Over the last decades, the global shipping industry has been one of the major factors of the globalization process. At the same time, the shipping industry is itself being transformed by growing international trade, market integration and the shifting balance of economic power from developed economies to rapidly growing lower wage economies. As shipping-related economic activities are also becoming more globalized, cities and states have to compete to attract international maritime companies.
Traditional shipping clusters in Europe are being successfully challenged by countries and cities in the developing world, primarily in Asia. As a result of the recent global economic turmoil, the decline in global growth rates and the drop in demand for both consumer and industrial products, accompanied by the deliveries of the new-built vessels, have had a negative impact on the shipping industry, leading to substantial tonnage overcapacity, and a dramatic decline of freight and charter rates.
The Greek shipping industry has weathered the storm and the Greek-owned fleet, with over than 5,272 vessels and a value approaching USD 86 billion, remains the largest in the world, in terms of tonnage capacity, and has enhanced its dominant position in terms of value, in many of the sector’s segments. The shipping industry is by far the most extrovert sector of the Greek economy. The inflows from shipping activities account for approximately 6.5% of Greek GDP and also have a substantial indirect multiplier effect on the Greek economy through cross-industry organizations gathering all or part of the maritime subsectors.
The multiplier effect is channeled into the economy primarily through shipping clusters, consisting of all related and downstream industries and associated institutions, which advance the competitiveness and increase the value input of shipping in the economy of a country. Some of the shipping clusters, such as Singapore, were nurtured with government support, while others, like Piraeus, have developed on an ad hoc basis with limited government support, developed mainly by the shipping industry entrepreneurs. The shipping clusters constitute a key tool in the effort of Greece to increase its attractiveness for the global shipping community and strengthen its role as a global shipping center. The Athens-Piraeus maritime center is all important in this context, with Thessaloniki playing a minor, more specialized role, primarily due to the importance of its port as a gateway to Southeast Europe and the prospects created by the privatization of the port.
Four main factors are the main contributors to the attractiveness of a city or region as a global maritime center:
a. The presence of substantial local ship ownership and ship-management activity
b. Well established financial, legal and other sophisticated business services
c. The existence of significant port and logistics infrastructures
d. A tradition of maritime technology associated with R&D, innovation, education and availability of talent
In addition, the overall business environment, the stability of the regulatory framework, tax regime and political institutions, transparency of the legal system and the willingness of local government to support the industry are vital in securing the attractiveness of a maritime center. Over the coming years, competition among the major global maritime centers will intensify. As the shift of global trade towards the Far East continues, it is very likely that, in the next twenty years, none of the top maritime capitals of the world will be located in Europe. London, Hamburg, Oslo and Rotterdam, each with its own strong competitive advantages, are struggling to emerge as the leading maritime center within Europe. Greece (Piraeus) will need to work hard if it is to retain or strengthen its standing as a maritime capital in the world. Our survey among leading members of the Greek shipping community sheds light on the shipping industry’s perceptions of the competitive advantages and disadvantages of Greece as a basis for shipmanagement functions, the attractiveness of competitive maritime centers and the ways in which the competitiveness of the Greek maritime cluster could be improved.
The related issue of the perceived advantages and disadvantages of the Greek flag is also examined. Our survey revealed that human capital, the seamanship, along with geographic location and, obviously, ship-ownership, are the main competitive advantages of Greece as a ship-management center, while the lack of a stable regulatory environment governing the cluster, lack of access to financial institutions, poor infrastructures and tax issues are the main disadvantages. As a result, more than half of the respondents would consider a potential relocation of their ship-management function outside Greece, with Singapore, London and Dubai identified as the most attractive alternative destinations. Three out of four respondents singled out Singapore as the likeliest leading maritime center within the next ten years. Cyprus is also emerging as a close by to Greece, competitive maritime cluster.
In spite of the perceived disadvantages of Piraeus and the growing attractiveness of competing maritime centers, the Greek shipping community remains confident about the role of Greece as maritime center in the coming years and believes that its enhancement would strengthen their business. Our survey, and the in-depth analysis of the maritime clusters of Piraeus and Thessaloniki, that was performed with the contribution of Professors A.A. Pallis and G.K. Vaggelas, highlights four main areas where concerted effort could potentially improve the competitiveness of Greece as a whole, as a maritime center.
1. Education: Marine and maritime educational institutions need to be strengthened while young Greeks need to be encouraged to consider the option of a career in the shipping industry.
2. Regulation: A more business-friendly regulatory environment which will facilitate establishing and operating a shipping-related business in Greece is urgently needed.
3. Infrastructures need to be upgraded in order to improve the ports’ accessibility and connectivity.
4. A closer coordination of private sector initiatives aimed at establishing a competitive Greek shipping cluster will also help in promoting its image globally.
Summary of recommendations
International experience and best practices, combined with our analysis of the Piraeus cluster and the findings of our survey, which reflects the views of the Greek shipping community, suggest that there are four major areas where strategic measures and policy interventions will improve the prospects of Greece in its efforts to establish itself as a major global maritime center.
1. Maritime education and training is a field where Greece traditionally has enjoyed a competitive advantage. Significantly, 80% of respondents to our survey identified maritime education and training as a key factor that could improve the competitiveness of the Greek maritime center. Today, however, two factors appear to be undermining this advantage: Firstly, as documented by an earlier study by EY1, in spite of persistent high levels of unemployment, fewer young Greeks are today opting for a career in shipping. Secondly, there is widespread concern that marine education is being overlooked. Marine academies are grossly underfunded, while their curricula are rapidly becoming outdated. There is a need for the formulation of a national strategy on marine and maritime education, an increase of funding for marine academies and closer involvement of the shipping community in the formulation of curricula, in order to strengthen the supply of human capital in terms of both numbers and quality. R&D is also a critical success factor for a global maritime center, as demonstrated by Oslo and Hamburg, which are recognized as the world’s leading maritime technology hubs. Closer cooperation between Greek academic institutions, renowned researchers and companies with a strong R&D presence should become a key priority.
2. A stable, transparent and business-friendly regulatory, legal and tax framework is a key priority for facilitating maritime operations. Indeed, almost half (49%) of respondents to our survey identified the regulatory environment as a key disadvantage of Greece as a shipmanagement center, while one in three mentioned tax. Such a framework should encompass the International Maritime Organization (IMO)/ International Labour Organization (ILO) conventions and be globally oriented. Further, minimizing transaction costs by curtailing bureaucracy and red tape, modernizing the ship registry and tax authority for shipping through the use of new technologies, will greatly contribute to making Greece a more attractive base for the operation of shipping companies. Modernisation of IT infrastructures – or their introduction where they do not exist – is a key priority. Emerging shipping centers, which aim to play a global role as maritime capitals of the future, are characterized by their systematic focus on attracting primary ship-management activities through the introduction of attractive fiscal regimes for non-resident companies.
Introducing a single shipping point of contact to facilitate the establishment of companies in Greece will also be a major step forward, as, today, shipping companies have to deal with a big variety of agencies. Ideally, the task of attracting major players and high ranking executives serving shipping could be assigned to specialised and service oriented “account officers”, who would act as a single point of reference, address the “client’s” issues and requests, coordinate all relevant resources and manage the relationship on a long-term basis. A similar approach has been successfully implemented by the Marshall Islands to promote its flag. Addressing the legal framework and high payroll-related costs is also critical. Finally, maintaining a stable tax framework and establishing a favourable tax environment for the relocation of expatriates is crucial for strengthening the position of Greece compared to emerging shipping centers. The example of Singapore is instructive in this respect: Singapore’s dedicated Maritime Sector Incentive (MSI) scheme, targeting both shipping and shipping-supporting companies, has played a major role in transforming the city-state into a business hub for the Asia-Pacific region.
3. Infrastructure is another critical area with great improvement potential. Connecting the port of Piraeus by rail to the rest of Europe, would improve its prospects by leveraging its geographical position as a gateway to Southeast Europe. The exploiting of the port’s ship-repairing zone by the new port operator can bring extra activities and participants in the cluster. The improvement of accessing Piraeus by car, which has forced several shipping companies to relocate to the north of Athens, is also a priority.
4. Finally, closer coordination between the Piraeus cluster participants and the establishment of a governance scheme would strengthen initiatives to leverage synergies and advance the port’s operational excellence. It will also provide a framework for more effective cooperation and coordination between the shipping industry, the government and other stakeholders and for promoting the image of the Greek maritime center globally, on the basis of an in-depth marketing analysis and a well thought out promotion plan. Significantly, a strong majority of participants in our survey indicated they would back a national promotion strategy.
Maritime UK, a non-profit organisation which brings together the UK’s shipping, ports, marine and business services sectors to promote the UK as a world-class maritime center, could be a useful model for a similar Greek association. The Singapore Maritime Institute (SMI) is a similar initiative, aiming mainly to develop strategies and programs related to the academic, policy and R&D aspects of the industry. By working closely with knowledge partners and attracting researchers and renowned academics, it seeks to prepare the next generation of talent and promote the R&D ecosystem.
The implementation of the above policy recommendations is a long-term project, which will need to be based on an ongoing inter-governmental dialogue with all stakeholders and will require a strong political commitment from all major political parties. It goes without saying that a key prerequisite for establishing Greece as a global maritime capital is the existence of a stable political and economic environment. This will not only help in convincing Greek shipping companies to retain their base of operations in Greece, but will also help attract leading providers of financial, legal, insurance, technology and other knowledge-based services, as well as human capital, which are vital for the transformation of Greece into a one-stop shop for the shipping industry and, thus, a truly global maritime center.