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CONTENTS
Future
of Australia's Merchant Shipping Industry
This
discussion is repeated as the Victoria Divsion considers many
of the matters raised are still of current interest.
SPEAKER:
William (Bill) Bolitho - (Past Chairman Australian National
Maritime Association (ANMA - now named Ship-owners' Association
- ASA) - past Chairman Australian National Line (ANL).)
THE
FUTURE OF AUSTRALIA'S MERCHANT SHIPPING INDUSTRY (c1997)
On Monday night there is a meeting between the Peter Reith, Minister
in charge and the Maritime Unions, at which I understand he will
put the Government's new OZ policy with respect to shipping, before
the Unions. He has already spoken to the ship-owners this week
I understand. I wouldn't expect anything significantly favourable
to Australian shipping to come out of that. Whatever I tell you
tonight might be completely wrong by Monday. In Australia today
shipping and waterfront activities are the responsibility of the
Minister for Workplace Relations and Small Business. Clear evidence
that Government policy accord to Australian flag shipping an equality
of importance to the economy with sandwich shops, lawn mowing
services and newsagents. Unfortunately, both for the industry
and for the nation as a whole, this is the case.
In his speech to the Australian National Shipping Industry Conference
in Melbourne last month the minister concerned, Mr. Peter Reith,
gave an absolutely clear statement of the Government's policy.
In essence this is a policy of no support for Australian flag
shipping, the encouragement of Flags of Convenience vessels (FOC's)
to displace them and a determination to replace Australian seafarers
with third world crews. The Minister told the Conference that
the industry was "dead in the water" with "unmistakable signs
of decay". That the percentage of Australia's trade carried in
Australian flag ships had fallen over a decade from 8.2% in 1986
to 5.2% in 1996 and that Australian flag ships carried a $2 million
dollars a year cost disadvantage in respect of their F.O.C counterparts.
All this is true but what the Minister did not tell his audience
was that this was the result of deliberate policy of Governments
of both political persuasions over many years and that the $2
million cost disadvantage was a direct and inescapable result
of Government taxes, charges and social on-costs which Australia
levies on its ships and crews and which their Flag of Convenience
competitors escape.
Indisputably the industry has been in decline since shortly after
the end of the Second World War and the policy of the present
Government appears to be to make that decline terminal and complete
the collapse of the industry.
But why is this so?
How did it come about that a sovereign nation with the fifth largest
shipping task in the world is abandoning that task to foreign
interests by deliberate Government policy?
And more importantly what might be the results of this policy?
Despite its population of only 18 million people Australia, situated
at the end of the world's trade routes, has the fifth largest
sea transport task in the world in terms of ton/kilometres. That
task is dominated by the annual import of some six million tons
of oil products and the export to relatively distant markets of
between 500 and 600 million tons of raw materials and primary
products such as coal, iron ore, bauxite and grain. With its domestic
sources of raw material remote from its manufacturing centres,
Australian coastwise trade is also dominated by the carriage of
raw materials in bulk. Of the 45 million tons or so moved coastwise
annually, bulk cargoes represent about 85% and of that 85%, steel,
aluminium and oil account for about 90%.
These three industries underpin the productive capacity of the
economy and the volumes of raw material required to serve them
are such that coastal shipping is the only feasible means of transport.
THERE ARE NO ALTERNATIVES TO SEA CARRIAGE FOR THE RAW MATERIALS
OF AUSTRALIAN INDUSTRY - There is simply no alternative. It is
no exaggeration therefore to state that the whole of the Australian
economy rests on our ability to access safe, efficient cost effective
and uninterrupted sea transport both domestic and overseas.
A study by the Directorate of Naval Shipping in 1987, which is
still relevant today, (Coastal Shipping: Its Importance to the
Economy) found that a relatively minor disruption to coastal shipping
would seriously damage the economy so that the disruption of shipping
would be a cost effective and inviting proposition for an aggressor.
A single conventional submarine loitering in our sea-lanes would
seriously disrupt our economy and triple or quadruple freight
rates. In 1958, a decade after the end of the Second World War
and very largely as a result of the dearth of shipping caused
by that war, Australia had a flourishing shipping industry.
There were 188 major trading vessels flying the Australian flag.
Foreign vessels operating on the Australian coast under Single
Voyage Permits were almost unheard of and vessels of the newly
formed Australian National Line (ANL) were trading extensively
overseas. Experiments in the carriage of refrigerated containers
were under way, a car and passenger ferry was under design for
the Bass Strait trade and the number and mix of vessel types was
adequate to the support of the economy in peace and the operations
of the Australian Defence Forces (ADF) in emergency. ANL alone
had 46 vessels in commission and 7 vessels building.
At that time it would have been plausible to assume that a bright
day was dawning for Australian shipping.
It was however a false dawn. By 1986 there were only 100 major
trading vessels left under the Australian flag and today there
are just 63. A decline of nearly 40% in ship numbers over the
last decade. Admittedly they are bigger, faster and more efficient
ships but that does not change the picture of accelerating decline.
The national flag carrier ANL has been largely destroyed by Government
action; competition from untaxed unregulated F.O.C vessels and
is under process of sale to foreign interests.
The use of foreign flags in our domestic economy under Single
Voyage permits (SVP's) is extensive and growing exponentially
and the number and mix of vessel types under the Australian flag
is totally inadequate to support either the economy in peace or
the operations of the ADF in time of emergency. This situation
of war requiring Australia to build up a shipping fleet responsive
to the needs of the emergency followed by the destruction of that
fleet in times of peace is not however a new phenomenon. It has
happened before.
In the First World War the shortage of shipping caused the then
Prime Minister, Billy Hughes to form the Commonwealth Government
Line of Steamers in 1916. Better known as the Commonwealth Line,
at its height in 1923, it operated 54 vessels under the Australian
flag both domestically and internationally. By 1928 it had been
reduced to 7 vessels and was sold off to foreign shipping interests
for a song by the Bruce-Page Government then in power. Indeed
the purchaser defaulted on the payment, the ships had to be repossessed
and were eventually disposed of at a further discount to their
worth. Thus in its short history of under a hundred years as a
sovereign nation Australia has twice built up a major national
flag fleet in emergency and then seen it destroyed by Government
action after the end of the emergency.
With the fifth largest sea transport task in the world and with
both our economy and the defence of our sovereignty dependant
upon that sea transport why do we not have a national flag capacity
appropriate to the task?
Why have successive Governments first placed Australian flag shipping
in an uncompetitive position with taxes and charges not borne
by its foreign competitors and then used that uncompetitive position
as an argument to destroy the industry, as minister Reith did
last month?
It is a bit like the parricide who, having murdered his parents,
throws himself on the mercy of the court as an orphan. The Government's
policy might be right and it might be wrong, only time, circumstances
and perhaps the fortunes of war will tell, but my task here tonight
is to see if we can determine how this situation came about?
What it might mean for the future of the Australian fleet and
our ability to ensure the safe sea carriage of our commerce in
an emergency?
Well then how did it come about?
There are two determinants overlapping in time. One historical
arising from our colonial origins and one of more recent times
arising from the inability of nations either individually or collectively
to control the free market in international shipping. As the historical
influence has waned with the weakening of our colonial bonds the
free market influence inimical to the development of Australian
flag shipping has waxed in importance and overtaken it.
Australia's huge market for sea transport draws foreign owners
like flies to a honey pot in times of peace and that competitive
commercial pressure is obviously a constant and major factor inhibiting
the growth of Australian flag shipping. To understand the restraining
influence of historical forces upon our industry however we must
go back to European settlement when the structure of our industry
was imported entire from imperial England. This industry structure
was no doubt well suited to British ships at the height of empire
when half the ships in the world flew the British flag. It was
no doubt well suited to the management of sailing ships. Fragile
envelopes of wood and canvas at the mercy of wind and wave where
the margins of safety were small. Where harsh discipline and the
instant unthinking obedience of uneducated illiterate crews were
necessary for the safety of all. But it was not well suited to
Australia. Either then or now. It was a class based structure
of the master under god and the beasts in the foc'sle and the
dreadful industrial relations history of our industry sprang like
dragons teeth from attempts to force it upon Australian seafarers.
This eighteenth century us and them" master-servant" industrial
relations structure of the industry is even more inappropriate
in modern democratic Australia than it was when we received it
from Imperial England 200 years ago. It was and remains a significant,
although I would argue not crucial, factor in our fatal inability
to develop a national flag fleet.
Along with an attitude to industrial relations based upon a master/servant
relationship we also inherited a system of maritime commerce owned
and controlled by Britain through its Navigation Acts, which has
lead to a situation where our freight rates and shipping services
are still determined today, not in Australia in the light of day,
but in the smoke filled back rooms of London, Hamburg, Tokyo and
Piraeus.
From its first drafting in 1902, until its provisions came into
operation nineteen years later in 1921 the bill for our own Australian
Navigation Act was bitterly opposed and frustrated by British
shipping interests and an imperial shipping conference was held
in London in 1907 in order to - and I quote - "forestall the serious
injury that will be done to the interests of British shipping
and the Empire". It took nineteen years to get approval from Britain
to control our own trade in our own ships in our own country under
our own flag because the British shipowners opposed it, delayed
it and lobbied against it on the grounds of the serious injury
that it would do to the interests of British shipping and the
empire. The 1923 Royal Commission into the Navigation Act revealed
that over this nineteen year period virtually the whole of the
Australian shipping industry had fallen into the hands of the
British Inchcape Group and that their interlocking interests were
such that and I quote " it becomes patent that a comparatively
few persons, mostly resident outside Australia, and with large
English and foreign interests, constitute an enormous Trust which,
to a large extent, controls the economic destinies of Australia."
The conclusion of the Royal Commission was that the Navigation
Act had failed to build up an Australian mercantile marine and
that the actions and investments of foreign shipping interests,
mainly British, were responsible for that failure. The formation
of the Commonwealth Line by Billy Hughes in 1916 as a response
to wartime exigencies was bitterly opposed by the British shipping
interests. Initially it was a huge success and by keeping freight
rates down, it was a thorn in the side of the foreign shipowners
until it was sold by the Bruce Page Government in 1928 after they
had already hamstrung it through the Commonwealth Shipping Act
of 1923.
Here is what the Oxford History of Australia has to say about
the sale of the Commonwealth Line. "Its reorganisation in 1923
had impaired its capacity to compete with the British shipowners
and its sale in 1928 (to a British purchaser who subsequently
defaulted) allowed the British shipping combine to immediately
increase freight rates." So from its formation by a Labour Government
in 1916 to its demise at the hands of Stanley Melbourne Bruce
and his conservative Government in 1928, the Commonwealth Line
was bitterly opposed by the foreign shipping cartels and that
opposition was a principal factor in its demise.
In his 1932 "The Story of the Commonwealth Fleet", D.J.Amos
paints a picture of a viable national flag shipping line being
sunk by Prime Minister Bruce for political purposes.
Twenty-five years later, again under the exigencies of war, the
forerunner of the Australian National Line, The Australia Shipping
Board was formed to carry the nation's sea borne commerce. The
formation of the Australian National Line and the events surrounding
the abortive and damaging attempts of the Labour government to
sell it in recent times bear an uncanny resemblance to the saga
of Bruce and the Commonwealth Line. But the inhibiting influence
of British shipping interests on the development of Australian
flag shipping, declining with the decline of empire, has been
overtaken by an even worse problem. One which threatens to complete
the destruction of the industry. Destruction which the accidents
of history and the corruption of Governments have so well begun.
The Flag of Convenience (FOC) phenomenon.
In its modern form the FOC problem first arose in America in 1917
when American shipowners, aggrieved at having to pay taxes on
their profits, found that by setting up a so called 'open register'
in Panama and flagging their ships out to it they could avoid
paying taxes. To their great delight they found that they could
not only avoid taxation but could also evade prohibition and other
laws and in 1920 two American cruise ships, the "Resolution" and
the "Resolute" were flagged out to Panama to evade America's prohibition
laws. When the American shipowners first avoided taxation and
evaded the law by setting up the first modern open register in
Panama three quarters of a century ago, they triggered a cascade
of developments in tax avoidance and law evasion in ocean transportation
which has become an avalanche, the outcome of which cannot be
foreseen.
Shipowning in the free market of international shipping has now
frequently and increasingly become a system of financial asset
plays with "casino ships". A shipping entrepreneur buys an old
and unseaworthy ship cheaply on credit using the ship as security,
registers it in a tax haven, crews it with unskilled seamen with
fraudulent certificates of competency, classes it with a dubious
classification society sight unseen, operates it through a ship
manager and places it in a single ship company. If the ship sinks
or is stranded so that pollution, personal injury or other liabilities
attaching to it exceed the quite small- value of the ship, then
the owner simply bankrupts the company and walks away to repeat
the process elsewhere. Leaving the wreck and its liabilities to
the bank and leaving his creditors and any surviving crew left
alive to whistle for their money.
The existing systems of international regulation and control of
shipping built up over centuries have failed to control the FOC
ship phenomenon and new ones have not yet arisen to take their
place. Despite the best efforts of the international community
through the IMO there is in reality no real control over the quality
and conduct of international shipping other than the enlightened
commercial self-interest of individual shipowners. Some are good,
some are bad and some are very bad indeed.
In its policy of replacing Australian flag shipping in the domestic
economy with foreign flag ships the Government is following in
the footsteps of the American shipowners when they avoided tax
and evaded the law by flagging out to Panama in 1917. Disguise
it how they will and use whatever bureaucratic euphemisms they
may the Government is advocating the avoidance of tax and the
evasion of the law by holding these actions up as models of successful
economic behaviour. And indeed they are if the profits remain
with the FOC operator and the human, social, environmental and
other costs are borne by the public at large.
I have spoken at great length on the origins and development of
the FOC vessel in order to emphasise that this phenomenon is not
going to go away. It is a deep rooted and formidable economic
force in International Ocean transport. The short term profits
to shipowners and charterers are great, immediate and certain,
while any sanctions or penalties are slight, distant in time,
and unlikely to happen at all.
It is therefore going to be impossible to reverse this process
until the long term damage to the environment and the structure
of ocean transport becomes abundantly clear even to the most doctrinaire
economic fundamentalist or more likely until our established controls
and institutions are completely overwhelmed. Many of you here
tonight will remember the case of the F.O.C. oil tanker Kirki
in Western Australia a few years ago. The hull was so rusted her
bow fell off. A more recent and equally perfect example of an
F.O.C. is the Giga II discharging iron ore at Port Kembla in November
last year. A badly corroded bulkhead collapsed injuring two workers.
The ship was owned and flagged in Malaysia, managed by a Norwegian
ship manager, chartered by a Japanese firm, sub-chartered by an
Australian firm and crewed by Filipinos who could not read the
ships operating manuals which were in Japanese.
Once the Government's policy has come to full fruition and the
Australian flag fleet is no more then the whole of Australia's
maritime commerce, including the coasting trades will be in the
hands of foreign flag vessels. Inevitably some proportion of that
trade, on which our vital production of iron, steel, oil and aluminium
depends, will be carried in vessels such as the Kirki and the
Giga II. Australia currently has the capability to carry out at
least the coastwise movement of the raw materials of its commerce
in Australian flagships.
In an emergency the exigencies of that emergency and the fog of
war will render it hard for the Navy to protect that commerce
in any case.
How is the Navy to protect our sea lanes in an emergency when
dealing with vessels like the Kirki and the Giga II even supposing
that the foreign vessels do not disappear at the first gun shot
as they have on two occasions in the past?
It is going to be hard enough in an emergency to communicate with
and exercise control over well maintained Australian flag ships
over which we have some legal control let alone the rag tag and
bob tail of international shipping that is likely to be available
to us in an emergency.
The standard of seamanship in many of these vessels is so bad
that in close company escort vessels will have to protect themselves
from them as if they were the enemy. You will not be able to talk
with some of these ships in English let alone control them.
Under the Government's policy towards Australian flag shipping
I suspect that Navy would be well advised to think long and hard
about procedures to deal with unsafe vessels operated by unskilled,
incompetent crews with little or no English because these are
the only ships likely to be available to Australian industry in
any sizeable emergency. I don't know what procedures the ADF has
in place to meet the shipping requirements of an emergency, but
whatever they are I am sure that in an emergency the international
FOC's available to us will test them to breaking point and beyond.
The end result of the Government's policy is to place the carriage
of our sea borne commerce totally in the hands of vessels such
as these because they are cheaper than Australian ships. And they
are cheaper. They evade taxes and avoid the cost of complying
with the international conventions on the payment of a living
wage to the crews, occupational health and safety, and pollution
such as SOLAS and MARPOL.
It will also place support for the armed service in the defence
of our sovereignty in uncertain and possibly hostile foreign hands.
It is criminal folly for an island nation to allow the carriage
of its commerce and the defence of its sovereignty to fall totally
into the hands of foreigners. Yet that is what the current policy
of the Government is doing.
On a global scale the ultimate consequences of this FOC phenomenon
cannot be foreseen. They can however be foreseen with respect
to the Australian flag fleet and its future. Without an immediate
change of policy and strong Government and public support the
industry has virtually no future. Thankyou.
QUESTION
& ANSWER TIME
(c) Copyright Navy League of Australia) - Victoria Division Aug
2004
Q: The costs and taxes the Government has levied from our
ships make them uneconomic. Is there any logic in that at all or
is it purely destructive tactics? If it is the latter then why?
What is the advantage of it?
Bill Bolitho (B.B.) : There are two factors. One is the leave
conditions of Australian crews are better than, as a rule, than
foreign crews. It takes about 2.1 Australian crewmen to man a berth
in an Australian ship and about 1.8 in an equivalent FOC OEDC type
vessel. So there is a leave component that makes them a bit more
expensive. The principal factor is firstly the oncosts. For every
dollar you pay an Australian seaman there is approximately 46 percent
in oncosts. This is true of most Australian industries - long service
leave, superannuation, goodness knows what. This doesn't apply to
foreign flagships. Australian crews pay PAYE. Foreign crews almost
totally, where they are registered in a tax haven, do not pay any
tax at all. The ship may pay 5 or 6% as a general tax to the tax
haven in which they are registered but the crews certainly do not
pay tax. It's much more advantageous to an Australian Officer or
Engineer to sail in an FOC ship, even though his wages are lower,
his take home pay is higher as he pays no tax. It is the tax and
the oncosts that are the greatest single component of the difference
between Australian crews, ship costs and foreign ship costs. It
is roughly of the $2 million, about $1.6 or 1.7 million is in taxes
and oncosts and the $300,000 is the component owing to the additional
leave conditions.
Q: That is not all due to Government policy the oncosts are
going to be there regardless of the policy are they not?
B.B. Certainly they are not carried by foreign flag ships.
You don't have long service leave, superannuation, sick pay, occupational
health and safety in foreign ships, they don't have it. To that
extent they are operating much cheaper than Australian crews.
Q: So what should the Government be doing if it was so minded?
B.B. There is only one thing you can do, and the Labor Government
did it just prior to sacking a couple of years ago, for Australian
ships operating internationally they introduced the removal of PAYE
for Australian crews on foreign flagged ships. That moved a significant
way towards closing the gap between the foreign flagships and Australian
flagships. That was then removed by this Government when they came
to office.
Q: PAYE tax was given back to the owner not to the person.
B.B. That's true but that also enabled the owner to pass
that through.
Q: I can't imagine, as much as I would like to think it,
that Australia is not unique in this situation, which other countries
are affected in the same way?
B.B. The United States principally.
Q: Is there any operation to bring in the United Nations
to remedy this disastrous situation?
B.B. Well a number of countries such as Norway, Germany, Holland
and France have introduced equivalent tax havens if you like. The
French have established a register down in the Kergeulen Islands
in latitude 55 south where there are three meteorologists on staff,
I think. It is a device to enable them to relieve the tax burden
on French flagged ships without that spreading to the general community.
A number of countries have introduced what they call second registers,
which exempts ships flying that flag from national taxations. So
a number of countries are endeavouring, you might say the more historical
maritime countries, to overcome this problem by placing their ships
on roughly the same footing as their international competitors.
Another factor driving this is that once you lose a national flag
fleet you lose your source of skilled seamen and administrators
that you need to run your maritime commerce. Pilots, harbour masters,
ship surveyors, cargo surveyors, cargo brokers. You lose over a
period of time, those skills in your economy. The Norwegians in
particular, which have a very strong maritime commerce, have found
that they have literally been forced to set up a second register
in order to retain access to the people coming out of the shipping
industry into the commercial side ashore. Certainly it is a worldwide
phenomenon. It is a very serious phenomenon.
Q: What are the organisations doing to remedy this in terms
of approaches to Governments and standardisations ……. ?
B.B. The national maritime organisations has about 160 odd
members, the principal body trying to control this phenomenon, but
it is not possible for them to do it. The diplomatic processes are
so slow it takes several years for the IMO to approve any sort of
sanction. It takes only a few months for any recalcitrant member
to work out a scheme to avoid the sanctions. Very very difficult.
The profits are so great, the flow of money is so immense, that
I think it is virtually impossible to control through ordinary diplomatic
channels.
Q: Why have the established maritime nations and governments
gone out of their way to basically do away with the shipping? You
look at the Norwegians and the Danes the taxes are so high they
almost seem to want to do away with the shipping itself.
B.B. Well the Danes for example did, for many years, I am
not sure of the position in the last couple of years, exempted their
seafarers from taxation altogether. The only problem was that the
rest of the Danish community said 'if the seafarers are exempt from
tax what about us? It got to be a hell of a problem for them politically
a couple of years ago and I don't know what the outcome was.
Q: The tax went to the company owner not the seafarer.
B.B. PAYE the owner employer takes the pay out at the source,
so what happens is instead the owner takes the PAYE out so the seaman
is not better off but the employing company is by taking the PAYE
to its own advantage, which makes the ship cheaper.
Q: It seems to be self-destruct. The flag nations themselves
the bureaucratic costs are so much on the shipping. You look at
the Norwegians they had one of the strongest fleets in the world
for such a small country and now they are going out to second register.
B.B. The shipowner is there to make profit he is not there to
carry cargo or carry out any social responsibility, he is there
to make profit. If it is cheaper to put his ship over to the Bahamas
or the Kerguelen Islands then he'll do it.
Q: I understand that aspect but what I am saying is the bureaucracy
themselves have brought these huge charges and seem to want to destroy
the shipping.
B.B. I am not sure there is any great desire to destroy shipping
it's so politically difficult to give substantial tax breaks, although
the government does it in many areas to give a significant tax break
to shipping. The argument by treasury here is if we do it for shipping
we have to do it for everyone else. Why would we do it for shipping
when if we let shipping be done by foreigners the money Australians
had invested in shipping will then be invested in other useful activities,
computers or something else? So the government is basically indifferent
as to whether shipping disappears or not. That's the Treasury's
point of view and I am sure it is the same in the other countries.
Q: But surely there must be sense in some governments if
not all governments. How do you see the solution to this world wide
problem?
B.B. Just because there is a problem doesn't mean there is
a solution.
Q: I think there is a solution to every problem.
B.B. Eventually.
Q: Yes.
B.B. Eventually I think there is no doubt that standard of ships,
bulk ships, is still falling. They really are absolutely appalling
but not all of them. There always have been good ship owners long
before there were international organisations, long before there
was any shipping law. There were good ship owners and always will
be some good ship owners. The problem is the enormous profits to
be made are so great that small governments actually encourage it.
Like the Netherlands Antilles for example, which out of 168 ships
per year in one port under their supervision, the inspector from
Curacao visited them once a year in discharging his port state controlling
inspections. Smaller governments are making substantial amounts
of money out of them. If you set up a ship's register and a tax
haven for ships it's substantial income for that government and
the commercial activities that go on. There is a strong incentive
for smaller governments to do this anyway. Even though it might
damage other economies it benefits theirs in a small way.
Q: One aspect that is seldom looked at in this matter is
the fact that Australians in general don't give two hoots about
a ship. In my time on the coast here three ports which I thought
were like a traditional shipping port. Newcastle, Fremantle and
to a lesser extent Port Adelaide. If you met someone in the street
in Newcastle and asked him a question about a ship he will be able
to answer it. Anybody. The rest of the country couldn't care less.
It looks inwards not outwards. The politicians are pragmatic in
some ways but realise there are no votes in having ships. I they
destroy the shipping industry there is a ready made substitute wanting
to come in with their Kirkees and all the rest of it. I they destroy
the car industry they don't have that they have to import everything.
Any other industry they care to damage or ignore you don't have
a substitute waiting to take over the job. So that is one aspect
that has to be looked at. B.B. Certainly there is no general awareness
of the shipping industry's importance. We don't know why that is,
it's historical I suppose.
Q's: Historically we should have in this country a very strong
connection with the sea. In the beginning sea transport was the
only one we had. The same thing applies to the interest in the Navy.
Lack of interest.
B.B.: Although there is a good article in the bulletin that
seems full of interest 'Rape , Loot and Pillage'.
Q: Yes I dare say, but no company would show up in shining
colours if it had its past 27 years of problems presented as a summary
giving the impression that that they all happened yesterday. The
article was unfair to the Navy.
Q: When Mr Wran was conducting an investigation into the
shipping industry at great cost to the country and great benefit
to Mr Wran, I didn't see any examples other than the huge losses
that were being incurred. I didn't see any examples of what you
were saying. The individual costs were such that if you take the
burden that was placed on Australian ships by Government they wouldn't
be as excessive as we believe. Are there any simple examples of
a standard ship, be what it is, 100,000 T tanker or 50,000 T Container
ship, and you 'right here's a container ship, here are its direct
costs and here are the overheads and the other costs etc. and compare
that with ship A from Liberia, ship B Monrovia, ship C Panama. Set
it out and illustrate that the Australian costs are unreasonably
high, or they aren't.
B.B. Two Points. First the enormous losses you mention with
respect to Australian National Line are not losses at all. What
Wran did was take a massive provision of almost $100 million out
of it and say "these are provisions to be made against the sale
of the line". That $100 million provision is now coming back in.
It came back in and $15 million came back out of provisions this
year into profit. You will notice in the paper The Australian, the
National Line made a profit of only $13 million this year. $15 million
of that was those provisions being replaced. What Wran did was jiggery
pokey with the balance sheet to prove the line was losing money
when it wasn't. The second point is that it has been done exhaustively.
There are many many studies done by the Australian Shipowners' Association,
the Government itself, they all came up roughly with the same answer.
It's about $2 million difference between crews and the FOC, OECD
and Australian flagged ships. The bulk of that is taxes and charges.
Q: So therefore what you are saying is that the Government
doesn't want to have a shipping line. B.B. That's right.
Q: You can't toss the infrastructure that is associated with
the people who are coming out of the maritime service into the commercial
side.
B.B. There is another point here that is the balance of payments
argument. The Australian Shipowners' Association did some very extensive
work about 5 or 6 years ago when I was chairman and demonstrated
and we took these figures to the Bureau of Commonwealth Statistician
and some other government mob to make sure our methodology was right.
I just forget the exact figures now but the positive impact on the
current account of a tanker operated as Australian Flag as against
Foreign Flag was about $3 million a year. Container ship was about
$8 or $10 million and a bulk carrier was about $1 million dollars
a year. So there is a positive impact on the balance of payments
on the current account while operating Australian flagships.
Q: My comment I find it a bit harsh to blame the government
purely for the oncosts. I think maybe you would have to admit that
the unions would try to kick up a fuss if you tried to take away
long service leave, etc, which are all oncosts. The question is
you blamed a lot of this current situation on the master servant
situation, I was wondering if you could give me an example of what
you think we should be having, a soviet or something or some sort
of commune. Or could you give me an example of another country something
other than the master servant relationship? B.B. Yes I can both
the Germans and the Norwegians for many years had a very different
structure. It is a structure, which about 8 or 10 years ago we started
implementing in this industry. And that is instead of having the
captain, first mate, second mate, third mate, Chief Engineer, Second
Engineer, Third Engineer, Bosun, greaser, donkey man, AB and so
on, the structured hierarchy. Probably the single major reform that
the Australian industry introduced in the last ten years was to
do away with that structure entirely and start to introduce a concept
of team work so that smaller teams of better skilled people operated
as teams. That is instead of the master saying put out the gangway
or the Chief Engineer saying pull down that unit, as is done in
almost every company ashore, the days work is discussed between
the people and agreed and the people go away and do it. The British
system we inherited, and I have done this myself, some twenty odd
years ago introducing some changes to the weekend penalty rates
on ships I just stood on deck all day I said you pick up that paint
pot, you do that sack, you do this, and if they didn't do it instant
dismissal. There was no other way to get those crews to work without
trying to take away weekend penalties, so I had to stand there all
day saying you pickup this…….put it on the hatch, and he would put
it there. All bloody day. That was the system we inherited from
the Brits. It never worked here. The system we started to introduce
about ten years ago totally did away with that. There are probably
some seafarers here tonight who have seen it work. It actually worked.
Instead of having a separate dining room for the officers and Engineers,
separate dining room for the crew, separate room for the cooks and
stewards, there was one dining room, one mess room and everybody
got the same food, just as you would get at the cafeteria at BHP
or the cafeteria at Western Mining or anywhere else. Everybody got
the same meal and ate it in the same mess room under the same conditions.
These ships worked very very well and as far as I know they are
still working well. That reform process was totally stopped by the
strike in 1994 when Laurie Brereton sold certain portions of the
National Line after having given the maritime unions a clear promise
he wouldn't do so and he did it. They went on strike and the whole
of that reform process was blown up. The rank and file of the unions
said to their leadership 'Hey! What's all this reform bullshit we
have been hearing about. You have been forcing these reduced crews
and these changes on us for years. All of a sudden we find all we
have to do is the old style, we kick the government in the balls
and the cash register rings. That was the end of the reform process
because it was very hard to get the union membership to accept any
more reform. Reform basically meant more work less pay and conditions
for them. They simply won't do it any more. We know now we can kick
the government in the balls, a nation-wide four-day stoppage and
look what we got. It destroyed the reform process and no one has
really taken the initiative to start it again. So the answer is
not a commune on board but to introduce ordinary standard management
techniques in the ships. And that's the answer that's what the Norwegians
did and to some extent that is what the Germans do. There was another
part to your question but I got carried away.
Q: I still maintain they have a master servant relationship
where the captain does have somebody doesn't turn to for work. Somebody
jumps ship. You stop paying them. You've still got a master servant
relationship, granted the management style might be different but
the crew member is still responsible to do a days work for a days
pay.
B.B. Master relationship you refer to is the Master Servant's
Act of New South Wales about 1845 or 1850 which was modelled on
the British Master Servant's Act which in fact was quite disgraceful.
I'm not talking about the authority to run your business. What I'm
talking about is a specific set of conditions which flow from the
Master Servant legislation which was incorporated in NSW and was
the basis of most of the ship board authority.
Q: Are you saying that the current shipping master stands
there and says lift that bag tote that bale and that's that way
it works now? I've never worked on a ship like that.
B.B. That was certainly the situation here about twenty years
ago when we tried to introduce reduced penalties for weekends. What
happens now depends largely on the capability of the master and
his character, whether he is good or not. Whether he can personally
carry the confidence of his crew. It is very much a character thing.
The legislation has been changed. It is quite difficult now to give
an instant dismissal on a bad discharge. There are all sorts of
avenues of appeal open to the seamen now and you probably have to
carry the bloke back to the next port or to his home port and then
it gets into the hands of the bureaucrats then he is given a slap
on the wrist and sent to another ship.
Q: Has any of this been transmitted to the Chief of the Navy
and his staff and if so was the result?
B.B. I've been banging this drum for several years now and
some people here know. I delivered this same address to the navy
league and the Master mariners in Sydney about a week ago.
Q: About coastal shipping. Supposing one of the rail links
to Darwin, the central one or the eastern one goes ahead, what effect
is that likely to have on coastal shipping?
B.B. Very little I think. Lets talk from Darwin down. It
is only about a day and a half's further steaming. It is going to
be an enormous cost to build a railway to Darwin. A ship deviation
of say a day and a half extra steaming down to Fremantle. Sooner
or later the cargo carries the cost of all this. The cost of a railway
link up from the centre to Darwin is going to put an enormous cost
on cargo which is certainly not going to be cheaper than another
day and a half's steaming down to Fremantle where you have got ht
existing infrastructure. I just happen to think it's economic madness
to even think about it.
Q: What about picking cargo up at Melbourne and Sydney rather
than going to Darwin? Would that be another week's travel?
B.B. Its about 5000 miles from Darwin around to Melbourne.
But you have already got the existing intercontinental links.
Q: But the ship wouldn't be going anywhere near Darwin originally.
Just say coming down from Singapore instead of going to Darwin she
comes to Fremantle and round the corner.
B.B. That's right its only about a day's extra steaming to
come straight down to Fremantle as it to divert into Darwin. There
is really no point in doing it.
Q: I think that what you are saying is that if we had a rail
straight from Melbourne to Darwin, as straight as you could get
it, the cost of freighting cargo via rail would be vastly greater
than the cost of loading it on a ship at Melbourne.
Q: It has to be.
Q: I believe the cost of acquiring the land for an eastern
corridor would be massive, nearly impossible.
B.B. It's the investment necessary to build a railway that
is huge. You are talking many billions of dollars to build a railway.
Q: Has anyone done a cost analysis on such a proposal? B.B.
Sure that first proposal was done about the turn of the century.
Q: They have unions there too.
Q: Has there been any consideration for Australia setting
up a register for a flag of convenience? Christmas Island, Norfolk
Island?
B.B. I think that . . . . . . .(tape switched off)
Q: What about the ANL being part of a Royal Fleet Auxiliary
and using container ships and whatever?
B.B. That's certainly been considered from time to time including
conversion of container ships for helicopter and VTOL aircraft use.
I am sure you know that two ANL ships were used in support of the
Australian Forces in the Vietnam War - Jeparit and Boonaroo.
Q: The Navy purchased a couple of ships a short time ago
and they turned out to be rust buckets. In my view ANL should be
empowered to have a type of ship that is easily converted for strategic
purposes.
B.B. The only problem is that it all costs money and there
are neither votes nor money in shipping, the money is just not available.
Q: They paid more money in converting this lot than they
would have spent in buying brand new ships.
Q: Do you think that the Australian Unions will go different
ways with say the officers agreeing to less manning where the MUA
would just dig their heels in?
B.B. That's very likely. There is no doubt there is a world
wide shortage of qualified officers and engineers and any officer
or engineer in possession of a valid certificate of competency can
get a job almost anywhere in a reasonable ship under reasonable
conditions. That's not true of the ratings. The real problem is
that the ratings are pouring out of places like China, very poorly
paid, very bad conditions, very hard working, and can very easily
replace Australian ratings. But it is much harder to replace qualified
officers and engineers. That split is already there.
Q: I think that worldwide there is a shortage of officers
and engineers of about 40,000. B.B. 40,000 a year that's right.
Q: 120,000 excess of ratings.
B.B. There are more pouring out of training ships in the
Philippines and China, although the IMO is setting up a 'white list'
to accredit the training of seafarers and if you are producing substandard
ratings and substandard officer then you won't get on the IMO's
'white list' and make it make harder to get crew manning contracts.
But that is going to take a long time and corruption will slow it
down anyway.
Q: One thing is the apathy of the average Australian voter
to the question of overseas trade via the sea. We in Navy League
have been fortunate in having one of our Sydney members produce
the maritime video "Sea & Australia" and yet we found that after
it had been gifted to every Australian Secondary school there was
very very little interest to show the video to their children. Have
you any comment on that and what can we do to re-educate the population?
B.B. I honestly don't know. I have spent my life at it and
I still don't know.
Q (Arch Waters): I would like to ask one last question as
this talk has been terrific. What would you suggest we do with the
governments of the day?
B.B. We'll be here within a couple of years I think. I also
believe we will fiinish up with some foreign flag register here,
a tax haven of some sort, and you'll finish up with ships manned
by Australian Engineers, mates and possibly foreign ratings. I think
that is a strong possibility. I guess all you can do is what I try
and do, speak as often as I can and as loudly as I can, earnestly
as I can, that there is a problem and the government would be wise
to do something about it to try and lift some of the burdens on
the industry. But there is a problem here in that in the senior
levels of the public service at least there is a strong belief that
all it needs to make Australia great is to break the power of the
trade union movement. It might be right it might be wrong. The power
of the trade union movement lies very largely in its ability to
inflict damage on the economy in pursuit of its own interests. They
are just another group of self interested people like any other
like the Master Mariners, the Navy League or anyone else, they all
have their interests. Those unions which can inflict the greatest
pain for the least cost to themselves are therefore the most useful
to the trade union movement, are the aircraft refuellers, transport
workers union, maritime unions. So I suspect there is a fairly strong
head wind in general in the government and the public service that
says let us not encourage an industry which may turn out to be a
powerful tool in the hands of the trade unions. I think there is
a fair bit of that. And they would rather have a subservient bunch
of Chinese seamen rather than a bunch of recalcitrant Australian
trade unionists. There is a bit of that in it too.
Q: Has a similar thing happened in New Zealand? I've seen
ships around their coasts with Danish flags on them, they certainly
didn't look like they had come out from Denmark, they looked like
they were under charter there.
B.B. The NZ coast has been partially opened about 1995, not
totally. Foreign ships are able to carry cargo between NZ ports
but only if they are engaged on an international voyage, they can't
come out and trade on the NZ coast, as I found out very recently.
If it's part an international voyage, from say Christchurch to Auckland,
they can carry cargo from Christchurch to Auckland. But that is
the limit of the opening of their coast because of the large number
of ships that transit New Zealand on the Australian New Zealand
route. There are quite a lot of them. But as far as I know the legislation
did not allow the complete abrogation of cabbotage and enable a
foreign flag vessel to trade on the NZ coast if its engaged in an
international voyage.
Q: In the event of a crisis arising and, assuming that the
ANL becomes non existent, all these foreign ships bringing trade
into this country, the responsibility of protecting that trade would
fall upon our Navy and Air Force. Would it be feasible for the Australian
Government to impose a levy on these foreign companies to pay for
that protection?
B.B. There is a small tax paid on all cargo shipped out of
the country now I think it's 5% and has been for a long long time.
Any foreign flag ship picking up cargo because it's so difficult
to tax any profits, and with the ship owners you would never get
to the truth of it anyway to be honest, the government puts an arbitrary
5% flat tax on all cargo carried out of the country, or they used
to up until a few years ago, I don't know the situation now. I suppose
it would be possible to impose a surcharge of some nature in that
form. The agent of the ship concerned has to pay 5% of the value
of the freight to the government. Whether that made Australian imports
and exports competitive with competitive nations I don't know. Certainly
you could impose such a tax by fiat, whether you can collect it
and whether t might damage trade I don't know.
END OF DISCUSSION FORUM.
Complied
by Navy League of Australia - Victoria Division - 2001
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