e-brod.com: LOST AT SEA
Topic: Shipbuilding
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TIME IS RUNNING OUT FOR SHIPYARDS
Years of brushing aside problems in the Croatian shipbuilding industry has finally
culminated in a frantic last minute search for a restructuring solution that is
compatible with EU competition policy
During early last week, reviewers
in the Ministry
of Economy, Labour and
Entrepreneurship reviewed abstracts
concerning the restructuring
plans for Croatian shipyards,
aimed at making the industry
compatible with European competition
policies.
State Secretary for Economy Leo
Begović, who will be responsible
for “smoothing the edges” when
things get difficult around the
negotiating table, announced on
television that the scenarios for
overcoming the most difficult
chapter are still not satisfactory
and must be modified. Talks with
leading shipyard directors were
resumed later in the week.
By the summer, EU negotiators
will expect the final solution designed
for EU competition policy
harmonisation. In other words,
a thorough restructuring of the
shipbuilding industry is expected,
aimed at enabling shipyards
to function on the market with
the aid of standard subsidies. Until
now, the main burden has been
carried by taxpayers, as current
and former governments have
deftly avoided and dismissed
the problems of the shipbuilding
industry. Despite the $15 billion
spent since 1995, today the
shipbuilding industry remains
technologically, financially and
organisationally crippled, with
no chance of competing with the
Far East’s thriving industry, especially
when it comes to building
simpler tankers and similar
fleets, which is starting to resemble
the textile industry – tailored clothes in one, tailored metal in
the other.
With the new shipyard recovery
project estimated to cost HRK10
billion, some have been busy calculating
how many kilometres of
new motorways, school buildings
and health centres this would
add up to. The activity undoubtedly
annoyed Ozren Matijašević,
Chairman of the Croatian Association
of Unionists (HUS), who
publicly criticised “the tabloids
for disparaging the shipyard issue”.
Unfortunately, it does not
seem likely that the media will
lose interest. Any “hot topics”
that could have been printed in
the past ten years had no basis, as
actual restructuring of the industry
was not happening. Now that
the failures have become evident,
so have the headlines, and with
pressure rising due to imminent
deadlines, uncertainty remains
as to how all those involved
– workers, local authorities and
the government – will react in the
following two months when the
Prime Minister and his team will
have to play out their roles in the
restructuring drama.
A promise on the horizon
Instead of intense restructuring,
the focus over the past few years
has been on unsuccessfully “chastising”
the shipyards’ boards of
directors. For the fifth consecutive
year, the Government has
been doling out money for recovery
projects and obstinately ousting
complete boards of directors.
The time has come for the final
cut and with the deadline only a
few weeks away, it seems like
an excruciatingly short period of
time for extremely tough decisions
to be made. What remains
to be seen is whether decisions
made on the spur of the moment
might actually prove to be effective.
As things stand now, the unionists
are already threatening to
strongly oppose any move to cut
production or reduce staff, whilst
the MP’s are finding that the situation
has got slightly out of hand.
Marin Jurjević, representative for
the SDP, was the first to directly
address the issue to Vice Prime
Minister Damir Polančec. He
asked how the reduction of direct
state subsidies – one of the reforms
stipulated by the Stabilisation
and Association Agreement
– will affect shipyard workers
and subcontractors.
In a rather lengthy answer,
Polančec said that direct subsidies
have already been reduced,
comparing last year’s 10% share
of the value of a ship to this
year’s reduction to just over
7%. Polančec also confirmed
estimates that the Croatian shipbuilding
business will experience
severe difficulties once it begins
to rely on subsidies equal to
those granted in the EU. “Certain
shipyards will have to be used
for something else, whilst others
will no longer be able to produce
ships”, said Polančec, at the same
time promising that all the workers
will be provided for “there
will be no staff reductions”.
Marin Jurjević seemed pleased
with this answer commenting
that “this promise has been duly
noted by the Croatian public and
will be remembered”.
Damir Kajin, representative for
IDS, expressed his interest in the
Government’s privatisation plan
for “Uljanik”. He reminded his
fellow peers that the Board of
Managers of “Uljanik” had ruled
that the shipyard was not ready
for privatisation. The Vice Prime
Minister was unable to provide
a prompt answer, saying that the
matter concerned a former issue,
which the Government still had
not solved. In fact, in 1993, property
was made available as basic
capital for all shipyards. However,
the property cannot be privatised,
hence the current problem
of separating maritime property
from basic capital. Once the issue
has been resolved, all those
concerned will decide on the best
privatisation model.
Kajin also questioned claims that
the Croatian shipbuilding industry
had a huge impact on the country’s
balance of payments. He reminded
those present that in 2006
and 2007 alone, HRK4.2 billion
had been invested in shipyard recovery
and, in addition to standard
annual subsidies of HRK100
million, total expenditure since
the 90’s added up to more than
the total value of exported ships
– all taxpayers’ money, of course.
Furthermore, Kajin did not fail to
mention the unequal division of
invested money for recovery purposes
in the past two years - Split
received HRK1.7 billion, Rijeka
HRK700 million, Kraljevica
HRK250 million, Trogir HRK650
million and Uljanik zero.
Almost 50% fewer workers
Only tradition and know-how
can ensure the survival of the
shipbuilding industry, of course,
drastically restructured. Those
who wish to be better informed
should already be on the look out
for favourable opportunities and
significant value-added production,
with a sense of global trends
and a strong hand when it comes
to bringing order to the business.
It is no secret that a large number
of construction workers use paid
sick leave to work as subcontractors
for other shipyards; thus
earning bigger wages. Furthermore,
shipyards experienced a
very unbalanced reduction of
workers - from 20,000 to 11,500.
It would not be wise to underestimate
EU measures and policies,
nor overestimate actual capacities
– or as an old saying goes – if
you cannot beat them, join them.
Best practice in countries that
have run down their shipbuilding
industry - Sweden, or drastically
reduced it - Greece, or otherwise
restructured - Germany, Spain,
Italy and France - have shown
that it is not wise to taunt destiny
by brushing apparent problems
under the carpet, which currently
seems to be the populist political
trend in Croatia.
Source: PV International 28.04.2008.
By: Franjo Kiseljak
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