Thinking Outside the Box on Cabotage

By Sandy Galbraith

(Part 1 of an extract from a speech delivered to the Australian Marine Pilots Institute at the Australian Maritime College, University of Tasmania by Sandy Gailbraith on November 20, 2014.)

Australia generates massive demand for shipping services. It has the fourth largest shipping task on the globe, with 99 percent of all our international trade volume transported by ship at a value of A$418 billion.

However, at present Australia does not leverage maximum economic opportunity from its shipping dependency. This is despite the fact that the benefits of maritime clusters have been harnessed in many areas of the world – in particular Europe, South America and closer to home in Asia.

In Australia, freight transport services do not even rate among the top 25 goods and services exports and the domestic shipping fleet, as well as Australian involvement in both coastal and international trade, has been in decline for over 20 years.

When I arrived in Australia 25 years ago, we had a fleet of more than 70 ships. Today our fleet is just 21. Why has this happened?

Alternative governments since the 1980s have periodically reviewed the state of the Australian shipping industry. However, persistent failure to take a bipartisan approach in adapting to the fundamental changes in global vessel operating practices in the proactive manner of many other established maritime nations has resulted in a prolonged decline of our domestic shipping industry.

Despite the ongoing lack of investment in blue water ships in Australia, there are still factors which have the potential to create additional demand for these services over time.

Within the lifetime of a typical Australian, the number of people living in this country is expected to increase by some 60 percent by 2050. This will drive unprecedented demand for goods and services with the overall domestic freight task projected to triple by 2050.

This presents an exciting opportunity for Australian shipping and the government has already acknowledged that shipping will have to play a stronger role in Australia’s transport task into the future. However, in the absence of determined government action to level the playing field and encourage re-investment in blue water ships, most stakeholders expect the domestic shipping fleet to continue its long decline.

Some stakeholders have described the current state of the industry as “the worst in living memory” while others have said the industry is “withering on vine” and unless something is done “the coast will be opened up by default”.

It is clear the Australian coastal shipping business in its current form needs some kind of revival. The Gillard Government’s reforms under the Coastal Trading Act have been an abject failure. The Australian International Second Register created under that government’s reforms has failed to produce a single new ship. And the signals coming from Canberra suggest that the Abbott government may well opt for a broad and unrestricted opening of the coast to international ships.

For reasons I will now outline, I believe that this would be a catastrophic mistake. There are lots of vested interests shouting loudly in support of this approach, but the fundamental question that needs to be addressed by government is whether it is prepared to maintain a workable and efficient cabotage regime that enables fair competition, or whether it wishes to return Australian shipping to the untenable position where it cannot compete with international ships, thus consigning the industry to a slow but inevitable demise.

The government must also consider potential impacts on the maritime skills base. Maintenance and replenishment of a maritime skills base is one of the legitimate policy rationales for maintaining a viable coastal shipping fleet. The blue water coastal trading fleet carries a disproportionately large share of training and maritime skills development responsibilities (compared to other non-coastal shipping sectors such as offshore oil and gas).

Coastal shipping currently provides training for 36 percent of maritime cadets annually, more than double compared to offshore oil and gas, which is the second largest contributor to training at 17 percent.

The reality for the Australian coastal merchant fleet is that having endured a prolonged period of decline and a lack of investment in training of new personnel, the industry is almost certainly at the tipping point in terms of long-term sustainability. A growing number of industry veterans argue that it is already past that crucial point.

Whilst it is widely acknowledged in the industry that a healthy domestic shipping fleet provides the foundation for many professional tasks based ashore (e.g. pilots, harbour masters, terminal managers, marine surveyors, etc.), there is a widespread and growing view within the maritime-related shoreside industries that Australian mariners no longer offer the same attraction as they did in the past. These employers are increasingly eschewing the local market and going directly overseas to source talent. Why?

Most obviously, the age profile is an issue. Australian mariners are on average getting older and moving beyond the “sweet spot” shore-based industries look for in terms of age when sourcing new staff. Next is the lack of skill sets. A diminishing Australian fleet that has been focussed on a narrow set of operational activities has worked against Australian mariners.

Personnel in fleets abroad may serve aboard five or six different types of ships in a five-year period with the result that they widen their skill sets considerably. For example, the Dutch, whose larger companies have fleets that can comprise anything from offshore supply, river barges and wind-farm service vessels through specialist heavy lift and semi-submersible ships to super panamax container vessels and extremely high-tech Q-Max LNG ships. Officers and crew in the Dutch (or the Danish, Swedish, German, Canadian or Japanese) merchant services can gain a broad range of professional experience during relatively short periods at sea. Little wonder then that these personnel are in high demand when jobs come up ashore in ports, pilotage services and maritime administration centres.

Interestingly Denmark, which is arguably the most successful shipping nation in the world today, has developed a model to make the seagoing profession more attractive. In brief, officers who have achieved the levels of master or chief engineer, typically having accumulated more than 10 or 15 years at sea, are eligible to pursue various marine-related qualifications (in insurance, maritime law, and finance, for instance) at recognised Danish universities with no additional costs or entry requirements. The objective of this scheme is to give young people considering a career in shipping some perspective on the various career paths they can pursue after their chosen timeframe at sea.

In many respects, this approach mirrors that of many military navies around the world where officers and crew know they can have a limited time at sea before coming ashore. The navies prepare and train them whilst at sea in a range of craft to optimise their professional knowledge and skills when required to come ashore.

In stark contrast, an Australian mariner may find him or herself spending most or all of his or her career employed on the same ro-ro vessel plying voyages back and forward across the Bass Strait. This offers little in the way of stimulation, career variation and can (and apparently often does) lead to what some employers describe as “poor attitude” perceptions.

In recent years, the developing offshore industry off Australia’s northwest coast has increasingly drawn the best of the coastal shipping talent offering high wages, modern and sophisticated tonnage and arguably better working conditions. Many of those remaining on the coastal trade can be left somewhat embittered with those problems I have just outlined only being accentuated. Lack of motivation, lack of initiative, complacency and insubordination can result, all of which may have the potential to impact on vessel safety

Okay. Now that’s the downside. Next I’ll look at the opportunities.

Sandy Galbraith is director of Maritime Trade Intelligence, Australia. He has 40 years’ experience in the global maritime and transport industry in a career that has spanned international seagoing operational roles, senior editorial positions in the UK and Australia, maritime consultancy on major projects for governments, government agencies, industry organizations and the private sector, as well as industry education, media training and crisis management.