Tag: ships

December 2016 Flags of convenience

Flags of convenience


A flag of convenience is the flag of a vessel for which the actual property and control are located in a country other than that of the flag under which it is registered. For the owners of these vessels, the benefits are numerous,[1] including in the field of taxation, of security or labor law.

It is a phenomenon related to globalization. In 2015, they represented 71% of the total tonnage of the merchant navy. [][2] The world fleet operated under 152 pavilions. Three of these pavilions, Panama, Liberia and Marshall Islands accounted for 42.8% of the total capacity; either, 710 million tonnes (Mt) and 12 000 flags of some 50 000 vessels navigating the oceans. Panama dominates with 20.7% of world tonnage with[3] 343 Mt and 6 745 ships. Followed by Liberia with 1990 Mt and 2 996 ships and Marshall Islands with 168.6 Mt and 2 345 ships.[4]

None of those countries are among the major owners. The real and principal owners are Greece, Japan , China and Germany, which accounted in 2015 a capacity of 864 Mt and 16 752 vessels. Greece is largest owner with 308 Mt and 4 252 ships, mainly of bulk carriers and oil tankers. Japan comes in second with 242 Mt and 4135 Ships and China with 190 Mt and the 4720 ships.  [5]


This disproportion between the ship’s country of registration  and of countries owners is symptomatic of a market which is not efficient (Market Failure ). Flags of convenience and tax havens have no economic impact to added value of services, products or the development of markets.

It is a vicious circle, because the oligopolistic structure of the industry encourages imitation in order to protect market shares; the initiative of one will … Lire la suite



Can governments contribute to the development of the shipbuilding industry without resorting to public procurement? In a North American context, can we gain market share on Asia, the dominant player in this field?

A report released by researchers at the National Defense University (Eisenhower school) in the spring of 2015 partially addresses these issues. [1] It concludes that they are competitiveness problems in the  U.S. industry against Asia. China, Japan and South Korea now occupy more than 80% of the market share of shipbuilding on the commercial segment contracts.

Analysis of the strengths, weaknesses, opportunities and threats (SWOT), [2], highlights the importance of the national defense budget to compensate for the weaknesses of U.S. industry in the commercial segment.

Currently, this industry survives almost exclusively  on public procurement, notably with the military sector. It represented 38.1 billion $ in 2014, and is expected to grow annually by 3.9% per year until 2019, or 46 billion $. Barely 15% of revenues of the U.S. industry are related to the export.

One of the flagships of the report recommendations is that,  in order to ensure predictability of revenues of the industry, a strategy of public long-term purchases is necessary, as what presumably has been done in Canada. [3] However, an approach which uses public procurement for economic development purposes may have some shortcomings: it makes governments abdicate the implementation of structural measures for commercial market development; it distorts the objectives of a public policy of national defense in favor of strictly economic ones and, ultimately, undermines the efforts of the industry to increase its productivity, which would make it more competitive commercial international markets.

We must recognize that government contracts are important to ensure and maintain shipbuilding industry’s development. But dependence on collateral in the long term, as … Lire la suite