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X. PROSPECTS OF SHIPPING AND SHIPYARD INDUSTRIES IN
INDONESIA
1. General
As the largest archipelagic country in the world, with the second longest coast line after Canada, shipping and shipyard service activities play significant roles in Indonesia’s trading activities. Indonesia is located strategically
in the middle of the main route of world trading. The combination of 240 million population the fourth largest in the world, high demand for marine transportation Indonesia, as an archipelagic country boasts a total of 17,000
islands, and strong domestic demand as a result of economic growth 5-7, even during the slowdown in the world economy, creates bright prospects for shipping and shipyard industries.
In shipping industry, the easy access for foreign-flagged vessels has hindered the growth of domestic shipping companies, until the Cabotage Principle policy was introduced in 2005. The Cabotage Principle is a government
regulation stipulating that all goods shipment in Indonesia must be carried out by Indonesian-flagged vessel. This policy is commonly implemented in other countries, including in the United States through the implementation of
US Jones Act.
Since then, domestic shipping companies have been growing rapidly, in line with the development of domestic captive market, with estimated total investment of USD 16 billion as per Indonesia National Shipowners
Association’s INSA data. The policy will continue to benefit domestic shipping companies Indonesia, where the volume of national shipping continues to grow, in line with the growth in inter-island, regional and international
trading. The revocation of Cabotage Principle exemption on large scale vessels servicing the offshore oil and gas industry will also increase the number of domestic shipyards with the capacity to service those types of vessels,
whereas shipping companies chartering the said types of vessels will have exclusive access to a captive market with continuously growing demand.
2. Shipping and Shipyard Industries Development in Indonesia 2.1. Shipping Industry Development
The historical development of shipping industry in Indonesia is reflected by the following indicators: Based on Ministry of Transportation data in 2013, the number of fleets from 2005 to 2013 has doubled,
from 6,041 units to 12,972 units. Indonesian fleet capacity has tripled from 5.67 Gross Tonnage GT in May 2005 to 17.89 GT in July
2013. Total shipping companies has increased from 2,071 companies in 2005 to 3,328 companies in 2012.
Total domestic marine cargo increased from 206,339,130 tons in 2005 to 355,023,728 tons in 2012, with total market share of national shipping companies increased from 55.5 in 2005 to 99 in 2012. The
market share of national shipping companies in export import transportation has doubled from 5 in 2005 to 10 in 2012.
Commercial shipping sector small-scale shipping, pioneer shipping and special shipping is estimated to have recorded the highest growth, i.e., tripled from 3,167 units in 2005 to 8,738 units in 2012.
With the implementation of cabotage principle, domestic shipping companies are able to control substantially all market share of domestic cargo transportation.
Shipping industry in Indonesia has continuously grown rapidly each year, in line with the increase in Indonesian population, the development of middle class income, the development of eastern Indonesia area and the
discoveries of new oil and gas fields. Furthermore, considering Indonesia is an archipelagic country, shipping is practically the most economical and feasible inter-island transportation mode for large scale cargo.
For example, the demand for vessels from Pertamina as the mandate holder of domestic field distribution has continuously increased from year to year. Pertamina’s refinery locations that are generally established in the
densely populated western Indonesia require Pertamina to use vessels to distribute its fuel to regions such as Kalimantan, Sulawesi, especially Papua and others.
However, prior to the implementation of cabotage principle in the 2005, the rapid developments were largely enjoyed by foreign shipping companies. Large size vessels in particulars are mostly foreign-flagged as they
require significant investments. As the government came to realize the size of potential held by this marine transportation market and the
important roles played by commercial ships in national security and the distribution of energy and cargoes across islands within the country, the government implemented the cabotage principle in 2005, which requires the use of
Indonesian-flagged vessels for domestic cargo transportation. Since then, within the period between 2005 – 2012, domestic shipping companies have been in a race to invest in
Indonesian-flagged vessels to replace foreign vessels, which are mostly large-size.
148 The Company, as a national company that has been engaged in the shipping industry for more than 30 years,
made the most of this momentum by investing in foreign-flagged large vessels. Moreover, following the world economic crisis in 2008, the prices of second-hand vessels were exceptionally low. For example, the Company
managed to purchase the largest Indonesian-flagged vessel, with a capacity of 300,00 ton to cater crude oil transportation from Arab Saudi to refineries in Indonesia. The aforementioned vessel is chartered based on a
long-term contract of 10 years. Other than the oil and gas sector, Indonesia is also the largest CPO producer in the world, which quantity
continues to grow from year to year. This growing sector takes part in supporting the shipping industry, since CPO requires liquid carrier vessels tankers for inter-island distribution.
In the future, the national shipping industry will continue to grow with the growth in Indonesian economy, as each increase in demand for energy or cargo will always be followed by the increase in demand for ships. Furthermore,
the implementation of cabotage principle indirectly maintains the balance of supply and demand for domestic ships tonnage.
Introduction to Tanker Types
In general, the difference between each type of tanker lies in the capacity and dimension of the
ship length. 1. Coastal tanker
Coastal tankers are vessels with dead weight tonnage DWT below 10,000 tons
that are used for distributing fuel and gas directly from refineries or depots to areas all
over Indonesia. The vessel, with length less than 205 m can easily enter shallow rivers,
therefore fuels can be directly distributed to ground storage depots to be further
distributed to gas station by trucks.
2. Handysize General Purpose tanker This type of vessel has a dead weight tonnage ranging from 10,000 – 20,000 tons and is generally used to
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