Banks not supportive of shipping sector: INSA

JAKARTA (JP): The Indonesian Ship Owners Association (INSA) has complained that Indonesian banks are not supporting efforts to develop the country's shipping sector.

"Many foreign banks offer credit for ship procurement. But due to the absence of local bank guarantees, they cannot provide such credit to Indonesian shipping companies," INSA chairman Firdaus Wadjdi said here over the weekend.

He said that his association suggested to the Ministry of Finance that it set up a financial institution to provide financial guarantees for the association's members to acquire the needed credit.

The credit is urgently required to help shipping companies procure new ships, he said.

Speaking to reporters on the sidelines of the association's two-day working meeting over the weekend, which was attended by 150 members, he said that such a financial facility would support the efforts to reduce the increasing deficit in the shipping sector.

Director General of Sea Transportation Soentoro estimated in September that the shipping services deficit would account for nearly 25 percent, or US$2.1 billion, of the country's current account deficit, projected to reach US$8.7 billion this fiscal year.

The deficit resulted from more than 97 percent of the Indonesian cargo transported to and from international destinations last year being carried by foreign ships. The volume of Indonesia's international cargo exceeded 287.89 million tons last year.

In the domestic cargo market, foreign shipping companies controlled 48 percent of the total cargo volume of 154.7 million tons.

According to Firdaus, the lack of ships owned by local shipping companies caused the foreign domination.

"It is very difficult for us to procure new ships because of the high interest rate," he said, adding that the local interest rates were as high as 22 percent.

He said that his association was pursuing negotiations with the government to allow local shipping firms to carry state-owned companies' cargoes, which currently were mostly carried by foreign shipping firms.

He also said that a number of Indonesian shipping companies planned to set up a consortium as a way to break the foreign domination of the country's cargo market. (bnt)