F G S Impact Assessment of Greek Shipping on the Economy and Society

Impact Assessment ofGf Greek S hipping on the Economy and Society

October 2013 Greece is on the downturn; due to its size, Greek Shipping could become a key growth driver of the Greek economy

Greek economy under protracted recession since 2008

Real GDP change (%) 5

3.0 %

0 -02%0.2 %

-3.1 % -4.9 % -4.2 % -7.1 % -6.4 % ll rights reserved.

-5 AA nsulting Group, nsulting Inc. -10 oo 2007 2008 2009 2010 2011 20121 20131

How can Shipping further supp ort C 013 by The Boston 22 the recovery of the Greek economy?

1. Forecast © Copyright Source: Eurostat 1 The study covers the classic impact as well as the broader impact of shipping cluster in Greek economy and society

Classic impact assessment: Economic Broader impact: Economic and social impact of the shipping cluster itself impact of funds from shipping activities

Investments (other industries, Banks Ship repairs real estate) Investments in Returns Lawyers Core Shipping Insurers Greece (ocean-going/passenger Shipyards Brokerage ship companies + ports) Funds earned by shipowners Supporting companies Donations Philanthropy Wider economy (individual donations, foundations) ll rights reserved. AA Quantitative study on economic impact of shipping Explorative study of impact generated from funds that activities have been originally earned from shipping activities • Contribution to the Greek economy (in €-terms) • Investments into other industries

• Employment effects • Philanthropy Group, nsulting Inc. o o

Based on standard econometric model (multipliers derived from Input / Output tables)

2 Impact assessment study based on a comprehensive approach incl. databases, interviews with experts and desk research

Database built based on four The outcome of the impact different types of sources assessment study includes 2 elements

30+ interviews BCG internal database • Shipping companies • Benchmarks for ocean- 1 Assessment of the economic and social • Supporting companies going ships' operating impact of Greek Shipping cluster expenses • Core Shipping companies (ocean-going, • ΒCG experts' input passenger, ports) • Supporting companies • Wider economy and society b. Internal a. Interviews benchmarks 2 Recommendations for further developing ll rights reserved.

Greek Shipping cluster in order to AA enhance its direct impact on the Greek economy c. Publicly d. Best practices

available data Group, nsulting Inc. oo

40+ sources Global best practices 013 by C 013 by The Boston

• Databases • State Authorities 22 • Similar studies in other • Comparative studies countries • BCG experts

• Other reports © Copyright 3 Greek Shipping cluster contributes ~€13.5Β to the Greek economy and generates ~ 165,000 jobs

Out of ~€13.5Β total impp,act, Out of ~165,000 total jj,obs, ~140,,pp000 people €6.5B directly from ocean-going shipping employed by the Greek ocean-going shipping

Economic impact (€B) Employment ('000 employees)

20 Wages & salaries 200 86% 48% with only induced 30% 44% effects 41 163 15 150 3.4 13.4 34 85 303.0 2.3 10 100 7.6 1.7 71 137 5 11.2 50 37 ll rights reserved.

Other AA 6.5 Ocean going shipping 31 0 0 Direct Indirect Induced Total Direct Indirect Induced Total nsulting Group, nsulting Inc. %GDP% GDP %total% total oo 3.5% 6.0% High indirect effects 3.5% 2010: due to high multiplier employment of Services sector 2010: 013 by C 013 by The Boston

Given the overall GDP contraction over the last Previous studies of the sector have estimated more 22 years total impact exceeds 7% of economy in 2013 than 200,000 people employed by shipping Copyright © Copyright Source: Company Annual Reports 2010, analyst reports, Industry experts' interviews, BCG analysis 4 Ocean-going shipping with the highest contribution on the direct impact of the cluster

Direct economic impact per type of company and type of Operating Expense

€B

8 101.0 020.2 767.6 383.8

6.5

4 2.0 ll rights reserved. AA

0.2 2 1.6 nsulting Group, nsulting Inc. oo 0 Ocean-going Passenger Ports Total direct Wages & Fuel / Repair / Other1 impact Salaries Lubricants Maintenance Type of company Type of OpEx 013 by C 013 by The Boston 22

1. Including Admin expenses, insurance fees, consumables, 3rd party fees, depreciation etc.. © Copyright Source: Company Annual Reports 2010, analyst reports, Industry experts' interviews, BCG analysis 5 Ocean-going ship companies drive 85% of direct employment Almost same allocation of direct employment between on shore and sea

Direct emppyloyment1 of Greek Shipping p er type of company and type of employees

# of employees ('000) Additional 14 k 40 1.9 37.3 19.5 foreign seafarers in 414.1 GkhiGreek ships2 31.3 30

20 17. 8

10 ll rights reserved. AA 0 Ocean-going Passenger Ports Total direct impact Seafarers Employees in Greek Head-Quarters employees 8.9 48.8 nsulting Group, nsulting Inc.

per ship: oo Type of company Type of employees 013 by C 013 by The Boston 22

1. Employees that are based or live in Greece 2. Ships under Greek flag or other ships that are affiliated with NAT (Seamen's Pension Fund) – Alpha Bank Economic Bulletin 2009 © Copyright Source: Company Annual Reports 2010, analyst reports, Industry experts' interviews, BCG analysis 6 Sea transport sector largest contributor to Greek Services Balance inflows

Sea transport inflows from Greek ... represent the biggest component of Shipping companies' services ... Services Balance (2012)

€12-15B annual receipts from sea transport €B inflows (receipts) of Services Balance 2012 services that are provided to foreigners 383.8 27.1

• Mainly from revenue generated by Greek 1.5 shipping companies for transferring cargo 10.0 across the world on behalf of third parties

€140B cumulative during 2002-2012 11.8 ll rights reserved. AA nsulting Group, nsulting Inc. oo

Sea Travel Communication Other1 Total transport

No investment required in Greece C 013 by The Boston 22 to drive sea transport inflows to Greece

1. Including Constructions, Insurance, Financial Services, Computer & information etc. © Copyright Source: Bank of Greece, BCG analysis 7 Greek shipowners invest beyond shipping in key sectors of the Greek economy

Investment rationale Main sectors

Energy, Transportation, Construction Investment in Shipping -related sectors Financial services

• Shareholding Tourism • Start-ups • Support of Shipping Participation in biggest sectors problematic and Technology ll rights reserved.

of Greek economy AA funds financi all y challenged companies Retail nsulting Group, nsulting Inc. oo

Asset management Real Estate

Shipowners' investments in other sectors could also C 013 by The Boston 22 support the recovery of the Greek economy Copyright © Copyright Source: Press search, Interviews 8 Greek shipowners contribute further to the society through three different channels of philanthropic activity

Channels of philanthropic activity

Union of Greek Individual Foundations Shipowners donations ll rights reserved. AA nsulting Group, nsulting Inc. o o 013 by C 013 by The Boston 22 Copyright © Copyright Source: press search 9 Concrete recommendations for enhancing the direct impact coming from Greek Shipping on the country 's economy

Recommendations

1 Integration of shipping in the long-term national development strategy

2 Increase enrollment in maritime schools in order to increase employment of Greeks in the shipping cluster1

3 Upgrade educational quality and establish private maritime schools

4 Simplify requirements and processes for start-ups and reduce bureaucracy ll rights reserved. AA 5 Stable institutional framework to maintain attractiveness in an increasingly competitive international ship registration environment and to attract further

shipping activities Group, nsulting Inc. oo 013 by C 013 by The Boston 22

1. In February 2013, Greek State gave the green light for the establishment of private maritime schools © Copyright Source: Press search, Interviews with industry experts, BCG analysis 10 Summary of the study

Greek-owned fleet is leading the World Cargo Shipping, being first in total capacity. Furthermore, Greek-owned ships under EU flags are also ranked in the first position with 42.72%1.

Greek Shipping is a key growth driver and could support Greek economy' s liquidity , employment, GDP and investments • It contributes to the Greek economy €13.4B (2010 figures), more than 6.0% of Greek GDP, and 3.5% of country's total employment annually • The direct contribution of Greek ocean going shipping to country's economy is estimated at €6.5B • ~ 165,000 people are employed in the whole Greek Shipping cluster • At least €12-15B annual contribution to the Services Balance – €140B contribution over the past decade ll rights reserved. AA • Beyond Shipping, Greek ship-owners are investing shipping funds traditionally in other sectors of the Greek economy, further boosting the country's economic development, and contribute to the society through their philanthropic activities nsulting Group, nsulting Inc. oo 5 concrete recommendations could increase the direct contributions of Greek Shipping to country's economy • 1. Long-term national development strategy 2. Increase enrollment in maritime schools in order to increase employment of Greeks in the shipping cluster 3. Upgrade educational quality and establish private maritime 013 by C 013 by The Boston schools 4. Simplify req uirements and processes for start -ups and red u ce bu reau cracy 5. Stable and 22 competitive institutional framework Copyright © Copyright 1. In terms of dwt. Source: Jan 2013, IHS Fairplay World Shipping Encyclopaedia 11 Appendix Introduction to Greek Shipping and detailed methodology used in the study ll rights reserved. AA nsulting Group, nsulting Inc. oo 013 by C 013 by The Boston 22 Copyright © Copyright

12 Appendix

Introduction to Greek Shipping

13 Greece, a country with a long tradition in Shipping

Ancient • Initially Greeks were trading in the Aegean Sea, and gradually in Mediterranean and Black Sea Greece • Civilizations with biggg, sea tradition e.g., Minoan etc.

Roman • Big part of sea trade done by Greeks Empire

Byzantine • Catalytic role in the defense against Arabs and in the commercial and cultural exchanges with Empire the West World for over 1,000 years

• 16th century: The Greek Sea trade is spreading due to the increasing European needs for cereals • 18th century: The British-French wars created shortage in supply, which was covered by the Greek shipping business Ottoman • Most recognized Greek shipping areas: Empire – In Aegean Sea: Hydra, Syros, Andros, Chios, Kasos, Psara, Spetses – In Ionian Sea (due to trade with Italy): Galaxidi, Arta, Preveza, Corfu ll rights reserved.

• Greek fleet contributes to the War of Independence AA • During the Enlightment, Greek Ship-owners establish Greek schools and libraries 19th century • The dispersion of families coming from Chios island led to the spread of Greek shipping in Europe during the Napoleonic wars nsulting Group, nsulting Inc. • After World War II , increasing use of Greek flag oo • From 1970 onwards, once the institutional framework became competitive and the necessary 20th century infrastructure was developed, Greek shipping companies rapidly moved their headquarters and their activities to Greece, • Greek flag was also developing in a fast pace, reaching its peak in 1979, right before the big 013 by C 013 by The Boston

shipping crisis 22

Today • Greek Shipping: a global leader, in terms of capacity, with 16% of global fleet's capacity

• Over 3,700 ships © Copyright Source: press search 14 Ocean-going shipping represents ~95% of Greek fleet

Greek fleet, March 2013

# ships Ocean-goihiiing shipping Passenger Ocean-going 5 000 shipping Passenger

73 140 105 4 000 320 (2%) 3 677 (4%) (3%) 241 (9%) 571 (7%) 3 000 (16%) 591 (16%) 1 636 2 000 (44%) ll rights reserved. AA

1 000 nsulting Group, nsulting Inc.

0 oo Ore & Bulk Oil Tankers Chemical Cargo Pure Liquid Gas Passenger Άλλο Σύνολο & Products Containers

Capacity1 127 92 21 2 19 5 0.3 0.4 265

(Mn DWT): C 013 by The Boston 22

Note: Ships over 1,000 GRT in service and currently on order

1. Data as of March 2013 © Copyright Source: Greek Shipping Co-operating Committee March 2013 15 Average age of Greek-owned fleet reduced by 9 years during the past decade driven by newbuilding investments

Shippppg scrapping and investments on new ship s Average age1 of Greek-owned fleet during 2011

Average age # of ships 25 300 282 -49% Net change: 20 60 +60 ships 20 222

200 15

10 10 ll rights reserved. 100 AA

5 nsulting Group, nsulting Inc. oo 0 0 2000 3/1/13 # of ships retired in 2011 # of ships built in 2011 013 by C 013 by The Boston Continuous investments even during crisis 22 for World ocean-going shipping 1. In terms of number of ships and not capacity

Note: Left Hand Side graph: data from Lloyd's Register of Shipping – Fairplay - Greek Shipping Co-operating Committee March 2013 were used © Copyright Source: Hellenic Chamber of Shipping, Lloyd's Register of Shipping – Fairplay March 2013, Greek Shipping Publications online database 2012, Marine Information Services 16 Greek-owned fleet is leading World ocean-going shipping against strong competitors

Greek-owned fleet with the higgghest global Greek flaggp is important, but Greek ship owners capacity, lower though vs. 2000 levels prefer mostly foreign flags

% of total capacity (DWT) Capacity dwt (Mn) 20001 20111 Common practice among 20 300 shipownersshipowners onon a globalglobal levellevel 18.1 265 16.2 15.8 On a European level, Greek-owned fleet is bigger than the sum of the next 15 73 3 largest European fleet markets Greek flag Liberia 46 12.7 (28%) (Germany, Norway, Denmark) Malta 42 200 Marshall Islands 37 9.2 10 8.6 Panama 23 7.6 Bahamas 16 5.3 Cyprus 16 ll rights reserved.

5 404.0 192 AA 3.4 3.5 3.4 100 Other IIlsle o fMf Man 6 2.8 (72%) 2.2 1.9 1.9 Hong Kong 2 Bermudas 1 0 Germany 0 rk ny ce nsulting Group, nsulting Inc. ay an ea aly ina

aa 5 r r o OtOtherher o tt aa e e pp w w I 0 Ch Ko Ja Gre Nor March 2013 050 Denm Germ Capacity dwt (Mn) % global GDP 0.4 8.5 5.2 10.0 1.6 0.7 0.5 3.2 C 013 by The Boston (2011)2 : 22

1. Data as of Jan 1st of the respective year 2. Gross Domestic Product Note: Right Hand Side graph: Due to lack of data for other countries from Lloyd's Register of Shipping – Fairplay, UNCTAD database was used as common source of data Copyright © Copyright Source: UNCTAD, Review of Maritime Transport, 2000, 2011 , EIU, Lloyd's Register of Shipping – Fairplay March 2012 17 Greek flag among most preferred flags globally

Top preferred flags for global fleet based on capacity, Jan 2013

Deadweight(Mn tonnes) 400

300

200

100 ll rights reserved. AA

0 Malta China Liberia Cyprus Greece nsulting Group, nsulting Inc. ahamas l Islands ngapore Panama ng-Kong oo ll ii BB S Ho Marsha

# of ships ('000.): 8.6 3.2 2.1 2.3 3.4 1.4 1.8 3.7 1.6 1.0 013 by C 013 by The Boston 22

Note: Ships over 1,000 GΤ © Copyright Source: IHS Fairplay/ World Shipping Encyclopaedia, Jan 2013; Clarkson Research Services March 2013 18 Due to the global economic crisis, shipping is on the downturn

Crisis with a neggpative impact Increased fleet led to Dry transfers with the on global demand reduction in productivity highest hit

M tonnes of load % Global GDP Tonnes transfer / DWT Baltic Dry Index 2010-2012

10.000 10 10 5.000 Baltic Dry Index -5% 8.000 8 4.000 -1% 5 6.000 6 3.000

4.000 4 2.000 ll rights reserved.

0 AA

2.000 2 1.000

-5 0 0 0 Group, nsulting Inc. oo 2007 2008 2009 2010 2007 2008 2009 2010 April October May October March 2010 2010 2011 2011 2012 % of global GDP Tanker Dry M tonnes of load Low charter market indexes due to not only the reduction 013 by C 013 by The Boston in g lbldlobal deman dbtld but also due to thithe increase supp ly, 22 which was driven by high number of deliveries for orderings made in the rising period 2007-2008

Introduction to Greek Shipping

20 The study was based on more than 70 interviews and sources

40+ sources 30+ interviews

• BCG Tanker Benchmarking Initiative • Harvard Business School • Interviews with Greek Shipowners • BCG Container Benchmarking Initiative • The Steel And Shipbuilding Industries Of • Greek law firm • Marine information Services South Korea: Rising East Asia And • UK law firm • Lloyd's Globalization Kyoung-ho Shin Paul S. • P&I club • Clarkson's Ciccantell • Shipyards • EIU (Economist Intelligence Unit) • A study of Korea's shipbuilders strategy for • Greek Ship brokerage • Hellenic Statistical Authority sustainable growth, Duck Hee Won • Foreign Ship brokerage • Eurostat • SinggpaporeSetu p.com • Biggest Greek Banks • Company Annual reports 2010 • Shipping Strategy by P.Lorange, • International Maritime Association Cambridge University Press • Bank of Greece • SunStar Manila newspaper • Analyst reports (Alpha Bank) • Input-Output Methodology Guide, Scottish

• Hellenic Chamber of Shipping Government ll rights reserved. AA • Greek Shipping Publications database • Center of Maritime Economics & Logistics • UNCTAD, Review of Maritime Transport Erasmus University Rotterdam • The World Bank - Doing business • The Economic Significance of Maritime 2012report Clusters – July 2010, Danish Shipowners'

• Financial Times Association Group, nsulting Inc. • Policy Research Corporation • The economic impact of the UK Shipping oo • Hill Dickinson – International Ship Industry - Oxford Economics Registration Requirements • The Greek Shipping Register, a proposal • Ernst & Young Shipping Industry Almanac for the Foundation of an International/ 2011 second Greek Shipping register, Andreas 013 by C 013 by The Boston • Druid Entrepreneurship and innovation - Merikas, SfSofia Gialoutsi, Nikitas 22 organizations, institutions, Systems and Kanellopoulos regions • Foundations websites1 Copyright © Copyright 1. Eugenides, Laskaridis, Latsis, Lemos, Niarchos, Onassis, Pateras, Tsakos... 21 Unique methodology for quantitative assessment Euros spent and employees based in Greece and their impact on the economy quantified in 3 effects

Direct economic contribution of companies in the core shipping cluster (ocean-going shipping, passenger shipping, ports) Direct impact • Expenses of the core shipping cluster spent in Greece • Number of jobs based in Greece from the core shipping cluster + Effect from core shipping activities on direct suppliers, their suppliers, and so on ((gassuming constant household income ) Indirect impact • GDP contribution in Greece in € • Number of jobs dependent on core shipping ... + ll rights reserved. AA Effect of core shipping activities on the wider economy including additional consumption by households from increased income Induced impact • GDP contribution in Greece in € nsulting Group, nsulting Inc. o • Number of jobs dependent on core shipping ... o = Total impact of

22 Methodology based on unique set of sources

Sources used to estimate expenses & employees based in Greece • Comprehensive BCG benchmarking database on ocean-going shipping (covering > 20 international shipping companies) Direct impact • Greek shipping directory covering > 3 500 ships • Annual reports of > 10 companies and many analyst reports • > 20 expert interviews +

Indirect impact

Unique econometric model to estimate so-called multipliers that ... assess core shipping's impact on the wider economy based on + ll rights reserved.

• Input / Output tables from Eurostat AA • Employment data from Hellenic Statistical Authority Induced impact nsulting Group, nsulting Inc. o ... o = Total impact of