of 13,300 TEU since 2007 that will be in use by 2011 (Samsung Heavy Industries 2008).

Lloyd’s Register as quoted by Global Security Organization (2006) announced that a study on innovative design carried out by Germanischer Lloyd and Hyundai Heavy Industries has resulted a design of 13,000 TEU containerships with 382 meters length, 54.2 meters width and draft 13.5 meters. Global Security also expected that in the next 10 years (from 2006), containerships of 18,000 TEU, with 60 meters length and maximum draft 21 meters will be built. This is simply because a research conducted by their experts shows that this huge containership is possible to be developed.

As a consequence, according to Robinson (2002), the rapid transformation and development within the industries will significantly affect to structural and functional changes to ports and port authorities. In this such a situation, port authorities and port managements need to define the new core business of the port, to identify an appropriate strategic intent as described by Hamel and Prahalad (1994, 1988), to specify relevant core and threshold competencies and to position the port for growth.

However, according to Magala (2004), many ports (regional ports) are experiencing problems of ill-formulated and poorly implemented strategies set in place and of unclear mechanisms of port growth or in Hamel’s (2001) view, many firms, including ports, are facing the dilemma of that they don’t have enough variety and enough testing in their strategies or they just simply experience what Hamel and Valikangas (2003) labeled as strategy decay which is replicated, supplanted, exhausted, and eviscerated. Too overcome these problems, study is always in need to learn how ports grow, to identify sources and factors that contributing to port growth, to formulate relevant and unique strategies for growth and to understand perceived strategies for growth of port authority. This kind of study is essential for port development, growth, and survival and to achieve sustainable competitive advantage of the port; and this paper attempts to achieve small part of it for Aceh seaport system.


The number and type of vessels pass through the Straits of Malacca is now increasing drastically. According to Zubir (2007), every year more than 50,000 cargo ships use the straits or more than 30 per cent of the vessels are containerships (The National Maritime Portal Malaysia 2008). Most of these containerships will be berthed at several ports in the straits to load and unload containers at the ports.

Vessel traffic congestion, growing ship sizes, highly growth of the market, and depth limitation facing by the Straits will contribute negatively to future development of ports (UNCTAD 2008) especially in the Straits of Malacca where in fact the statistics show that commodities demands through containerization are vastly increasing (Port Aid 2008). Therefore, well-defined strategies are needed for the growth of the ports in the region such as development of new or up-graded ports in the deepwater of the region that be functioned as transhipment or hub port will perhaps be a sound strategy to sustain competitive advantage.

As the consequence of containerships increase, the throughputs activities at several ports in the World and especially in the Straits of Malacca are also significantly increase from year to year (PSA 2007, 2008 and Port Aid 2008). The average increase of container throughputs for the world is sharply increased at 6.7 million TEU per year. If we look at the throughputs activities at the top 10 main container ports in South Asia where the Malacca Straits located, we will find that there was 6.7 million TEU increased or 13.17 per cent for year 2006 compared to year 2005. The throughputs also increased for 17.73 per cent in East Asia region, the closest neighbor to South Asia region (see table 1).

Aceh, sitting at the northern tip of the island of Sumatra and becoming a west-gate keeper of the Straits of Malacca, geographically offers important shipping lanes throughout the region and to ports’ hinterland of Indonesia. Strategically, with its rich resources and its position surrounded by the fastest growing regions of the world economy, China on the right side and India on the left side, and its location in one of the major markets of the world container shipping, Aceh ports naturally has opportunities and capabilities to grow (see figure 1).

Aceh with the population of 4,223.8 thousand in 2007 and with area of 56,500.51 square kilometers is the fourth biggest province in Sumatera Island whose area is about 446,686.68 square kilometers constitutes 24.01 per cent of total area of Indonesia to be the second largest island in Indonesia. Aceh’s average monthly income per capita as in 2007 is Rp.1,275,908 makes up the third highest average monthly income in Indonesia after Papua and Jakarta (BPS 2008).

Recently, the Government of Aceh has announced a plan to upgrade and redevelop several ports in Aceh with the assistance from the United Nations for Development Programs (UNDP) and other bodies (Aceh Government 2008). Aceh port system comprises of eight ports and five of them facing the Malacca Strait. Two of the five ports are deepwater functioning ports (UNDP 2005) i.e. Sabang Port which is located at the northern tips of the Malacca Straits from Sumatera Island side and Lhokseumawe Port in North Aceh. The position of Sabang as a centre for trading and port has been retaken into account since 1993 (Syaiful 2007) in relation to the establishment of Indonesia, Malaysia and Thailand Growth Triangle (IMT-GT). Sabang has been stated as The Integrated Economics Development Region (KAPET) through President Habibie decree No.171 dated 26 September 1998 and in 2000, President Wahid has stated the region as the Free Trade Zone (FTZ) and the Free Port Zone or FPZ (Syaiful 2007, Mawardi 2007). On the other hand, Lhokseumawe Port is benefited of being a commercial port close to the industrial and agricultural regions of Aceh.

Aceh, geographically, has locational advantage of being positioned at one of the world busiest shipping lane of the straits of Malacca (see figure 1). With this position, Aceh ports have a broad accessibility to shippers. In addition, Aceh seaport system is situated within IMT-GT regions and has a lot of unique resources that can be used to complement for the port growth. But in fact, despite having those values and resources, Aceh port system is still having problems to grow as major and dynamic ports in Indonesia and in the region that maintain and increase competitiveness. At one point, as pointed out by some abovementioned authors, many ports including Aceh ports are facing problem of ill-devised and poorly implemented strategies and of unclear mechanisms of port growth in all aspects. At another point, Aceh ports are surrounded by and in the shadow of world huge and busiest ports like Port of Singapore, Port Klang and Port of Tanjung Pelepas that always enhance their advantages and values that likely difficult for other ports in the region to compete.


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