EXECUTIVE BRIEF: Indonesia’s Shipyard Revitalization Signals Industrial Maritime Push
Indonesia, with more than 17,000 islands and over 95,000 km of coastline—making it the second-longest in the world after Canada—relies fundamentally on maritime transport to sustain inter-island trade, food distribution, energy logistics, and industrial connectivity. Despite this vast maritime potential, Indonesia’s shipbuildingcapacity still lags behind regional peers like the Philippines and Vietnam. The shipbuilding industry is not justa peripheral sector, but a strategic enabler for national logistics resilience and industrial sovereignty.
Although Indonesia operates 342 shipyards across 29 provinces, most run at just 30–40% capacity—far behindmajor shipyards like Subic Bay in the Philippines, which achieves utilization rates of over 80%. The industry is still concentrated on the construction of small to mid-sized vessels, while high-value and technologically advanced ships are mostly imported, resulting in limited domestic value creation. Furthermore, Indonesia imports more than 70% of the marine engines and navigation systems it needs, significantly increasing production costs and weakening national competitiveness.
Indonesia’s Structural Gap: Capacity Without Competitiveness
Indonesia possesses a broad shipyard base distributed across major maritime provinces, yet domestic buildersstruggle to compete with foreign imports. The market for large and complex vessels—such as VLCCs, P/C tankers, LNG Carriers, and container ships—is dominated by heavyweights from China, Japan, and SouthKorea.
Key structural constraints creating this gap include:
- High Import Dependency: Indonesia imports over 70% of its marine engines, navigation systems, andspecialized steel, significantly inflating production costs and vulnerability to supply chain shocks.
- Limited Economies of Scale: Fragmentation across hundreds of small yards prevents the efficiency gains seen in massive integrated yards elsewhere.
- Financing Constraints: High interest rates and short tenors limit financing options for shipowners ordering domestic builds.
- Inconsistent Demand Visibility: A lack of predictable long-term order books prevents yards from investing in upgrades.
- Talent and Technology Deficit: A lack of specialized maritime engineering talent and the technology required to build massive, complex ships.
As a result, domestic shipyards operate below optimal capacity and face persistent demand constraints. Whileleading players like PT Batamec Shipyard, ASL Marine Holdings, PT PAL Indonesia, PT Dok dan Perkapalan KodjaBahari, and Marco Polo Marine exist, the sector’s scale and technological depth remain uneven. National shipping companies continue to procure vessels from overseas, perpetuating a cycle of low utilization and underinvestment.
ASEAN Benchmark: Lagging Behind Regional Leaders
Within ASEAN, Indonesia is a massive maritime market but not yet a regional shipbuilding leader. A comparisonwith neighbors highlights the disparity:
1. Philippines (Most Robust)
- Global Standing: Ranked as the world’s 4th largest shipbuilding nation.
- Key Infrastructure: Features major, globally competitive shipyards in Subic Bay and Cebu, integrated with steel processing and logistics hub.
- 2025 Developments: The inauguration of the HD Hyundai Heavy Industries Philippines (HHIP) shipyard at Subic Bay in September 2025 solidified its dominance. This facility alone is capable ofhandling 5 million tons of ships annually—dwarfing Indonesia’s total national output.
- Key Players: Hyundai Heavy Industries (Subic Bay), Hanjin Heavy Industries, Tsuneishi HeavyIndustries (Cebu), Austal Philippines, Keppel Philippines.
2. Vietnam (Fastest Growing)
- Global Standing: Ranked 7th in global shipbuilding as of March 2025.
- Growth Rate: The industry has grown tenfold over the past decade, with exports to Europe and Korea increasing by approximately 15% annually.
- Focus: Strong in constructing small to mid-sized vessels, including high-tech tugboats for international clients, bolstered by partnerships with European and Korean firms.
3. Indonesia (Emerging Hub)
- Status: While trailing in total tonnage, Indonesia is positioning itself as a future maritime industrial Its annual production capacity currently sits around 1,200 vessels, a figure the government aims to increase significantly.
- 2025 Outlook: Significant investment is underway to upgrade shipyards for both defense and commercial vessels, driven by a need to serve domestic inter-island trade demand estimated at over 5,000 vessels annually—of which only ~20% are currently built locally.
Government Push: Stimulating Domestic Orders and Industrial Upgrading
The government views shipbuilding as a high-multiplier industry. Beyond vessel production, the sector stimulates demand for steel, marine components, engineering services, logistics, and skilled labor. Unlockingidle capacity is seen as a macroeconomic opportunity. Notably, examples from other countries demonstrate the impact of bold, coordinated interventions—South Korea’s shipbuilding dominance, for instance, was built on similar government-backed financing schemes in the 1970s, which provided long- tenor loans and export guarantees, ultimately catalyzing industry growth and competitiveness.
However, while Indonesia’s 975-vessel procurement program is ambitious and aims to replicate such success, its impact will depend on consistent execution and the ability to avoid bureaucratic delays or policy reversals that could undermine order visibility and investor confidence.
To activate this multiplier effect, the government is deploying a coordinated policy package:
- National Procurement Program: A 975-vessel procurement initiative to anchor domestic order visibility.
- Fiscal Incentives & Permit Reform: Simplification of permits and targeted fiscal incentives to accelerate project execution.
- Zero Percent Import Duty: Eliminating duties on ship components to reduce production costs andimprove competitiveness against foreign yards.
- Low-Interest Financing: Introduction of low-interest, long-tenor (15–30 year) financing schemes to support shipowner purchases, mirroring strategies used successfully by South Korea in the 1970s.
- Tighter Import Regulations: Prioritizing domestic builders by restricting the entry of foreign-built vessels where local capacity exists.
The objective is deep industrialization: deepening domestic value chains, raising utilization, and strengthening maritime self-reliance.
Strategic Implications: Industrial Policy Signal, Not Just Sector Support
Indonesia’s shipyard revitalization plan signals a broader shift toward maritime manufacturing depth and supply chain localization, drawing inspiration from successful industrial clusters such as the Philippines’ Subic Bay, which integrates shipyards with steel processing plants, marine electronics suppliers, and logistics hubs to create a self- sustaining ecosystem.
1. Upstream Component Localization Becomes Investable
High dependence on imported propulsion systems and steel has long weakened cost competitiveness. With zero-duty incentives on raw materials combined with tighter import rules for finished vessels, the economics are shifting toward domestic value addition.
- Opportunity: Establish local manufacturing for marine components or form joint ventures with foreign technology partners (e.g., Japanese or South Korean firms).
- Goal: Moving away from assembly toward genuine manufacturing creates a supplier ecosystem around major shipyard hubs.
2. Industrial Park & Maritime Cluster Development
Shipbuilding competitiveness relies on dense industrial clustering—fabrication, steel processing, systems integration, and logistics access.
- Opportunity: This policy push increases the likelihood of dedicated maritime industrial parks in strategic locations like the Riau Islands and East Java, which offer deep-water access and proximity to existing infrastructure.
- Signal: For developers, this signals demand for specialized heavy-industrial parks with fabrication-ready infrastructure.
3. Financing as Enabler
The introduction of long-tenor credit schemes addresses the core bottleneck of shipowner capital.
- Opportunity: If backed by credible guarantees, this opens opportunities for financial institutions in structured finance and leasing.
- Impact: Improved domestic order predictability encourages private capital participation and supports long-term asset financing.
Skylight’s Opinion
Indonesia’s shipyard revitalization signals serious intent. However, demand stimulation alone will not close the competitiveness gap. Long-term success depends on structural ecosystem development—spanning policy consistency, industrial clustering, and human capital upgrading. For example, in Vietnam, partnerships between shipyards and technical universities have produced over 5,000 certiffed marine engineers annually, directly addressing the industry’s persistent talent gap. For Indonesia, clear key performance indicators should be considered, such as increasing domestic vessel orders by 50% within ffve years and reducing import dependency on marine components by 30%. To translate ambition into sustained competitiveness, coordinated action is required across three stakeholder groups:
1. Policymakers
- Frameworks: Provide institutional frameworks for large-scale maritime workforce development.
- Consistency: Maintain regulatory consistency and streamline licensing.
- Incentives: Offer targeted fiscal incentives to accelerate upstream component localization.
- KPIs: Align import controls with measurable domestic capacity upgrading (e.g., target a 30% reduction in component import dependency within 5 years).
2. Industrial Parks
- Infrastructure: Prepare ready basic infrastructure to ensure seamless industrial activity.
- Clustering: Facilitate tenant recruitment to build dense supplier ecosystems similar to Subic Bay’s integrated model.
- Partnerships: Build partnerships with academia for workforce pipelines.
3. Academic Institutions
- Curriculum Alignment: Align programs with shipyard-specific skill needs, focusing on modern naval architecture and green shipping technologies (LNG, electric).
- Certification: Strengthen technical certification and applied training.
- Collaboration: Develop structured apprenticeships with industry, similar to Vietnam’s model where technical university partnerships produce thousands of certified marine engineers annually.
To realize its shipbuilding potential, Indonesia must prioritize policy consistency, industrial clustering, and workforce development. Stakeholders across government, industry, and academia must collaborate to build a globally competitive maritime sector that matches the nation’s geographic destiny.
Latest Update
- Indonesia Plans to Launch a US$6 Billion Textile, State-Owned Firm
- Indonesia plans to establish a new state-owned enterprise (SOE) in the textile and garment sector to strengthen the industry’s resilience against external pressures, including US tariff risks and rising Chinese textile imports in recent years.
- The SOE will be managed under Danantara with an initial funding allocation of up to US$6 billion. The investment will focus on capital equipment upgrades, technology adoption, and export expansion, although the official launch timeline has not yet been announced.
- The government has set an ambitious roadmap to increase textile exports from approximately US$4 billion to US$40 billion over the next decade, alongside efforts to deepen the domestic value chain across spinning, weaving, dyeing, printing, and finishing—segments where Indonesia currently lags behind regional competitors.
- While the initiative aims to modernize and reinforce the sector’s industrial backbone, experts caution that establishing a new SOE—rather than restructuring or strengthening existing players—could create market distortions, intensify competition with struggling private firms, and potentially lead to further consolidation or layoffs.
- Danantara Broke Ground on 6 Projects Worth IDR 118 Trillion
- Danantara broke ground on six downstream projects in the mineral, energy, and agro-industry sectors with a total investment of IDR118 trillion (US$7 billion), spread across Mempawah (West Kalimantan), Banyuwangi (East Java), Cilacap (Central Java), Malang (East Java), and Gresik (East Java); all projects are fully funded by Danantara and are expected to expand downstream distribution throughout Some of these projects are:
- Aluminium smelters in Mempawah & Kuala Tanjung:
- Aluminium smelter with 600,000 tons capacity and investment of IDR 40.6 trillion, built by Inalum in collaboration with Antam and Bukit Asam (MIND ID members); and Aluminium smelter in Kuala Tanjung with capacity of 275,000 tons/year.
- In addition, Danantara is financing SGAR II in Mempawah targeting capacity of 1 million tons/year; an investment of 8 trillion. SGAR I is already operational with 1 milliontons/year capacity.
- Integrated Sugar & Bioethanol (Banyuwangi): A 211,000-ha integrated sugarcane estate supports a processing plant producing 882,000 tons of sugar and 679,000 tons of molasses, with bioethanol output blended into fuel for biofuel production.
- Bioavtur (Cilacap): Pertamina’s green refinery will produce sustainable aviation fuel, with 3,000 bpd capacity in Phase I, expanding to 6,000 bpd in Phase II, reducing fuel imports and lowering carbon emissions.
- Poultry Downstreaming (6 Provinces): An integrated chicken industry project spanning 30 factories across East Java, Gorontalo, Lampung, South Sulawesi, East Kalimantan, and West Nusa Tenggara. The project targets an additional 5 million tons of chicken meat and 1 million tons of eggs, strengthening national food security.
- Salt factory & Mechanical Vapor Recompression (MVR) (Madura & Gresik). Three salt processingfacilities were inaugurated:
- Sampang (200,000 tons/year; US$ 119.05 million; MVR technology)
- Manyar, Gresik (100,000 tons/year; US$59.52 million; JV with Unilever)
- Segoro Madu II, Gresik (80,000 tons/year; US$6.67 million) The projects enhance domestic industrial salt supply and reduce import dependence.
- Intiland Group Expands to Data Center Sector
- PT Intiland Development (DILD), through its subsidiary PT Intiland Alfa Rendita, has formally entered the data center sector via a strategic partnership with PT Parsaoran Global Datatrans (ION Network), an Internet Service Provider (ISP).
- The partnership established a 50:50 joint venture, PT Inti Arunika Persada, operating under the DC Land Its inaugural facility, located at Intiland Tower Surabaya, was officially launched in early February 2026.
- DC Land marks Intiland’s strategic diversification beyond its core segments— housing, industrial parks, and offices—aimed at enhancing asset value and generating recurring, infrastructure-based income streams.
- The Surabaya facility has an installed power capacity of 3 MW. While categorized as mid-scale, this capacity is adequate to serve enterprise demand in Eastern Indonesia and provides a scalable foundation for future expansion, as power availability remains the primary constraint in data center development.
- Approximately 50% of the 3 MW capacity has been absorbed, with tenants primarily from the telecommunications (telco), ISP, e-commerce, and startup The Surabaya project is positioned as a pilot site, forming the basis for potential expansion into other major Indonesian cities.
- King Jim Expands Indonesian Factory to Boost Furniture Production
- King Jim , Ltd., Japanese major stationery manufacturer, is expanding its operations at PT. KINGJIM INDONESIA in Pasuruan Regency, East Java, by constructing a new 4,000 m² woodworkingfacility within its second plant. The expansion, set to begin operations in February 2026, aims to boost production capacity and diversify product lines for ready-to-assemble furniture supplied toits group company, Bon Furniture Co., Ltd.
- The company introduced production equipment in 2022, conducted trials in 2023, and began mass production in Established in 1996, the facility spans a 30,000 m² site, with existing factories covering 14,400 m². As of June 2025, it employs 377 people. The new facility will enable the production of higher value-added furniture products.
- Machinery Trading Company Yamazen to Acquire Indonesian Somagade
- Yamazen Corporation, a trading company specializing in machine tools and industrial equipment, has announced its plan to acquire Somagade Indonesia (SGI), an industrial supplies The acquisition, set to be finalized by the end of March 2026, will make SGI a wholly owned subsidiary of Yamazen. SGI, with a nationwide sales network in Indonesia, supplies cutting tools, adhesives, and maintenance supplies to industries such as metals, mining, machinery, and consumer goods, with a strong focus on Japanese automotive manufacturers. In the fiscal year ending December 2024, SGI reported sales of JPY 3.3 billion and an operating profit of JPY 182 million.
- This acquisition aligns with Yamazen’s medium-term management plan, “Proactive Yamazen 2027,” which prioritizes the expansion of its overseas production goods business. By leveraging SGI’s local network, Yamazen aims to strengthen its geographical presence, diversify its business portfolio, and enhance relationships with global suppliers to expand its sales foundation in growing markets.
- East Java Japan Club Exchange First Meeting with Provincial Government
- On January 30, the Consulate-General of Japan in Surabaya and the East Java Japan Club (EJJC) hosted their first-ever networking reception with the East Java Provincial The event aimed to strengthen ties between Japanese-affiliated companies and the provincial government.
- Ahead of the event, the East Java Investment Office received anonymized feedback from Japanese companies highlighting concerns such as lengthy environmental regulation procedures, challenges in securing raw materials due to import restrictions, flood control infrastructure improvements, and investment policy clarity.
- During the reception, the provincial government honored eight Japanese- affiliated corporate groups, including Hisamitsu Pharmaceutical, Otsuka Pharmaceutical, Shikibo, Riken, Meiji Seika Pharma, Toray Industries, Sumitomo Forestry Crest, and Ajinomoto, for their over 50 years of contributions to the local Currently, 147 of the 2,409 Japanese- affiliated companies in Indonesia operate in East Java Province.
- Hinoya Curry Opens First Outlet in Surabaya
- Hinoya Curry, a renowned Japanese-style curry chain originating in Tokyo, is set to open its first outlet in Surabaya, Indonesia. Known for its strong domestic reputation, including winning the Kanda Curry Grand Prix, Hinoya Curry is internationally recognized as a leading brand of Japanese curry.
- Indonesia, with its large population and growing dining-out demand, has been identified as a key growth market for the Surabaya, East Java’s commercial and cultural hub with increasing interest in Japanese cuisine, was chosen as the entry point. This launch is part of Hinoya Curry’s global expansion strategy, which already includes outlets in China, the United States, Taiwan, and Europe, as the brand continues to promote Japanese food culture worldwide.
- PT Pertamina and Hyundai Launch Waste-to-Hydrogen Project in West Java
- PT Pertamina New & Renewable Energy (PNRE), Hyundai Motor Group, and the West Java Provincial Government have completed an initial study to develop a waste-to-hydrogen ecosystem at the Sarimukti landfill in West Bandung, West The project aims to convert landfill biogas into clean hydrogen to power low-emission public transportation, including Transjakarta buses and other vehicles in West Java and Jakarta.
- The study, conducted in 2025, identified Sarimukti as an ideal site due to its untapped biogas potential, producing 20,000 cubic meters of biogas daily— enough to generate 5 tons of hydrogen per day and power approximately 100 buses with a 200-kilometer range. If implemented, the project could reduce carbon emissions by up to 200,000 tons of CO₂ annually.
- Next steps include establishing a centralized hydrogen production unit, selecting refueling station sites, and completing a feasibility study by Q1 Engineering, procurement, and construction(EPC) are set to begin by Q4 2026, with commercial operations targeted for Q4 2027. The project is funded by Pertamina, supported by a US$10.7 million grant from South Korea, and builds on earlier collaboration between Pertamina and Hyundai to advance Indonesia’s hydrogen ecosystem. This initiative marks a significant step toward sustainable energy and carbon reduction in the region.
- Java’s First Mini LNG Refinery Officially Operational in East Java
- PT Kawasan Industri Jababeka Tbk (KIJA), through its subsidiary PT Likuid Nusantara Gas (PT LNG),has inaugurated a mini liquefied natural gas (LNG) plant at the Pasuruan Industrial Estate Rembang(PIER) in East Java
- The project represents a total investment of approximately US$16.9 million.
- The facility is the first privately managed mini LNG plant on Java, marking a strategic milestone in downstream gas infrastructure development.
- The project is structured under a joint venture scheme: PT Jababeka Infrastruktur holds a 60% stake in PT LNG, while PT Fortius Development Asia and individual shareholders each hold 20%.
- Built on approximately one hectare of land, the plant has an initial production capacity of 5MMSCFD, with scalability to 4 MMSCFD. Capacity expansion is targeted for 2nd half of 2027 through the addition of two processing units.
- The facility is expected to enhance domestic gas utilization for industrial and power generation needs, while supporting broader regional distribution.
End of Document
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