Development of a Fair Competitive Environment in the World Shipbuilding Market and Stabilization of Supply-Demand Imbalance
Shipbuilders mainly of large oceangoing ships are competing for a limited volume of demand in a single worldwide market, which includes a limited number of shipbuilding nations. The competitive environment in this international market can be greatly impacted by the policy of any one nation or order-taking practices of builders from any one country. Therefore, policy coordination among the major shipbuilding nations is indispensable for healthy development of the shipbuilding industry. Based on this perception, Japan has been actively seeking international cooperation both in the framework of the OECD Council Working Party on Shipbuilding and through bilateral consultations.
Especially in recent years, the shipbuilding market has run into a state of supply-demand imbalance as a consequence of the worldwide increase in newbuilding capacity, and the supply-demand gap will widen further. Therefore, government subsidies and rampant damping in the absence of effective competition rules are feared to obstruct fair competition. At present, the WTO Agreement provides international discipline to govern the rules of competition, but does not effectively apply to shipbuilding, which the ordinary concept of export and import does not fit because of the presence of flag-of-convenience ships among other factors, and so an international accord fully reflecting the specific circumstances of shipbuilding is needed.
Furthermore, as a result of the establishment of new facilities and the expansion and/or modernization of existing newbuilding facilities in newly emerging shipbuilding nations including China, these nations are increasing production capacities and actual outputs. Dialogue with these newly participating players will take on great importance in the future international coordination official shipbuilding policies. In view of these circumstances, Japan is earnestly addressing the following issues.
|An image of LPG FPSO designed and built by IHI Marine United, Inc. (Ishikawajima-Harima Heavy Industries Co., Ltd.)
i) Market discipline should be formulated to fully reflect the peculiarities of shipbuilding transactions and enable the forces of market to function effectively, and conditions for fair competition should be established.
ii) Efforts for policy coordination between major shipbuilding nations will be continued, and closer dialogue with newly emerging shipbuilding nations, including China, which is now rapidly becoming more important, will be promoted to expand the sphere of policy coordination.
iii) Policy coordination between shipbuilding nations should be facilitated by developing an accurate common perception of market trends regarding the supply-demand balance and the shipbuilding price level, and shipbuilders should be encouraged to observe propriety in business activities.
|A 105,200DWT tanker, Champion, constructed by Sumitomo Heavy Industries Marine & Engineering Co., Ltd. (Sumitomo Heavy Industries, Ltd.)
Initiatives at OECD Council Working Party on Shipbuilding
The OECD (Organization for Economic Cooperation and Development) Council Working Party on Shipbuilding is the sole forum for multilateral policy discussions on shipbuilding issues. The working party consists of principal shipbuilding countries, such as Japan, member countries of the European Union (EU), and the Republic of Korea (ROK). Since its first meeting in May 1966, the working party has been discussing market issues including the need to stabilize the supply-demand imbalance and issues regarding how to ensure fair competitive conditions.
The working party on shipbuilding is also addressing the following major issues.
a) Early formulation of a new market discipline (New Shipbuilding Agreement) which could adequately function in the international shipbuilding market to replace the existing Shipbuilding Agreement not yet in force with a view to ensuring fair competitive conditions in the international shipbuilding market.
b) Deepening of dialogue with newly emerging shipbuilding countries not participating in the working party, especially China.
c) Periodic forecasting of the supply-demand trend and monitoring of the shipbuilding price trend, and the sharing of the resultant information to develop a common perception of market trends.
|A 299,999DWT VLCC, Bunga Kasturi, completed by Universal Shipbuilding Corporation (Hitachi Zosen and NKK)
Dialogue with Principal
(a) Republic of Korea (ROK)
Since the combined newbuilding output of Japan and the ROK accounts for about 70% of the world total, the shipbuilding policies of the two countries significantly impact the business climate in the international market. Therefore, cooperation between the two countries is not just a bilateral issue, but is of vital importance to the steady development of the world shipbuilding industry. From this point of view, the Japanese and the ROK governments have been exchanging views through periodic bilateral consultations about twice a year since 1984.
(b) European Union (EU)
European shipbuilders, having constructed mainly passenger ships and other high value-added vessels, are major players in the world shipbuilding market together with their Japanese and Korean counterparts. They are also playing a leading role in the forums of international policy coordination, including the OECD Council Working Party on Shipbuilding, regarding the problems facing the international shipbuilding market, In view of their important presence, bilateral discussions between Japan and the EU have been held from time to time with a view to smooth policy coordination.
(c) People's Republic of China
China has successively constructed new shipbuilding facilities and expanded existing facilities for oceangoing vessels since 1980, and been rapidly increasing both shipbuilding output and newbuilding order intake over the last few years. It is now the third biggest shipbuilding country in the world. Furthermore, as China has reorganized its shipbuilding industry by completely separating the policy making sector and the business sector, consolidated or discarded less productive shipbuilding facilities, and continues to install more modern shipbuilding facilities, it is expected to have an even greater potential impact on the market in the future. In view of these circumstances, Japan began government-level dialogue with China in fiscal 2000.
|Malaccamax VLCC, Iwatesan, built by Mitsui Engineering & Shipbuilding Co., Ltd.
Economic and Technical Assistance in the Field of Shipbuilding
In many developing countries, ships play a vital part in people's daily life as well as in socio-economic development as important means of passenger and cargo transport. However, many of these countries at present have inadequate facilities for the supply of newly built tonnage and the maintenance of existing tonnage on account of the lack of financial and technical resources.
Moreover, public concern has been rising in recent years about the safety of marine transport and the prevention of marine pollution, and the need for institutional arrangements to address these issues is now increasing more than ever. At the same time, in the context of the move toward elimination of substandard vessels, some countries are particularly interested in developing the ship scrapping business. Developing countries are now expecting Japan not only to supply active tonnage but also to provide international assistance in both hardware and software aspects covering diverse areas including the construction of shipbreaking yards and guidance in legislation.
Furthermore, because of the ripple effect of shipbuilding on related industries, cooperation in the shipbuilding area will stimulate general economic development in those countries. Thus Japan, based on its advanced shipbuilding technology, will actively extend economic and technical assistance in the fields of shipping and shipbuilding.
Economic and Technical Assistance to Developing Countries
Projects currently supported by Japan include:
1) Financial cooperation on a loan or grant basis (provision of ships, shipbuilding facilities, training schools related to shipbuilding, and equipment for crew education).
2) Dispatch of experts to governments, shipyards and other organizations in developing countries (for cooperation in the formulation of shipbuilding and ship safety policies and in the improvement of ship inspection systems, and advising on the upgrading of shipyard management and shipbuilding technology in the recipient countries).
3) Acceptance of trainees (group training in the "International Maritime Conventions and Ship Safety Inspection" and "Shipbuilding and Quality Assurance Systems," as well as training in general shipbuilding technology and ship inspection on an individual basis).
4) Surveys for shipping and shipbuilding projects (execution of feasibility studies and drafting of master plans).
Grants under item 1) and aids under items 2) through 4) are provided through the Japan International Cooperation Agency (JICA), while loans under 1) are provided through the Japan Bank for International Cooperation (JBIC) in cooperation with the Ministry of Land, Infrastructure Transport (MLIT) and the Overseas Shipbuilding Cooperation Center (OSCC).
|4,646TEUcontainer carrier, MOL Efficiency, built by Mitsubishi Heavy Industries, Ltd.
International Cooperation in the Asia-Pacific Region
The Asia-Pacific Shipbuilding Experts Meeting (APSEM) is regularly held with the aim of facilitating regional cooperation in the area of shipbuilding and to contribute to the development of shipbuilding in the countries of the region. At these meetings, shipbuilding experts from participating countries exchange opinions and information on shipbuilding. The 26th APSEM was held in September 2003 in Surabaya, Indonesia.
Private Sector Initiatives in International Cooperation
International exchange is also ongoing in private sector organizations. Top executives from major shipbuilding concerns in Japan, Europe, the PRC, the ROK and the US hold regular meetings. This group (also known as the JECKU Top Executive Meeting) considers topics such as trends in the shipbuilding market, supply-demand balances, and substandard vessels. In October 2002, the eleventh meeting was held in Jeju island, the ROK. Expert meetings to discuss newbuilding requirement forecasts and shipbuilding capacity evaluations was held in Beijing, the PRC, in September 2002, including the Association of European Shipbuilders and Ship Repairers (AWES), the China Shipbuilding Economy Research Center (CSERC), the Korean Shipbuilders' Association (KSA) and the Shipbuilders' Association of Japan (SAJ). Regarding the problem of substandard vessels, all major shipbuilders' associations are committed to the activities of the Committee for the Elimination of Substandard Ships (CESS). At these meetings, shipbuilders are endeavoring to develop common perceptions and thereby encourage international cooperation at the private industry level.