Perhaps, President Joko “Jokowi” Widodo is unaware of Indonesia’s 2008 law on cabotage and its impact on the country. These principles were implemented when the domestic shipping industry in Indonesia almost collapsed as a result of foreign vessels engaging in coastal transportation. The government implemented restrictions with the introduction of the Maritime Law No. 17/2008, which was aimed at providing business opportunities and greater market share for local companies, and shipping and the offshore marine industry underwent major changes.
Hereafter, it was assumed that the rules applied only to passengers and goods — not a threat as assumed by the oil and gas companies. Later on, the government changed the rules to bring oil and gas activities under the law — done to encourage Indonesia’s shipbuilding industry to grow and protect member companies of the Indonesian Ship Owners Association.
However, with the lack of local vessels to service the needs of the oil and gas sectors, further exemptions were created in 2011 in order to avert production losses. Regulation No. 22/2011 and Transport Ministerial Regulation No.48 of 2011 allowed foreign-flagged ships to continue to operate in local waters. There were two deadlines, one aimed at Dec. 2012 and Dec. 2013 for offshore construction vessels and dredging vessels.
Then, the Transportation Ministry announced it would extend exemptions to March 2014. Exemptions for oil and gas survey vessels, offshore construction vessels and others expired in December 2014. The government anticipated that with the implementation of the cabotage rules, the Indonesian shipbuilding industry would now be able to construct and build offshore vessels with its growing local expertise but it was not to be.
Analysts considered it as a measured strategy only and by December 2015, the expiry will affect the jackups, semi-submersibles, deepwater drill ships and swamp bridge rigs — creating a dearth for the shipbuilding industry.
I doubt the ban on buying new vessels is the elixir to lift Jokowi’s woes. On the flip side, I understand that McDermot of the US has moved its operations from Batam to West Malaysia because of the significant increase in rent in a new 30-year lease of its land.