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Cabotage Law

What is cabotage?

Cabotage is a term universally adopted by the international maritime community to protect registered or licensed ships to trade between ports in the country concerned. The word is French in origin meaning coastal sailing. Similar policies exist throughout the world in regard to domestic transport each country for local shipping protections.

Nearly every country in the world with a coast of its own regards coastal shipping as an integral part of its domestic transport system. For some countries it is not a big issue where there is a short coastline with one or two ports. For others with very large coastline opening up domestic transport sectors to foreign competition is something they have persistently regarded as non-negotiable.

Cabotage Law and Shipping Industry

The cabotage law prevents foreign vessels from delivering cargoes from one local point to another. The need for the prohibition is also quite simple since allowing international cargo vessels to call on two or more local ports would eat into the income generated by local inter-island vessels ferrying passenger and goods from one port to another.

Local shipping operators that can’t cope with intense competition from their foreign counterparts in ferrying of cargoes from one port to another within the country will either be forced to cut-down the number of their trips or close shop due to bankruptcy.

Advocates of the lifting of the Cabotage Law have reasoned that such “sacrifice” would be beneficial since this would spawn local tourism and result to increased port and custom revenues. The move was “counterproductive” since this would undermine the local shipping industry’s current thrust to become more competitive and be at par with their global counterparts. This means that the local shipping industry has a lot of potential to become a global player.

However as history shown, Indonesia had nightmarish experience when its government was forced to relax its Cabotage Laws in the early 80s because of the oil crisis. The Indonesian shipping executive said such policy nearly resulted to the direct annihilation of its domestic fleet. Indonesia’s (domestic) fleet drastically fell. 97% of Indonesia’s (inter island) trade was paid to foreign shipping lines.

The experiment was costly stressing that most of the regulatory measures promulgated in the 80s were counterproductive and were a great disservice to the shipping industry of Indonesia.

Instead of the “repealing” of the Cabotage Law, the best way is to urge the private sector, ship owners and shippers, and the government agencies to “work together toward a common vision: To allow shipping companies not to miss out this opportunity”

It is important that the country’s shipping industry retains its “indigenous shipping capability” and, in the process, protects its national interest. The answer is not in lifting the Cabotage Law but in the existence of “a consistent and equitable legislative and regulatory regime” that would level the playing field between foreign and local shipping operators.

Cabotage Law in Inpres No.5/2005 and its Implementation in Indonesian Maritime

It is not easy to develop National Maritime Industries. Why? Because more than 95% of export import’s activities are being served by foreign vessels. More over, these foreign vessels also take up almost 50% of domestic transportation services.

Indonesia is trying to bring a new revolution in her maritime industries by issuing Inpres No.5/2005. It is only re-evaluation of government’s commitment for its maritime regulations that has been existed since two decades ago but has not been implemented correctly until now. As law and political protection in this revolution, it has strongly declared its support for national benefits to built a strong foundation for national maritime industries to gain its glory and world recognition.

This Inpres will answer the main problem for national maritime industries that is the fleet limitation especially in international route. Conceptually, the solution is the realization of cabotage law as soon as this Inpres is legally signed. With this law; intra-domestic ports sea cargoes have to use domestic fleet for their international transportation services, fiscal/tax for vessel building and repair in domestic dockyard has to be given, numbers of international ports have to be decreased, and mortgage law and arrest of ship ratification must be prepared to solve the limitation of domestic source of funding for the building and regeneration of national fleets.

The implementation of cabotage law in Indonesia that is not followed by a strict schedule for rearranging domestic sea transportation management would be the problem and challenge for implementing Inpres No 5/2005. The government must regulate those domestic cargoes to be distributed by national fleet. More over because of the limitation of domestic fund, the ratification of international regulation for mortgage and arrest of ship law can be the key of success for the existence of National flagged fleet by supplying international funding. The Inpres does not strongly give a time limit to change the scheme of marine transaction that creates a doubtful tought of the readiness of national potential to end the reign of foreign vessels in international and domestic transportation services.

If the domestic shipping industries developed, the sea transportation services would not be dominated and exploited by foreign vessels in the future. The integrity of national area would be safe due to the good distribution of domestic vessels through out the national sea. Hence, this would create a good image for Indonesia as a proud maritime country.

About the Author: admin

Kangdadang earned his Diploma degree from dr Otten Academy of Nursing, Bandung in 2002. 2010 He joined the accounting graduate program In economics faculty at The University of Kepulauan Riau. He received his Master of Science degree in Human Resource in 2013 from The University of Batam. While his work at local government, Kang Dadang also interest on IM, today he manage many blog and owner of Pesonaweb.com

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