As we head towards the EU, the island’s shipping industry is confident of a bright future
This year’s Maritime Cyprus, the last before EU accession, marks the coming of age of the island’s shipping industry, from ‘Europe’s best kept secret’ in 1989, when the first conference was held, to ‘Europe’s new frontier’ as of May 2004.
“It’s a win win win situation,” said Thomas Kazakos, general-secretary of the Cyprus Shipping Council (CSC) referring to EU accession. “It’s good to repeat this because it is the reality of the situation.”
After decades of high detention and accident rates and the tarnished image that goes with the territory, Cyprus` ‘open registry’ has finally shed its ‘Flag of Convenience’ tag to possess the 6th largest global fleet, and also to turn Limassol into one of the three top shipmanagement centres in the world, alongside Hong Kong and Singapore.
And from next May, Cyprus, with Malta and Greece, will account for more than 75 per cent of Europe’s shipping fleet and the island’s 25 per cent stake will boost the EU’s global share to 15 per cent.
“But its not all rosy,” said Kazakos in an interview with the Cyprus Mail. “We have our obstacles and we are facing them but the main thing is not to bend the whole forest for a couple of trees. The point is that Cyprus shipping has turned a page and has embarked on a road of no return.”
Kazakos said that a decade of hard work by the CSC and successive Cyprus government’s has paved the way for the successful road to Europe. The results have been a reduction in detentions to the point where Cyprus has reached the bottom of the black list on the Paris Memorandum of Understanding (MOU) and will likely be crossing into the grey list by next year.
An increased number of inspectors, which now number 49 covering 29 ports in 17 countries, have also helped, as has the government’s new policy of zero tolerance for substandard vessels. But it wasn’t always like that.
“We used to have two uneven relatives,” said Kazakos. “The resident shipping industry which always enjoyed a high reputation and recognition for its high standards of operation, and the poor relative, the Cyprus flag, with its bad tarnished image. But over the years we pushed them, we urged them, we threatened them, we sweet talked them and we put together a lot of effort to bring them up.”
Kazakos said that shipping is the only truly globalised industry in Cyprus and it’s one on which the economy can always depend. “That is why successive governments realised that shipping is not a matter for petty politics. It’s a matter of the economy of Cyprus,” he said adding that the sector now accounted for two per cent of GDP, employed 5,000 people and contributed over £100 million to the economy.
“It’s the second largest chunk of contribution after tourism, which is heavily subsidised,” said Kazakos. “We have no subsidy whatsoever. Tell me one industry in Cyprus, which will be able to withstand competition in Europe and continue to contribute two per cent of GDP? The Cyprus government, irrespective of political background has realised that this is the one golden goose they have.”
The island’s new image is reflected with the top-level participation at this year’s conference. Main speakers include Vice President of the European Commission Loyola De Palacio, and outgoing president of the International Maritime Organisation (IMO) William O Neill “which again reflects the respect and recognition of the substance of the shipping infrastructure in Cyprus by both the international shipping fraternity, represented by the IMO as well as the European perspective represented by the EU,” Kazakos said. “There are not so many conferences in the world that attract these two figures.”
Kazakos said there were only three major international shipping conferences; Japan, Norway and Cyprus that are used as a platform for discussion and presentation of international shipping developments and that most of the other conferences are combinations of an exhibition and/or training seminars. “So the attraction of Cyprus has been maintained over the years and it’s quite difficult for eight consecutive times to do that,” he added stressing that Maritime Cyprus was not a marketing pitch although that is how it first began in 1989.
This year’s conference is the last before EU accession and is reflected in the programme, which will focus on maritime security in the wake of September 11, flag-state responsibilities and maritime industrial relations. “It’s like an update of where we left off two years ago,” Kazakos said.
Since the last conference in 2001the bulk of developments in the industry have naturally been EU related. The government closed the chapter relating to shipping in May 2001 and since then it’s been a matter of tying up loose end to bring legislation completely in line with the acquis.
The main issues for Cyprus were safety, detention rates and image, and the taxation of shipping companies in Cyprus.
Upgrading the safety of ships registered under the flag has a knock on effect on detention rates, which in turn helps the image of the flag. Kazakos said that although Cyprus is still on the MOU black list, he stressed that the black list was not a banned list.
“It’s a priority inspection list but the bad thing is you have to score three years running below the accepted minimum in order to get out. We are in the third year now and every indication now is that we will be off of it before we join the EU although that is not a requirement,” he said. “I would like to find one person now to say that that we are a flag of convenience otherwise it’s like saying to the EU that you have accepted a substandard flag.”
With the image much improved the issue of taxation had also to be sorted out with the EU. Cyprus asked Brussels for third party ship management companies to be classed as shipping companies since the days of ‘ship owners’ in the classic sense are becoming a thing of the past.
“Guys who own the ships and run the ships this still exists but a very fast developing trend is ship management, professional shipping experts who actually manage the ships. The Onassis type is a dying breed. The true ship owners now, if you look behind the corporate veil, you realise that they are either corporate funded or they’re banks,” he said. “But the day to day experts that run the ships are the ship managers. This is a fast growing trend.”
Cyprus successfully made its case in Brussels with the result that the EU changed its internal policy to recognise ship management as a legitimate shipping activity, which safeguards the industry in Limassol as ship management companies will not opt to leave Cyprus.
“We are talking about a huge fleet of ships being managed from Cyprus,” said Kazakos. “Limassol is considered to be the biggest third party management centre in the world.”
“Now we have a quality tonnage on our registry we will be able to attract more quality tonnage from within Europe but also from outside and that Cyprus will be like a gateway for companies from Asia and from America to have an EU flagged ship. Now that is win situation. We have nothing to fear since the image of the flag is improved, our taxation structure has been approved so we are not afraid of any competition. The seal of approval as a member state is going to give us a lot more flexibility and prestige.”
The EU will also benefit from the acquisition of the Cyprus fleet and give it a “lot of clout” in the global shipping industry, Kazakos said.
One of the remaining issues for Cyprus is the Turkish ban on Cyprus ships, which was imposed in 1987 as a result of the island’s political situation. Part of the ban on passenger ships was lifted in 1997 but Turkey, with its own EU aspirations will have to
think long and hard about continuing to impose an embargo on an EU member state after May 2004.
“Immediately upon accession any violation against a member state is a violation against Europe,” he said.
“Europe can take regional action against Turkey if they don’t shape up in terms of lifting the ban. If anything it will benefit them (Turkey) and us.”
He said that as Cyprus is the closest regional country to Turkey and Turkey has the biggest transshipment trade in the eastern Mediterranean, Cyprus would be the closest reefer centre to Turkey from Europe, Asia and Africa as well as to Europe resulting in a heavy increase in the transshipment trade, which would revitalise the port industry in Cyprus and at the same time also benefit the tourist industry as far as cruises are concerned.
“Cyprus is coming out of the dark ages with flying colours,” said Kazakos. “It’s been accepted by Europe. It’s not all hunky dory but even with the small teething problems we expect to face the important thing is to stress that with concentrated efforts jointly between the private and the public sectors, the maritime industry in Cyprus has achieved a lot. There is still a way to go and there is always going to be still a way to go but the future of Cyprus shipping can only be described as very very promising and encouraging and the challenge now is to maintain the standards at the high level we have now.
