Maritime to Indonesia
Trends and opportunities
With a coastline of nearly 95,000 km, Indonesia has ambitions to fulfil its vision as a maritime power. Maritime infrastructure has been a distinctive focus of President Joko Widodo’s plans to develop infrastructure and livelihoods in Indonesia to make it not only more competitive within ASEAN but also globally. Widodo is seeking to improve ports, maximize inter-island connectivity, and turn Indonesia into a “Global Maritime Axis.”
The government is also aiming to rebuild Indonesia’s maritime culture and increase its naval assets – resulting from an increase of the military budget from less than 1 per cent to 1.5 per cent. It is also aiming to significantly upgrade Indonesia’s ports and other shipping infrastructure, so that the country can become more integrated in trade between the Indian and the Pacific oceans. This will in turn improve logistics and enable Indonesia to better take advantage of its archipelagic nature.
President Joko Widodo’s Sea Toll Road initiative, worth an estimated US$429 billion, is focused on the development of 24 commercial ports and more than 1,000 non-commercial ports. There are opportunities for Australian business to build and/or manage these ports and to assist with technological overlays to ensure these ports operate efficiently.
Also, Indonesia aims to become a regional shipbuilding hub and President Widodo is committed to the development of the local industry and stated all ‘state-owned vessels’ (including for military and use in the oil and gas sector) will be made domestically. Opportunities exist for Australian businesses who can find a local partner and are committed to investing in the local area to develop its workforce.
The Ministry of Industry of Indonesia boasts experience in building new ships, with an internationally recognised style and size including the bulk carrier 50,000DWT (exported to Germany, Turkey and Italy) ferry ro-ro19,000GT (exported to Sweden) chemical tanker(s/d6,200DWT), Landing Platform Dock, LPG Carriers 5,600CuM, research vessels, dry cargo vessels 18,500DWT (exported to England and the Netherlands) passenger ships with capacity for 500 people, general cargo and container vessels, container ships/d1,600TEUS, oil tankers/d 30,000DWT, fishing vessels 300GT, fast patrol boats 57m and 28m, tug boats 7,500HP and Anchor Handling Tug Supply/AHTS) 2x8,000HP.
There are approximately 250 shipyards in Indonesia with production capacity reach 1 million DWT per year for new ship building and about 12 million DWT per year for ship repairment (Ministry of Industry, Indonesian shipyard industry needs financial assistance, February 2020. Indonesian language only). Most yards in Indonesia are not equipped to build vessels over 20,000 deadweight tons, unlike their much bigger rivals in China, Japan or South Korea. Although the regulatory environment dictates that shipbuilding will remain dominated by local interests, partnerships have proven effective win-wins previously and there are also opportunities in the passenger vessel space for companies able to supply at the right price and companies who have capability in the aforementioned vessel types.
In Indonesia, the productivity of most national shipyards is below 500 deadweight tonnage, which is still relatively low compared to other Asian countries. Constraints faced by the shipbuilding industry include a strong reliance on imported raw materials (about 65 per cent) and an inability to maintain and repair boats in a timely manner.
Ports and Tourism
Indonesia’s nascent cruising industry is oft mentioned as a driver for Indonesia’s tourism growth and many opportunities exist in this sector, including the development and management of Indonesia’s natural beauty and touring routes, consultancy related to cruising activities and the sale of vessels into Indonesia for a rapidly developing wealthy class. At present, these are several major marinas in Indonesia; Marina Del Ray Lombok Gili Gede Indonesia; Lombok, Nongsa Point Marina & Resort ; Batam; Medana Bay Marina ; Pantai Mutiara Marina Jakarta and; Bali Benoa. Benoa Harbour in Bali is the most popular port of call for cruising yachts.
However, infrastructure development is required initially and Pelindo Properti Indonesia, a subsidiary of Indonesia Port Corporation III, a state owned port operator, with the support of Indonesian Ministry of Tourism took the initiative to start mapping out new marina developments. Pelindo plans to develop lifestyle Marina’s, such as Boom Marina in Banyuwangi which will aid the development of this sector and provide opportunities in marina management and opportunities for investment in commercial real-estate developments, retail activities and the hospitality sector.
Future prospects 2015 -2025
Indonesia plans to increase the national shipping industry ability from 85,000 DWT (2015) to 300,000 DWT (world class industry) by 2025. It is also forecast that Indonesian maritime players will continue to improve their capabilities and build more specific class of ships including the Korvet, Frigate, Cruise Ship, LPG Carrier, and LNG Carrier. Indonesia is aiming to grow its knowledge and better its national design capability through its domestic ship engineering companies. Opportunities exist for Australian companies who have capability in naval architecture design and development and are interested in technology transfer and partnership arrangements for production.
The Indonesian government aims to grow the maritime-based economy, and one of the major industries is shipbuilding. The shipbuilding industry has good prospects along with the increasing demand for mass transportation and logistics in Indonesia amid rapid economic growth in Indonesia. Vessels are a core element in large industries including in mining, fisheries, tourism, as well as defense. Defense in particular is one the most high potential sub-sectors considering Indonesia is currently very active in combating illegal fishing and wishes to improve its maritime power. Some areas of opportunity include patrol vessels, interceptors, warships, and submarines.
Currently, 80 per cent of the world's ships are built in Asia. With the shift in ship production away from Europe to Asia, Indonesia will potentially be one of the suppliers to meet global demand in the future. With the new sea toll program and tourism sector development, there is an increasing demand for ships to meet the demands of the domestic market – both new ships as well as those replacing the old.
Tariffs, regulations and customs
Indonesia’s implementation of the cabotage principles has been a key factor of the growth of Indonesia’s shipping industry. Indonesia’s cabotage rules were introduced via Law No. 17 of 2008 on Shipping (Shipping Law). The cabotage principles broadly require that domestic sea trade is carried out by an Indonesian shipping entity, flagged in Indonesia and manned by an Indonesian crew. A number of exemptions to the restrictions have allowed the operation of foreign flagged vessels, in order to support certain activities in particular sectors.
The Shipping Law applies a “closed” ship registry in Indonesia, meaning that Indonesian-flagged vessels can only be owned by and registered to Indonesian individuals or legal entities.
Presidential Regulation No. 44 of 2016 (Negative Investment List) stipulated that an Indonesian shipping company may only have up to 49 per cent of its shares owned by a foreign individuals or companies and must own at least one Indonesian flagged vessel with a gross tonnage of at least 5,000 tons, if it has any foreign shareholders.
(Source: Holman Fenwick & Willan, Indonesia in-depth 2019 Industry Outlook, 2019)
Marketing your products and services
In general, to successfully market to Indonesia’s maritime industry, you may wish to consider:
- participating in major local aviation trade exhibitions
- highlighting your international track record to customers
- engaging a local distributor (crucial to effective business penetration)
- visiting the market on a regular basis and investing time (relationship based market)
- consider opening a representative office or presence
- engaging Austrade in tailored services to help you identify opportunities or connect you with key distributors and buyers.
Representative office set up application is conducted through the Indonesian Investment Coordinating Board or BKPM and for your direct line of business you can contact the Ministry of Trade. Clarity around business purpose is important particularly for registration and tax purposes. Austrade can refer you to local notaries or service providers who can advise in these areas.
Based on our close interaction with Indonesian customers, Austrade notes that some Indonesian companies would prefer to cooperate with foreign companies that have local representative offices or distributors based in the market. This increases their confidence when engaging with foreign partners in terms of after sales service.
Indonesia’s maritime industry is concentrated in Java, Riau Islands, and Makassar. For distribution of components and parts, Austrade can assist in connecting companies to Tier 1 and Tier 2 suppliers in market.
Links and industry contacts
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.
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