Starting a Shipping Company in Indonesia

6 min read|Last Updated: January 17, 2023|
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Shipping companies serve as companies which connect businesses all over the world, especially if the products involved are bulky. In Indonesia, water transport is the predominant means of transport because two-thirds of its territory is surrounded by water. The country serves as a transport hub for Southeast Asian countries and therefore receives large volumes of shipment on a daily basis.

The shipping industry in Indonesia is protected by a list of restrictions imposed by the Indonesian government. While these restrictions are intended to protect local businesses in the Indonesian maritime industry, they also provide opportunities for foreigners to enter the Indonesian shipping business.

Reasons to Start a Shipping Company in Indonesia

According to the latest statistics, the shipping companies of Indonesia contributed approximately 12% of the country’s GDP, a figure which is generally increasing. This rate of growth presents prospective business owners with an opportunity to undertake business activities in the shipping industry in the anticipation that the market conditions will improve. In its attempts to facilitate the growth of the industry, the Indonesian government has initiated many port development activities in its major ports in order to improve freight handling as well as the time taken to clear out goods from ports.

Indonesia is set to become an important country in the world’s maritime industry. This fact is evidenced by the heavy investment which has been given to the shipping industry. This capacity for economic growth has done much to facilitate the transport of goods across ports as well as all ship-building activities which take place in Indonesia.

Key Notes About Starting a Shipping Company in Indonesia

  • Requirement of a local shareholder

    Indonesia’s shipping laws allow for complete local ownership of shipping companies. However, any foreigner who is interested in starting a shipping company is only allowed to own up to 49% of the shares of the company. The reason for this is to retain as much local control over shipping companies as possible in order to secure local investments.

  • Partnership with a local firm

    Before any foreigner may start a shipping company in Indonesia, the government requires a foreigner to partner with a local firm when seeking opportunities in the shipping industry. Foreign vessels are banned from participating in local transportation of both goods and people. However, in high-value industries like oil and gas, the Indonesian government allows an increased degree of foreign participation.

    Starting a shipping company in Indonesia as a foreigner requires the foreigner to register and incorporate a company by following the regulations stipulated by Indonesia’s company laws.

  • Share ownership in public limited liability shipping companies

    Investors from other Southeast Asian countries, however, are allowed to actively participate in shipping ventures by owning not more than 70% of the shares in public limited liability shipping companies.

Licenses Required to Start a Shipping Companies in Indonesia

To fully commence operations after register a shipping company in Indonesia, businesses need to apply for business licenses.

Here are some of the licenses that are needed:

  • Sea Transportation Business License (SIUPAL)

    This license is electronically generated after the issuance of a temporary business license upon the registration of a shipping company.

  • General Vessel Certification

    Although it is not a license, the general vessel certification for each shipping vessel owned by a shipping company is also required. This certification is issued following the adherence of the vessel to safety, tonnage, and load line rules stipulated by the Indonesian authorities.

  • Pollution Prevention Certificate

    The shipping company must also obtain a pollution prevention certificate which confirms the company’s willingness to adhere to pollution standards.

  • Radio Station Certificate

    For every shipping vessel owned by the company, there should also be a ship radio station certificate which states the communication channels to be used by the vessel during the vessel’s operation.

  • Import & Export Licenses

    Should any shipping company based in Indonesia intend to export or import any products, it must obtain an export and import business license. Export and import business licenses which are owned by shipping companies based in Indonesia may be renewed at any time through the proper legal means.

Laws in Indonesia Which Are Related to Shipping Companies

The shipping industry in Indonesia is replete with laws which have been created to regulate the industry and all activities therein. These laws have been integrated into a collective shipping law which is applicable to all shipping ventures within Indonesia’s shipping industry.

One of the most important shipping laws in Indonesia is Law No. 17 of 2008. This law stipulates that:

  • Any costs or damages which have been suffered as a result of a collision between two or more vessels due to a force of nature are to be borne by the respective owners of the vessels.
  • If the collision is the fault of a single vessel, the costs of the accident will be placed upon the owner of that vessel.
  • If two or more vessels are considered to be at fault during a collision, the owners of the vessels will proportionately and collectively bear the costs of the collision.

The cabotage policy is also an extremely important piece of legislation which exists within Indonesia’s shipping industry. This shipping law originally stated that only vessels which have been registered under the flag of Indonesia were allowed to carry passengers and goods across Indonesia’s domestic ports. This policy implied that only Indonesia-based shipping companies were allowed to participate in local shipping services except when certain permissions which permitted a degree foreign participation were in force.

An amendment of the cabotage policy would be created in order to restrict the importation of vessels from outside Indonesia. As such, foreign shipping companies which were allowed to operate within Indonesia were therefore required obtain their vessels from Indonesian ship-builders. The cabotage policy has been cited by some as one of the Indonesian government’s most notable efforts to increase the shipping industry‘s GDP contribution to the country from 11% to 25%.

There are several other laws related to Indonesia-based shipping companies. Marine casualty laws, for example, are in force to remove ambiguities in solving marine casualty cases when they occur. The Indonesian shipping laws also state requirements related to pollution; they state that it is the responsibility of crew members to prevent and mitigate pollution which is or would be emitted from their vessels. Vessel owners and operators are also required to insure their vessels against pollution and its effects. A further law also requires vessel owners to insure their vessels against wreck removal.

Conclusion

The shipping industry in Indonesia possesses tremendous potential for industrial growth. The government’s commitment to improvement of the industry in the country has created a suitable business climate. The growth potential of the shipping industry of Indonesia will therefore lead to an increased need for and purchase of shipping services by various people, businesses, and other entities from within Indonesia as well as from abroad. The need for transportation services to and from Indonesia’s ports has also increased tremendously. Therefore, starting a shipping company in Indonesia is clearly a viable business option.

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Starting a Shipping Company in Indonesia FAQs

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