Cabotage provides a big boost to shipping industry



The number of national-flagged vessels operating in domestic waters has doubled to over 12,000 as of July, nearly eight years after the implementation of the cabotage principles in 2005.

Indonesian National Shipowners Association (INSA) data shows that the number of Indonesian vessels rose 207.5 percent from 6,041 in 2005 to 12,536 by the end of July this year.

“The number of Indonesian-flagged ships has doubled to over 12,000 ships, which means that this policy has benefited local players and has increased investment in the country’s shipping industry,” INSA chairwoman Carmelita Hartoto told The Jakarta Post.

“This has encouraged old players to expand and new players to enter the industry,” she added.

The rising number of vessels has also increased volume or capacity by 315.5 percent from 5.67 million Gross Tonnage (GT) in 2005 to 17.89 million GT in July 2013.

In addition, she said the cabotage principle, which is in line with the 2005 Presidential Instruction on national shipping industry development and the 2008 Shipping Law, had resulted in the arrival of more than 1,000 new players in the shipping sector over the past seven years.

“This has created new entrepreneurs and jobs here because cabotage also requires crews to comprise Indonesians. I can say that we have not foreseen any issues that could possibly hinder further growth,” she went on.

Given that two-thirds of its territory is water, Indonesia depends heavily on maritime transportation for domestic as well as international trade. Coupled with a high demand for maritime services, especially from the shipping industry, many vessels, including foreign-flagged ones, have chosen to operate within Indonesian waters.

According to data from the Transportation Ministry, from the 1980s to the early 2000s, foreign vessels were the majority in Indonesian sea transportation, while national maritime companies had suffered.

However, since the government introduced the cabotage principles in 2005, which required all vessels operating within Indonesian waters to be domestically owned, the game has changed, with local firms greatly benefitting from this policy.

Contacted separately, Wintermar and Samudera Indonesia — both long-time players — agreed with Carmelita, saying that their businesses had strengthened after the cabotage principles were implemented.

Wintermar president director Sugiman Layanto said the firm was able to accelerate the rejuvenation of its fleet in 2005 because demand rose.

“We want to tap into this opportunity and now we have a few more vessels that Indonesia did not have before the cabotage principles were implemented,” Sugiman told the Post, adding that the vessels included a Platform Supply Vessel with an advanced Dynamic Positioning System (DPS), a Diving Support Vessel and an Anchor Handling Tug.

Wintermar is involved in the upstream activities of offshore oil and gas companies during production and post-production stages.

Samudera Indonesia managing director Bani Mulia also concurred with Sugiman. He said that the cabotage principles had given the firm more room to capture the market, which encouraged the firm to rejuvenate its fleet.

He said the firm operated 70 multi-type ships, from tankers to Offshore Support Vessels, to distribute goods and support offshore activities.

“We have been experiencing the ups and downs of this industry. But the cabotage principles have been one of the drivers of our expansion,” he said.

Even though the principles have benefited local players, Carmelita said that foreign companies had tried to approach the government in hopes of re-entering some areas.

She said the government should be firm on this issue since the principles had successfully boosted the nation’s shipping industry.

The Transportation Ministry’s sea transportation director general, Bobby Mamahit, guaranteed that the ministry would not compromise the principles.

“I can assure you that we will not compromise with any party who attempts to loosen the cabotage principles for their benefit,” Bobby said.






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