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Coal companies demand clarity over use of foreign ships
Less than 2 percent of coal exports use domestic shipsIndonesian coal mining companies are looking for clarity about a top government official’s vague claim that a trade ministerial regulation that would have required the companies to only use Indonesian-flagged ships starting May has been revoked
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Less than 2 percent of coal exports use domestic ships
Indonesian coal mining companies are looking for clarity about a top government official’s vague claim that a trade ministerial regulation that would have required the companies to only use Indonesian-flagged ships starting May has been revoked.
The Indonesian Coal Mining Association (APBI) wrote in a statement on Friday that mining companies wanted the Trade Ministry to “immediately issue” a new regulation to revoke the problematic Trade Ministerial Regulation No. 82/2017 “to ensure clarity for coal importers and exporters”.
APBI chairman Pandu Sjahrir explained that the regulation, slated to take effect on May 1 after a two-year delay, would cut coal exports significantly.
“Less than 2 percent of coal exports are being handled by domestically owned ships,” he said, adding that “several coal export shipments have been canceled” because of confusion over the regulation’s implementation plan.
The association was responding to Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan’s statement on Wednesday that “the President [Joko 'Jokowi' Widodo] had decided at our last limited meeting to revoke the ministerial regulation”.
“I think that decision was made last week,” he said during a live-broadcast press conference on YouTube.
Contrary to Luhut’s statement, Trade Ministry secretary-general Oke Nurwan, who used to oversee the implementation of the regulation when he served as international trade director general, told The Jakarta Post on Friday that the regulation was still intact.
“We are still working on it. I do not have the full details; this is under the [Trade Ministry's] International Trade Directorate General. But they are in the formulation process,” he said.
The Post tried to contact the current international trade director general, Indrasari Wisnu Wardhana, but he was unavailable for comment.
The regulation was initially introduced to stimulate investment in Indonesia’s domestic maritime sector that, according to a 2016 Bank Indonesia study, only contributed 4 percent of the country’s economy. Such a contribution was lower than in other Asian archipelagos such as the Philippines (21 percent) and Japan (28 percent).
However, coal mining companies are concerned about the domestic shipping industry’s ability to meet coal export needs. According to APBI data, all operational Indonesian-flagged bulk carriers can carry up to 3.5 million tons of coal, which is only one-tenth of the country’s total export volume, which ranges between 35 and 38 million tons each month.
Prior to Luhut’s announcement, Indonesian National Shipowners Association (INSA) chairperson Carmelita Hartoto said that up to 98 percent of Indonesian-flagged ships’ capacity was used to transport coal domestically. Only 2 percent was used for coal exports.
INSA members, she continued, faced difficulties securing fresh funds for new ships, such as a lack of competitive interest rates and of long-term contracts with cargo owners.
Nevertheless, she said on Feb. 21 that “INSA members will meet requirements set by the government, namely the Trade Ministry.”
In Friday’s statement, APBI also piggybacked on the COVID-19 coronavirus epidemic by saying the ministerial regulation countered government efforts to boost exports, which were needed to “prop up an economy shaken by the COVID-19 outbreak”.
Indonesia’s overall mining industry contributed 7.26 percent to the country’s GDP in 2019, lower than the 8.08 percent of the previous year, Statistics Indonesia data shows.
Responding to the shrinking contribution, Indonesian coal mining companies are shifting their exports from Europe and the United States to Asian markets such as those in South Asia, Southeast Asia and, the most pivotal market, China.
The International Energy Agency said it foresaw declining coal demand in the West from the increasing competitiveness of solar panels, wind turbines and natural gas. Meanwhile, demand in Asian markets would rise as they use coal to fuel development.
Indonesia’s coal consumption alone is projected to grow 12.3 percent year-on-year to 155 million tons in 2020, according to official data. Consumption would be largely driven by the country’s ambitious electrification program.
