Ship­ping drives Cyprus re­cov­ery

Financial Mirror (Cyprus) - - FRONT PAGE -

The ship­ping sec­tor has proven to be a re­silient force in the frag­ile Cyprus econ­omy, with the pri­mary ship-man­age­ment sec­tor grow­ing to 5.1% of GDP and the mar­itime in­dus­try as a whole adding a fur­ther 2 per­cent­age points to na­tional out­put.

Ship-man­age­ment, as op­posed to the con­ven­tional Cyprus­flag op­er­a­tions by lo­cally owned ves­sels, gen­er­ated rev­enues of 417 mln eu­ros in the sec­ond half of last year, with the bulk orig­i­nat­ing from non-Cyprus flag fleets, but man­aged by the 4,500 strong com­mu­nity on the is­land, half of whom are highly-ed­u­cated Cypri­ots.

“In the past five years, ship-man­age­ment has been the pil­lar of our sec­tor’s growth, de­spite the prob­lems faced in the in­ter­na­tional mar­kets in 2012 and 2013, es­pe­cially in the char­ter­ing sec­tor with fall­ing rates driv­ing many ship-own­ers into trou­ble,” Cyprus Ship­ping Cham­ber Di­rec­tor Gen­eral Thomas Kaza­kos told the Fi­nan­cial Mir­ror on the side­lines of the three-day In­ter­na­tional Ship­ping Cham­bers con­fer­ence hosted in Li­mas­sol this week.

“Our in­dus­try was faced with too many ships and too few car­goes, which re­sult in many com­pa­nies and their fleets be­ing seized by banks. How­ever, this turned out ben­e­fi­cial for Cyprus as our ex­per­tise in ef­fi­cient ship-man­age­ment was an at­trac­tion to ad­min­is­tra­tors who wanted a quick re­turn or safe re­cov­ery of their in­vest­ments and many turned to ship-man­age­ment com­pa­nies in Cyprus,” Kaza­kos said.

He ex­plained that ship-man­age­ment, in re­la­tions to GDP con­tri­bu­tions in Cyprus has grown from 3.8% more than five years ago to 4.5% in late 2012 and 5.1% in the sec­ond half of 2013. Add to that at least two per­cent­age points gen­er­ated from Cyprus-owned ves­sels and other earn­ings for the Depart­ment of Mer­chant Ship­ping and our sec­tor’s con­tri­bu­tion to GDP is a steady 7.1%, Kaza­kos added.

“The fi­nan­cial vi­a­bil­ity of the mar­itime sec­tor, es­pe­cially within the lack of liq­uid­ity in banks, was one of the three key is­sues we are dis­cussing at this week’s ICS con­fer­ence, as well as the pre­ced­ing sum­mit of mar­itime min­is­ters, at­tended by no less than ship­ping of­fi­cials from ten coun­tries,” he said.

Kaza­kos added that the other two key is­sues of dis­cus­sion are the en­vi­ron­ment and the harsh CO2 and emis­sion con­trols im­posed on ships, with aims to cut these emis­sions fur­ther, as well as labour stan­dards de­bated in co­op­er­a­tion with the labour or­gan­i­sa­tion ILO.

Sus­tain­able de­vel­op­ment of mar­itime trans­port was also dis­cussed dur­ing the min­is­te­rial sum­mit hosted by the Min­istry of Com­mu­ni­ca­tion and Works, at­tended by govern­ment of­fi­cials and rep­re­sen­ta­tives of or­gan­i­sa­tions.

The Cyprus Ship­ping Cham­ber is mark­ing its 25th an­niver­sary by host­ing this year’s meet­ing of the ICS, tak­ing place at the Four Sea­sons Ho­tel in Li­mas­sol.

The CSC also or­gan­ised a gala din­ner at the Pres­i­den­tial Palace in Ni­cosia on Tues­day night where Pres­i­dent Ni­cos Anas­tasi­ades praised the cre­ation of the Cham­ber 25 years ago “with a mis­sion, not only to pre­serve Cyprus’ prom­i­nent po­si­tion in world ship­ping, but also to im­prove and fur­ther de­velop it.”

“The 25th year an­niver­sary comes in the aftermath of the re­cent ad­verse fi­nan­cial de­vel­op­ments in Cyprus. In this con­text, as the ship­ping sec­tor con­sti­tutes a cru­cial part of our econ­omy and one of the main pil­lars of growth, there is no doubt that ship­ping has played a leading role in our ef­fort for re­cov­ery,” the Pres­i­dent said.

“To­day, just over a year since the Troika Loan Agree­ment for Cyprus was made, I am pleased to tell you that the Cyprus econ­omy is well un­der way for full re­cov­ery. We have re­peat­edly and timely met the obli­ga­tions we have un­der­taken against our lenders for struc­tural re­form, restor­ing the sound­ness of the Cyprus bank­ing sys­tem, as well as pub­lic spend­ing.”

“The ship­ping op­er­a­tional and taxation in­fra­struc­ture in Cyprus and the Cyprus flag re­main in­tact, fully op­er­a­tional and very com­pet­i­tive.”

Ac­cord­ing to Cyprus Cen­tral Bank data, rev­enues from ship­man­age­ment reached EUR 417 mln in the sec­ond half of 2013, up 3.73% from the EUR 402 mln in the first half, with the sec­tor con­tribut­ing 5.1% to the is­land’s GDP, the only sec­tor that has shown sta­bil­ity dur­ing the trou­bled past year of the econ­omy. The rev­enue level was, how­ever, the low­est in four years, in­dica­tive of some im­pact from the is­land’s eco­nomic melt­down that af­fected all sec­tors.

Some 85% of rev­enues from ship­man­age­ment arose from ser­vices pro­vided to for­eign-flag ships, up from 82% in the first half of 2013.

Ger­many re­mains the big­gest part­ner of the Cyprus mar­itime sec­tor ac­count­ing for 53% of the ship­man­age­ment busi­ness, fol­lowed by Viet­nam-flagged ves­sels (6%),

Rus­sia (5%), Sin­ga­pore (4%) and 2% each from Greece, Liberia, the Nether­lands and Italy.

On a rev­enue ba­sis, 48% from ship­man­age­ment de­rives from Ger­many or about EUR 200 mln, fol­lowed by Poland (8%), Cu­ra­cao, (6%), Hol­land (5%), Sin­ga­pore (4%) and 2% each from Rus­sia, Mar­shall Is­lands and Nor­way.

The pre­ferred ser­vice pro­vided to Ger­man shipowners is crew man­age­ment (52%) which in turn ac­counts for 43% of all ser­vices in the sec­tor.

Full ship­man­age­ment ac­counts for 46% of busi­ness, of which 22% is from Rus­sian shipowners, 12% from Ger­many and 10% from Malta. Tech­ni­cal man­age­ment ac­counts for 11% of ship­man­age­ment busi­ness, while there were no cases of char­ter­ing recorded in the sec­ond half of 2013.

In the case of ex­penses, the bulk of 55% of the EUR 368 mln in costs ac­counted for crew wages, of which 40% was paid to non-EU na­tion­als. A fur­ther 27% of costs went to man­age­ment fees and 18% to ship­man­age­ment rates.

The costs were paid in the Philip­pines (22%), fol­lowed by Cyprus (20%), Poland (10%) and Ukraine (10). The costs paid to the Philip­pines, Poland and Ukraine were mainly crew wages.

The Cham­ber’s Thomas Kaza­kos said that the in­dus­try in­cludes 155 ma­jor ship­ping com­pa­nies that own or man­age 2,300 ves­sels with an out­put of 50 mln gross tonnes, that ranks Cyprus as the third big­gest mar­itime coun­try in the Euro­pean Union and tenth in the world, as well as sec­ond big­gest in ship­man­age­ment across the globe.

“We em­ploy 4,500 people in all ser­vices and main­tain about 55,000 sea­far­ers on cargo and pas­sen­ger ships around the world,” gen­er­at­ing a steady 7% of GDP of the Cyprus econ­omy.

“In tough eco­nomic times, such as the present, a solid in­come for the state, busi­ness and em­ploy­ees is very im­por­tant,” Kaza­kos added.

Fur­ther­more, Kaza­kos said the in­dus­try’s prospects are “at least pos­i­tive,” as they are at­tached to the sta­bil­i­sa­tion and the im­mi­nent rise in global freight mar­kets, as the world is emerg­ing from the global fi­nan­cial cri­sis that started in 2008. The ship­ping in­dus­try will also ben­e­fit from the ex­plo­ration and even­tual pro­duc­tion of oil and gas from off­shore fields, with more and more en­ergy-spe­cific ship­ping com­pa­nies op­er­at­ing or trad­ing out of Cyprus.

“Ship­ping is the en­ergy in­dus­try’s first cousin and when the in­dus­try de­liv­ers what the so­ci­ety an­tic­i­pates, ship­ping will be di­rectly linked with the trans­porta­tion of gas,” he said.

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