Government told to deregulate shipping further

Government told to deregulate shipping further

JAKARTA (JP): The government must follow up its recent reform
measures with further steps if it wants to prevent national
shipping companies from going out of business, an executive of
the Association of National Shipping Companies says.

Association chairman Barens Saragih, while acknowledging the
role of the reform measures to eliminate value-added tax on ship
imports, said that without further deregulations, national
shipping firms would remain on the brink of bankruptcy.

"Almost all shipping companies are at the stage of going
broke," Saragih told The Jakarta Post yesterday.

But he acknowledged the government's new deregulation measures
could at least encourage shipping companies to add to the number
of their fleets.

The government last month announced its most recent reform
measures which, among others, cuts back restrictions, tariffs and
levies on imports for export-oriented businesses. It also
eliminates the value-added tax on imports of fishing, freight and
passenger vessels.

Last year, members of the Association of Indonesian Fishing
Companies urged the government to lift the ban on imports of used
fishing vessels. As a result of the ban, foreign fishing fleets,
including those operating without local permits, dominate fishing
activities in Indonesia's territorial waters and exclusive
economic zone.

Saragih said yesterday that national freight companies faced a
similar condition.

"Many freight companies cannot survive the high maintenance
and operating costs -- including those incurred by port and
government officials -- and others can't afford to buy new
ships," he said.

In addition to this, he said, the ban on logs and the oil glut
in the 1980s caused many shipping companies to go out of
business. Up to 120 log carriers from 21 shipping firms had to
close down, he said.

"The oil glut caused people to shift to non-oil exports and
forced companies which operated oil-tankers to go out of
business," Saragih added.

A 1985 presidential decree further pushed national shipping
firms into the corner. The decree opened up national ports to
foreign shipping lines and allowed national trading companies to
charter foreign lines to do their business.

"Many companies prefer to charter ships rather than buy new
ones," he pointed out.

Saragih said the situation caused the number of the shipping
association's members to increase from around 300 to 1,600. "But
many of them don't have their own vessels and only operate fleets
on a charter basis under a foreign flag," he pointed out.

To follow up the recent deregulations, Saragih suggested that
the government provide incentives, such as tax deductions, to
encourage the use of domestic fleets.

The Malaysian government, for example, provides double freight
deductions if traders use national shipping lines, and only a
single deduction if they used foreign lines, he said.

In Thailand, the government allows free-of-tax sales for
freight imported on national fleets, he added. (pwn)