Business
3.2 Policy issues
good example is Switzerland, a landlocked nation, which is home to the world’s largest freight forwarder and to Mediterranean Shipping Company, one of the top five liner shipping companies in the world. According to UNCTAD (2008), there are 258 Swiss ships – 29 flying the national flag and the rest open-registry – that constitute 1.3% of the world fleet. The meteoric growth of the Chinese maritime enterprise in the new millennium was discussed earlier. The following subsection discusses salient policy developments in traditional maritime nations as well as newcomers that have shaped the course of maritime business.
transportation service providers (Kumar, 1987) as illustrated by the declining relevance of revered shipping practices like the liner conference system. This has impacted current transport policy-making, in the maritime sector as well as in other modes. Sletmo (2001) captures the contemporary maritime policy-making trend by emphatically placing the supremacy of global trade perspectives over maritime issues. Accordingly, mode-specific transportation policy has become a doctrine of the past in developed market economies, most of who were the major maritime nations of the past. Although one could argue that air movements are still an exception because of the extensive use of bilateral negotiations involved in air transportation, major developed nations today advocate an integrated transport policy that favours seamless multimodal freight movements in general.
These nations have thus assumed a more holistic approach in national transportation policy-making that is conducive to the facilitation of a seamless movement of its commerce. Accordingly, the emphasis today in many developed nations is not in the size of their fleet or their tonnage, but on eradicating barriers to the through movement of cargoes. An excellent example of this is the United States, the world’s largest trading nation and the home of many former prestigious shipping companies. Today, it is left with relatively very little presence in the deep-sea fleet, in spite of the Jones Act and other measures that oblige carriers to use US flagged, built and manned vessels for cabotage services.
Figure 7 shows the maritime engagement of traditional maritime nations as of end 2008. It is to be noted that all the traditional maritime nations with the exception of Germany and Japan have a greater share of world trade in value than their percentage share of world fleet in deadweight. Figure 8 (maritime engagement of newly emerging maritime nations) however shows quite the contrary for the newly emerging maritime nations most of who possess higher percentage of owned fleet than their value share in international commerce. For Hong Kong and Singapore, the percentage flag-share exceeds both the value share
Figure 7: Maritime engagement of traditional maritime nations, 2008 Source: UNCTAD, Review of Maritime Transport, 2009
Figure 8: Maritime engagement of emerging new maritime nations, 2008 Source: UNCTAD, Review of Maritime Transport, 2009
and world fleet share in dwt. Figure 9 shows a precipitous decline in the shipping fleet registered in developed market economy nations, most of who also fall under the traditional maritime countries category. The decline in the fleet of these nations during the past 30 years is in direct contrast to the gains made by fleets registered in open registry nations and developing countries. Presently, four out of every five merchant ships are registered either under an open registry flag or in a developing country, and owners from developed countries are more likely to choose a foreign flag than those from countries with a lower GDP per capita (Hoffmann et al., 2005).
Many countries’ trade profiles in some way match their fleet profiles. Among the countries with the largest shares of oil exports are Kuwait (93% of its exports are fuels and mining products), Saudi Arabia (90%) Islamic Republic of Iran (88%), Russia (68%), United Arab Emirates (53%) and Indonesia (38%), and all of them also have the highest share of their nationally controlled fleets in oil tankers. Among the countries with the highest shares of agricultural exports are
Brazil (29% of its exports are agricultural products), Vietnam (21%), Indonesia (18%), Thailand (16%), India (12%) and Turkey (10%). Among those countries, Thailand, Turkey and Vietnam also have
Figure 9: Ship registration trends
Source: UNCTAD, Review of Maritime Transport, 2009
the highest shares of dry bulk carriers, and the other three countries also have important dry bulk fleets. In China, Hong Kong (China), Republic of Korea and Taiwan (Province of China) the dry bulk fleet has the highest share, reflecting the large import demand of iron ore, grains and other dry bulk products (UNCTAD 2008b, pp. 41ff).
A different picture emerges if we look at manufactured goods, which are mostly traded in containerised liner shipping services. These services call in numerous countries’ ports, unlike oil tankers and bulk carriers, which are usually employed on direct port-to-port voyages. Many container ships are operated by companies different from the vessel owner (the latter charters the ship to the company that provides the actual liner shipping service). All these aspects may explain why there does not appear to exist a correlation between a country’s trade in manufactured goods and its nationally controlled container ship fleet.
Even China, which accounts for about 25% of world containerised exports, has only a very small share of containerships among its nationally controlled fleet.
The largest nationally controlled fleets that also fly the national flag include oil tankers from Brazil, India, Kuwait and Thailand; dry bulk carriers from Hong Kong, India, Republic of Korea and Thailand as well as general cargo ships from Indonesia, Russia, Thailand and Vietnam. In several cases, these nationally flagged and nationally controlled ships are employed in cabotage trades that often mandate the use of the national flag, or they are nationally flagged as a consequence of some public involvement in the vessel owning companies.
3.2.2 The rise of a new order in maritime business
While the traditional maritime nations in general are losing their supremacy in the business, a new group of nations have proactively enacted maritime policies that favour their shipping base. A 1996 attempt to classify nations based on their attitude towards shipping in general listed these new centres of maritime business as shipping-friendly whereas the policies of many of the traditional maritime nations were listed under the shipping-hostile category (Lovett, 1996).
Examples of the shipping-friendly category include nations such as South Korea, Taiwan and Singapore, all of which appear prominently in Figure 8. The ascendancy of these nations is usually focused on specific aspects of the shipping business, such as ship operation and construction in South Korea, or ship registration in smaller service economies. Some, such as Singapore, Brazil and China, do apparently pursue all-out efforts to build the entire shipping milieu. It is entirely conceivable in the near future that China will not only have the world’s largest shipping companies but also the largest shipyards, busiest ports, biggest maritime universities and the most envied maritime infrastructure.
It is noteworthy that despite the efforts by shipping and seafarer organisations from some traditional maritime nations, the open registry fleet has continued its spectacular growth during the last two decades (Figure 9). Furthermore, the open registry nations have also encountered increasing competition from some traditional maritime nations like Norway and Denmark that have established international ship registers to stem the outflow of their domestic tonnage to foreign registries if not attract some of the previously lost tonnage back to the national fleet.
Governmental interference in shipping has a long history (Farthing, 1993).
Ever since the British enacted their restrictive Navigation Acts in the mid-1600s the global maritime business has never operated in so liberal a commercial environment as it exists today. A rational justification for this new wave of liberalism is the impact of globalisation. As maritime policies have become subservient to the overall trade policies of major trading nations, the crux of the issue is not the flag of registration but the overall fit of shipping services in the global supply chain. Under such circumstances, the specialisation referred to earlier has led to a new breed of maritime players where nationality is once again irrelevant. As an example, the concept of giving away one’s flag to a ship owned by a foreign entity (although not pro bono) and staffed by foreign crew is an
illustration of high shipping liberalism.
A cursory examination of the current breed of ship owners will show relatively few of the historic shipping families but more so of investment firms, pension funds and business conglomerates, none of which have any significant shipping heritage. Thus, it is ironical that globalisation has led to a certain loss of identity and respectability for the industry. A perfect example of this irony is the high public attention that the industry receives when there is a shipping accident, but the total lack of coverage that it receives from the media when it performs normally. The average citizen today is more aware of the mistakes made by the maritime industry rather than its contribution to the global commerce and our standard of living. The following subsection examines issues related to safety at sea and employment conditions. It suggests that the neo-liberalism in shipping policies has not meant a decline in operating standards but on the contrary, a general improvement in the safety of ships and the environment.