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ECSA Voices Concern Over Indonesian Cabotage Law

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File image courtesy ICMA

By MarEx 2018-02-19 19:41:00

On Monday, the European Community Shipowners' Association (ECSA) expressed its members' concerns about a new Indonesian cabotage law, which goes further than most by imposing restrictions on the nationality of vessels in international trade. The new law requires that certain bulk cargoes can only be transported for export by "national maritime transport companies," notably coal and crude palm oil (CPO), and can only be insured by "national insurance companies." In addition, all government-purchased goods and all imported rice are subject to the same restrictions. Where a suitable Indonesian vessel is not available, foreign vessels may be employed. 

ECSA described the law as a "clear measure of protectionism" and warned that it will impact European shipping companies with a long history in Indonesia. The association suggested that the decree is incompatible with free trade; goes against Indonesia's commitments under the WTO; distorts the market; and reduces confidence in Indonesia's business climate. 

Martin Dorsman, secretary general of ECSA, said that the law should be addressed during bilateral trade talks between the EU and the Indonesian government. “In a time when the EU and Indonesia are negotiating on a free trade agreement the adoption by the Indonesian authorities of such a law is unacceptable," he said. "In view of this week’s bilateral trade talks we have passed our concerns on to the European Commission and hope they will see a chance to question their Indonesian counterparts on this matter.” ECSA called on the EC to ask for the law's repeal.

The International Chamber of Shipping has also expressed its concerns about the cabotage law. In a recent letter to the Indonesian Ministry of Trade, ICS echoed ECSA's warnings about the regulation's compatibility with WTO requirements and with basic commitments to the freedom of maritime trade. In addition, ICS warned that the decree could increase shipping costs and reduce Indonesian export volumes, and could create an "unwelcome precedent" for other nations to follow.