T

he government says it will revisit a proposal requiring that imported used ships be less than 15 years old, down from 20 years, to encourage domestic shipyards.

“In the future, only vessels with an age of 15 years at the most will be able to be imported to stimulate the higher production of new vessels here,” Budi Darmadi, the Industry Ministry’s director general for high-technology priority industries, said recently.

The government aims to increase the capacity of local ship producers to make new ships with a dead weight tonnage between 700,000 and 1 million tons by 2015, according to the Industry Ministry’s road map.

The ministry also wants local shipbuilders to have the capacity to repair from 12 million tons of vessels a year by 2015, up from a current 9.5 million tons.

The increase in production and repair capacity might ease implementation of recently imposed cabotage laws that require vessels operating in Indonesian waters be locally-owned, according to the ministry.

Separately, Carmelita Hartoto, the chairwoman of Indonesian Ship Owners Association (INSA), said that local ship owners imported used vessels due to high local taxes on the components used in ship production.

“Importing used ships is still more efficient than producing new ships locally,” Carmelita told The Jakarta Post on Sunday, urging the government to change the tax system to give local shipyards more of a competitive edge.

The government currently imposes an import duty of up to 15 percent on raw materials and components and a 10 percent value-added tax on locally built ships, making them up to 17 percent more expensive to produce than in other Asian countries, such as Vietnam and China, Carmelita explained.

However, in the free trade zone of Batam, Riau Islands, the production of new vessels is more competitive as shipyards there operate duty-free and with reduced taxes, she added.

Seventy of the nation’s 250 shipbuilders operate in Batam.

Indonesia, the world’s largest archipelagic nation, should have a developed maritime-based logistical system to support inter-island connectivity instead of relying on land transportation, according to experts.

Budi declined to specify a timetable for reducing the age limits for imported ships, which has been under consideration since 2009.

He also cited safety concerns among the reasons why the government wanted to reduce the maximum age of used ships allowed for imports.

The maximum age of 15 years was determined based on “common practices” in many countries around the globe, although that may change in the future in accordance with technological developments, according to Budi.

The ministry would likely reduce the limit after several shipyards under construction in Batam; Karimun, Riau Islands; South Sulawesi and Lampung were complete, Budi added.

Imports of secondhand ships aged up to 25 years are permissible under a 1998 presidential decree on the importation of new and used commercial and fishing ships, and a 2007 Trade Ministry regulation on imports of used capital goods.