SUBMISSION TO

Joint Select Committee on Northern Australia

North Australian White Paper

By

Sea Swift – North Australian White Paper Submission Page 1

Contents

Page No.

1. Executive Summary...... 3

2. Sea Swift background ...... 3

2.1 Transport System Issues and Constraints...... 4

2.2 Freight Rates…………………………………...... 5

2.3 Freight revenue breakdown by service sector and client classification ...... 6

2.4 Genuine Employment & Innovative Training...... 6

2.5 Support for tourism, businesses, charities, & community organisations...... 7

2.6 Community Support - Sponsorships, Donations, Subsidies...... 7

2.7 Our creative and innovative approach………………………………………………7

2.8 Usage of local infrastructure and Expanding our Service...... 8

2.9 Enhancing our Core Business Operations…………………………………………8

3. Sea Swift recommendations to the North Australia White Paper ……………...9

3.1 Policy Settings…………………………………………………………………………...9

3.2 Infrastructure Ownership and Maintenance………………………………………12

Sea Swift – North Australian White paper Submission Page 2

1. Executive Summary

Sea Swift has grown from humble beginnings 30 years ago to be the largest private Coastal shipping operator in Australia providing essential services to 40 remote communities weekly across North Queensland and the Northern Territory.

As Sea Swift are inextricably linked across Northern Australia in every sense, providing regular weekly essential services to remote Island and Coastal Communities, we are well placed to allow for the growth aspirations of many regional operators, communities and Government agencies at all levels, and thus support the aspirations of many that have already made submissions. Importantly we believe we can do this by:

 Ensuring enhancement and use of existing services and infrastructure in the first instance (making the most of what we have, and a “no new toys” approach)  Ensuring services are Robust (able to function with existing infrastructure without the need for “gold plating”)  Ensuring services are Reliable (Regular weekly)  Ensuring services are Resilient (able to handle all climatic extremes and in particular the North Australian wet season)  Ensuring that a civilian approach to some defence and regional security activities is incorporated into the regional service model

In essence, Sea Swift believes that the challenges of operating and developing remote Northern Australia, are best handled by those who are used to operating day-in, day-out in the region. It is such people and organisations that have a real passion for developing the North, and will do so by utilising what they have in the first instance, and certainly are used to doing “more with less”

2. Sea Swift background

Sea Swift has been providing coastal shipping services throughout Northern Australia for over 25 Years. During this time the Company has grown into one of the most respected and awarded marine operations in Australia.

With a fleet of 30+ vessels ranging from 80t to 3,500t, Sea Swift not only provide regular weekly essential services to over 40 remote communities throughout Far North Queensland and the Northern Territory (totalling at least 25% of Australia’s coastline), but also project logistics support, and mothershipping services to the Northern Peninsular Area fishing fleet. The Sea Swift fleet is purpose designed in order to be able to operate remotely and with minimal infrastructure.

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Sea Swift area of operation across Northern Australia

The Sea Swift team have grown to over 350 maritime and logistics professionals, located in many strategically positioned supply bases across Northern Australia from Cairns to Darwin including Horn Island, Thursday Island, Weipa and Gove. Alongside an internal culture of employing local expertise, Sea Swift has developed a National award winning cadet training program and customised leadership development program that ensures seafarers are being continually developed to a high standard to meet the growing demands of the industry.

Since inception, Sea Swift has worked closely with the various Island communities, not only to meet their freight requirements, but also to support local communities through various sponsorships and employment opportunities.

2.1 Transport System Issues and Constraints

By any definition Northern Australia is remote. Access is often restricted, especially when the monsoon trough sets in from December to April. The regular weekly scheduled services up and down the east coast of Australia, through the Torres Strait and into Weipa and throughout the Northern Territory are in many ways considered essential services. In fact the services Sea Swift offer are the only freight link for many of the remote Island communities in Northern Australia.

Sea Swifts’ diverse fleet of specialised vessels allows the Company to carry and deliver not only essential everyday food stuffs, but also a huge range of general and refrigerated cargo, fuel for remote power stations, vehicles, transportable housing and construction materials, essential mining consumables, and heavy earthmoving machinery.

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Unlike most other freight providers and Coastal operators, Sea Swift offers essentially a flexible door-to-door service in order to meet most customer needs. However, there are a number of issues which constrain the provision of freight services to the Torres Straight region on a regular basis. These include, but are not limited to:

 The climatic conditions,  High travel and rental costs (for labour and crewing),  A varying quality of infrastructure (in particular ramps and access channels), and  A lack of commercial enterprises worthy of providing volumetric back freight options.

Coral reefs are prolific in the area making navigation more difficult and travel more dangerous for larger vessels. Some of the larger communities (ie. Thursday Island and Badu) have more protected offshore passages, but most communities have seasonally exposed approaches and mooring facilities. Weather extremes are a concern hampering safe access by barge to communities and threatening smaller vessels. Tides and strong currents also effect safe navigation, and may restrict services at specific times of the day or month to some communities.

Climatic issues aside, the inability to use larger vessels to offset rising commercial overheads, and the relatively high cost of shipping from southern ports over 1000km away also have an impact. Port charges add further to the cost base with levy’s being applied in Port Kennedy (Horn Island and Thursday Island) 5 times higher than those applied in Cairns, this consequently has a further negative impact on the cost of goods for all Torres Strait residents.

The main issues at Island delivery points are the maintenance of berthing dolphins, barge ramps, and access channels. Problems include:

 Insufficient swing basin size and channel depth and width due to an increase in barge size over time in order to improve efficiencies  Reduced channel and swing basin depths due to siltation  Poor protection from seas afforded by groynes or breakwaters  Deteriorating barge ramps and poor road surfaces directly off the ramps

The entire region is, without exception, totally dependent on marine transport to deliver almost all of the requirements of daily life, accordingly this must be considered in the broader context of developing Northern Australia, particularly in those areas where year round road access is an impossibility.

2.2 Freight Rates

Northern freight rates have historically been inconsistent with the cost of service varying due to predatory pricing by multiple sea freight entrants over the years. The rates previously provided by other entrants were proven to be unsustainable and resulted in the closure of services. During such periods of predatory activity Sea Swift have matched these freight rates to avoid disadvantaging businesses that preferred the Sea Swift service.

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Along with internal cost cutting measures and a continuing focus on efficiencies as well as ensuring our vessels are maintained for sustainable operation, it has been necessary for Sea Swift to adjust freight rates to a sustainable level in order to avoid the further closure of essential sea freight services.

Clearly sea freight rates are significantly impacted by the regulatory environment with respect to crewing numbers and rates in particular. In this sense changes in definition or legislation can have a massive flow on effect to such remote communities, either negatively or positively. For example, a change in definition around what is considered a “Coastal Shipping Vessel” from a tonnage point of view could either have a negative or positive effect on taxation relief for those providing a true coastal essential service.

2.3 Freight revenue breakdown by service sector and client classification

Approximately 50% of Sea Swifts services are tailored for the delivery of general cargo and freight, the balance being for services to the fishing industry and the delivery of fuels and oils to the remote power stations in the region, and Project Services.

In terms of General Cargo approximately 22% is directly for retail operations whilst the balance supports The Construction industry and personal freight requirements.

63% of Retail freight supports Grocery operators whilst the balance is delivered to other retail operators in the area.

2.4 Genuine Employment & Innovative Training

The Sea Swift operation is an extremely diverse business that requires skills, licenses and broad marine and logistics knowledge and experience to operate and maintain the fleet of vessels that service and supply a massive geographical area in a challenging and tough tropical environment. It is the skills and vast knowledge of our staff that ensures our vessels are safely operated and maintain their schedules.

Sea Swift has a long term association with the customers and remote indigenous and island communities to whom it provides its essential services, and understands that there is an ongoing obligation to enhance the skills and knowledge of the entire workforce to continue to meet this commitment.

Through these long-term relationships Sea Swift has created a distinct advantage by employing and training its crews locally. The strategic intent of the company is the need to draw upon and develop the local people through employment to operate and load the vessels. It is a true partnership because without each other, vital food sources, amenities and other services would not reach these remote islands and coastal locations.

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Sea Swift has created a distinctive advantage by employing and training local persons; we currently have an indigenous workforce representing 15% of our employees – one of the highest ratios for a private business. In our remote depots and vessels, this ratio is around 80-90%, and on some vessels it is not unusual to have an entirely indigenous crew. The manner in which we provide training and developmental opportunities empowers our staff to progress their careers to the highest level.

2.5 Support for tourism, businesses, charities, & community organisations

The only remaining ‘working cargo passenger cruise’ operating in Australasia, the MV Trinity Bay is an 80 metre vessel that has accommodation for up to 40 passengers and operates a weekly year round service delivering vital services and supplies to remote communities and industries. The vessel departs Cairns and travels through the Great Barrier Reef Marine Park to Thursday Island, Horn Island, Seisia and back to Cairns. For the previous year, this equates to approximately 1600 passengers. Since inception, we have transported close to 22,000 passengers who have had extended stays in this part of the world.

In collaboration with numerous operators, we underpin the local tourism economy. There is no doubt that the survival of these local tourism operators places an enormous reliance on our journey to bring passengers into the area. This is a visceral example of self- determination in action.

90% of our passengers gravitate to our product from across Australia and overseas. We know through our surveys that these tourists extend their stay and locally spend on retail, hospitality, and other tourism attractions; they require taxis or hire cars, and love to attend local markets, musical and cultural events. This promotes economic activity in these remote locations, thereby assisting the communities to become independent of government assistance.

2.6 Community Support - Sponsorships, Donations, Subsidies

Sea Swift provides enormous input into the wellbeing of the communities through a range of sponsored activities for the local clubs and cultural events, and provides services to ‘Not for Profit’ associations that also support the population base. We are a platinum sponsor of the Northern Pride Rugby League Team, specifically their ‘Take Pride’ Program that engages with youth in Cape York and Torres Strait to provide educational, career, employment, and lifestyle opportunities for disadvantaged indigenous youth. This program won the ‘Community Service’ award at the 2011 NRL One Community Awards.

The Board and senior management at Sea Swift truly believe that they have a significant role to play within these communities. Employment and education is a necessary contribution, but a far greater commitment is the effort that goes in to supporting the heart and soul of these communities; their dance and art festivals, schooling, sporting events, basic

Sea Swift – North Australian White paper Submission Page 7 infrastructure and general lifestyles. These simple contributions can be valued at close to $600,000 per year.

2.7 Our creative and innovative approach

At a corporate and senior management level the company allocates a significant amount of time fostering networks and business practices throughout our entire operation, but particularly in our core business of the Torres Strait and Cape York Peninsula. The success of our business is inextricably interwoven with maintaining harmonious relationships with the communities we serve, and axiomatically, fostering reconciliation. This approach cascades down through our management structure and is undertaken through a variety of methods by utilising the company’s networks with industry, all levels of Government, service and training providers, and of course our customers in the remote communities.

We have developed a workforce plan for 2014 which has three key areas: it focuses on supporting the organisation’s growth; it will develop and manage our talent pool; and create a workplace culture that is seen to be “the” place to work.

Due to the consistency, employee diversity, and professionalism of our workforce and the increased reputation of the company we have won new contracts to service freight and provide other services in new geographical locations. For example, the volume of freight we transport to Weipa has increased from 10 TEU container slots several years ago to its current rate of 50-60 TEU.

There is ongoing improvement being made in our safety, quality, and environmental standards. Our company’s Lost Time Injury Frequency Rate (LTIFR) has reduced from the mid-fifties four years ago to its current rate of one (1).

These are examples of business productivity improvements in our indigenous communities, and corollary greater workforce participation rate in training activities and other organisational development initiatives, leading to increased staff retention and improved morale.

2.8 Usage of local infrastructure and Expanding our Service

On a weekly basis our vessels carry cargo to the remote islands and communities, providing materials and equipment that supports the building of infrastructure projects such as wharves, roads, hospitals, schools, and airstrips. Our consignment is also being delivered to support the growth and operations of power and desalination plants as well as other growing industry sectors. To improve our services, we have expanded our Customer Service employee base to increase the direct interaction with our clients and stakeholder base in the Torres Strait and local communities.

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Through our tourism venture on the MV Trinity Bay, our passengers take full advantage of the many local tourism operations to broaden their experience of the lifestyles on the islands and draw in all of the rich history through the interpretative stories related on a range of themes. Through this operation, they will continue to sustain businesses and communities, thereby enhancing traditional cultures and ways of life.

2.9 Enhancing our Core Business Operations

There are considerable plans being developed to expand Sea Swift’s footprint in Cape York and the Torres Strait. We view Horn Island as the key trans-shipment port of our operations, and with the growth of our services to various islands and communities, our Horn Island Depot is being upgraded and expanded. There have been increased employment opportunities on our Torres Strait-based vessels, and in our depots. Furthermore, there will be a growth in our Weipa Operations, providing opportunities for residents of Napranum and Mapoon. We are directly targeting local indigenous and islander residents within those local communities.

In the Northern Territory, Sea Swift continues to expand following the acquisition of the Tiwi barge business in Darwin in 2013. We are currently now servicing all remote communities by barge and have a depot set up in Gove, with a Groote depot expected to be set up by the end of 2014.

Our expansion will fuel an increase in economic activity throughout this region, thereby increasing health, lifestyle, and employment programs. As we grow, the company increases its sponsorship, donations and subsidies to support non-profit and charitable organisations in the remote communities. This promotes reconciliation and assists to close the gap on indigenous disadvantage.

3. Sea Swift recommendations to the North Australia White Paper

3.1 Policy Settings

There have been numerous submissions made that have dealt with policy settings in the broader sense looking at tax breaks and incentives for business to develop Northern Australia. Sea Swifts recommendations will deal specifically with the settings that will drive and allow Coastal Shipping reform in the true sense. Getting such settings right will ensure that this vital link in developing the North remains sustainable and be available for a full year round service, year in year out.

Coastal Shipping and remote Coastal shipping in particular, relies on essentially a “one stop shop operator” who does everything from cargo consolidation, to loading and operating the vessel, through unload, de-consolidation, and ultimately delivery of the cargo to the door. This is much different to the standard model that comes to many minds when shipping is

Sea Swift – North Australian White paper Submission Page 9 discussed, and is the only model that works in remote Northern Australia. As such, policy settings that set remote coastal shipping operators apart from the regular coastal operators that rely on other transport links and stevedoring operators, is a must. This will ensure this vital link to so many communities is preserved to allow for the growth aspirations that are spelt out in the various submissions.

I would draw the Committees’ attention to the recently released Options paper from the Commonwealth Department of Infrastructure and Regional Development that was considering options regarding the approaches to regulating coastal shipping in Australia (released in April 2014)

As one of Australia’s’ true Coastal Shipping operators in every sense, Sea Swift does not at all agree with either Option 1. Or Option 2.

Option 1. Calls for the removal of all regulation of access to Coastal Trading. We see this as providing an environment that essentially loses control of Coastal Shipping in any form, which would ultimately lead to severe damage to genuine Coastal operators and their respective markets and communities, not to mention workplace relations, safety, and environmental issues.

Option 2. Is essentially a variation of Option 1. To the extent that further legislation may be enacted to ensure open market access while attempting to provide some protection for Australian registered coastal traders. Although idealistically trying to protect genuine operators we see this as being too complex an approach, which would most certainly lead to confusion and conflict.

Sea Swift has a view as a genuine Coastal Shipping operator, that Option 3. of all Options provided is the only sensible approach in providing a competitive regulatory framework, whilst ensuring Cabotage rights are preserved.

Sea Swift Recommendation 1: Sea Swift do not support either Options 1 or 2 of the April 2014 Options Paper: Approaches to regulating coastal shipping in Australia.

Sea Swift Recommendation 2: Sea Swift does support Option 3 of the April 2014 Options Paper: Approaches to regulating coastal shipping in Australia, with the

inclusion of further recommendations 3-6 as listed.

Having said this though, Sea Swift have a distinct view that the definition of Coastal Trading must be changed from the current “Coastal Trading is the carriage of domestic passengers or cargoes on interstate voyages between ports in Australian States and Territories” to “Coastal Trading is the carriage of domestic passengers or cargoes on interstate or intrastate voyages between ports or remote destinations in Australian States and Territories”.

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Sea Swift Recommendation 3: Alter coastal trading definition to “Coastal Trading is the carriage of domestic passengers or cargoes on interstate or intrastate voyages between ports or remote destinations in Australian States and Territories”

Further, the size restriction on vessels determined to be engaged in Coastal Shipping activities should also be reduced to allow for all vessels operated by a Coastal Shipper provided the activities are for the purpose of providing regular weekly essential services to remote communities. We understand this may be somewhat contentious but believe that by having a definition as pointed as this, only true Coastal Operators will benefit from an alteration to the definition and appropriate legislation.

Sea Swift Recommendation 4: Reduce size definition for Coastal Traders provided they are engaged in regular weekly essential services to Australian remote Coastal and Island Communities, to vessel over 100 gross tonnes.

Sea Swift delivery of quality fresh foods to remote communities is one of the key indicators in the Council of Australian Governments closing the Gap Strategy. The Strategy identifies that proper nutrition is critical in pregnancy, infancy and childhood and will help to reduce the incidents of obesity, type 2 Diabetes, cardiovascular diseases, renal disease and dental problems in Aboriginal and Torres Strait Communities.

In remote Island and Coastal Communities there exists a high fixed cost in providing a door to door same day of the week delivery transport solution to all Communities (viable or not) in Northern Australia and the health benefits this provides.

One of the key points (with respect to this submission) is that for Sea Swift, coastal shipping is only one component of the essential service we provide and that other components such as depot and land based activities are inextricably linked and reliant on the coastal shipping component of the transport chain. In other words, if international operators with a much lower cost base (due to wages, regulation, safety etc) are allowed through legislation (and a relaxation of Cabotage laws) to opportunistically cherry pick ports and communities Sea Swift service, then this will destabilise this essential service to the detriment of the Communities effected.

Sea Swift Recommendation 5: When evaluating operators for Cabotage purposes, the full cost of service offering should be considered if the service impacts on a door-to-door service provided by a Coastal Trader.

Because of this, Sea Swift strongly believe that Northern Australia should be "off limits" to any watering down of Cabotage laws. Additionally, for genuine remote Coastal Shipping operators like Sea Swift, the opportunity to extend services and therefore extend Cabotage laws (should this be substantiated that this will either lower the cost base and therefore the price of freight to remote Communities or improve the service offering to remote Communities) should be provided and supported at all levels of Government.

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Sea Swift Recommendation 6: Remote Northern Australia should be “off limits” with respect to Cabotage laws, ie. Shippers cannot apply for exemptions for remote Island and Coastal Communities.

Furthermore and whilst outside of the scope of this submission, Sea Swift would like to highlight that we meet all requirements of the ITE - Income Tax Exemption except the training requirements for the position of Integrated Rating which is not required in our domestic services. And that we would like to have the opportunity to address this as this will have a direct and positive impact in countering the increased costs we have experienced and which we must pass on to remote Coastal and Island Communities.

3.2 Infrastructure Ownership and Maintenance

In many remote Island and Coastal communities, a combination of the desire for self determination coupled with the curtailment of State and Federal Government spending, has resulted in many Local Council Authorities evaluating other means for revenue raising. In many cases this has lead to Councils lobbying for ownership of available infrastructure from either State or Federal Authorities, who themselves are suffering from spending cuts and thus find it difficult to monitor and maintain remote infrastructure.

A case in point is remote barge ramps across North Queensland and the Torres Straits. Local Councils have lobbied the State Government to transfer ownership to them so that they can utilise these facilities as a source of revenue. Local Council Authorities have already begun levying charges for the use of such facilities on the very operators who are providing the only link for the essential supply of goods and services. As many of these services are already cross subsidised, further charges levied must be passed back to the customer, who in this case is the Council itself, and many underprivileged families who cannot afford the charge increase either. This is completely nonsensical.

Further, the transfer of such infrastructure has occurred from a body who has at least some expertise in managing the ongoing maintenance and design criteria necessary to remain as a sustainable asset and vital link for these remote communities. Transferring to a local Council Authority who has no expertise in this, will ultimately lead to a failure of the asset, and a greater expense in replacement in the long term. This is clearly a situation that must be corrected as a matter of priority.

Sea Swift Recommendation 7: Vital infrastructure in remote communities should be owned and maintained by the State Department of Infrastructure, and not

local Council Authorities.

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In the Northern Territory, the recent announcement by RTA to close the refinery at Gove has resulted in Leaders in the region looking at what can be done in order to maintain viability for the 4th largest population centre in the NT. Gove is a regional hub, offering a full suite of services from supermarkets, to schools, to hospitals and a range of Government services, in addition to the on-going mining (albeit not refining) operation for RTA.

There exists considerable well maintained port infrastructure at Gove that has serviced this region for many years. This infrastructure should transfer to the NT Government to allow for public access of all shipping companies (at a suitable Government regulated access fee similar to all regional Ports) that are in a position to support the aspiration for opening up Northern Australia.

Sea Swift Recommendation 8: Existing Gove infrastructure should be transferred to the NT Government and regulated like all regional Ports.

This would then allow for trade routes to be developed, and for Gove to realise its aspiration of becoming a regional transport shipping hub, in turn having a positive impact on remote Gulf communities by providing conditions that would result in a reduction in sea freight rates.

Fred White, Managing Director and CEO

Sea Swift Pty Ltd

June 2014

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