Jakarta to ditch controversial coal and palm oil shipping ruling until 2020

The Indonesian government has taken the decision to postpone until 2020 controversial plans to make all exports of coal and crude palm oil be carried on Indonesian-flagged vessels.

The rules, that were due to take effect this month and intended to boost the archipelago’s shipping industry, were initially postponed in February and have come under a barrage of criticism from international shipping bodies.

The European Community Shipowners’ Associations (ECSA) stated in February the proposed law was a “clear measure of protectionism” that could have put at risk the Indonesian business climate and confidence for foreign investors.

In the same month, Peter Hinchliffe, the departing International Chamber of Shipping secretary general, wrote an open letter to Indonesia’s minister of trade, Enggartiasto Lukita, in which he voiced similar concerns.

“If our understanding is correct, this would appear to be a form of discriminatory cargo reservation, which would be contrary to accepted international practice and maritime free trade principles that are adhered to by Indonesia’s trading partners, including those in Asia,” Hinchliffe wrote. Cargo reservation is also contrary to the obligations which Indonesia has accepted as a member of the World Trade Organization (WTO), he pointed out.

The proposed regulation had stated coal exporters “shall use sea transport which is controlled by a Indonesian sea carriage company for their transportation activities”. Concerns had been raised that there would not be enough decent tonnage available to move the cargoes.

As it stands, 95% of the Indonesian coal export industry relies on foreign-owned vessels. Indonesia exports up to 35m tonnes of coal a month.