Government incentives are still insufficient to help them reach the target, let alone be competitive in the region. Industry Ministry director general for high-technology priority industry Budi Darmadi was quoted as saying that the ministry would endorse local shipbuilders to build ships up to 70,000 dwt and there was a particular demand for tankers as the ministry anticipates rising demand for fuel outside of the main Java island.
Indonesia has around 200 shipbuilders, mostly centered in Batam, Riau Islands; Tanggamus, Lampung; and Lamongan, East Java. They however currently mainly only have capacity to build ships of up to 50,000 dwt with only yards in Batam being able to handle ships up to 70,000 dwt.
The capacity of the domestic shipbuilding industry has reached 800,000 dwt for ship production and 10m dwt for ship repairs each year.
The government would continue to provide incentives, including government-paid import duties for component purchases and tax allowances, Budi said. The government will also boost the development of CNG and LNG carriers for the next four years.
Local bodies such as Indonesian Shipbuilding Association (Iperindo) said, however, that 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.
Meanwhile, Indonesian Shipowners Association (INSA) added that the reduction of interest rates for loans and the elimination of a 10% value-added tax on locally built ships could help the government meet its goal.
High borrowing costs and the tax, coupled with tariffs on component imports, pushes Indonesia’s production costs above its competitors in other Asian countries such as Vietnam and China.
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