Businesspeople protest Lloyd's war risks labeling

Fitri Wulandari, The Jakarta Post, Jakarta

Businesspeople are protesting the labeling of Indonesia as a war-risk zone by a London-based insurance committee linked with insurance giant Lloyd's, saying the classification was unfair and would adversely affect the flow of goods into and out of the country.

Barens TH Saragih, chairman of the Indonesian National Shipowners Association (INSA), said the association would ask the Ministry of Finance to file a protest with Lloyd's.

He also questioned the reasoning for the classification, saying that Lloyd's did not list the United States as a war-risk zones after the Sept. 11 terrorist attacks there last year.

"It is unfair. Indonesia is not an open war zone and the bombing only happened in Bali. Why didn't (Lloyd's) do the same to the U.S.? It is completely baseless," Barren told The Jakarta Post on Friday.

Anton J. Supit, chairman of the Indonesian Footwear Association (Aprisindo), also criticized the decision, saying it would hurt the country's trade activities.

Shortly after the bombing in Bali that killed more than 180 people, mostly foreign vacationers, the London-based Joint Hull Committee issued a marine hull war risks cancellation notice.

The notice, which took effect on Thursday, called on insurance and reinsurance firms to cancel or amend all contracts with vessels sailing to Indonesia. Additional premiums will be applied should ship operators insist on entering Indonesian waters.

According to the Directorate General of Sea Transportation, Indonesia currently has 2,109 ports, of which 140 are open to foreign ships with the other 1,973 for local vessels only.

Barens predicted the marine hull premium would increase the current fees 15 percent, which amounts to 3 percent to 4 percent of a ship's price. However, he said, the rates would vary depending on the underwriter.

"It's a big increase for us," Barens stressed.

According to Barens, all insurance firms in Indonesia reinsure their clients with Lloyd's, which controls 80 percent of the world's insurance market.

A marine hull insurance expert, Nico Lukum, said the country's insurance industry must make clear the true situation in Indonesia to the international insurance market.

"It is possible the international insurance market has the wrong perception about Indonesia after the bombing. The Indonesian Insurance Council (DAI) must clarify this," Nico, who works at state-owned insurance firm Jasindo, told the Post.

Nico said that DAI must also question the decision by Lloyd's to include Indonesia on its list of war-risk zones.

It is feared increased premiums will disrupt the country's international trade, as it will raise transportation costs for Indonesian exports and imports.

"Our export goods will not be competitive because they will become too costly and the import goods will become more expensive," Anton said.

According to INSA, 94.6 percent of the country's exported and imported goods, which total 350 million tons annually, are transported by foreign ships. A mere 5.4 percent is transported by locally owned ships.

As for imports, Anton said, domestic consumers would have to pay higher prices for imported goods.

"Eventually, the consumers at home have to pay for the increased transportation costs," he said.

Anton also warned that exports might decline with international importers likely to turn to other countries offering cheaper goods.

For the past three years, the country's exports have steadily declined from US$62.02 billion in 2000 to $56.03 billion in 2001 and $27.38 billion for the first half of 2002.

With declining investment, the country now relies on exports and domestic consumption to drive economic growth.

Analysts say the country needs to post economic growth above 5 percent per year for many years to come to absorb the country's huge number of unemployed. But, they say, following the Bali bombing the country's growth is likely to reach only 3 percent this year.