Indonesian Government revokes controversial cabotage legislation

Following pressure from various stakeholders, the Indonesian government has revoked Ministry of Trade Regulation No. 82/2017 on the Utilisation of Indonesian Sea Carriage and Insurance for Export of Certain Goods (“Regulation 82”), which was approved in October 2017. Regulation 82 would have required exporters of coal and crude palm oil (CPO) from Indonesia (and the import of rice and goods for government procurement to Indonesia) to use vessels “controlled” by Indonesian shipping companies and to procure insurance from Indonesian insurance companies (please see our previous Law-Now article for details regarding the intended legislation). Regulation 82 had already been amended in April 2018 to postpone the implementation date from 1 May 2018 to 1 August 2018, for the provisions relating to use of domestic insurance, and to 1 May 2020, for the provisions relating to use of domestic vessels.

Industry players did not view the amendments as going far enough to clarify certain ambiguities in Regulation 82 or to address the risks to the import and export industry posed by the requirements. Widespread concern remained that the Indonesian shipping industry and insurance market was not in a position to service the demands which would be created by Regulation 82, in particular that the insurance products on offer would not be acceptable to global importers and exporters and that there would not be enough capacity in domestic vessels.

It has been reported that the Indonesian Trade Minister met with members of Indonesia’s National Ship Owners Association earlier this year to discuss the ability of the Indonesian shipping industry to service the import/export of the targeted commodities. It appears that Indonesia has recognised that further developments in both the shipping and insurance market will be required before the import and export industry of the targeted commodities can rely solely on domestic capability without having a negative economic impact on trade and profits.

It bodes well for businesses in Indonesia that the government has been receptive to concerns raised in respect of Regulation 82 and demonstrates the Indonesian government’s desire to continue to support those involved in the export of coal and CPO from Indonesia.