SHIPPING INDUSTRY SET TO SAIL IN STORMY SEA THIS YEAR
Posted on February 06, 2014 on 07:00:44 WIB
Indonesia will see around 7 percent growth in the shipping industry this year, lower than last year’s 10 percent, on the back of global economic crisis and a heavy tax burden, says an association. Indonesian National Shipowners Association (INSA) chairwoman Carmelita Hartoto said on Tuesday that up to the third quarter of 2013, the shipping industry saw a decrease in traffic to Europe and United States by up to 25 percent compared to 2012 due to the global economic crisis that had yet to fully recover. “We are basically still optimistic that the domestic shipping industry will still grow this year at 6 to 7 percent despite the crisis,” Carmelita told reporters on Tuesday, citing an increase in the number of national-flagged vessels operating in domestic waters. She said the association also predicted a 7 percent increase in investment from US$2.8 billion last year, for the procurement of around 800 vessels this year. INSA data shows that the number of Indonesian vessels rose from 11,628 in October 2012 to 12,774 by the end of October last year. The rising number of vessels has also increased volume or capacity of shipments from 16.08 million gross tonnage (GT) in October 2012 to 18.20 million GT in October 2013. The local shipping industry has improved since 2005, when cabotage principles began to be implemented, allowing only national-flagged vessels to sail and distribute goods in Indonesian waters. “However, the industry can grow if the government provides fiscal incentives this year,” Carmelita said, citing as an example the abolition of value-added tax on loading and unloading services. Indonesian shipping lines still struggled to compete in the export-import market, which was dominated by foreign competitors, due to the 10 percent value-added tax for loading and unloading services, she said. She added that the government had long promised to scrap the tax, but had never done so. According to INSA, more than 90 percent of 571 million tons of export commodities, which are dominated by coal and nickel, are handled by foreign shipping lines. The country’s shipping industry, according to INSA, loses around $8 billion per year in potential income from shipments of coal and nickel, which totaled around 500 million tons in 2012. “Articles 56 and 57 of Law No. 17/2008 on Shipping state that the government should give fiscal incentives, including by removing value-added tax,” Carmelita said. “Why is the government so hesitant to scrap the tax? No other country in the world imposes such a tax.” She also encouraged Indonesian exporters to use cost, insurance and freight (CIF) terms of delivery to grab more market share. Currently, most Indonesian exporters still utilize the free on board (FOB) system for transporting goods overseas, through which they pass on the risk of losses to buyers who pay the costs of insurance and freight. This has prompted foreign buyers to choose foreign vessels to carry their cargoes.