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Analysis of Demand, Supply and Efficiency of Maritime Transportation Service as an Effort to Decrease the Current Account Deficit
Abstract:
This research aimed to study (1) the competitiveness of the national shipping service compared with foreign shipping service; (2) the external and internal factors influencing the low condition of competitiveness of the national shipping service; (3) the efficiency condition of the national shipping service industry; and (4) the factors that influence the demand and supply of the national shipping service, as well as the impact of the economic factors, particularly in economic crisis. Descriptive and quantitative analyses with econometric approach were applied in this research.
Results showed that the competitiveness of the national shipping service was very weak due to the inability to compete with foreign shipping service. This case was indicated by the reduction of the freight share, which was left with just 2.5 percent of the total export/import cargo of Indonesia in 1995. The low competency of the national shipping service can be identified through the limited armada potential, low vessel technology and technology in the company, high freight cost, limited shipping network, conventional pattern of shipping, and the low shipping quality which covered the shipping frequency, unstable regularity, inaccurate schedule, longer time of transit, and low skill level of the crew.
The external factors that affected the weakness of competitiveness were the government policies that lack in support, i.e., vessel scrapping policy and limitation of vessel import, opening of the Indonesian seaports to foreign vessels and ease to establish the shipping company to support the increase of non-oil export through the Presidential Instructions (INPRES) No. 4 Year 1985 and Policy Package of November 21, 1988, provision of several taxes, and burdening regulations. Other factors were lack of capital support from the bank; the Indonesian international trade pattern where 90 percent use the Free on Board (FOB) system for export and Cost, Insurance, and Freight (CIF) for import; and weak seaport performance. The internal factors included the low quality of human resources and lack of support in technology.
The estimation result of efficiency of the national shipping service industry showed that the marginal product value (MPV) ratio toward input price for capital input was 0.67 while manpower input was as much as 3.85, indicating the use of input allocation as not yet optimal or still inefficient. The return to scale value of 71.17 percent showed that the national shipping service industry was in the condition of decreasing return to scale.
The estimation result of the demand and supply of national shipping service model showed that INPRES No. 4 Year 1985 had caused the demand of national shipping service to decline. The supply of national shipping service was influenced by the scraping policy and exchange rate variables, with coefficient of -42,239 and -14,847, respectively. Both variables had caused the supply of national shipping service to decline due to weakness in capital and the strong dependency toward the import components in the national vessel operation, especially spare parts.
The estimation result of the impact of change in economic factors showed that the increase in export price, increase in national income, and decrease of exchange rate increased the amount of export and import, increased the demand of national shipping service, but decreased the supply of national shipping service. The change percentage of overall endogenous variables greater than one showed that the overall endogenous variables were very elastic toward the change in the economic factors.