Plans by the Indonesian state port operator to build a $1.6 billion international container port in Sorong, Papua, have been put on hold while the developer waits for the government to issue the necessary permits, the company's president director said in Jakarta on Tuesday.

The Sorong port project, to be constructed on a 7,500-hectare site, is expected to serve as a transit hub so that goods from resource-rich Papua as well as from neighboring Australia and Papua New Guinea, do not need to sail all the way to Singapore for transhipment.

"This will be a big port. Everything is ready, the design is ready, but we are now awaiting permits," said Richard J. Lino, the president director of Pelindo II, also known as the Indonesia Port Corporation (IPC).

He explained that IPC, which operates 12 ports throughout the country, was now awaiting permits from the Transportation Ministry and the local government before it could proceed with the project.

"Without the permits, we can't start work," Richard said, declining to elaborate on what was causing the delay.

The IPC will not be alone in this project, as a mix of local shipping lines and contractors will join the development, although IPC will have a controlling shareholding.

"What we expect is that once the port is in operational, the logistics cost from Java to the eastern part of Indonesia will get cheaper. When that happens, there will be an incentive for investors to build factories in the east," Richard said.

Under the existing plan, the container port will have a capacity of 500,000 twenty-foot-equivalent units (TEUs) per year, Richard said.

That planned capacity will still be much less than the around 5 million TEUs at Tanjung Priok in North Jakarta and 2.2 million TEUs in Tanjung Perak in Surabaya.

Richard said that Sorong's position made it well-placed to serve as a transport hub for the western Pacific Ocean as well as the eastern islands of the Indonesian archipelago.

"Some big shipping companies have said that they want to make Sorong their hub for the western Pacific region," Richard said.

While Papua harbors some of the world's largest gold and copper reserves, the retail prices of basic materials, including cement, remain much higher than in the rest of the country, mostly due to costly logistics.

IPC is also involved in the extension of Jakarta's Tanjong Priok port. The first phase costs $2.5 billion and involves building three container terminals and two fuel depots on 195 hectares. Richard said the facilities were expected to be in operational in 2014.

Richard was speaking after a ceremony that saw the World Bank sign an agreement with Pelindo II to provide advisory work in an effort to advance the government's connectivity agenda, in Jakarta on Tuesday.

According to a World Bank press release, it is currently cheaper to import food products from China than transport them within Indonesia.