Indonesian Law | Hukum Indonesia - Blog: An Overview on Cabotage Law in Indonesia and Its Impact to Industries

Saturday, July 7, 2012

An Overview on Cabotage Law in Indonesia and Its Impact to Industries

Cabotage in Indonesia

Indonesian industries must be prepared if Law Number 17 of 2008 on Shipping (the “LOS”) is fully enforced in Indonesian water territory. The LOS creates a significant impact to Indonesian industry especially oil, gas and telecommunication industry. One of the articles in the LOS regulates cabotage principle in Indonesian water. The cabotage principle is a principle which stipulated that only Indonesian flagged ships are permitted to operate in Indonesian water territory. Regulations pursuant to the LOS further provide that foreign share ownership in an Indonesian shipping company is limited to 49%.

The LOS has been broadly interpreted to include :-

  • vessels commercially engaged in domestic sea transportation of goods and persons; 
  • various types of vessels used to provide services including technical and repair services; and 
  • vessels used by companies for their own purposes supplementary to their core business. 
Cabotage Law impact on Oil, Gas and Telecommunication Industry.

The oil, gas, and telecommunication industry have been affected significantly due to lack of supply of vessels meeting the above conditions. In general, vessels that have been used to support oil, gas, and telecommunication industry providing offshore technical and repair services are non-Indonesian flagged ship, moreover in telecommunication industries there are no Indonesian flagged ships are able to be used to provide repair services for thousands kilometers of underwater telecommunication cables, whereas today the vessels been used are all foreign flagged ship and this fact also similar to deployment of underwater telecommunication cable work.

Due to the fact of heavy shortage of Indonesian flagged vessels able to provide underwater services and works especially in telecommunication industry, therefore the Indonesian Government via Ministry of Transportation Regulation No. 48 of 2011 provides permit and procedures to use foreign flagged vessels until 2013. The challenge for Indonesian industry is as of 1 January 2014 the Cabotage Law is fully implemented and enforced in Indonesian water territory.

by: tnrlawfirm

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