Maritime Cluster in Japan - Shipbuilding and WP6 - Shin Otsubo Deputy Director-General Maritime Bureau Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Ministry of Land, Infrastructure, Transport and Tourism
Contents Maritime Cluster in Japan Shipbuilding industry and WP6
Maritime Clusters in the World Stavanger (Norway) Concentration of shipbuilding and universities specializing in offshore energy development Rotterdam (Netherlands) Biggest European port; accounts for 60% of inland water transport; Piraeus (Greece) London (U.K.) Birthplace of marine insurance and classification society; concentration of informationrelated industries Biggest European port for cruise; concentration of shipowners Singapore Concentration of trade and financial business in Asia, bunkering These clusters have their own specialized strengths. 3
Characteristics of Japanese Maritime Cluster Japanese maritime cluster has a wide range of marine-related activities and competitive core activities. Core activities: shipping, shipbuilding, marine equipment, port, etc. Marine-related activities: education, financing, broker, legal services, etc. 4
Overview of Maritime Cluster in Japan Total sales of the Japanese maritime cluster: 141 billion USD (2011). Value added: 47 billion USD (2011). Core maritime industry: 109 billion USD Ship mgmt (part of shipping) Ship repair 3 billion USD Port transport 18 billion USD Shipping 47 billion USD Shipbuilding 27 billion USD Ship machinery and equipment 11 billion USD Society Waterway mgmt 1 billion USD Maritime industry Waterway services 1 bln USD Classification Marine equipment 1 billion USD Marine insurance Education Relevant industries 11 billion USD Retails Paper making Grain Steel Car Oil Non-core Maritime industry 20 billion USD Parts supply for ships Public services Coast guard Storehouse Logistics Legal Finance services Trading House Staffing services Industries close to maritime 1 billion USD Marine development Offshore Fishery Marine leisure Broker, consulting Research Electronics Non-ferrous metal Utilities Others Source: Japan Maritime Center 5
Core Activities of Japan s Maritime Cluster 75 % Japanese Shipping 25 billion USD Maritime Transport Ocean-going: 47 billion USD 88 % (fleet) Japanese Shipbuilder Ocean-going: Companies: 210 Employment: 6,000 Companies: 1,100 Employment: 85,000 Sea farer Classification Society Ship management company Marine insurance 71 % Japanese Shipbuilder 95 % Japanese Ship Machinery Industry Finance 9 billion USD Companies: 670 Employment: 41,000 Trading company Source ; final report New Comprehensive Policy on Shipbuilding Industry 6
Concentration of shipyards in western Japan The shipbuilding industry is concentrated in Western Japan. In many local cities, a large portion of economies depend on shipbuilding. Share of shipbuilding in local economy Imari:30% 伊万里市 30 % Mihara:17% 三原市 17% Nakatado:22% 仲多度郡 22% 丸亀市 Marugame:33% Sasebo:18% 佐世保市 18 % 35 % Imabari:24% 今治市 Saikai:81% 西海市 24% 長崎市 23% Source: Clarksons Research, Japan Ship Machinery & Equipment Association 81 % Nagasaki:23% 玉名郡 36 % Saeki:35% 佐伯市 35 % Tamana:36% 臼杵市 24 % 出典 : 製造業全体は 経済産業省 工業統計調査 造船業は 海事局調べ Usuki:24%
Source: Commission of maritime city interaction in Imabari city (2014) Imabari Maritime Cluster Largest as shipbuilding Ship construction 522 Imabari 19 % Share of shipbuilding companies which have office is in Imabari 34% Related industries Marine equipment maker: 160 Ship building Ship machinery BARI-SHIP maritime exhibition comparable to Posidonia/ Nor-shipping? Biggest maritime city in Japan Maritime Cluster Shipping Financial institutions Seamen s training Local banks focusing on ship finance Largest as shipowner Ocean-going vessls 2,566 Imabari 940 Education base for seafarers National Maritime College National Institute of Technology
Economic ripple effect of shipbuilding industry Shipbuilding is one of the economies which have large economic ripple effect; ranked as 6th in 49 industries. Economic ripple effect of shipbuilding Ratio of economic impact of shipbuilding to total economy is about 3. Induced total production value / Ship production value Ranking of Economic Ripple Effect, by industry in Japan Rank Industry 1 Trucks, buses 2 Cars 3 Steel 4 Car Equipment 5 Shipbuilding and repair --- --- 30 Shipping Shipbuilding is a core part of Japanese Maritime cluster.
Contents Maritime Cluster in Japan Shipbuilding industry and WP6
Characteristics of Shipbuilding Large economic impact High spillover effect Employment in local cities Many emerging countries are trying to develop the shipbuilding industry. Cyclical industry: booms and slumps, depending on the shipping market. Time-lag between order and delivery of ships; coupled with volatility of shipping market, speculative orders may prevail. High exit barrier: facilities difficult to use for other purposes, loss of employment feared OVERCAPACITY
Developments of the Global Shipbuilding Shipbuilding is cyclical: short booms followed by longer slumps. million GT 110 100 90 80 70 60 50 40 30 Other Europe Korea China Japan Seaborne transport volume Constructed too much 12000 10000 8000 6000 4000 20 10 2000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 0
Negative Effects of Overcapacity 140 120 100 Neworders drop sharply and stay low for a long time Low level of ship price remains for a long time 80 60 40 20 0 million GT Neworders 2000 2002 2004 2006 2008 2010 2012 2014 2016 180 160 140 120 100 (Jan.~Sep.) 80 60 40 20 million $ Vessel price bulker(capesize) bulker(panamax) tanker(vlcc) tanker(aframax) 0 2005 2007 2009 2011 2013 2015 Fleet surplus keeps freight rate low, keeping ship prices low, too. Excess capacity, once emerged, does not go away easily.
What happens during shipbuilding depression? Due to large economic impact and long slump of shipbuilding, governments tend to protect shipbuilding in their countries. Subsidies, loan, debt forgiveness, etc. inconsistent with international rules However, since global shipbuilding industry is a single market, governmental support inconsistent with international trade rules in one country will distort the entire global market. Policy coordination among shipbuilding countries is essential to establish normal competitive conditions: OECD WP6
Efforts by WP6 Core mandate of WP6: Establish normal competitive conditions in the global shipbuilding industry 1960s - 1980s: Non-mandatory instruments General Guidelines for Government Policies in the Shipbuilding Industry General Arrangement for the Progressive Removal of Obstacles to Normal Competitive Conditions in the Shipbuilding Industry 1994: Mandatory instruments; tailor-made for shipbuilding Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry: not entered into force 2000s: The 2 nd attempt for the mandatory rule, with China Negotiation for new shipbuilding agreement: failed
Role and challenges of WP6 Role Time has passed, but the significance of the WP6 mission unchanged: Establish normal competitive conditions. Challenges Address the excess shipbuilding capacity. Back to the basics: re-confirm the market principle. Let the productive ones survive. Adjusting the capacity may be painful. The main government role is to reduce the social costs. Learn from the past, while more and more countries wish to develop shipbuilding industries. Brazil, India, Indonesia, Philippines, etc.
Viewpoints for Sustainable Maritime Industry Key words for sustainable development of the maritime industry Environment, safety, innovation, productivity, human resource, etc. Japanese Maritime Cluster grew together with local economies. Not overinvestment; enough care for education and training, stable employment. Model of sustainable maritime industry! Fair competition continues to be an indispensable element for sustainable development of the maritime industry due to its nature of single market. More for WP6 to accomplish