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Maritime Cluster in - and WP6 -

Shin Otsubo Deputy Director-General

Maritime Bureau Ministry of Land, Infrastructure, and (MLIT)

Ministry of Land, Infrastructure, Transport and Tourism Contents

• Maritime Cluster in Japan

• Shipbuilding and WP6

Maritime Clusters in the World

Stavanger () Concentration of shipbuilding and (Netherlands) specializing in offshore Biggest European ; accounts for energy development 60% of inland water transport;

Piraeus ()

Biggest European port for London cruise; concentration of (U.K.) shipowners Singapore

Birthplace of marine and Concentration of and classification society; financial in Asia, concentration of information- bunkering related industries

These clusters have their own specialized strengths. 3 Characteristics of Japanese Maritime Cluster

Japanese maritime cluster has a wide range of marine-related activities and competitive core activities.

 Core activities: shipping, shipbuilding, marine equipment, port, etc.

 Marine-related activities: , financing, broker, legal services, etc.

4 Overview of Maritime Cluster in Japan Total of the Japanese maritime cluster: 141 billion USD (2011). Value added: 47 billion USD (2011). Maritime industry

Core maritime industry: 109 billion USD insurance mgmt Shipping Waterway Marine Relevant industries (part of shipping) 47 billion USD services 11 billion USD 1 bln USD

Ship repair Shipbuilding Classification 3 billion USD 27 billion USD Society

Ship machinery and equipment Waterway mgmt Education Paper Car 11 billion USD 1 billion USD making

Port transport Marine equipment

18 billion USD 1 billion USD Grain Oil

Non-core Maritime industry 20 billion USD consulting

Broker, Broker, Electronics Utilities Parts supply Storehouse Trading for Logistics House Non-ferrous Public Legal Staffing Others Finance metal services services services

Industries close to maritime 1 billion USD 5 Source: Marine Marine Japan Maritime Center Offshore Fishery Research guard development Core Activities of Japan’s Maritime Cluster

Maritime Transport Sea farer Ocean-going: Companies: 210 Ocean-going: 47 billion USD Classification : 6,000 Society 88 % (fleet) 75 % Japanese Ship Japanese Shipbuilder Shipping company

Companies: 1,100 Marine 25 billion USD Employment: 85,000 insurance

71 % 95 % Japanese Japanese Ship Finance Shipbuilder Machinery Industry

Trading Companies: 670 company 9 billion USD Employment: 41,000

Source ; final report “New Comprehensive Policy on Shipbuilding Industry” 6 Concentration of in western Japan ◆The shipbuilding industry is concentrated in Western Japan. ◆In many local , a large portion of depend on shipbuilding.

Share of shipbuilding in local Nakatado:22%仲多度郡 Imari:30%伊万里市 Mihara:17%三原市 17% 22% 30 % Marugame:33%丸亀市

35 % Sasebo:18%佐世保市

18 % Imabari:24%今治市

24% Saikai:81%西海市

81 長崎市Nagasaki:23% 臼杵市 % Saeki:35%佐伯市 玉名郡 24 35 % 23% % 36 % 出典：製造業全体は、経済産業省「工業統計調査」Usuki:24% Source: Clarksons Research, Tamana:36%造船業は 、海事局調べ Japan Ship Machinery & Equipment Association

出典： 製造業全体は、経済産業省「平成25年工業統計調査」 造船業は、国土交通省調べ Imabari Maritime Cluster BARI-SHIP maritime exhibition comparable to Posidonia/ Nor-shipping? Largest as shipbuilding Largest as shipowner Imabari Biggest Imabari 19 ％ Ocean-going 940 Ship maritime vessls in Japan 2,566 522 Share of shipbuilding Ship companies which Shipping have office is in Imabari 34％ Maritime Cluster Ship Seamen’ machinery s training Education base Financial for seafarers institutions Related industries • National Maritime College Marine equipment maker: 160 • National Institute of Local focusing on ship finance

Source: Commission of maritime city interaction in Imabari city (2014) Economic ripple effect of shipbuilding industry

産業名 影響力順位 その他の自動車（トラック・バスなど） 1 Ranking of 乗用車 2  Shipbuilding is one of the economies “Economic Ripple Effect”, 鉄鋼 3 which have large economic ripple by industry in Japan 自動車部品・同附属品 4 自家輸送 5 effect; ranked as 6th in 49 industries. 船舶・同修理 6 Rank Industry 自動車整備 7 金属製品 8 1 Trucks, その他の輸送機械・同修理 9  Economic ripple effect of shipbuilding プラスチック・ゴム 10 2 Cars 化学製品 11 • Ratio of economic impact of 3 Steel はん用機械 12 パルプ・紙・木製品 13 shipbuilding to total economy is 4 Car Equipment 電気機械 14 情報・通信機器 15 about 3. Shipbuilding 航空輸送 16 5 電子部品 17 and repair 業務用機械 18 Induced total production value / 生産用機械 19 ------鉱業 20 Ship production value 飲食料品 21 30 Shipping 建設 22 その他の製造 工業製品 23 水道 24 繊維製品 25 非鉄金属 26 農林水産業 27 Shipbuilding is a core part of Japanese 窯業・土石製品 28 情報通信 29 Maritime cluster. 水運 30 Contents

• Maritime Cluster in Japan

• Shipbuilding industry and WP6

Characteristics of Shipbuilding • Large economic impact – High spillover effect – Employment in local cities

Many emerging countries are trying to develop the shipbuilding industry.

• Cyclical industry: booms and slumps, depending on the shipping market. – Time-lag between order and delivery of ships; coupled with volatility of shipping market, speculative orders may prevail. – High exit barrier: facilities difficult to use for other purposes, loss of employment feared OVERCAPACITY Developments of the Global Shipbuilding

Shipbuilding is cyclical: short booms followed by longer slumps.

million GT 110 12000

100 Other Constructed too much

10000 90

80 Korea 8000 70 60 Japan 6000 50 Seaborne transport volume 40 4000 30

20 2000

10

0 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Negative Effects of Overcapacity • Neworders drop sharply and stay low for a long time • Low level of ship price remains for a long time Neworders Vessel price million GT million $ bulker(capesize) 140 180 bulker(panamax) 160 120 (VLCC) 140 100 tanker(Aframax) 120 80 100 60 80 60 40 40 20 20 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 … 2005 2007 2009 2011 2013 2015 （Jan.～Sep.）

Fleet surplus low, keeping ship prices low, too. Excess capacity, once emerged, does not go away easily. What happens during shipbuilding depression? ◆ Due to large economic impact and long slump of shipbuilding, tend to protect shipbuilding in their countries.  Subsidies, loan, debt forgiveness, etc. inconsistent with international rules

◆ However, since global shipbuilding industry is a single market, governmental support inconsistent with rules in one country will distort the entire global market.

 Policy coordination among shipbuilding countries is essential to establish normal competitive conditions: OECD WP6 Efforts by WP6

 Core mandate of WP6:  Establish normal competitive conditions in the global shipbuilding industry

 1960s - 1980s: Non-mandatory instruments  General Guidelines for Policies in the Shipbuilding Industry  General Arrangement for the Progressive Removal of Obstacles to Normal Competitive Conditions in the Shipbuilding Industry

 1994: Mandatory instruments; -made for shipbuilding  Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry: not entered into force

 2000s: The 2nd attempt for the mandatory rule, with China  Negotiation for new shipbuilding agreement: failed Role and challenges of WP6

 Role  Time has passed, but the significance of the WP6 mission unchanged: Establish normal competitive conditions.  Challenges  Address the excess shipbuilding capacity. Back to the basics: re-confirm the market principle. Let the productive ones survive. Adjusting the capacity may be painful. The main government role is to reduce the social costs.

 Learn from the past, while more and more countries wish to develop shipbuilding industries. • , , Indonesia, , etc. Viewpoints for Sustainable Maritime Industry  Key words for of the maritime industry  Environment, safety, , productivity, human resource, etc.

 Japanese “Maritime Cluster” grew together with local economies. Not overinvestment; enough care for education and training, stable employment. Model of “sustainable” maritime industry!

 “ competition” continues to be an indispensable element for sustainable development of the maritime industry due to its of “single market“.  More for WP6 to accomplish