# Transportation Deployment Casebook/2025/The Life-Cycle of Containers in Indonesia's Maritime Trade
## Technology

Freight containers are boxes specifically designed to facilitate the carriage of goods through multimodal transportation without intermediate reloading. These containers should be strong enough to be used repeatedly, with features that enable easy handling by designated container equipment to be moved from one mode of transport to another. There are two common container sizes, 20-foot containers and 40-foot containers. Both containers commonly have 8’ width and 8’ height. However, the International Organization for Standardization (ISO) acknowledges other container sizes varying in length and height. As a standardized tool for transporting goods, the ISO also set units of measurement for containers, 20-foot equivalent units (TEUs) and 40-foot equivalent units (FEUs), in which one FEU equals two TEUs.
The existence of containers enabled seamless intermodal transport of goods without the need to unload the cargo carried inside the containers while moving from one mode to another. This is made possible by corner casting of containers that fit the specifically designed lifting clamp in container cranes. The corner casting also enabled safe and reliable container stacking connected by a twist lock. On a broader perspective, containers' success in streamlining freight transportation is also caused by all the supporting infrastructures (ports) and equipment (container vessels, container cranes, container trucks) designed to fit the needs of container movements.
The container is described as an automated system for transporting goods from any part of the world to wherever they need to be with optimal cost and minimal obstacles to the traditional way of transporting goods. Nowadays, container transport is a necessary part of the global maritime trade, including Indonesia’s.

## Context

Geographically, Indonesian archipelago has always been a central location at a crossroads of international trade. The history of Indonesian maritime trade dates back to 500 BCE, when sailors from India and Ceylon (now Sri Lanka) started to sail from the Strait of Malacca to the Batavia (now Jakarta), Makassar and the Spice Islands (now Maluku Islands) looking for spices and other products to trade. These trade activities continually evolved until today, comprising several eras within the history of the Indonesian archipelago.
During the Major Empires Era, the Indonesian archipelago was notably ruled by two powerful kingdoms, Srivijaya (7th to 11th century) and Majapahit (13th to 15th century). Both kingdoms are known for their maritime power. Srivijaya ruled large areas of Sumatera, western Java, and much of the Malay Peninsula. The empire dominated the Malacca and Sunda Straits making them strategically located to be rich and powerful by facilitating trade and collecting taxes to the passing ships of China, India, and eventually Arabia. Srivijaya’s main port, the Port of Palembang was considered an important trading hub which always filled with commercial activities done by foreign traders and moneychangers. The Srivijaya empire was a true maritime power with a highly developed port, shipping and shipbuilding infrastructure.
During the Colonialization Era, the fame of Indonesia’s spices was heard by the Europeans like the Portuguese and the Dutch. The Dutch expedition to Indonesia led to the establishment of a highly profitable company named Verenigde Oost Indische Compagnie (VOC), also known as Netherlands East Indies Company, which is headquartered in Batavia (now Jakarta). This led to the establishment of the Port of Sunda Kalapa in 1610 and the Port of Tanjung Priok in 1877. In 1936, the Dutch Governor General of East Indies released the Indische Scheepvaartwet 1936, or the Indonesian Shipping Law 1936 which became a reference to Indonesian shipping, port, and maritime trade in the post-independence era.
During the Post-independence Era, Indonesia started taking control of its ports in 1960. At that time, container technology was barely invented in the USA.

## Invention

Containers were invented by Malcom McLean, an independent truck owner-operator in the USA. The idea was to minimize delays due to the long waiting time in port unloading processes inspired by ro/ro (roll-on/roll-off) operations by removing trailer wheels and reinforcing the sides so that they could be stacked on the ship. This model was not very successful, so McLean developed detachable trailers that were carried by modified tanker ships. This model was successfully accepted by the market and proven to bring more efficiency to the transportation process. This led to improvements in truck trailer design and container ships to better fit the container's cargo handling needs. The acknowledgment of this technology brings forward the standardization of dimensions, which are today commonly known as TEU for one 20’ container.
The growth of containerized trades was significant, within 20 years of operations, all containerizable cargo on the transatlantic route was containerized. This was followed by the invention of land-based gantry cranes replacing shipborne cranes that increased productivity.

## Early Market Development

In the middle of global containerization period, Indonesia through the administration of Tanjung Priok port operated its first dedicated terminal to serve container cargo on 17 December 1978. Earlier, it was recorded that Tanjung Priok Port already handled container cargo with 20 thousand TEUs throughput during 1976. Interestingly, the first container vessel with an Indonesian flag was recorded in 1982. This indicates that all container cargo recorded in Indonesia during periods before 1982 was either international cargo or domestic cargo carried by foreign vessels. This illustrates how massive containerization was around the world.
During the 1970s to 1980s, Indonesia’s container traffic, specifically in Tanjung Priok and Tanjung Perak port increased. This increasing market demand was responded to by the administration of both ports by establishing open storage yards to stack containers in both ports which were initially used by other types of cargo. Following this initiative, the Port of Semarang also extended their wharf to support container cargo.

## The Role of Policy

In 1960, the government formed 9 national port companies divided into 9 separate regions: Belawan (Medan), Dumai, Tanjung Priok (Jakarta), Tanjung Perak (Surabaya), Banjarmasin, Ujung Pandang, Manado / Bitung, Semarang, and Irian Jaya (now Papua). This marked the first time Indonesia got true control over its ports. Following the early time of Orde Baru era, the government dissolved all national port companies and shifted the control of Indonesia’s ports to the Ministry of Transportation in 1969. Fourteen years later, in 1983, the government created 4 Perusahaan Umum or Perum (State Corporation) to manage ports based on regions called Perum Pelabuhan I, II, III, and IV. During this period, specifically in 1987, the President released a Presidential Decree on Container Terminals which governs the roles of all related ministries in regulating containerized trade activities including export and import. This policy adopted former national policies related to port management and governance. Additionally, the Indische Scheepvaartwet 1936 which was established during the Dutch colonialization was also referred to.
In 1991, Perum Pelabuhan I, II, III, and IV were reformed to become State-Owned Enterprises (SOE) identified as Perseroan Terbatas (PT) named PT Pelabuhan Indonesia I, II, III, and IV with identical regional divisions among the enterprises:
* PT Pelabuhan Indonesia I (Persero) or Pelindo I headquartered in Belawan, covered the north-western part of Sumatera;
* PT Pelabuhan Indonesia II (Persero) or Pelindo II, also known as Indonesia Port Corporation (IPC) headquartered in Jakarta, covered the southern part of Sumatera, the western part of Java, and West Kalimantan;
* PT Pelabuhan Indonesia III (Persero) or Pelindo III headquartered in Surabaya covered the area of middle-eastern Java, Bali, Nusa Tenggara, and middle-southern Kalimantan;
* PT Pelabuhan Indonesia IV (Persero) or Pelindo IV headquartered in Makassar covered East Kalimantan, Sulawesi, Maluku, and Irian Jaya (now Papua).
Specific to Indonesia’s context, this reformation signified a difference in how the company is being run. Perseroan were obliged to make a profit through their business, while Perum was more focused on providing public services. On the other hand, during this period, Pelindo I, II, III, and IV were considered to have monopolistic privilege by the business environment due to the requirement for any private businesses to engage in partnership with Pelindo to provide port-related services and the dual role of Pelindo as a business entity and regulatory body.

## Growth

In line with the world trend, Indonesia’s national container traffic in the 1990s to 2000s experienced substantial growth. To facilitate the growth, container port expansions and partnerships were initiated. Tanjung Priok Port partnered with Hutchison Ports to establish a joint operation named TPK Koja in 1996 and a joint venture named Jakarta International Container Terminal (JICT) in 1999. This partnership was aimed at improving Tanjung Priok port performance, proven by JICT becoming the busiest container terminal in the upcoming year.
As container traffic grew, Indonesia’s maritime industry went through a turning point. The issuance of Act number 17 year 2008 on Shipping, marked the separation of regulatory and operatorship functions in Pelindo, which led to the establishment of Indonesia Port Authorities. This allowed private players to serve Indonesia’s port industry, avoiding monopoly. On the other hand, each Pelindo I, II, III, and IV were allowed to expand their business outside their designated operational location. The cabotage law was also established, prohibited foreign-flagged ships from transporting goods and passengers domestically within the Indonesian seas and waters.
In 2012, the Nusantara Pendulum concept was proposed by Pelindo. This concept will connect the western and eastern parts of Indonesia, swinging containers from Belawan in the west to Sorong in the east, aimed to reduce domestic transportation costs. The formation of Nusantara Pendulum concept was triggered by the national economic disparity between the western and eastern parts of Indonesia, which resulted in the high national logistics cost. On the other hand, the President of Indonesia modified this concept in 2015 by initiating the Sea Tollway program, which was stated in the National Mid-term Development Plan (RPJMN) 2015-2019. The implementation of this program was evaluated regularly. However, the strategic goal to reduce national logistic costs continued to be the true north of the container shipping industry in the upcoming years.

## Maturity

In 1 October 2021, the Government of Indonesia decided to merge Pelindo I, II, III, and IV to become PT Pelabuhan Indonesia (Persero) or Pelindo. This merger was envisioned to reduce the national logistic cost by improving maritime connectivity, standardizing operational performance and digitalization across ports in Indonesia, and increasing global competitiveness, which allowed Indonesia port SOE to focus more on business specialization rather than regional division. Pelindo handled 95% of container cargo all across Indonesia, supported by specialized container sub-holding. This approach potentially improves Indonesia's container industry and helps it become more integrated in order to achieve national efficiency.
During the post-merger era, operational transformation in container terminals across Indonesia was done. This transformation was perceived to have successfully increase the operational performance of container terminals, leading to efficiency.

## Quantitative Analysis of Container Life-Cycle in Indonesia Maritime Trade

To distinguish the birthing, growth, and maturity stages of container life-cycle in Indonesia maritime trade, an S-curve model is used following this formula:
${\begin{aligned}S(t)&={\frac {Smax}{1+e^{(-b(t-t_{i}))}}}\\\end{aligned}}$
Where
* S(t) = the status measure (the annual predicted Indonesia container traffic)
* t = time (year)
* t$_i$ = the inflection time (year)
* S$_{max}$ = saturation status level
* b = coefficient to be estimated
The model is developed using Indonesia’s annual container traffic data from 1976 until 2022 sourced from the World Bank and UNCTAD. Through iteration, appropriate Smax value is found, resulted in a predictive model that fits well with the real dataset. Below are the parameters resulted from the regression analysis:
* S$_{max}$ = 13.50 million TEUs
* Intercept (c) = -390.08971
* Slope (b) = 0.1894452
* R$^2$ = 0.9794
* Inflection time (t$_i$) = 2006.33
Table 1 and Graph 1 illustrate the comparation between real dataset and predicted model. The model shows that the estimated final market size of Indonesia's container traffic would be reached at 13.5 million TEUs, while the inflection time happened in 2006. The birthing stage was started in 1976 which was the first time 20,000 TEUs cargo ever recorded to be handled in Indonesia. The birthing stage was then followed by the growth stage which began in the early 1990s marked by the transition of Indonesia's port business model which initially focused more on public service becoming more profit-oriented. The inflection point in 2006 was close to the period when Indonesia released Act number 17 year 2008 which marked a significant reform in the maritime trade scene. The S-curve indicates that until 2022, Indonesia was still in the growth stage although the maturity stage is foreseen in several years ahead.
Table 1. Indonesia Annual Container Traffic :
| Year | Container Traffic (million TEUs) | Predicted Container Traffic, St (million TEUs) |
| 1976 | 0,02 | 0,04 |
| 1977 | 0,03 | 0,05 |
| 1978 | 0,04 | 0,06 |
| 1979 | 0,04 | 0,08 |
| 1980 | 0,08 | 0,09 |
| 1981 | 0,14 | 0,11 |
| 1982 | 0,16 | 0,13 |
| 1983 | 0,14 | 0,16 |
| 1984 | 0,22 | 0,19 |
| 1985 | 0,23 | 0,23 |
| 1986 | 0,21 | 0,28 |
| 1987 | 0,38 | 0,34 |
| 1988 | 0,40 | 0,41 |
| 1989 | 0,78 | 0,49 |
| 1990 | 0,92 | 0,59 |
| 1991 | 1,16 | 0,70 |
| 1992 | 1,33 | 0,84 |
| 1993 | 1,60 | 1,00 |
| 1994 | 1,91 | 1,19 |
| 1995 | 2,20 | 1,41 |
| 1996 | 1,76 | 1,67 |
| 1997 | 1,92 | 1,97 |
| 1998 | 2,23 | 2,31 |
| 1999 | 2,66 | 2,69 |
| 2000 | 3,80 | 3,13 |
| 2001 | 3,90 | 3,60 |
| 2002 | 4,54 | 4,13 |
| 2003 | 5,18 | 4,69 |
| 2004 | 5,37 | 5,28 |
| 2005 | 5,50 | 5,90 |
| 2006 | 4,32 | 6,54 |
| 2007 | 6,58 | 7,18 |
| 2008 | 7,40 | 7,81 |
| 2009 | 7,26 | 8,42 |
| 2010 | 8,64 | 9,01 |
| 2011 | 10,12 | 9,56 |
| 2012 | 10,97 | 10,06 |
| 2013 | 11,44 | 10,53 |
| 2014 | 10,94 | 10,94 |
| 2015 | 10,01 | 11,31 |
| 2016 | 10,54 | 11,64 |
| 2017 | 12,08 | 11,92 |
| 2018 | 12,53 | 12,17 |
| 2019 | 12,62 | 12,38 |
| 2020 | 11,67 | 12,56 |
| 2021 | 12,91 | 12,71 |
| 2022 | 12,38 | 12,84 |

## References

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* 1 2 International Standard Organization (2020). ISO 668:2020 Series 1 freight containers - Classification, dimensions and ratings.
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