TRANSPORT: by News WeeklyNews Weekly
How Government policy is sinking Australia's shipping industry
, May 6, 2000
Foreign-owned shipping companies, generously subsidised by their governments, have made substantial inroads into Australia's coastal shipping trade, due to Canberra's unwillingness to support the Australian shipping industry.
Overseas shipping companies - already dominant in Australia's $100 billion export and import trade - have expanded their share of Australia's coastal shipping trade in recent years, as restrictions on their operations have been reduced, on the recommendation of the Productivity Commission, with the support of the Federal Government.
The reduced cost of shipping services has been the justification for the entry of overseas ships into the coastal trade. The lower cost of operation of international ships is due to economies of scale, heavy subsidies offered to shipping companies overseas and low labor costs from Third World countries.
In contrast to Australia, where shipping companies receive little or no government support, most European countries offer generous subsidies to their shipping industries.
Other countries comparable in size to Australia offer extremely generous incentives, according to the OECD survey of fiscal support measures for shipping.
Canada, for example, offers accelerated depreciation of 33 per cent for vessels built and registered in Canada, effectively allowing ships to be written off in three years.
According to the OECD survey, the United Kingdom, offers very favourable breaks for UK shipping companies such as P&O. These include a "writing down allowance" amounting to 25 per cent of the ship's declining balance. Additionally, ship construction or repair is zero-rated for Britain's goods and services tax, the VAT.
British seafarers are eligible for generous foreign earnings concessions, which allow 100 per cent deduction for UK residents who work abroad for a qualifying period of a year. Other assistance is available through the Home Shipbuilding Credit Guarantee Scheme, subsidies for 20 per cent of the cost of economy airfares for crews joining or leaving ships overseas (beyond Western Europe), government supported training of seafarers, and other assistance.
The United States also offers a range of incentives to its shipping companies, including generous depreciation allowances, together with construction incentives, and subsidised wages for seafarers, representing the difference between foreign wage rates, insurance, maintenance and repair costs in the US.
Other European countries offer very generous incentives for their shipping companies. Denmark offers depreciation at up to 30 per cent of purchase price of ships. Danish shipping companies offer low-interest loans to finance shipping purchase, or a 9 per cent up-front subsidy for ships from Danish shipyards. Seafarer training is subsidised as part of the national education system.
Sweden offers its shipping companies a 30 per cent depreciation on launching of ships, and a five year life for depreciation purposes. Additionally, it offers a special seafarers' tax rate, which is lower than the general income tax rate, and offers a refund of crew income tax to operators of Swedish flag ships in the international trade.
Land-locked Switzerland offers Swiss shipping companies generous depreciation allowances, and tax relief on dividends distributed to investment companies. It also offers a government guarantee on up to 85 per cent of the purchase price of ships.
One of the most aggressive countries in the Asia-Pacific region is South Korea, which has substantially expanded its shipping fleet over recent years.
It offers generous tax provisions for Korean ship operators, reduced tax rates for Korean seafarers, loans of up to 80 per cent on the purchase or construction of vessels from the Korea Development Bank, and up to 90 per cent from the Bank of Korea Foreign Exchange Holding Fund.
Developing countries with significant ocean fleets frequently offer government support for their shipping industries, as well as access to low crew costs. Turkey offers a maximum 25 per cent depreciation per annum, and Turkish seafarers' salaries are taxed at just 10 per cent while working in international waters.
Turkey also offers low-interest loans of up to 50 per cent of the total loan value for roll-on, roll-off vessels.
Australia is one of the few OECD countries to offer little or no assistance to its domestic shipping industry.
The consequence is that most of Australia's imports and exports are carried by overseas-owned operators, leading to billions of dollars in freight costs being paid overseas every year.
This, in turn, contributes to the soaring deficit in Australia's balance of payments, and the growing foreign debt.
Submissions from Australian shipowners, to at least create a level playing field with overseas operators, have been ignored by Canberra.