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Stakeholders said the local shipping industry would not be
ready for the implementation of the cabotage principle, scheduled for
2011, without more incentives and regulatory reforms.
President director of PT Samudera Indonesia Tbk Randy Effendi said the
local shipping industry might need more than three years before it
could expand its armada due to unfavorable policies on taxes and a lack
of incentives.
"The local shipping industry needs more time to prepare, at least until
2015," Randy said, "Unless, the government exempts the 10 percent value
added tax (VAT) on vessel purchases and capital gains tax (CGT)."
Randy said VAT had caused domestically made vessels to become more
expensive than those built outside of the country, and that CGT had
caused local shipping companies to suffer capital cutbacks.
"When a shipping company receives money from an insurance firm, for
example, the money will be cut by 30 percent. This is ironic because
that amount of money can be used to purchase a new vessel," Randy said,
adding that the policy could discourage local shipping companies from
investing in new vessels.
Under the shipping law, passed by the House of Representatives earlier
this month, only locally flagged vessels would be allowed to transport
domestic cargo between Indonesian ports.
Director General of Sea Transportation Effendi Batubara said cabotage
would bring more opportunities to local players.
The Transportation Ministry said Indonesian flag vessels last year
carried 148.7 million tons of domestic cargo, or 65.3 percent of the
country's total, while the remaining 34.7 percent was served by foreign
shipping companies.
To meet domestic demand in 2010, the ministry said the local industry
must provide 654 vessels.
Law expert on maritime issues Chandra Motik said the industry would not
be ready by 2011 to carry out all freight services in Indonesian waters.
She said if the industry was not ready, it would face fierce
competition from foreign investment.
"Foreign investors could just disburse their money to local companies
to get new vessels. As a consequence, the vessels would be
foreign-owned, but would fly Indonesian flags," she said.
She said the government and lawmakers should think carefully when
drafting regulations for the implementation of the law, which are
slated for completion by March next year.
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