Indonesia is to postpone a controversial decision to force all exporters of coal and palm oil to use Indonesian-flagged ships.
The new regulation was due to take effect this month, but will now not be introduced until 2020 at the earliest. The new rule was initially intended to be introduced in February, but political and technical problems have assailed the proposal from the start. The European Community Shipowners’ Association called the proposal “clear protectionism” on the part of Indonesia that could threaten foreign confidence in the country. Currently about 95% of exports of coal from Indonesia (running at 35m tonnes a month) use foreign-flagged vessels, and producers have pointed out that Indonesia simply does not have the capacity to use only Indonesia-flagged ships. Indonesia’s shipping industry, consisting mainly of small-scale operators, would not be able to move all the cargo the new rules would require, according to an executive at a major Japanese ocean freight company, speaking to Nikkei.
Indonesia is the world’s top exporter of thermal coal and Japan sourced 32.07mt – 17% of its coal imports – from there in 2017.
The Japanese Shipowners’ Association warned last week that it would drive up freight costs and hurt Indonesia’s economy in the long run.
“If we tolerate this regulation, other countries may make similar moves,” an official at the Japanese Shipowners’ Association had said before the latest Indonesian announcement. Japan’s Transport Ministry urged Indonesia to scrap the regulation on the grounds that it would break World Trade Organization rules, as well as a bilateral Economic Partnership Agreement between Japan and Indonesia.
If it had been introduced, the net effect would have been Indonesian companies having to charter foreign-owned vessels for the exports, adding a layer of bureaucracy (and cost) to the export process.