MOSCOW. (RIA Novosti economic commentator Vasily Zubkov.)
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 instrument 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 refrigerators and passenger liners. 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.
In the current doctrine, the president does not promise any manna that will come from who knows where but creates mechanisms of state support, designed to encourage shipbuilders to feed themselves. Russia loses up to $7 billion every year to international freighters because only 4% to 5% of all exported cargo is carried by the Russian fleet - in a world where maritime cargo traffic, including electric recourses, grows by 20% to 25% annually and will exceed 500 million tons by 2010, compared with 337 million tons in 2002.
The interdepartmental shipbuilding commission created under the umbrella of the Industry and Energy Ministry and headed by minister Viktor Khristenko 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.
Khristenko says the state will provide stable and reasonably integrated structures crucial for finding a common ground between Russian shipbuilders and shipowners. Lower taxes and favorable loan terms that the commission will fight for will create prerequisites for a competitive shipbuilding industry.
Lawmakers have so far been helpful, adopting at the second reading, a so-called "Second Register" bill that provides for better registration conditions for shipowners who want to register their international vessels in Russia. The bill targets three groups of vessels: Russian-owned and Russian-registered vessels that are oppressed by high taxes and tariffs and accordingly poised to move to "more favorable" countries; Russian-owned and foreign-registered vessels; and foreign-owned vessels that operationally should be Russian-registered. Shipowners who submit registration papers within 45 days will be relieved of VAT and customs tariffs (but will still have to pay the registration tariff and the unified social tax) and will work on a transparent freight market. Most importantly, the bill will allow them to attract Russian and international financing to build new ships.
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.
An international register will be also good for crews as trade unions have successfully lobbied for considering Russian sailors employed by an internationally registered vessel to be subject to all international requirements (including wages starting from $1,550 a month for Sailor First Class and compensations, up to $75,000 for death of a sailor to his family). Shipbuilders who fail to comply with international standards usually have to deal with the influential International Transport Workers' Federation, rather than with weaker national bodies.
The unified social tax for all sailors will go to the Russian budget, and all crewmen will be protected by Russian laws and by numerous conventions of the International Labor Organization, which Russia has ratified. This should help prevent Russian sailors from being held in foreign custody for failure of their shipowner or operator company to pay tariffs, taxes or whatever, which so far has been easy to get away with because Russian crews have no legal protection.
The faster the good intentions of the doctrine are translated into action, the sooner we will see the Russian merchant fleet resurrected. All economic preconditions are already there. The only thing that is left is the political will to use them.
