Global Business Guide Indonesia

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Business Updates | Indonesia’s New Maritime Law; A Big Catch for Investors

Indonesia holds the potential to be a major global producer and exporter of fishery and aquaculture products. As part of President Joko Widodo’s maritime centred vision for the country, the Minister of Maritime Affairs and Fisheries, Susi Pudjiastuti, is making strides in putting an end to the illegal fishing which has plagued the sector and has taken a more emboldened stance on fishery exports to international markets. The first 100 days of the new administration have been punctuated by a number of controversial moves such as the destruction of illegal fishing boats confiscated in Indonesian waters; however these very public demonstrations should not overshadow the real progress that is being made in laying the foundations for a sustainable fisheries and aquaculture industry in Indonesia that can improve the livelihood of millions and generate new investment opportunities.

Tough new measures

Indonesia has long been a paradise for illegal fishing due to its poorly policed seas with 5,400 foreign boats operating in its waters; 90% of which are estimated to be illegal costing the country $24 billion USD every year. The Minister of Maritime Affairs and Fisheries has introduced new measures in 2015 to bolster maritime surveillance with the introduction of new patrol vessels and a pledge by the Indonesian Air Force to invest in amphibious aircraft to help prevent illegal shipping. As a sign of its commitment, at the end of 2014 the government blew up three Vietnamese fishing boats that were seized in the Natuna Sea. A six month moratorium has also been introduced on the issuing of new licenses to foreign fishing vessels above 30 GT while a ban has also been put on transshipments whereby smaller vessels offload their catch onto larger, foreign vessels generating unaccounted transactions between local and foreign ships.

The Ministry of Maritime Affairs and Fisheries (MMAF) issued Regulation No. 1/2015, in order to ensure that certain species have sufficient time to reproduce at least once. For example, this has restricted catches to lobsters that are more than eight centimeters in length, crabs measuring more than 15 centimeters and flower crabs longer than 10 centimeters. Any of the aforementioned crustaceans that are carrying eggs are also prohibited from being caught and taken from the sea. The MMAF Regulation No. 2/2015 bans the use of trawls and seine nets for catching fish so as to stop the catching of incidental, non-targeted species. Fuel subsidy limitations for fishing boats of less than 30 GT are also being mulled.

Rules threaten local fishermen in the short-term

The new measures have had a negative reception among local fisherman who see them as a threat to their livelihood and which could cause widespread unemployment as a result of the increased cost in operations due to the fuel subsidy reduction. A ban on transshipments means that boats will have to shuttle their catch back to port for storage which will also increase fuel uptake, while many foreign vessels used by local fisherman will be out of action under the moratorium. A further complaint is that regional particulars have been overlooked such as the length of lobsters in southern Java which rarely exceeds 8 centimeters.

The immediate impact of the measures has been an increase in fish prices in the local as well as regional market coupled with a feeling of uncertainty in the industry for the short term. In the longer term, it is hoped that these measures will foster a more sustainable approach to Indonesia’s fisheries and aquaculture industry. This should see local fisherman obtaining better prices for their catch and increased investment to take advantage of the new resources freed up from illegal fishing practices.

Foreign investment needed

The new government has pledged significant investment in Indonesia’s maritime infrastructure through the development of new seaports and the purchase of new vessels (See Indonesia's Maritime Ambitions Require Massive Upgrade of Seaports) which can support a modern fisheries industry. The development of seaports in emerging hubs for the fisheries industry such as in Sulawesi and Papua offer lucrative investment opportunities within private terminal projects and PPP developments (See Unleashing the Potential of Indonesia's Eastern Islands).

A crucial area of underinvestment that requires attention is that of cold storage facilities and specialized logistics for the fisheries and aquaculture sectors such as for the delivery of live catches to local and overseas markets. Companies with know-how and technology within maritime logistics as well as fish and aquaculture farming (both near shore and offshore) have a renewed opportunity to enter the Indonesian market as fisherman turn to more sustainable methods to increase their yield and lower costs (See Indonesia’s Aquaculture & Fisheries Sector).

Downstream processing of fishery products and the development of value added finished goods such as breaded, frozen fish and seafood are further areas of potential investment opportunities given the huge local market demand.

Challenges ahead

The ASEAN Economic Community has a roadmap for the greater integration of the fisheries sector which encompasses the key producing countries namely Indonesia, Vietnam, Thailand and the Philippines as well as Myanmar. Indonesia has a leading role to play in this vision, provided it addresses the gaps in its maritime security as competition intensifies in Southeast Asian waters. The MMAF has made progress in a short time window to combat illegal fishing, however many of the security measures are not new but rather a commitment to better enforcement which will need to be followed through. A handful of new patrol vessels are a drop in the ocean in a country with over 5,000 km of coastline.

To 2016 and beyond, the net will have to be cast wider to encourage increased output and investment into modern fish and aquaculture farming techniques as well as a move up the value chain in downstream processing to keep Indonesia competitive. Incentives for investment in the sector should be offered. Local and foreign investment in the sector has not been forthcoming in the past, but now is the time to enter the market and take advantage of Indonesia’s maritime focused approach to development.

Global Business Guide Indonesia - 25th February 2015

icone share

Indonesia Fisheries & Livestock Snapshot

Contribution to GDP: 13.70% (2016 for Agriculture including Fisheries & Livestock) Exports: $2.6 billion USD (2015 for Fisheries)
Main Products: Shrimp, Tuna, Grouper Fish, Snapper Fish, Mackerel, Squid, Octopus, Cuttlefish, Crab, Seaweed, Sea Cucumber, Lobster.
Main Imports: Live Cattle, Frozen Beef and Veal, Cow Milk.
Relevant Law: Indonesia is aiming for self-sufficiency in both beef and poultry with restrictions placed on imports of both products. However, the country is still heavily reliant on imports of live cattle and beef. The Animal Husbandry and Animal Health Law of 2014 widens the scope of countries from which Indonesia can source animal products.