Greece’s leading role, particularly in the shipping industry, with the Greek-owned fleet accounting for 22% of the world fleet and almost 70% of the European fleet, is a driver of global economic growth.
Almost 90% of world trade is carried by sea.
Together with other sectors, such as cruise and short sea shipping, and a net- work of companies providing services and goods alongside shipping, such as port services, shipbuilding, ship repair, marine equipment, ship finance and other services, Piraeus, which covers an area of only 40 square kilometers, is an international maritime center.
Recently, the Foundation for Economic and Industrial Research - IOBE, published a study on the contribution of shipping to the Greek economy. The study was conducted with the support of the Aikaterini Laskaridis Foundation.
The 136 pages of this study describe in detail the contribution of Greek-owned Shipping to the Greek economy, as well as the prospects and challenges for the future in a barrage of regulations and targets with a time horizon of 2030 and 2050.
In this edition of NAFS magazine we publish an interview with the General Director of IOBE, and Professor of Economics at the Athens University of Economics and Business, Mr. Nikos Vettas, with whom we will discuss these import- ant issues of the Shipping Industry.
What is the current position of Greek-owned shipping in the European and global market?
Greek shipping continues to be a world leader. Its position can vary from first to third, de- pending on what is measured (i.e. capacity, value, large or small vessels, etc). It should be stressed that what happens in shipping is very much influenced and determined by global trends, which are currently strong. Among these trends are, firstly, the need for decarbonization and greening of the world fleet. Secondly the changes in global trade flows. The sooner the global shipping industry understands and processes these changes, the better. In terms of numbers, the Greek-owned fleet is the first in the world in terms of tonnage, ahead of the second fleet owned by China and the third fleet owned by Japan. In terms of value, the Greek-owned fleet is second only to China, with a value of just over $160 billion. Also, according to official data from the Union of Greek Shipowners, the average age of the Greek-owned fleet is lower than that of the world fleet. The third trend, which is also linked to the above and is considered the most important, is related to investments. The ship-owners current position is important, however, equally important is what you build, in order to be at the forefront of the market tomorrow. Currently, the Greek-owned fleet is the third largest in terms of newbuilding orders after China and Japan.
Within the numbers of the study are there any that should worry us?
Within Europe, the Greek-owned fleet remains by far the most powerful. Yet the strong Asian economies, which are most directly in the path of world trade, are growing fast. At the opposite side, the flagging out effect from the Greek registry (Greek flag) is a concern with possibly negative implications in Greek shipping sustainability. We see a gradual decline every year, coming mostly from large ocean-going vessels. In terms of numbers, in 2015 we had 800 ships under the Greek flag, while today we have around 600. The Greek flag is still among the top 10 flags in the world, but if this decline continues, then indeed, maybe the government should reconsider its national maritime policy to increase its attractiveness.
What is the role of Short Sea Shipping in Greece and how does it contribute to the European shipping network?
Short sea shipping is also a very important part of the Greek maritime cluster, with a role proportionate to its involvement in the trade routes. Of course, there is a significant potential for the sector, especial-
ly considering the geographical position of Greece (entry point from Asia) and the need for secondary transport with ships that cover short- er distances. Here, things are also a little more complicated as there are also routes involving a rail network.
What is the contribution of ship- ping to the Greek economy?
The Greek economy entered a deep recession since 2008 for at least 8 years and has been trying to find a solid branch to catch in this recession flood. In the continuous effort to rely on sectors that are extrovert and of high added value, shipping is a sector that provides income and jobs, even when things are not going well in the Greek economy. Shipping during the recession brought consistently incomes to the country and maintained jobs for people working in the sector. It is crucial that how shipping moves does not depend on domestic demand but on global demand and competition. If you take all these effects into account, about 8% of the Greek Gross Domestic Product derives from shipping. Therefore, the better the shipping sector does, the more the Greek economy will be positively affected.
According to the study, 98% of Greek ports have inadequate reception equipment and 75% are unsuitable for cruise ships. How do you think Greek ports will meet the environmental targets?
Hosting cruises and design of routes that start and finish in Greece can bring in huge revenues. As an example, we can consider the economic impact from just the consumption incurred during the vessel’s stay in a port. Unfortunately, Greek ports are still far behind in relevant infrastructure hindering the increase of cruise ship calls in the future. The implementation of existing plans need to be accelerated. I personally believe that we should not move towards a model of mass cruise ship berths in the Greek islands in favour of hosting 2-3 thousand tourists for a couple of hours; managing our natural resources and creating touristic models that are sustainable in the long run is necessary.
What is the current situation in the shipbuilding and ship re- pair sector in Greece?
The shipbuilding industry in Greece is reviving, albeit at a slow pace. It is true that most of the shipbuilding activity is now taking place in Asia, while Europe competes in terms of specialization. The repair and technological upgrading of ships are pillars that bring high profits and improve the national economy. Here too, Greek manufacturers of shipping equipment and supplies play a vital role. In the recent past, we have collaborated with HEMEX- PO (Hellenic Marine Equipment Manufacturers and Exports), who are very active in the areas of supply and equipment for ship- ping. One of the global shipping industry challenges is related to technological upgrading, such as the use of autonomous ships, the use of big data and even artificial intelligence. So, shipbuilding now incorporates huge amounts of specialized technology. This is a great opportunity for Greece and Greek companies.
What is the current picture of shipping finance for Greek companies?
Greek shipping has the potential to maintain its leading position in global shipping. The differential cost of financing for other industry sectors remains significant and high, whereas this is not the case for shipping. But here we should stress that the shipping industry is a global giant that has to comply with historical challenges, by investing heavily to achieve stringent environmental goals and
by adopting modern technologies, which, however, comes with potential high uncertainties. Access to funding is needed, the costs of which will then be amortized. So, the bet is to identify the correct mix of investments in proper technologies and to ensure that Greek ship-owners remain competitive on the global map of global ship- ping. In this frame, the rise of Asian leading powers with access to funding should not be overlooked. The next 5 -10 years are critical for adjusting shipping to the global challenges with regards to decarbonization and the new environmental standards.
* General Director, Foundation for Economic and Industrial Research - IOBE