INSA chases bigger share of exports

Anissa S. Febrina, The Jakarta Post, Jakarta

Domestic shipping lines, which currently control about 5 percent of total shipments of exports, aim to boost this figure by at least 10 percent by next year, says a local shipping association.

"We are set to increase the export volume shipped by domestic vessels by at least 10 percent next year," Indonesian National Shipowners Association (INSA) chairman Oentoro Surya said on Friday, adding that this would require significant additions to the national merchant fleet.

Currently, Indonesian ships only carry 22.5 million tons of exported goods out of the total annual total of 450 million tons, leaving the rest of the lucrative business to foreign shipping lines.

A lack of ships is one of the obstacles hampering the growth of domestic shipping lines.

Oentoro explained earlier that with the targeted growth, shipping lines would need a combined investment of around US$3 billion to add more ships to their fleets.

A second-hand 60,000 ton freighter costs around $20 million.

While established companies found it easy to secure loans and other forms of financial support, smaller ones would need the help of a consortium of financing institutions, Oentoro said.

"Currently, INSA is approaching foreign financing firms. There are some in Singapore and Germany that have stated their interest," he said.

Oentoro said that his own company, Arpeni Pratama Lines, would allocate between $100 million and $150 million next year to buy four more bulk carriers to augment its current fleet of more than 50 ships.

Meanwhile, one of the country's largest container shipping lines, PT Pelayaran Tempuran Emas, said on Friday it would buy three German ships at a cost of $26 million. It was still deciding whether to seek financing from a local bank or a German financing company.

With these additional vessels, Pelayaran -- which now ships about one-third of the 22.5 million tons of exported goods -- plans to grab at least 3 percent more of market share.

INSA estimates that by 2020, domestic shipping lines will only be capable of securing a 30 percent share of the some 550 million tons of exported goods.

Domestically, however, local lines will carry some 80 percent of the 370 million tons of goods transported within the country annually, as compared to 50 percent currently.

INSA calculation shows that with the current rate of growth, the Indonesian domestic shipping industry will lose about $11 million in potential revenue to foreign shipping lines annually.

"It is crucial for our shipping lines to keep adding capacity," he said, adding that the full trust of Indonesian exporters would also help boost the shipping industry.

"Our exporters should start using the C&F (cost and freight) trading system instead of FOB (free-on-board). This would require more work but the multiplier effect it would have on the shipping industry would be tremendous," he explained.

Under the C&F method, overseas importers pay for Indonesian goods at a price that includes the cost of transportation, which means exporters are responsible for choosing the freighters, which it is hoped would be domestic shipping lines.

Meanwhile under the FOB system commonly used here, importers choose the shipping line as the exporters are only obligated to get the exports to the local port.