A last-minute plea from shipowners for the Indonesian government to back off an incoming law that requires coal and palm oil exports to be carried only on domestic tonnage looks like it might have paid off.
The new law, which also requires Indonesian carriers to be insured by local firms, was set to kick in from 1 May this year in a protectionist move intended to make sure that domestic shipping firms benefit from the country’s huge export of natural resources.
However, news agency Reuters has quoted Luhut Pandjaitan, coordinating minister for maritime and investment affairs, saying that the government has decided not go ahead with the law.
Prime minister Joko Widodo has decided the new law would be “disruptive” for exports, Pandjaitan is quoted as saying.
Local shipping experts have pointed out that since the new law was agreed the country has been unable to develop a domestic fleet large enough to handle the millions of tonnes of palm oil and coal that Indonesia exports each year.
It is also suggested that the country does not have enough capital available to insure cargoes and ships.
Shipowners' disapproval
The Indonesian government’s response also comes just months after three shipowner associations wrote to Pandjaitan, spelling out in no uncertain terms the problems they saw with the law.
The letter, signed by representatives from the International Chamber of Shipping, European Community Shipowners’ Association and Asian Shipowners’ Forum warned the Indonesian government: “This (law) is likely to have a damaging impact on the wider Indonesian economy and especially on those strategic national industries whose cargoes will be directly affected, i.e. coal, rice and crude palm oil.
"Implementing such protectionist measures would also limit competition in Indonesian shipping trades and almost certainly lead to an increase in shipping costs, to the detriment of the Indonesian economy," the letter said.
The shipping associations also pointed out that the law would go against international trade rules agreed under the World Trade Organisation.
The shipping associations then asked the Indonesian government to revoke the law.
They said: “The global shipping industry sincerely hopes that the Indonesian Government will give thorough consideration to revoking the cargo reservation provisions of the ministerial regulation, and therefore continue to permit the transportation of the goods and products – to and from Indonesian territory – to be conducted by all ships irrespective of flag or ownership.”
