Indonesia Scraps Trade Ministry Regulation No. 82/2017 on National Shipping
The Indonesian government scrapped Trade Ministry Regulation No. 82/2017 on the Terms of Use of National Shipping and Insurance Companies for the Export and Import of Certain Goods. This regulation, which was originally scheduled to be implemented in May 2018 (but its implementation had already been postponed), would have made it mandatory to use local vessels (owned by Indonesian sea shipping companies) for the export of coal, crude palm oil (CPO), and rice.
Indonesian Trade Minister Enggartiasto Lukita confirmed earlier this week that his ministry has already revoked the aforementioned regulation; a regulation that ignited massive criticism. Considering Indonesia's domestic shipping capacity is largely insufficient to handle all coal, CPO, and rice shipments, it would seriously damage Indonesia's export performance.
For example, in the coal mining industry more than 90 percent of export shipments are done by foreign vessels. A similar figure applies to the whole shipping industry of Indonesia. Carmelita Hartoto, General Chairwoman of the Indonesian National Shipowner's Association (INSA), said around 90 percent of all shipping in Indonesian waters is handled by foreign vessels. Domestic shipping capacity was estimated at 67.2 million tons in 2016. Meanwhile, foreign vessels shipped 976.2 million tons that year, a major difference.
The key challenge for domestic shipping companies therefore is creating enough quantity (capacity) and quality in terms of shipping services. The regulation was intended as an encouragement to develop domestic shipping capacity. However, it requires a more gradual process rather than a sudden break.
Key goal of the regulation is that domestic shipping services companies will start to benefit more significantly from the (rising) amount of sea trade in Indonesian waters. Costs of sea trade across Indonesia is estimated to be worth IDR 2,400 trillion (approx. USD $176 billion) per year. So far, however, most of these earnings are being enjoyed by foreign shipping services companies.
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