Strategy Study On The Competitiveness Of Indonesian Shipbuilding Industry With Reference To Chinese Experience

Indonesia is the largest archipelagic country in the world consisting around 17,000 islands.Since its Independence,Indonesia geographical conditions are challenging for government,people and economy.The vast water area of Indonesia's sea is very difficult to maintain sovereignty,safety and logistical connection due to non-existence of adequate shipbuilding industry.Lack of logistical connection and routes,adequate ports,merchant ship fleets and other important maritime infrastructure affect in local economy especially in remote parts of Indonesia.Price disparity between region nearby the capital city of Jakarta and remote region and islands far from capital such as in Papua and Halmahera Island become very high,resulting stagnation regional development in the area.In order to reduce the price disparity,stakeholders need to build more ships to distribute the logistic goods in every remote island as possible with also building its vital infrastructures.Shipbuilding is one of the important keys to tackle all of these problems.In 2011 introduction of cabotage law has radically given more business opportunities for local shipyards with more vessels operating in Indonesia.However,Indonesia's shipbuilding yet its shipbuilding industry is considered left behind if compare to regional country such as Vietnam and Philippines.In 1985-2007 Indonesia's shipping routes rely highly on foreign ship charter and agent for logistical transportation and distribution between island chains.After Cabotage law implemented in 2011,the number of all national flagship carriers has increase by 120%in 2014 over the course of six years with a total of 13,244 carriers.President Joko Widodo's government has decided that all government and state-owned companies' vessels procurement have to build locally.Annual newly build ship production of Indonesia's shipbuilding is 990,000 DWT while the ideal demand of ships is more than that.From 250 registered shipyards,only 40%are currently actively operating which equal to 10%of domestic needs for new vessels.Sea highway policy is the idea issued by current government of President Jokowi Dodo which demand 4 billion US dollar of value for shipbuilding for maritime activity in Indonesia's water.The demand is perceived as difficult work for National shipbuilding industry as state-owned enterprises cannot procure imported ship because of cabotage law.This study uses porter double-diamond model to analyze Indonesia's shipbuilding industry and case study of China's shipbuilding policy as comparison to get the solutions of Indonesia's shipbuilding industry problems.From the analysis result conclude from four board determinants Indonesia shipbuilding only fully satisfy one determinant which the Basic factor condition.Indonesia has a huge potential to be a strong maritime country based on the abundance of raw material,strategic location and demographic bonus.While in other factors such as demand conditions,related and supporting industry and firm strategy need major improvement.The government policy did some efforts to help the improvement in the industry but its overprotective policy seemed undermine the domestic industry growth with VAT tax for ship material imported from abroad and cabotage law.Indonesia's shipbuilding industry need to make a reform as China's shipbuilding industry did two decades earlier by increasing its national rivalry,research and development and established its own supporting industry clusters.