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Jakarta Post

Shipbuilders struggle to meet production targets

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Wed, August 14, 2013   /  10:05 am

Shipbuilders are unlikely to meet the government'€™s expectations in developing large vessels, particularly tankers, by 2015, which would help grow the country'€™s shipbuilding industry.

Associations say the government'€™s incentives are still insufficient to help them reach the target, let alone be competitive in the region, jeopardizing the Industry Ministry'€™s goals in the shipbuilding industry development road map.

Industry Ministry director general for high-technology priority industry Budi Darmadi said on Tuesday the ministry would endorse local shipbuilders to make ships with a dead weight tonnage (DWT) of 70,000, including tankers, through the designated period.

He said the development of oil tankers, one of the ministry'€™s priorities, would help the distribution of fuel nationwide in the near future.

'€œWe are anticipating a rising demand for fuel in places outside Java along with the implementation of a mineral export ban next year,'€ Budi said, adding fuel consumption would increase to support mineral processing activities.

Indonesia, the world'€™s largest archipelagic nation, is home to around 200 shipbuilders, mostly centered in Batam, Riau Islands; Tanggamus, Lampung; and Lamongan, East Java.

At present, local shipbuilders already have the capability to produce ships of up to 50,000 DWT and to repair ships of up to 150,000 DWT, according to the Industry Ministry.

The capacity of the domestic shipbuilding industry has reached 800,000 DWT for ship production and 10 million DWT for ship repairs each year.

Budi said the government expected to spread the shipbuilding industry'€™s growth in other shipbuilding centers, with only shipbuilders in Batam currently possessing the facility to develop 70,000-DWT vessels.

To allow this, the government would continue to provide incentives, including government-paid import duties for component purchases and tax allowances, he added.

The government will also endorse the development of compressed natural gas (CNG) and liquefied natural gas (LNG) carriers for the next four years to support its campaign to replace oil with gas, according to the ministry'€™s road map.

Indonesian Shipbuilding Association (Iperindo) chairman Tjahjono Roesdianto said on Tuesday it would be more helpful for local shipbuilders if the government provided incentives in the form of the removal of import duties on raw materials and components and the provision of special industrial estates for the shipbuilding industry built on government investment.

The government currently levies an import duty of up to 15 percent on raw materials and components.

'€œUp to the present, the existing facility of government-paid import duties is hard to access due to complicated procedures,'€ he said.

He also said local shipbuilders could not afford to secure land for production facilities at an affordable price without government-backed shipbuilding industrial estates.

According to Indonesian Ship Owners Association (INSA) chairwoman Carmelita Hartoto, an investment of between Rp 350 billion (US$33.96 million) and Rp 500 billion is required to build a shipyard with a capability to build 70,000 DWT ships.

Sharing Tjahjono'€™s sentiment, Carmelita proposed the reduction of interest rates for loans and the elimination of a 10 percent value-added tax on locally built ships to help the government meet its goal.

She said high borrowing costs and the tax, coupled with tariffs on component imports, made Indonesia'€™s ship production cost more than those in other Asian countries, like Vietnam and China.

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