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close this bookThe Courier N 156 - March - April 1996 - Dossier: Trade in Services - Country Report : Madagascar (EC Courier, 1996, 96 p.)
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close this folderTrade in services
View the document(introduction...)
View the documentA trailblazing project for services in Africa
View the documentServices potential in the Caribbean
View the documentWhat do ACP nations have to win or lose from global liberalisation of services?
View the documentImplications for developing countries of liberalised financial services
View the documentTemporary movement of persons
View the documentNew realities for national shipping in Africa
View the documentState-owned airlines try to avert crash-lanclings
View the documentAir Jamaica: the bride without dowry soars to new heights
View the documentGlobal tourism
View the documentThe 'phone' phenomenon

New realities for national shipping in Africa

by John Prescott

In this article, the author, who is a staff feature writer for Lioyds List, the international shipping and trade daily, teaks at the future for Afriran shipping companies. He argues for a relaxation of state control in order to reap the benefits of the World Trade Organisation's (WTO) General Agreement on Trade in Services (GATS) and more specific liberalisations under the aegis of the World Trade Organisation.

There was a time when a national shipping line was an almost de rigeur adjunct for newly independent states of Africa and Asia. Fewer more visible and prestigious ways were available to assert one's new status in world commerce than by creation of a flag carrier, regardless of whether trade merited such huge investment or whether the necessary expertise was at hand. Too often, governments allowed themselves to be seduced in this way. There was more to it than pure status, however. A national shipping line was frequently seen as a useful foreign currency earner. It could also be an attractive source of employment for a struggling economy, and a carrier for national cargoes.

More questionable was the practice of using the national line as an instrument of patronage. Governments often dung to the idea that nationalised shipowning could be a panacea for any number of ilk and it has taken time for the reality - that little profit and less glamour is attached to shipping these days - to penetrate.

One of the cornerstones on which national lines hoped to build their future was the UNCTAD liner code, which promised protection from foreign competition under its 40-40-20 provision - 40% for the national flag fleet, 40% for the trading partner's fleet and 20% for others. But though the liner code might have helped some national carriers in the early years, it was disliked, especially by the industrialised world, as a barrier to free trade, and its cargo sharing ideals were often ignored or simply became irrelevant.

Ultimately, the code was swept out in 1992 by the Cartagena Commitment under which UNCTAD, the UN body, was told to foster competitive services in developing countries and encourage ideas of the open market and the private sector as the best way of helping Third World nations.

State carriers sinking

In Africa, the inefficiencies of state carriers and aid donors' reguirements for abolition of cargo preference have spelt the end for several nationalised companies. One of the latest to go has been the Nigerian National Shipping tine, which, after long decline is now in voluntary liquidation. It has been said that NNSL never even approached 10% cargo share, let alone 40%.

Another casualty, Societvoirienne de Transport Maritime (Sitram), was wound up as part of the restructuring and liberalising of Cote d'Ivoire's shipping industry. The company, whose cumulative losses reached $24 million last year, was liquidated by the debt-laden government under pressure from the World Bank, in return for a $100 million loan.

The position of Ghana's Black Star tine illustrates the other pressure that some state-owned shipping faces, namely the threat of having ships commandeered by government. Black Star is down to two ships anyway, but has had to cope with military requisitioning.

Where do thee discouraging experiences leave flag carriers and their governments as they try to wrest some benefit in international trading conditions that are, if anything, becoming more hostile by the year? It could be argued that the trading environment for developing countries has improved as a result of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). This gave rise to the creation of the World Trade Organisation at the beginning of 1995 and it is the WTO's intention that the new GATT agreements should benefit a much wider circle of nations than previously.

'The setting up of the WTO marks a giant step towards the full integration of all countries, whatever their level of development, into a global trading system of shared commitments, shared rules and shared opportunities,' said WTO Director General, Renato Ruggiero. The WTO says improving the trade of least-developed countries in Africa is a priority. According to Mr Ruggiero: 'I am confident that (WTO) is also creating new possibilities... to improve the participation of African and other least-developed countries in the fruits of economic growth.’

But while encouraging, such sentiment will take time to translate into real trade and then manifest itself in tangible results for the shipping industry. Taking the WTO's own figures, Africa's trade stagnated or declined in the years 1990-1994, while world trade - exports and imports 5% annually.

The question the WTO will have to address is if UNCTAD failed with a liner code aimed specifically at securing cargo shares for national lines, can the GATS do any better? One answer will almost certainly be that if shipping in developing countries is to see a resurgence, it will at least, have to have disciplined management and be capable of investment in modern tonnage.

Future in private hands

With a track record littered with failures, nationalised shipping in Africa, at first sight, seems to have an uncertain future. A more likely route is the emergence of private or part state owned shipping companies which will be more responsive to commercial demands and able to cope with competition and changing patterns of trade.

The process has already started in Nigeria where a new state shipping company, Nigeria Unity Line, has been created with the intention that 75% of the equity will be sold to Nigerian and foreign investors. A similar process is underway in Cd'lvoire where Nouvelle Sitram is being readied for eventual private investment.

As in many other industries, South Africa will be the powerhouse for shipping across much of the continent in the new millenium. It is almost certain that a major liner hub will be developed in the republic and flag carriers on both African coasts will have a golden chance to provide feeder services for national cargoes. They will be unable to capitalise on new opportunities, though, if they are shackled to governments which have other, political priorities. The day of the subsidised, cargo-protected national shipping line has passed. J.P.

Shipping and Fiji's sugar trade

by N. Singh

Fiji's long-standing sugar trade with the EU is now threatened by an ageing shipping fleet. For Fiji to get the most out of this commodity whose prices are aligned with the EU 'sown sugar price, a good, inexpensive shipping service from the far flung island is vital. Along with tourism sugar continues to be the country's economic mainstay. Sugar export revenue accounts for 30 40% of total foreign exchange earnings One quarter of the economically active population derives its income directly from sugar.

Fiji plans to develop and hold on to its long-standing market relationships, which include a special link with the EU. About 175 000 tons tel quel (mttq) of Fiji sugar is sold to the EU annually at preferential prices under the Lomugar protocol. Fiji is permitted to export an additional 50 000 mttq for the current delivery period to other EU countries, notably Portugal and Finland, under the Special Preferential Sugar Agreement, concluded on June 1 1995. And for the remaining five years of the six year accord, it will be able to export an annual minimum of some 30 000 mttq. It has also been agreed that ACP-EU discussions should be held before 1 January 2001 on the possible continuation of the Agreement. ACP signatories to Lom sugar protocol have already voiced concerns about the freight issue. The main worry is the increasing level of freight charges borne directly by ACP producers.

In 1992, the Commission's Transport Directorate General (DGVII) agreed to fund a study on ACP sugar transport costs. Undertaken by TECNECON, a British-based consultancy, its objectives was to 'identify, where possible, measures... to alleviate the burden of inland and sea transport costs on ACP sugar industries and which would respond to the present and future needs of the ACP-EU sugar trade.' ACP nations received the final report of the study in February 1994. It revealed that transport costs borne by ACP suppliers, represent an average of 15% of the total guaranteed sugar price. ACP ministers recently agreed that the findings of the study be updated. i Sugar cane is grown and milled in Fiji along its two main island coastal belts, minimising the need for land transport.

Both road and rail are used to carry the raw cane to mills for crushing and processing, as well as for transporting it to the bulk terminals near the ports. The cargo size for shipments from Fiji ranges between 18 000 and 20 000 tonnes. Most exports are to the UK. Physical restrictions, particularly at discharge ports, continue to play a major role in determining ship sizes. Of greater concern is the lack of replacement building of suitable cargo-size ships and this will continue to cause long term difficulties. The problem of the ships' age is becoming very serious for the two most famous industry 'workhorses', the SD 14 and the IHI Freedom Mark1/Mark 11 vessels. These are usually single deck bulk carriers ranging from 20 000 to 25 000 mt deadweight. Additional insurance is now routine for ships more than 15 years old and the cost doubles for those still plying the waters after 20 yeras. Basic economics will obviously decide how long such vessels can continue trading. Profits to the shipowner have to be adequate to cover escalating maintenance bills, insurance and running costs. If not, these old ships will rapidly disappear from service. The upshot is that charterers such as Fiji will have continuing freight problems for years to come. Much hinges on the ability of older vessels to keep trading and be adequately maintained. The long term solution entails improvements to discharge facilities to give Fiji access to larger and more modern ships. N.S.