Indonesia Pushes All-Local Shipbuilding in Bid to Revive Maritime Industry

JAKARTA, Investortrust.id — Indonesia has moved decisively to reassert control over its maritime industrial base, with senior officials and business leaders rallying behind a directive that all ships used by state-owned enterprises, particularly Pertamina, must be built in domestic shipyards.

The policy push, delivered publicly by Hashim Djojohadikusumo, chairman of the Advisory Board of the Indonesian Chamber of Trade and Industry (Kadin Indonesia), reflects a broader effort by President Prabowo Subianto’s administration to revive industrial capacity, create jobs, and reduce dependence on imported vessels, especially aging secondhand ships.

Speaking at a seminar on revitalizing Indonesia’s shipyard and shipping industries in Jakarta on Tuesday, Hashim said the order was explicit and non-negotiable. “All Pertamina ships must be built in domestic shipyards. This is a direct instruction from the President,” he said, adding that the message had been conveyed to Pertamina’s management and other relevant stakeholders.

The directive marks one of the clearest industrial policy signals from the new administration, which has set an ambitious target of lifting economic growth toward 8 percent over the medium term. Officials increasingly argue that such growth will be impossible without rebuilding manufacturing and heavy industry, including shipbuilding, long seen as underutilized despite Indonesia’s status as the world’s largest archipelagic nation.

Hashim said he was encouraged by the unusually strong attendance of senior policymakers at the meeting, including Industry Minister Agus Gumiwang Kartasasmita and top officials from the Ministry of Finance, such as the directors general of customs, taxation, and financing. Representatives from Pertamina were also present, which he described as a positive sign of alignment.

“This is what makes me optimistic,” Hashim said. “We are starting with a clean slate.”

Indonesia’s shipbuilding industry has long struggled with a lack of consistent orders, high input costs, and regulatory complexity. While local yards have demonstrated technical competence, they have often been sidelined as both state-owned and private shipping companies opted to import cheaper used vessels from abroad.

Finance Minister Purbaya Yudhi Sadewa, who also spoke at the forum, described the situation as ironic and largely self-inflicted. “Our shipyards are lagging not because they lack capability, but because they lack orders,” he said. “National companies, including state-owned enterprises, prefer to import used ships rather than build new ones domestically.”

Purbaya said Indonesia once had around 77 active shipyards in Batam alone, but today only about seven remain fully operational. The decline, he argued, has less to do with skills and more with opportunity. “We have capable people, but they are not given the chance to handle large projects,” he said.

According to Purbaya, thousands of vessels operating in Indonesian waters are already beyond their optimal service life. He cited data showing roughly 2,491 ships are more than 25 years old and will need replacement in the coming years. “The question is simple,” he said. “Who will build the replacement ships?”

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Despite these needs, ministries and agencies such as the Ministry of Marine Affairs and Fisheries have rarely placed orders with domestic yards, opting instead for imported vessels. This has created what Purbaya called an uneven playing field, where cheaper imported ships undermine the competitiveness of local builders.

Hashim acknowledged that domestic shipyards also bear responsibility for improving performance. He said delays in construction and cost overruns have sometimes strained relations with buyers, including Pertamina. “We must be fair and objective,” he said. “Pertamina also has operational considerations.”

Still, he argued that the current political moment offers a rare chance to reset the system. With many senior officials newly appointed, including at the Ministry of Industry, the Ministry of Trade, and the Ministry of Finance, Hashim said there is growing willingness to adjust regulations and provide tangible support.

He drew parallels with South Korea’s industrial rise in the 1960s and 1970s, when the government orchestrated close cooperation between the state and national champions in shipbuilding, automotive, electronics, and heavy manufacturing. “They called it Korea Incorporated,” Hashim said. “We hope Indonesia can adopt a similar approach, especially in maritime industries.”

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Indonesia’s shipyards, he noted, have already shown what is possible. He cited the recent launch of a roughly 6,700-ton vessel flying the Indonesian flag, delivered relatively on time, as evidence of domestic capability. A single shipbuilding project, he said, can mobilize between 100 and 150 vendors and employ 1,000 to 3,000 workers directly and indirectly, while also supporting local economies around shipyard hubs.

There are also early signs of renewed confidence. Some domestic yards have secured additional orders, including for defense-related vessels as part of Indonesia’s minimum essential force program. Hashim said he hoped Pertamina would eventually distribute orders more evenly across domestic yards, including for large-capacity vessels of hundreds of thousands of tons.

From a global perspective, Indonesia may also have an opportunity to capture skilled labor and production that other countries are losing. Hashim noted that South Korea, now one of the world’s leading shipbuilders, is facing shortages of skilled welders and has asked Indonesia to supply labor. “This is both an irony and an opportunity,” he said. “Why not employ them at home instead?”

Shipping companies, represented by the Indonesian National Shipowners’ Association (INSA), broadly support the goal of strengthening domestic shipbuilding but warn of practical constraints. INSA chairwoman Carmelita Hartoto said many national shipping firms already use locally built vessels, particularly tugboats and barges, as well as container ships and roll-on roll-off vessels.

“We have built domestically, not everything is imported,” Carmelita said, noting that INSA and the Indonesian Shipbuilding and Offshore Association had previously worked with the government to develop a national shipbuilding roadmap.

However, she said associations cannot force private companies to place orders domestically. Business decisions ultimately rest with individual firms, especially when demand uncertainty looms. Carmelita pointed to the planned reduction in Indonesia’s coal production target from around 790 million tons in 2025 to about 600 million tons in 2026, which could affect demand for shipping capacity.

To address financing challenges, Carmelita proposed mechanisms such as escrow-based payments and counter bank guarantees, allowing shipyards to secure bank financing while ensuring buyers pay only upon delivery. She said support from the Ministry of Finance in this area would be critical.

Trade policy is also being mobilized in support of the industry. Deputy Trade Minister Dyah Roro Esti Widya Putri said the government is prepared to adopt adaptive trade measures to boost shipyard utilization, including exemptions for steel imports used in shipbuilding.

Indonesia is the world’s 14th-largest producer of crude steel, with output of about 18 million tons, and exported $25.8 billion worth of iron and steel products in 2025, far exceeding imports of $10.66 billion. Yet Dyah acknowledged continued dependence on imported inputs, particularly from China. “This should motivate us to strengthen domestic production,” she said.

Under existing trade regulations, shipyards are eligible for import exemptions and special treatment for strategic inputs. The government also tightly regulates imports of used ships, allowing them only under strict conditions, including a minimum operational period before resale, to prevent speculative trading.

At the regional level, shipyard operators are pressing for stronger fiscal support. East Kalimantan Governor Rudy Mas’ud, himself a shipyard entrepreneur, called for value-added tax exemptions for shipbuilders, arguing that shipping companies already enjoy similar treatment.

“Shipyards must be fully supported if we want this industry to grow,” Rudy said. He also criticized the limited international recognition of Indonesia’s classification body, Biro Klasifikasi Indonesia, which he said hampers exports of domestically built vessels.

Rudy said most Indonesian yards still focus on small vessels, while larger ships for oil and gas and offshore activities are almost entirely imported. He cited slow customs processes as another bottleneck, recounting delays in clearing harbor tugboats intended to protect critical port infrastructure.

Finance Minister Purbaya said many of these issues are now being addressed through a cross-ministerial debottlenecking task force designed to resolve practical obstacles on the ground rather than produce more regulations. “If the direction is clear, we are ready to support 100 percent,” he said.

For the administration, the stakes go beyond shipbuilding alone. Officials increasingly frame the sector as a test case for Indonesia’s broader industrial revival. “Without industry, sustained growth is impossible,” Purbaya said. “We cannot keep relying on sectors outside manufacturing.”

Whether Indonesia can translate strong political signals into sustained orders, competitive pricing, and timely delivery remains an open question. But for the first time in years, the country’s long-neglected shipyards appear to have the attention, and backing, of the highest levels of government.

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