A puzzle revealed by the previous two chapters is that, apart from PELNI, shipping firms have remained so small. At the end of 1982 no other firm owned more than 9 ships or, if ships leased from P.T, PANN are included, 12 ships. In the 1950s or 1960s this result would hardly have been surprising. At that time firms were still in their infancy and capital and foreign exchange were scarce indeed. Since the late 1960s, however, these constraints have become less pressing. Large amounts of capital have been invested in deepsea shipping — both liners and tramps — as well as in many other sectors of the Indonesian economy. Yet even interisland shipping firms associated with powerful economic groups have remained modest in size. Some explanation other than lack of capital is therefore required.

This chapter argues that interisland shipping firms are subject to diseconomies of scale beyond about 10 vessels. It is further argued that these diseconomies are associated with a life cycle of growth and decline. Such behaviour has important implications for new entry and the effectiveness of competition. The special case of PELNI will be considered in the next chapter.

THE TYPES OF INTERISLAND SHIPPING FIRMS

Under the requirements of Regulation No. 2/1969, interisland shipping firms must be legally registered perusabaan terbatas or P.T. (limited liability companies), perusabaan negara or P.N. (state enterprises), or perusahaan daerab or P.D. (regional government enterprises). Since PELNI was converted to the status of a state-owned limited liability company in November 1975, no state enterprises now remain. Apart from three surviving regional government enterprises — a form of organization introduced under the Old Order — all firms are now P.T, companies. According to the old Dutch company law and terminology which remain in force, the basic form of die P.T. company is a dewan komisaris (board) which, under a presiden komisaris (chairman), exercises supervision over the direksi (management), which is under the command of the presiden direkturot direktur utoma (general manager).'