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Weak economy, red-tape stalls investment in Indonesian shipyards

Weak economy, red-tape stalls investment in Indonesian shipyards
Much-needed investment in Indonesia's shipbuilding industry has been stalled this year due to slowing economic growth and a sluggish bureaucracy, local reports said.

“Indonesia’s shipbuilding industry needs investments to the tune of IDR20-30trn ($1.5-2.3bn) but we haven’t seen any new investment so far this year,” said Hasbi Assidiq Syamsuddin, director of the maritime, aerospace and defence equipment bureau at the Ministry of Industry.

Indonesia Shipbuilding and Offshore Association (Iperindo) chairman Eddy Logam added that further investment in the sector was unlikely this year because of the slowing economy.

In the first quarter of 2015, With the Indonesian economy expanding at just 4.7%, its slowest rate in five years in the first quarter of this year, due to weak commodity prices and slackening export demand, shipping companies have responded by holding off new ship orders and shipyards have little incentive to build more drydocks.

Indonesia's notorious red-tape is also having a negative impact. While the government last year announced several policies to boost investment in the shipyard industry, including exemptions from value-added and import taxes for components, as well as tax allowances, it still has not yet finalized the list of ship components that will be eligible for import tax exemptions, Hasbi said. This will inevitably further delay the implementation of the tax-exemption incentives.

Hasbi added the government expected to see up to IDR10 trn ($760m) of foreign investments in the shipyard industry next year. The source of these investments was however unclear.