Hopes for Shipbuilding Sail on the Horizon
Indonesia’s shipyards may see a silver lining to what has been a cloudy past as the government’s focus on the maritime sector is reinforced by steps to improve the national logistics system.
President Joko Widodo has declared his intention to develop the long-neglected maritime sector. Many parties in the shipping industry and related businesses are confident that the time has finally come for Indonesia to redefine its logistics systems to provide greater opportunities for shipping companies while at the same time lowering the cost of shipping goods.
The first essential step, say industry actors, is for the government to free the shipyard business from the tariffs that add 25 percent to production costs.
Indonesia long ago realized the importance of the shipping business in the country’s logistics systems, but it has been painfully slow in acting to create efficiencies. Shipyards sit idle, without work to keep them busy, since shipping companies prefer to import ships rather than buy from local manufacturers.
At the same time government has tended to spend all its energies on land transportation, where there is congestion everywhere, a major cause of the high cost of logistics: the highest in the Association of Southeast Asian Nations at around 23 percent of gross domestic product.
Indonesia introduced the cabotage principle in 2005, stating that national ships should carry national cargoes. That has certainly helped. Since then the local shipping industry has tripled its number of ships and value of investment.