Challenging seafaring countries  the role of ship suppliers, and ISSA as a key facilitator.

By: Joseph FX Zahra. Chairman of Impetus Europe Consulting Group Ltd. and Administrative Secretary, Malta Ship Suppliers' Association.


October 2007


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Honourable Minister, Mr. President of ISSA, Mr. President of the Malta Ship Suppliers Association, Board and Executive Members, Members, distinguished guests, ladies and gentlemen, it is with my great satisfaction that I address you this morning during the opening of this convention entitled ISSA & adding Value.

My intention during this brief presentation is that of highlighting the developments in the maritime world today, and the manner with which Malta is facing the challenges of a fast changing trade, industrial and economic scenario. I will also focus on the issues that ISSA is facing today as business models are changing and regulatory forces are becoming more prevalent in the international maritime sector.

It is a great privilege for this Convention to have as its speakers later on today the Maltese Commissioner of Fisheries and Maritime Affairs who has launched only two weeks ago an integrated maritime policy for EU member states comprising clear guidelines for all relevant areas, including tourism and energy to climate change and fisheries.

My introduction therefore gives a succinct profile of an ever-green industry that forms the landscape with its contours, mountains and valleys of this long established commercial activity  this thriving sector of ship chandelling or ship supplies.

A business activity that has lived for so long in Malta, an open economy that survives only thanks to international trade, most of which is transported to and out of our ports by shipping vessels. Our ship suppliers are considered to be a vital artery in the maritime business as they procure and supply the vessels with all their requirements. A commercial sector in Malta that has also been vital in contributing to the value and volume of entreport trade and re exports.

I consider myself lucky to have come close to this sector in the late 1980s through my business consultancy work. I have played a role in facilitating the Maltese ship suppliers to get together to form the Malta Ship Suppliers Association in 1988. Since then we were able to attract two ISSA Conventions, the one in 1994 and this one thirteen years later. Through hard and quality work we have enhanced the reputation of this sector, and we are proud that a small association from a minute country has had its own President sit on the Board and the Executive of ISSA in the role of the Honorary Treasurer for so many years. Congratulations Mr. Borg.

Indeed, Malta s strategic geographic position in the centre of the Mediterranean sea gives it a head start in the appreciation of these global challenges. The Mediterranean remains to be an important location for both business and leisure. Trade flows between North and South and West and East as commerce between the industrialised countries to the North and the emerging countries in the South increases in importance and relevance. However, one can also note the growth of both cruise line business and yachting as the citizens of both Europe and North America become more affluent and the standards of living around the globe improve.

On the world maritime scenario, the business prospects are improving as :

World output grew at an average 3 per cent during 2006 and the first six months of 2007. We are seeing a greater contribution to this growth coming from developing countries. It is also reflecting the new economic frontiers of China and India which are experiencing a surge of economic activity and export growth. The volume of world merchandise trade is growing by around 6 per cent per year, putting pressure on increased fleet volume as well as changing route patterns.

The World merchant fleet expanded to 960.0 million deadweight tons at the beginning of 2006, a remarkable 7.2 percent increase, and the highest since 1989. Newbuilding deliveries are growing with major growth in tanker deliveries and bulk carriers. There does not seem to be an abatement in this demand as world trade particularly from China is expected to continue growing over the coming years.

Increased demand for haulage of crude oil and oil products in ton-miles for these commodities is growing at a slower rate, and this is an indication of crude oil supplies moving longer distances, for instance from sources in the Barents, Baltic, and Black Seas to destinations in Europe and North America and from West Africa to the Far East, notably China.

Regional variations in maritime transportation routes depend on the countries gross domestic product. Developing countries in Asia had the largest shares in exports and imports, reaching now 29 percent and 22 per cent of world exports and imports respectively. The share of developing countries in Latin America was 14 per cent of world exports and 5 per cent of world imports. The shares for African countries were about a half of the share for America  6 per cent of world exports and 3 per cent of world imports. Although most Sub Saharan countries are registering GDP growth rates that are lower than those considered appropriate by the United Nations Millennium Development Goal of halving poverty by 2015, an increase in trade is being registered which is particularly good in oil-producing countries of West and Central Africa.

The peripheral services in the maritime business of ship registration and ship management are directly benefiting from this surge of activity, with major open-registry fleets growing. Malta has been reconfirmed in 2006 as the second largest register in Europe among the 10 largest registers in the world in terms of gross tonnage.

Public and private partnerships have been established in several countries to modernize and expand existing port and rail infrastructure. By connecting national networks, the latter is expected to ease access to seaports for landlocked countries in East and Southern Africa.

Within this context Malta is gearing itself to reap the benefits of this improvement in international trade and new ship registration. A member of the European Union since 2004 it has a population of slightly more than 400,000. It will join the euro zone as on the 1st January 2008 following a period in the Exchange Rate Mechanism, ERM II during which the convergence criteria established in Maastricht for economic stability and growth , and necessary therefore for the country to become a member of the euro area, were remarkably achieved within a relatively short time frame. It is my honour to have a stewardship role in this challenging process in my position of Chairman of the National Eurochangeover Committee, responsible for the technical preparations and communications strategy facilitating the change from one currency to another. Malta itself is expected to register GDP growth of 3.6 per cent this year following two years of 3 per cent growth. Its public deficit in relation to GDP is expected to be 2.1 per cent by the end of this year, and Government is targeting a budget surplus for 2010. The Public debt to GDP ratio is moving closer to the 60 per cent requirement and now stands at 63 per cent. Inflation stands at 1.35 per cent while Malta has a 3.9 per cent unemployment rate.

Growth in value added is generated primarily by a variety of industries including tourism, construction, transport and communication. Financial intermediation and the new activities of remote gaming are also contributing to economic growth. New financial institutions including banks are opening up in Malta, and so are captive insurance companies and other financial intermediaries. Back office operations and call centres are being established here to benefit from Malta s high level of educated personnel and their proficiency in languages. Tourism contributes to around 25 per cent of GDP. The University of Malta, one of Europe s oldest Universities, founded over four hundred years ago in 1592, provides Malta s private and public sectors with high quality professionals. The University of Malta is indeed the oldest University in the Commonwealth outside Britain. The International Maritime Law Institute , established under the auspices of the International Maritime Organisation offers LL.M. and Ph.D. degrees and is a centre of excellence for learning. It attracts graduates to continue their studies in international maritime law and regulations as well as on procedures for safety and efficiency of shipping and the prevention of marine pollution. Students come from all over the world. Malta has in 1967 presented at the United Nations, just three years after becoming an independent state, the concept of the Common Heritage of Mankind to the international seabed and ocean floor. This led to the adoption in 1982 of the United Nations Convention on the Law of the Sea.

Malta is today is a hub of maritime activity with two Ports, the Grand Harbour in Valletta  considered to be one of the most picturesque natural harbours in the world, and Kalafrana in the south of the island.

In October 2004, the Government of Malta awarded the company, CMA CGM a thirty year concession to operate and develop Malta Freeport Terminals. Today the Malta Freeport handles over 1.5 million TEUs a year, and it is well known for its high operational efficiency. The Port has also warehousing facilities and a very busy oil terminal with tanks that are operated by an independent oil tanking company.

Government has recently announced a grand plan for the Valletta harbour. This includes twenty proposed projects worth an estimated Euro 1.165 million and creating around 6,000 new jobs. This will comprise expansions of cruise liner berths, an extension of the Valletta terminals, the expansion of yacht marinas, the upgrading of more dock areas, and the establishment of waterfront promenades surrounded by sea on one side and entertainment and international academic and cultural institutes on the other. The Grand Harbour Regeneration Corporation is overseeing the execution of this visionary project that is considered to be on the high quality level of regeneration projects in the London Docklands and in Genoa.

Malta will strengthen its position as a ship registration location ensuring quality shipping and that ships with a poor detention or safety and marine pollution record do not operate under the Malta flag. The Maltese authorities continue to maintain the growth in registrations but not at the expense of quality. There is scope for the development of other services ancillary to ship registration including ship management and ship financing. Malta will need to compete with mature jurisdictions to be able to grow these service segments, but Maltas long established maritime tradition as well as established legal, accounting, taxation offices and financial intermediaries manned by a solid professional cadre will provide the necessary impetus to the development of these services.

Following the partial privatisation of yacht berthing facilities in two different ports a few years ago, Government is now planning to privatise all other facilities. A growing demand for berthing facilities and the interest of visiting yachtsmen in Malta as a berthing location, has induced the Authorities to expand facilities to cater for this increased demand. Three other locations are being earmarked for yacht berthing expansion. Xemxija Bay in the north of Malta, Kalkara in the Valletta Port and Marsascala in the South of the island.

Although not strictly and directly related to Malta as a maritime hub, I would like to mention the SmartCity Malta project. This is a new self sustained township being constructed at the opening of the Grand Harbour for knowledge-based companies and which is being developed by Dubai-based SmartCity in partnership with the Government of Malta. This ICT project is expected to generate 4 per cent growth in the Maltese labour market, employing over 5,000 people. This project is already attracting interest from companies both in manufacturing and services to establish bases here to cater for the European and Southern Mediterranean markets.

But now back to the business of this Convention and the role that ISSA is playing in this international maritime scene. The challenges and opportunities that ISSA is facing, and its stewardship in international conventions and meetings.

I have been a keen, objective, observer of ISSA s performance over these last two decades. I realise that this is an organisation that has been strong enough in its principles and values, as well as a generous provider of service to the maritime community it represents. But it has also been able to adapt and change in response to the changing needs of modern times as well as the varied needs of its members.

In an environment of information communication technology, knowledge economies and globalization, ISSA had to adapt to changing business structures and models. And let us admit it, there has never been so much change than in these last twenty years !

As an observer of ISSA initiatives and decisions over these last years, I can notice the investment made in providing information to ship suppliers, its persistent efforts to tackle issues related to finances, its urge to create a global networking role for its members. The energy and enthusiasm of ISSA, in protecting and promoting the economic interests of its members and the ship suppliers community at large is indeed happening when the maritime industry is at an undisputed high level of prosperity. But this has not distracted the present management of this organisation from looking inwards to seek further avenues of reform and restructuring, while looking outside at the needs and wants of its members, or better still, its customers and its stakeholders.

The title of this Convention prompts this line of thinking. It cries out as a stark reminder than this Association strives to find ways of how to add value to the ship supplying community worldwide.

The challenges are big, but so are the opportunities.

ISSA s drive in enhancing ship suppliers service through improved quality is a clear example of how the Association is sensitive to its clients needs. Quality standard certification instils customer confidence, contributes to repeat business, improves the community s reputation and hence attracts new business.

The increased interest on an international level in the security of ship and port facilities, also reflects the demands of a discerning client and more responsible Governments. It can easily be dismissed as yet another additional cost, an overhead. However, strict implementation of the ISPS Code provides the necessary institutional and regulatory infrastructure that manages risks related to safety and security, also instilling confidence that adequate and proportionate maritime security is in place.

Ship suppliers are in a number of occasions finding it difficult to get paid by ship owners and ship management companies. There is a frank and genuine cry from ship suppliers to find ways of insuring against this financial risk. ISSA is having discussions with a number of financial institutions to seek strategic alternatives to assist ship suppliers in mitigating against this risk.

Finally, the challenges of globalisation on the ship suppliers as ship owners merge or acquire other ship owners, companies becoming larger, placing more pressure and demands on the ship suppliers. Again, the physiognomy of the market operators is changing, demanding that we change as well in our marketing and operational methods. ISSA is closely monitoring these trends and developments and will seek through Conventions of this nature, Seminars and other methods of information and knowledge dissemination, to understand better these changing patterns and to create the necessary spaces for networking that will get the various parties together.

I can sense a feeling of expectation and anticipation for this Convention to unfold. It is an honour for me to form part of a panel of distinguished guests addressing such an experienced audience coming from all over the world. Malta has welcomed you with its natural warmth of friendship and hospitality. The stage is now set, behold the players...
Thank you.