Covid-19 pandemic has affected health and economy worldwide. In Indonesia, many business sectors were hard hit by the pandemic. Shipping industry was one of the hardest hit. To get a better picture of the shipping industry, its challenge and outlook, MadeinIndonesia.com recently sat with Carmelita Hartoto, chairwoman of Indonesian National Shipowners Association (INSA) and president director of Andhika Lines. The following are excerpts of the interview:
MadeinIndonesia.com: How is the situation of the shipping business in Indonesia before and during the Covid19 pandemic?
Carmelita Hartoto: Thank God, until now, even though it is still not fully recovered, the shipping business still survives, floating on the surface of the water. Even though it was hit by a storm.
Our economy first experienced turbulence and grew negatively in the first half of 2020, due to the COVID-19 pandemic.
Actually, before Covid-19, shipping businesses are already in an unfavorable condition, due to falling global oil prices and fluctuations in the rupiah exchange rate. Then came the Covid-19 storm which brought a number of follow-up problems, such as the contraction of world and national economic performance, which in turn, had an impact on reducing the shipping company’s revenues (as in the transportation business in general), even disrupting the company's cash flow.
It is the passenger transport sector that is most affected.
Then in the second half of 2020 it began to expand, in line with the government policies not to impose lockdown and to give the industrial sector flexibility to produce with strict health protocol measures.
So far, how were the government’s response and policies to help business players to survive and, hopefully, to grow?
We appreciate that the government is quite responsive in providing a number of stimuli for shipping companies, so that at least we can survive the difficult conditions of Covid-19, such as the Finance Ministry's policy regarding [waiver] on the income tax of employees and the rescheduling of bank loan repayments as well as postponement on ship docking.
But, indeed, we still hope that some more stimulus can be given, for example exemption of non-tax state revenue [PNBP] within the Ministry of Transportation.
In order for us to develop, the national shipping industry demands the same policy or equal treatment as other countries provide fiscal and monetary policies for their shipping industry. As we all know, the overseas shipping industry gets low interest investment facilities and tax exemptions.
How is the proportion of services in the shipping industry? How much percentage serve domestic shipping and how much serve global shipping for export?
We are grateful, with the consistent implementation of the cabotage principle since 2005, today we have been able to serve all domestic freight forwarders. But for export-import transportation it is still dominated by foreign ships, perhaps still 95 percent using foreign ships. Those using ‘Red and White’ ships only 5 percent.
This condition is the result of the lack of competitiveness of the national shipping because it still faces a number of burdens that are quite heavy, both from the fiscal and the monetary sides, as I mentioned earlier.
MadeinIndonesia.com is a tech startup serving global B2B ecommerce and is designed to empower companies and producers in Indonesia, including SMEs, so that they can export. One of its business plans is to build partnership. Is INSA open for collaboration? Please elaborate!
We welcome collaboration with anyone, including [request] from MadeinIndonesia.com. Because indeed at this time, in the era of the Industry 4.0 we need to collaborate.
We have also collaborated a lot, both with fellow associations and with private business actors. For national shipping, we have collaborated with several SMEs and other industries in absorbing their products for use on ships.
Then, we also [collaborate with] Main Liner Operators [MLO] serving overseas routes and with domestic industries in terms of the availability of transportation and containers in long-term contracts.
Thus, given the current phenomenon where there are difficulties in loading space and [low availability of] containers, industries, which are generally high-level enterprises, can get guaranteed transportation and container availability.
As for SMEs, we also urge them to be able to tie up contract with MLOs, so that our domestic manufacturers will not get hampered when they want to export amid scarcity of space and containers.
Perhaps, it will be a little difficult if they do it alone because the production volume is not too large. But they can do it through a consortium of SMEs or cooperatives so as to achieve the desired volume and continuity.
What are the business aspects in the shipping industry?
In shipping, there are a lot of related businesses, because shipping is the motor of economic activity. Some of the related business sectors range from insurance, shipbuilding, warehousing, terminals, logistics, shipping education, ports and related services, to the component industry and others.
From those business aspects, what are the challenges and potentials in the industry that are untapped yet?
Of course, there are still many potentials in the shipping industry. One of them is a marine tourism cruise. The government is currently promoting 10 New Bali, 8 of which are marine tourism, such as in Labuan Bajo, Morotai and Wakatobi.
This is of course a potential that needs to be worked on seriously for business actors, although it is not easy to diversify the business from goods transportation to tourist transportation, because it is far different and requires a large enough investment fund.
But it should be done and supported.
Shipping industry is closely related to logistics, warehouses dan supply chains. How do you see the advancement of this industry in our country?
Even though our logistics costs are still quite high, around 23 percent of GDP, various attempts have been made to address the logistics costs and to lower them. But the problem is too complicated and it cannot be opened for discussion yet.
In calculating the logistic cost, it must be end-to-end, from the warehouse in the starting point to the warehouse of the destination point. There are many logistics chains, which contribute to logistics costs. Not only shipping.
There are aspects of trucking, forwarding, terminals, warehousing, ports, administration and documentation etc. Many issues affect the costs of land transport, such as congestion from and to the port, congestion at the terminal etc. This must be addressed for solution to make it logistically cost efficient.
In many developed countries, shipping and logistics industries have adopted automation or artificial intelligence. What about in Indonesia?
We are indeed heading to that direction. So far, the government and business actors have continued to make breakthroughs so that the entire logistics chain is connected efficiently. A number of breakthroughs have been made using latest information technology, for example the application of Inaportnet at ports, then DO Online, and shipping companies have also developed online booking systems, all of which are an effort to make our shipping system more efficient and effective for service users.
Finally, the government issued Presidential Instruction No. 05/2020 concerning the Arrangement of National Logical Ecosystem. And it has a target that there will be a reduction in logistics costs to 17 percent in the next few years. As stated earlier, the national logistic system still faces many challenges.
We all hope the Covid-19 pandemic will soon be under control. At least, the government can mitigate the impact and the economy can run again. What is your expectation?
Since last year, we have been in a difficult position, because we are hit by two crises, namely health and economic crises, simultaneously. First, of course, we hope Covid-19 can be resolved soon. [That’s why] we have to comply with health protocols.
So that the economy can grow and shipping activities can resume.
Second, of course we expect the government support by providing stimulus for national shipping. As well as withholding increases in port rates and other operating rates. We must face this pandemic together. Together we can do it.