Fri, 14 Feb 2003

Export costs will 'soar' if war in Iraq breaks out

Rendi A. Witular, The Jakarta Post, Jakarta

The cost of shipping exports to the Middle East, Europe and Africa will soar by at least 35 percent if a war against Iraq comes to pass, according to an expert.

Indonesian Shipowners' Association (INSA) chairman Barens Th. Saragih told The Jakarta Post on Thursday that the higher costs would result from increased operating costs and war-risk surcharges imposed by shipping companies.

"For the shipping charges alone, which now range between US$1,100-1,200 per 20-foot container, the increase will be around 15 percent, while for the war-risk surcharge, shipping companies will add about $50-150 per twenty-foot container," said Barens.

The increase in shipping costs was unavoidable as most ships had to sail by longer routes to avoid passing the Suez Canal for fear of being hit by stray missiles as the canal was located only about 650 kilometers from Iraq.

Thus, cargo ships would have to sail past South Africa en route for Europe, which would take much longer.

Meanwhile, shipping companies would impose various surcharges if the U.S. attacked Iraq. The war-risk surcharge for shipments to Egypt and Israel would be $50 per 20-foot container and $100 per 40-foot container, $24 and $48 respectively per 20 and 40- footer for Syria and Lebanon, $40 and $80 respectively per 20 and 40-footer for Algeria, $75 and $150 respectively per 20 and 40- footer for Libya, and $125 and $250 respectively per 20 and 40- footer for Europe.

The higher shipping costs would adversely impact on the country's already fragile export industry.

Local businessmen have said the looming U.S.-Iraq war has already dealt a blow to the country's exports, causing worries that Indonesia will not be able to reach its export growth target this year.

Many buyers in Europe, Africa and the Middle East have started canceling orders for the country's prime manufacturing commodities, such as textiles and footwear.

Europe, the Middle East and Africa together contribute to around 50 percent of the country's total exports, which last year reached $57 billion.

On average, Indonesia's exports each year to Europe are worth more than $8.5 billion, the Middle East about $11 billion and Africa about $1 billion.