Read The Times Australia

Daily Bulletin

How 'flags of convenience' have shrunk Australia's merchant fleet

  • Written by: Peter van Duyn, Maritime Logistics Expert, Centre for Supply Chain and Logistics (CSCL), Deakin University

In movies about ships, a crew feverishly changing their vessel’s name and flag to avoid detection is a common tactic. Nothing so simple could work in reality, right?

In a sense, though, running up a different flag is still as useful a corporate tactic as it was to Captain Jack Aubrey disguising the HMS Surprise to defeat the Acheron.

Changing flags largely explains the disappearance of Australian merchant ships. Three decades ago the national merchant fleet numbered about 100. Now it’s just 14.

That’s despite being an island continent where 99% of imports and exports are transported by sea, with thousands of large commercial ships operating in Australian waters.

The decline has many people bothered. The Australian Labor Party is promising to create a “strategic fleet” of up to a dozen ships – oil tankers, gas carriers and container ships – that can be relied on to deliver essential fuel supplies. The ships will be privately owned but could be requisitioned by the government in times of national need.

“It is a national disgrace that an island nation like Australia only has 14 flagged vessels, and it’s in our national interest to fix this,” said the Opposition leader, Bill Shorten.

But the prime minister, Scott Morrison, has dismissed the plan as simply an attempt to protect union jobs.

So who’s right? Does having an Australian merchant fleet matter?

Flying foreign flags

To appreciate what this issue is about, let’s recap what it means to be an “Australian” ship. It’s not necessarily about being Australian-owned.

Mostly it’s about flags.

The flag under which a ship sails determines the conditions the ship and its crew operate.

Australian-flagged ships must abide by Australian laws regarding employment conditions, safety, taxation and environmental regulation. A foreign-flagged ship operates under the rules of the country where it is registered.

How 'flags of convenience' have shrunk Australia's merchant fleet One of the few Australian flagged ships left, the MV Searoad Mersey II, which operates in the Bass Strait between mainland and Tasmanian ports. Wikimedia Commons, CC BY

About 40% the world’s commercial ships (by tonnage) are registered in just three countries: Panama, Liberia and Marshall Islands. These and other so-called Flags of Convenience countries attract registrations by foreign ship owners looking to avoid the costs of more stringent regulations and tax regimes in their home countries.

Ships registered under flags of convenience are more likely to have unscrupulous owners with crews working under unsafe, exploitative conditions.

Over the past 20-30 years, many Australian companies have made the decision to phase out Australian flagged and crewed ships and replace them with those owned by foreign companies and run by foreign crews, resulting in a dramatic decline in the fleet.

Costs and benefits

In January BHP and BlueScope Steel announced the end of their last two locally operated bulk carriers transporting iron ore from Port Hedland in northwest Western Australia to Port Kembla. The ships, MV Mariloula and MV Lowlands Brilliance, were not Australian-flagged (the former is registered in the Marshall Islands, the latter in Singapore), but were operated by an Australian company (Teekay Australia) employing almost 70 Australian crew.

Technically there are rules to impose Australian standards on all ships operating in Australian waters. Only Australian-flagged (and crewed) ships are able to gain a general licence to operate between Australian ports. But over the years laws granting “temporary” licences to foreign ships have been relaxed.

The rationale for allowing them is that their lower costs help local companies stay competitive in global markets. Most inquiries held into Australian shipping have been scathing of the industry’s inefficiencies and high cost. It’s one of the reasons shipping’s share of domestic freight has been falling.

How 'flags of convenience' have shrunk Australia's merchant fleet Australian domestic freight, by mode of transport, measured in tonne kilometres (the movement of one tonne of freight by one kilometre). The growth in rail freight has been mainly driven by rail’s transport of iron ore in the Pilbara region. BITRE

But there are big potential negatives in replacing Australian-flagged ships with foreign-flagged ones.

If we allow foreign-flagged ships in our waters there needs to be adequate oversight by the Australian Maritime Safety Authority) to ensure ships do not pose a greater threat to our precious maritime environment. This is a distinct possibility if crews are not well-trained or do not have proper working conditions.

A stark illustration of such risks was the grounding of the Chinese coal carrier Shen Neng I in 2010. It ran aground on a shoal of the Great Barrier Reef just north of the port of Gladstone, spilling oil and damaging more than 40 hectares of marine park over 10 days. The damage has yet to be repaired.

How 'flags of convenience' have shrunk Australia's merchant fleet Coal carrier Shen Neng 1 aground on a reef about 70 km east of Great Keppel Island on April 4, 2010. Maritime Safety Queensland/AAP

A government investigation found the ship’s chief mate had only two-and-a-half hours’ sleep in the 38 hours before the accident and made a succession of errors.

Need for bipartisanship

History has shown the importance of a merchant navy in times of conflict or natural disasters. So the Labor Party has a point in arguing government should do more to ensure local shipping remains a viable alternative to road and rail transport.

But it remains to be seen how Labor, should it win the federal election, will counter the trend of several decades and revive the fortunes of Australian shipping. Right now its policy is light on detail, with its only commitment being to establish a “task force”.

Shipping and associated infrastructure require a long investment horizon, so a bipartisan approach to shipping policy is essential. Shipping lines, ship owners, port authorities and unions will all need to cooperate.

Right now that looks optimistic. But other developed nations with high labour costs, such as Britain, the Netherlands, Norway and Denmark, have faced similar problems to Australia and overcome them.

So let’s not wave the white flag quite yet.

Authors: Peter van Duyn, Maritime Logistics Expert, Centre for Supply Chain and Logistics (CSCL), Deakin University

Read more http://theconversation.com/how-flags-of-convenience-have-shrunk-australias-merchant-fleet-115059

Business News

How Businesses Can Prepare for Unexpected Power Outages

Power failures can occur quickly. The supply may be interrupted by bad weather, issues with the electricity network, damaged equipment or local construction work. This can be just a hassle for a fam...

Daily Bulletin - avatar Daily Bulletin

How Chatswood Tutoring Can Fit Into a Student’s Weekly Routine

Create a Predictable Weekly Structure A consistent weekly routine can make study easier to manage when students are balancing several subjects. Chatswood tutoring can provide a fixed learning point a...

Daily Bulletin - avatar Daily Bulletin

The Rise of Digital Marketplaces in the Australian Trade Sector

For decades, the Australian trade and construction sector operated almost entirely on word-of-mouth recommendations and local community networks. Small business owners typically relied on local newspa...

Daily Bulletin - avatar Daily Bulletin

How Immigration Lawyers Can Help

Introduction Visa decisions can shape employment, family life, study plans, travel, and future residence. A small omission can lead to delay, added expense, or refusal. Immigration lawyers assess l...

Daily Bulletin - avatar Daily Bulletin

How Industrial Drying Equipment Supports Efficient Processing

Many industrial processes require moisture to be removed from compressed air, products or process materials before they move to the next stage. Excess moisture can affect equipment performance, produc...

Daily Bulletin - avatar Daily Bulletin

Practical Ways a Whiteboard Can Improve Workplace Communication

Effective communication helps teams stay organised, share ideas and keep track of important information. While digital tools are now common in many workplaces, a whiteboard continues to provide a simp...

Daily Bulletin - avatar Daily Bulletin

Designing Eco-Friendly Custom Water Bottles for Your Next Event

The Evolution of Sustainable Event Merchandise Event planning has undergone a massive transformation over the last decade. Gone are the days when organizers could hand out cheap, single use plastic...

Daily Bulletin - avatar Daily Bulletin

Why Choosing a Professional Florist Melbourne Makes Flower Delivery Impactful

Flowers have a great power to speak when humans cannot express their feelings with right words. Flowers are the best gifts when you are celebrating a birthday or welcoming a newborn child into your fa...

Daily Bulletin - avatar Daily Bulletin

The Business Case for Choosing Australian Fabricators Over Imported Alternatives

For a long time, you might have defaulted to overseas suppliers when sourcing fabricated metal components for a project. The unit price was lower on paper, and the maths seemed straightforward. That...

Daily Bulletin - avatar Daily Bulletin

The Daily Magazine

Why Sydney's Older Timber Homes Are the Last to Show Visible Termite Damage

There is a common misconception about how termite damage becomes apparent. Most homeowners assume th...

What to Consider When Choosing Duct Cleaning Melbourne Services

When property owners search for Duct Cleaning Melbourne services, the first consideration should b...

Why Does a Toothache Suddenly Turn Constant?

For weeks the tooth only complained now and then. A twinge with ice cream, a brief ache after a swee...

Best Jewellers in Brisbane to Discover for Custom Engagement Rings

Choosing a jeweller for a custom engagement ring is an important decision. The process involves mo...

How fast can you charge an EV at home? Charger speeds explained

Ask new EV owners what worried them before buying and charging time comes up early. A petrol tank fi...

Crossing Several European Borders? How to Keep Your Phone Working the Whole Trip

A multi-country trip through Europe can cross three borders in a day. Take the coach from Split to...

Behind the Scenes: How Medicines Stay Safe Before They Reach Your Pharmacy

You pick up a prescription, glance at the label and pop the box in your bag without a second thought...

How Local Organisations Can Get Their Story Told in the Media

The local junior footy club raises enough money to send a team interstate. A community garden double...

Understanding the Compassionate Flexibility Built Into Religious Fasting Traditions

You've probably been aware of religious fasting as part of the cultural landscape, whether through...