Abolish levies on shipping firms: Minister
JAKARTA (JP): Minister of Transportation Haryanto Dhanutirto is calling for the abolition of various levies imposed on domestic shipping firms in order to improve their share in the country's shipping activities.
Speaking at a hearing with the House of Representative's Transportation and Public Works Commission yesterday, Haryanto said a number of levies, especially import tax, have made domestic shipping companies uncompetitive.
Local shipping companies are required to pay a number of levies for operating and docking as well as income taxes, import duties and sales tax.
Consequently, foreign shipping companies are getting an edge, not only on the country's export-import activities, but also on inter-island trade, since they are not subject to such levies.
Haryanto said foreign shipping companies presently carry 96.7 percent of Indonesia's exports and imports and another 40.6 percent of goods shipped between islands within the archipelago.
At a hearing with the House's Trade and Logistics Commission earlier this year, executives of the Indonesian Importers Association said that both importers and exporters have very little "say" in deciding which shipping companies will be used to transport their exports or imports.
The association said most importers open letters of credit for their overseas suppliers with Cost, Insurance and Freight (CIF) arrangements, while most exporters open letters of credits with Free on Board (FOB) arrangements. Either way, both importers and exporters are very weak in deciding which shipping companies will be used.
The Indonesian Shipowners Association had earlier complained that its members could not compete with foreign shipping companies, not only because of their weaker fleets but also because of their heavier tax burden.
The association asked the government to give a level playing field to both domestic and foreign shipping companies by easing the tax burden on local shipping firms or by imposing similar taxes on foreign shipping companies.
Ownership
The levies on domestic shipping companies have forced a number of them to buy used ships and sail them under foreign flags. According to an informed source at the transportation ministry, 15 percent to 17 percent of foreign ships operating in Indonesia are owned by Indonesians.
At least 100 Indonesian ships, for instance, are flying the Panamanian flag because of the advantages it offers, such as lower taxation and its Colon Free Zone, which is the world's second largest free zone after Hong Kong.
A free zone is a port where no duties are imposed on ships that load or unload.
To empower local shipping companies, Haryanto said various levies imposed on domestic shipping companies must be abolished so that traders are encouraged to use ships owned and operated by domestic firms.
He said his office is aiming for domestic shipping companies to have a 10 percent share of Indonesia's external shipping activities and a 70 percent share of inter-island shipping activities by 2005.
Last year the volume of the country's export and import goods stood at 230 million metric tons and the goods shipped between islands reached 139 million metric tons.
On the assumption that Indonesia's exported and imported goods are growing by six percent per annum and inter-island goods by seven percent, by the year 2005 goods shipped from and into Indonesia are projected to reach 436 million tons per annum and goods shipped within the country will reach 290 million tons.
To reach the target for 2005, Haryanto said, Indonesian shipping companies have to provide ship space of 2.66 million dead weight tons (DWT) or 758 ships of 3,500 DWT each. Currently, domestic shipping companies have 1,126 ships or equivalent to 4.3 million DWT.
He said he would continue urging domestic shipping firms to buy locally-built ships to help nurture the development of the country's strategic industries. (rid)