In the colonial period the size of the interisland fleet and the financing of new construction were commercial matters for the KPM to determine. Since Independence, however, the government has had a pervasive influence on the size, composition and ownership of the interisland fleet. Despite various shifts in policy, three main concerns have been apparent. First and perhaps foremost, the government has wished to assist in building up the fleet of pribumi (indigenous) firms (including PELNI). Initially this assistance was provided to strengthen pribumi firms in opposition to the KPM; more recently it has been directed against non-pribumi (that is, Chinese) firms. Secondly, the government has tried to stimulate or restrain the growth of capacity in order to maintain some rough balance between the supply and demand for shipping space and avoid either undercapacity and consequent distribution crises or overcapacity and the resultant bankruptcy of ‘weak’ (that is, pribumi) firms. Thirdly, die government has been concerned with the quality of the interisland fleet, especially the age of ships. It has therefore introduced a scrapping policy to eliminate older ships, while ensuring through import controls that only modern ships are added to the fleet.

The first section of this chapter reviews the evolution of investment policy with particular regard to assistance to pribumi firms. The subsequent three sections focus upon the rehabilitation programme, the role of P.T. PANN (the Fleet Development Corporation), and scrapping policy.

THE EVOLUTION OF INVESTMENT POLICY

The policy of fostering the development of pribumi shipping firms was introduced actually by the Netherlands Indies Government when it established the Stidning Gemeenschappelijk Schepenbezit or SGS (J°i nr Shipowning Authority) in March 1947.' The government and the KPM together contributed 22 ‘powered lighters' of less than 175 gross tons for bareboat charter to pribumi firms to operate local feeder services for the KPM. After Independence the new Indonesian Government initially continued this policy with the formation of Pemilikan Pusat Kapal-Kapal or PEPUSKA (Central Shipowning Authority) in September 1950 to take over the role of the SGS.