Maersk Eyes Indonesian Investment

Maersk Line wants to invest about $3 billion into its logistics business in Indonesia over the next five years. However, Indonesia’s cabotage laws, which have been in place since 2008, present a roadblock.

Indonesia’s cabotage laws dictate that only domestic-controlled shipping firms can transport goods between islands in the archipelago. They are required to use locally-registered ships and Indonesian captains. Indonesia introduced its first cabotage principles in 2005 when it ruled that only national ships can carry national cargoes.

Indonesia's shipping industry transported about 826 million tons of goods in 2013. The sector has also experienced a steady growth of five to six percent per year.

Maersk, which is the world’s largest container shipping line, has transported cargo in and out of Indonesia since 1958, and sees potential in domestic shipping in the region.

Indonesia has tweaked foreign ownership laws in some industries recently, but there has been no indication if that will include domestic shipping. But Indonesia has made moves to encourage foreign investment.

In June, the Indonesia Investment Coordinating Board (BKPM) unveiled plans to cooperate with the Bank of China in promoting Indonesia’s investment potential. The country has also expanded income tax holidays and said it will lower corporate income taxes in 2016.

Indonesian President Joko Widodo has placed an emphasis on sea transportation connecting the commodity-rich eastern part of the country with the manufacturing centers in the western region as part of his infrastructure push.

Indonesia’s government intends to invest $150 billion in an infrastructure program which includes new ports, power stations and roads by 2020, and boosting investment will be crucial in achieving this aim.