China, Australia, and Taiwan Interested in Investing in Indonesian Shipyards

The Head of the Investment Coordinating Board (BKPM), Franky Sibarani, explained that the agency has so far issued principle licences for the shipbuilding industry worth Rp 3.9 trillion. The breakdown comprises Rp 2.2 trillion in domestic investment (PMDN) and Rp 1.7 trillion in foreign investment (PMA).

A number of interested foreign investors come from China, Australia and Taiwan. “There is one from China, one from Australia, and one from Taiwan. The one from Australia is planning around USD 150 million. I will meet them in November because they are still looking at locations. They are surveying sites at the moment,” Franky said at his office on Jalan Gatot Subroto, Jakarta, on Friday (25 September).

Franky believes that realised investment in the industry could still increase by the end of the year, despite the economic slowdown. “I think if it reaches Rp 5 trillion, that would be fine,” he added.

However, Franky stressed that foreign investment must eventually involve domestic parties. “That is the recommendation. I recommend that they partner with local companies, and so far that opportunity has been well received,” he said.

To encourage the national shipbuilding industry, the government has prepared a number of incentives. On the fiscal side, the government is providing the Government-Borne Import Duty (BMDTP) for imported ship components in accordance with Minister of Finance Regulation 249/PMK011/2014.

Another incentive takes the form of an exemption from VAT collection for shipyards, with a government regulation (RPP) currently being drafted to replace Government Regulation 38/2003 on fiscal facilities for the import and/or delivery of seagoing vessels, aircraft, railways and their spare parts.

The promise of these incentives has prompted several countries to declare their interest in investing in the shipbuilding sector and making Indonesia a base for ship production in the future.

Franky said that fiscal incentives are not the only incentive the government is offering to the shipbuilding industry. Other facilities include the development of a special industrial zone for shipbuilding in Lamongan Regency and a maritime industrial estate in Tenggamus.

“There is also the optimisation of the use of domestically produced vessels, the development of technology and human resources, and efforts to encourage the growth of the components industry,” Franky said.

“We have already met the Australian investors three times, twice with the Industry Minister, so they are very active. They consider ship production in Australia impossible because it is expensive, so they are reducing their production capacity there and investing here for the global market,” he added.

According to Franky, the investment demand from foreign companies has made overseas ship producers envious, including those in China. “Many of them are actually gnashing their teeth. Those who are regretful are the exporters and ship producers abroad. Ship producers in China say that orders have dried up this time, because we usually buy or import from China. So this policy will actually encourage production that used to be done abroad to move into Indonesia,” he declared.

At the same event, Industry Minister Saleh Husin added that besides China, Japan, Australia and Taiwan, several other countries are interested in investing in the shipbuilding industry, namely the Netherlands and Poland.

“I visited a shipyard in Rotterdam; they are building an industry in Vietnam for the Asia-Pacific region. And they see that the biggest market is in Indonesia, so why not make Indonesia the centre of ship production,” he added.