1. Maritime transport planning: -Optimization Perintis -Potential for cost reduction in inter-island container transport Robert Verhaeghe (TUDelft) Fitri Indriastiwi (Litbang MoT) 20 oct 2014 ADB TA8045 (Phase 2) “Improving Domestic Connectivity”

2. CONTENT 1.Review:  use of criteria (effectiveness of transport system, financial, economic, social) for evaluation of transport,  estimation of impacts for those categories 2.Illustration of the use of modelling for planning of  Perintis transport  Inter-island container transport 3.Conclusions – follow up  Potential of the approach  Expansions in view of current transport policy questions

3. 1) Review on criteria and impact estimation

4. Framework for design and evaluation

5. Effectiveness of the transport system Example Perintis: –provide the transport service in the most effective way fulfilling the demand for transport (frequency of service, minimum transport time), –with the best input of ships and combination of ship tours

6. Financial impacts Example Perintis: –Standpoint of provider/sponsor Operation cost for providing the service Revenue from the service for a particular price setting Cash balance: need for subsidy? –Standpoint of user cost of the service

7. Economic impacts Total effect of an improvement of transport on the welfare of the country/region Improved transport has a direct effect on some sectors of the economy but these effects propagate into related sectors Macro-economics has a modelling approach for this: Input- Output (I-O) modelling To include regional differences and transport a special version of I-O is available which includes trade between regions : a spatial I-O (Spatial Computable General Equilibrium model SCGE)

8. Economic impacts In macro-economics transport costs are called transaction costs; reduced costs improve trade and economic performance Problem: how well can the activities be supported by Perintis (small businesses, local) be included in the SCGE? Little data on those activities; how well are they represented in the modeling? Region A Region B Trade Transaction costs associated with transport

9. Social impacts Most difficult to determine and estimate; not included in economic modelling Basically the analysis of how Perintis improves the lifes of people should be carried out at the micro-level Which standard of minimal service frequency should be provided? When can a transition be made to commercial service? An ability to pay analysis could indicate if commercial service can be afforded. However the remoteness of the place also a plays role because transport to such place maybe very expensive due to low load. Conclusion: evaluating/justifying transport subsidy to low income users and/or a disadvantaged part of the network is difficult (universal problem)

10. Quantification: challenge for transport planning Ability to quantify the functioning of the transport system and the impacts is necessary to compare alternatives In the present presentation focus is on quantification (modelling) to enable an assessment of transport effectiveness and financial impacts Applications –Subsidized Perintis service –Commercial inter-island container transport

11. 2) Illustration of the use of modelling in transport planning (Perintis, Inter-island container transport)

12. Modelling basics

13. Transport analysis: supply - demand Demand for transport Supply of transport facilities employment social transport modes vehicle fleet(s) infrastructure trade Transport market: equilibrium/performance … … Value generated Implementation cost

14. ADB TA8045: analysis framework Demand for transport (O-D matrix) Transport supply system (infra, routes,…) Match of supply and demand Performance of transport system (revenue, ….) Design of improvements to the transport system Projection of economic activity Cost analysis (life-cycle) Transport model (Omnitrans) Base map (GIS) Spreadsheets / Matlab Spreadsheets Mapinfo, Arcinfo Demographic/ economic models Survey + secondary data Spreadsheets

15. Components of the framework 1)Demand estimation/monitoring: analysis of monitoring data, design and execution of a survey 2)Modelling: implementation of the Omnitrans transport analysis software including training 3)Cost analysis: derivation of life-cycle cost for shipping 4)Design of improvements to the Perintis service: Maluku case study

16. Analysis of Perintis

17. Implementation of transport software package at Litbang MoT

18. PANGKALAN AMBON TRAYEK R-31 Ambon -184- Geser -32- Gorom / Ondor -32- P. Kesui -17- P. Tior -36- Kaimer -12- P. Kur -28- P. Toyando -33- Tual -118- Dobo -118- Tual -33- P. Toyando -28- P. Kur -12- Kaimer -47- P. Tior -17- P. Kesui -32- Gorom / Ondor -32- Geser -184- Ambon -184- Geser -32- Gorom / Ondor -158- Tual -160- Dobo -132- Ambon JARAK:1.661 MILFREKUENSI: 19 VOYAGE LAMA PELY.:19 HARIUKURAN KPL: 500 DWT/GT.325 KPA: Adpel Ambon Kontraktor: PT. Pelayaran Dharma Indah Domisili: Ambon Nama Kapal: KM. Cantika Pratama 02 Kontrak:3.265.634.925 N.O.R: 04 Pebruari 2012 AMBON GESER GORAM/ONDOR P. KESUI P. TIOR KAIMEAR P. KUR P. TOYANDO TUAL DOBO Example: schematization of R-31

19. PANGKALAN AMBON TRAYEK R-31 Ambon -184- Geser -32- Gorom / Ondor -32- P. Kesui -17- P. Tior -36- Kaimer -12- P. Kur -28- P. Toyando -33- Tual -118- Dobo -118- Tual -33- P. Toyando -28- P. Kur -12- Kaimer -47- P. Tior -17- P. Kesui -32- Gorom / Ondor -32- Geser -184- Ambon -184- Geser -32- Gorom / Ondor -158- Tual -160- Dobo -132- Ambon JARAK:1.661 MILFREKUENSI: 19 VOYAGE LAMA PELY.:19 HARIUKURAN KPL: 500 DWT/GT325 KPA: Adpel Ambon Kontraktor: PT. Pelayaran Dharma Indah Domisili: Ambon Nama Kapal: KM. Cantika Pratama 02 Kontrak:3.265.634.925 N.O.R: 04 Pebruari 2012 AMBON GESER GORAM/ONDOR P. KESUI P. TIOR KAIMEAR P. KUR P. TOYANDO TUAL DOBO Links of the network (characteristics: distance, price,……) Transit line defining the route (characteristics: frequency, ship characteristics, ….) Data preparation …. Schematization transport system Length Velocity ….. Port dwell time

20. Data preparation …. Origin-Destination matrix 380

21. Results from modeling Shortest route from Tual to Manokwari

22. R-49 : Sorong-Ternate loading-unloading

23. Results from modeling Connection of Sorong with the region : demand (O-D passengers and freight)

24. Results from modeling Network performance: for example: trip time distribution

25. Results from modeling Time to reach a larger place (services): for example access to Ambon or Tual or Saumlaki for Maluku region

26. Maluku case (47 ports, 15 routes)

27. Locations to be connected (Maluku) Base ports Ambon Saumlaki Tual 47 ports

28. Criteria for design of the transport service Accessibility or Connectivity? –Connectivity is usually used in the context of the economy: economists think about how the economy is connected and performing; better connection means less transaction costs and better economic performance –Accessibility is usually used in the context of transport: a transport engineer/economist thinks in terms of improving the transport service; how well can a certain place be reached using the available transport facilities Basically the two concepts relate to the some thing in a different context Typical formulation

29. Criteria for design of the transport service Typical formulation of Accessibility –Usually a gravity type expression is used –The availability of public services can be considered proportional to the size of the population of a particular site. The accessibility of a site i will be proportional to the size of the population centers in the neighborhood and inverse proportional to distance to reach those centers. Further of importance is the frequency by which the connection is provided, a higher frequency results in a higher accessibility. Ai : accessibility Dij : distance to reach j from i Pj : population in j Fj : frequency by which the connection form j to i is provided m : nodes (population centers) in the network connected to i Dij : shortest route to reach j from i with available transport (provided by Omnitrans) Typical formulation

30. Example accessibility

31. Set up of Maluku case Accessibility index: only relative indicator; gives overall impression of the differences in region, where most action is needed; not sufficient/detailed enough to make new design of the transport service Present approach: comparison existing situation with a new design using 5 more detailed criteria (elaborated below) Using rational concepts/judgement (reduced length of tours, avoid overlap, hub and spoke,…) a new set of 11 tours has been defined; this is compared with the existing situation (15 routes) using the 5 criteria

32. R34 R35 R36 R37 SORONG R38 R39 R40 BIRINGKASI R41 R42 TUAL SAUMLAKI AMBON R38 R43 POMAKO R44 R45 REO R46 R47 R48 Bebar/Wulur Luang Lelang Moa Lakor Kisar/Wonreli EXISTING SITUATION (15 ROUTES)

33. R34a R35a R38a SORONG R37a R46a REO R47a BIRINGKASI R41a R44a POMAKO R43a R40a R999 AMBON TUAL SAUMLAKI AFTER RE-ROUTING (11 ROUTES)

34. Criterion 1: travel time performance

35. Criterion 1: travel time performance (cont.)

36. Criterion 2: access time

37. Criterion 3: number of visits - effectiveness Existing 15 routes New 11 routes Total number of visits 7460 Total number of visits 4910

38. Criterion 4: life-cycle cost Reduced number (4) of ships : saving 40 bln Rp/year

39. Criterion 5: passenger.miles – consumer cost Passenger miles: –Existing : 29 mln –11 route : 21 mln Reduction consumer cost with 11 route: 1,5 bln Rp/year Subsidy = cost-revenue Existing (15 routes) 150 – 5,5 = 144,5 bln Rp/year New (11 routes) 110 – 4 = 106 bln Rp/year

40. Evaluation summary Criteria 1: travel time distribution is the same Criteria 2 : slight improvement of the access time Criteria 3: –existing situation: very large variation of visits among the different ports –new route service: visits more equally distributed among ports but overall a reduced number of visits to ports Criteria 4: –the overall cost for the ship operator/sponsor is the following: 40 blnRp/year (cost savings) – 1.5 (reduced revenue because more efficient travel) = 38,5 blnRp (cost saving) –Total Subsidy (Maluku) : from 144.5 to 106 bln Rp/year Criteria 5: reduced consumer cost : 1,5 blnRp/year (cost saving) The new 11 route system represents a win-win proposal for operator/sponsor and consumer

41. Evaluation summary (cont) Observation: visit to most ports is about 1 per week Socially acceptable? If visitation needs to be higher then this will increase the cost ; trade-off between social standard and cost

42. Analysis inter-island container transport (how to reduce high transport/logistic cost?)

43. Existing container transport service (some characteristics) Wide range of ship sizes Load factor Statistics on shipping service based on DGST data (2009)

44. Existing container transport service (some characteristics) Current cost container shipment: example –Pontianak to Tg Priok : 600 $/TEU – China to Tg Priok : 400 $/TEU Imbalance between Inbound and Outbound flow (Java): examples What is the prospect for reducing transport cost? Transport volume 2009 (TEU/year) outboundinbound Perak-Makassar97.25061.480 Priok-Belawan233.430114.030

45. Role of scale effects in maritime transport Globalization is driven by developments in maritime transport (world-wide: 90% of total ton.km) : scale effect, logistics harmonization in corridors Transport and Communication Costs Indexes, 1920-2000;

46. Role of scale effects in maritime transport To which extent can such scale effects be realized on the Indonesian network? What is needed to realize them? The following analyses have been carried out to find out: –Preparation of container transport cost model (variables: demand volume, distance, ship size, load factor, logistic efficiency) –Analysis of options for the national network (using transport model)

47. Illustration scale effect (using cost model) Demand: 100 TEU/day

48. Optimal shipping size Optimum defined by : marginal cost for shipping = marginal cost for inventory Distance: 3000 km Demand: 100 TEU/day Time value: 50 $/TEU.day Optimum size: 700 TEU

49. What are the prospects for reduction of domestic container transport cost? Analysis approach We like to know what is possible in 2030 Pro-active planning of improvements to shipping and network, and increased demand by 2030 Set-up: –Demand projection for 2030 –Design of supply system for 2030 –Matching demand-supply

50. Pro-active planning container transport 2030 Domestic Network (26 strategic ports) Demand projection:  Use is made of projection by [Indii, 2012]: demand 2030 = 5.4 * demand 2009 Potential for International flow or

51. Pro-active planning container transport 2030 (continued) Design of transport supply infrastructure: –Shipping in 2030: line service (optimal shipping size) –Port turn-around time: from 5 to 2 days –Container handling cost: from 150 to 100 $/handling –Network alternatives: Alt 1 : international port at Sorong Alt 2 : “ “ Bitung Alt 3 : maritime highway (pendulum) and int. port at Sorong

52. International container flows (World Container Model, TUDelft, 2012) Halim, R. A., Seck, M., Diouf, & Tavasszy, L. A. (2012). Modeling the global freight transportation system: A multi-level modeling perspective

53. Projected (WCM) international flow at Sorong 734000 TEU/year PortTotal Throughput (TEU)Fraction from International flow (%) Sorong 1,508,0405.1 Tg Perak 8,653,20329.2 Tg Priok 16,406,63855.3 Tg Emas 479,3921.6 Belawan 2,615,3108.8 Total International Flows29,662,582100

54. Matching supply and demand : Modelling (with Omnitrans) of the domestic network: Loading of the network (2030 demand + international flow through Sorong) Output : performance of the supply system for the 2030 demand International flow

55. Loading of the Pendulum direction Belawan-Sorong (2030 demand + international flow through Sorong + Pendulum) Loading (west-east) of the maritime highway (1)

56. Loading of the Pendulum direction Sorong-Belawan (2030 demand + international flow through Sorong + Pendulum) Loading (east-west) of the maritime highway (2)

57. Challenge : Connecting Eastern Indonesia Batam Belawan Malahayati Padang Jambi Palembang P. Bai Panjang T. Priok Banten Cirebon Semarang Banjarmasin Pontianak Balikpapan Samarinda Bitung Makasar Kupang Benoa Surabaya Ambon Sorong Biak Jayapura Timika Merauke P. Baru Pendulum provides potential but eastern section commercially weak; potential contributions from: - international flow - pricing - perintis

58. Results: contributions to the reduction of shipping cost in 2030

59. Bitung versus Sorong

60. 3) Conclusions – follow up

61. Conclusions Observation: detailed quantification of the transport systems and their impacts strongly facilitates the analysis of alternatives Maluku case: –optimization results in 25% reduction in cost (=40bln Rp/year) for same service; – application to the total Perintis East-Indonesia (67 routes) may potentially result in a total savings of 18 tours (indicative 180 bln Rp) Inter-island container transport: strong reduction (50%) in the cost of container transport possible

62. Conclusions (continued) Economic/social justification of Perintis: represents most difficult assessment because of the social dimension of the service; difficult to determine the standard of the service, and to estimate its value to the welfare of the country Set up of a commercial transport service is much easier (supply can follow demand) Modelling provides a systematic tool to analyse the many alternatives for setting up a maritime highway and in particular address the challenges for East-I. Follow up: –Transport Demand estimation (passenger, cargo) linked to the national (CBS) socio-economic data base would be an important expansion of the modelling and its data base

63. Demand projection from socio- economic/land-use data National data base (CBS) Monitored demand data Estimation of relationship(s) Projected socio- economic/land- use conditions Projected demand