Will Good Intentions Revive Russian Shipbuilding?
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Will Good Intentions Revive Russian Shipbuilding?


Will Good Intentions Revive Russian Shipbuilding?

The Soviet Union was once one of the world's leading shipbuilders that produced a million tons DWT each year. Its collapse has left 65 shipyards and docks, 100 specialized factories and engineering plants, scores of research centers and institutes, and a workforce of 200,000 - a huge but still severely underemployed sector - without state support and with really little work to do. In 15 post-Soviet years, the Russian civilian (merchant and passenger) fleet has shrunk 3.5 times, losing about 800 vessels, notably almost all refrigerated carriers and passenger vessels. Defense orders have fallen to 5% of the Soviet-era level.

In early 2003, Russia had 940 freighters (5 million tons DWT) on its records; however, most large ships (180 totaling 7 million tons DWT) were registered in other countries and in offshore states. Put together, these two figures listed Russia as 13th in the world by the displacement of its operational fleet, fueling a bitter debate whether this country actually needs to fight for global maritime leadership. Now that President Vladimir Putin has signed Russia's Maritime Doctrine 2020, the answer to this debate is conceptually yes. The doctrine makes maritime revival one of Russia's national priorities, focusing on measures designed to encourage national shipbuilding and create a favorable and competitive market environment for operators. Hopefully, this effort will be administered better than the previous two: the 1993-2000 doctrine, under which 589 vessels (8,427 million tons DWT) were to be imported largely failed, with only 25% of the vessels and only 5% of deadweight actually bought; under the 1996-2000 fishing development strategy, the state promised to provide fishing companies with 301 new vessels but only 14 finally became operational.

The shipbuilding commission will now help coordinate relevant business interests with state activities and shipbuilding with other sectors of the economy; promote modernization in the industry; work out proposals on priority projects and bills to improve the legal base; and shape a national maritime policy, part of which is support for national shipbuilding. Future ships will be built and those that are operational will be used as collateral with creditors - this is a well-established world practice. However, nine in ten newly built Russian ships have been financed internationally and therefore have to be registered in countries providing the highest safety and lowest tax risks (taxes range from 5% of total revenue in "owner-friendly" countries to 86% to 88% in Russia).

Whether the government will reverse this appalling difference that makes foreign freighters more competitive than Russian in the Russian cargo market remains to be seen. If it fails, operational and even future ships built in Russia will immediately go to other countries for registration. The doctrine, however, does not go far enough in protecting national operators. In the United States, for example, the government guarantees shipbuilders' loans for 87.5% of the total cost of a new vessel. As a result, such loans are repaid by installments that are extended up to 25 years.

RIA Novosti  

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