Foreign-flag vessels still dominate coal exports

JAKARTA. Indonesia needs 285 Panamax dry bulk vessels to handle the shipment of the nation’s coal exports, which are expected to top 240 million tons in 2012, according to the Indonesian National Shipowners Association (INSA).

The nation currently operated 75 dry bulk vessels as of October 2011, leaving the lion’s share of the business to be transported by foreign companies, INSA’s shipping industry development council chief Ibnu Wibowo said.

Local shippers were reluctant to buy more vessels to serve international routes since, unlike foreign ships, local vessels were levied a 10 percent value added tax, which made their business less competitive when compared to foreign rivals, Ibnu said.

“The government should also collect that tax from foreign shipping lines, not only the local ones. The key is we have to protect the domestic market,” Ibnu told reporters in Jakarta on Wednesday.

According to an INSA study, foreign shipping companies collected US$14.4 billion in fees by transporting Indonesian coal overseas in 2011.

Other than the VAT, local shipping companies were also required to pay an additional 10 percent tax on locally bought fuel, further pushing up operating costs, he added.

“Our trade system is still Freight On Board [FOB] while foreign buyers have implemented Cost, Insurance and Freight [CIF],” he said. As a consequence, foreign buyers preferred to transport their cargos on foreign ships.

FOB are contracts involving international transportation where the risk of loss shifts from the seller to the buyer, who pays the costs of freight and insurance, while CIF contracts cover when the seller pays the costs of freight and insurance.

Ibnu said that the foreign shipping companies did not employ Indonesian workers, causing another loss for the nation.

INSA has urged the government to implement the Domestic Transporter Obligation (DTO) policy, which would oblige exporters to allocate 30 percent of coal shipments to Indonesian-flagged shipping lines.

The implementation of the DTO policy would benefit the Indonesian government, Isnu said.

“Political will is needed to implement the 30 percent DTO.”

Separately, Leon Mohammad, the Transportation Ministry’s sea transportation chief, said that the ministry supported the DTO policy to boost the local shipping business.

Leon said that the association had been lobbying the Trade Ministry to approve the DTO policy.

“As long as Indonesia does not change its trade system, it will be hard for us to boost shipments of export goods carried by local shipping companies,” Leon said.

Indonesia’s contribution to the world’s total dead weight tonnage (DWT), which represents global shipping capacity, is considered low despite its maritime status.

Based on United Nations Conference on Trade and Development (UNCTAD) data last year, Indonesia’s DWT was only 0.8 percent of total global freight, below neighboring countries like Malaysia (1.12 percent) and Singapore (2.53 percent). (The Jakarta Post)