Friday, November 4, 2011

Challenges ahead for Greek Shipping

I recently had an opportunity to address the ICS 7th Annual Forum “Navigating through the Economic Storm – Setting a route in difficult time” in the questions and answers session and wish to share my thoughts on two major structural issues that could drastically reduce the competitive advantages the Greek market in years ahead, starving it of valuable human resources and entrepreneurial incubation.

Greek shipping faces two fundamental and interrelated challenges to competitiveness.

First, Greeks are no longer going to sea. The Greek government and the Greek shipping industry have been entirely indifferent to this and done nothing about it. The accession to the European Union and government policies that encouraged tourism in the islands with subsidies for rented room provided an alternative for Greeks, who normally would have chosen careers in the merchant marine. Social changes in Greece discouraged people from going to sea. Euro accession put Greek seaman at severe cost disadvantage for companies.

Greece once had numerous maritime academies, often in the islands. It also had many private marine schools in Piraeus. Today only one marine academy is still functioning at Aspropyrgos. All the private schools are closed. Greek families of marine tradition are now sending their children to US merchant marine schools for proper education that is not available in Greece. All this is very sad for a country that was one of the greatest seafaring nations in history.

30 years ago Greek ships due crew costs were cheaper on the average than peer Norwegian or Japanese operators. Now Greek companies use the same crewing resources as their peers. Far East and Indian crews with sometimes Russian or East European officers. Their costs are identical.

The Greek crews were a source of middle management for the Greek offices that gave them an unbeatable operational advantage as vessel providers with an indelible bond between the office and the vessel. Today, with fewer and fewer Greek seafarers, the labor pool for middle manager Port Captains and Port Engineers is drying up and is increasing elderly in age. Some Greek companies are beginning to use Indians from abroad, for example, in their headquarters, so why not management from Dubai or Singapore?

Second, Greek medium. small companies are now shut out of bank finance with the Greek banking system locked up in Greek sovereign debt crisis. Typically these companies have small fleets of older units, mainly bulk carriers. They buy elderly tonnage close to scrap-level, trade them a few years, building up net worth. They then roll over their fleets, buying somewhat newer units and selling the older units for scrap. Greek banks were specialists in this kind of lending with higher pricing and shorter tenor. These companies are too small for foreign bank finance and their vessels do not meet bank age criteria.

These companies are a critical entrepreneurial incubation crucible for a continuing renewal of Greek Shipping community. The best of crop become ultimately the Greek shipping powerhouses of the future. The offices are a major source of office employment in Greece. They contribute to the support of a large marine service industry in Greece.

Without the human resources of seafarers and the entrepreneurial incubation of new companies, the future of Greek shipping may well be in jeopardy. Shipping in Greece risks the danger of a mature industry that consolidates with a few major players, but a much smaller base than previously where Far East and other competitors become the growth area of the industry in the future.

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