The Maritime Economist Magazine Spring 2015 | Page 22

THEMARITIME Economist

INPLAIN
Policy makers’ choices and trade-offs

Over the last decades, trade has grown faster than
the economy as a whole, and shipping will continue
to be the most important mode of transport with the
lowest environmental impact. The long term
perspectives for seaborne trade and the maritime
businesses are good. Policy makers are well advised
to identify and invest in maritime sectors where their
countries may have a comparative advantage. And
sometimes choices will have to be made. The following
three examples illustrate such choices and possible
trade-offs.
Example #1: Would policy makers favor the national
ship owners or rather the national seafarers? For a
national ship owner to remain competitive, he may
want to employ less costly foreign seafarer. To be
allowed to do so, he may need to register his ship
under a foreign flag. Without the emergence of open
registries – most were initially set up in developing
countries – the ship owners of the traditional, richer,
maritime nations may not have remained in business.
The flags of Liberia, Marshall Islands and Panama were
first and foremost used by ship owners from the
United States, Europe and Japan.

“ Policy makers are wellinadvised
to identify and invest
The implementation of the
Taman port project will
facilitate the process of
maritime sectors where their
diversion ofmay have a out of
countries Russian cargo
Ukrainian ports.
comparative advantage.

ME Mag

Example #2: Is the priority the shipper, i.e. the
importer and exporter, or rather the service provider?
In several countries, still today liner shipping
companies are allowed to engage in so-called
“conferences”, which may include the joint setting of
freight rates. Shippers generally consider that such
price fixing is detrimental to their interests, while
shipping companies argue that this helps them to
22 provide better services at a more stable freight rate.

In the European Union, the “anti-trust immunity” of
liner shipping conferences was significantly weakened
with a view to increasing competition and reducing
freight rates.
Example #3: Are policy makers more concerned
about the nationally flagged fleet or about the
attractiveness of their national seaports? In many
countries, maritime cabotage (i.e. shipping between
two national seaports) is still reserved to nationally
flagged ships. This protects the national shipowners
and seafarers who are employed on nationally flagged
ships. It may even help to generate business for
national ship yards, if the legislation includes the
obligation to deploy nationally build vessels on
cabotage services. At the same time, such
limitations put national ports at a disadvantage when
competing for transshipment services. In Malaysia,
cabotage restrictions were softened in order to help
national seaports compete better with Singapore for
transshipment from and to other Malaysian ports.
In conclusion, it is no longer a policy choice to support
“the” maritime sector, but the challenge is to identify
and support selected maritime businesses. Policy
makers need to carefully assess 1) the competitive
environment for each of the maritime sectors
individually it wishes to develop; 2) the value added of
a sector for the country’s economy including possible
spill-over effects to other sectors - maritime or not;
3) assess existing and potential synergies between
maritime businesses; and 4) design industrial policies
to support the businesses the country wishes to
develop.
Further reading: The article makes use of the latest
available data, including for example world fleet dat