A SEA of economic potential

by the Hon. Minister for Transport, Infrastructure and Capital Projects Dr Ian Borg

Minister Borg spoke to Malta Maritime Directory on the role of Malta as a geopolitical entrepôt, the effects of the pandemic and how Malta keeps up and keeps ahead in this very competitive sector.

With international trade and shipping playing a key role in the transportation of essential supplies, foods and other necessities, the role of Malta’s maritime sector has become yet more significant in today’s scenario.

The pandemic has left an imprint on the maritime sector, and the lockdowns and restrictions on entry imposed by many countries have caused severe disruption to the industry which rendered routine operational procedures like crew changes very challenging tasks. The crisis has also reduced manufacturing activity which in turn greatly affected shipment volumes and traffic. The outbreak of COVID-19 almost coincided with the introduction of the IMO 2020 Sulphur cap, inevitably causing some short-term uncertainty in the industry. The pandemic’s cumulative effects on the industry and the consequent insurance and legal implications have yet to be clearly determined.

WEATHERING THE STORM
Overall, at a time when the industry was preparing to undertake a more green approach, maritime stakeholders have been constrained to consider the wider implications of the pandemic, whilst continuing to retain the positive steps which have already been taken towards the preservation of the environment.

The government is in constant liaison with educational institutions to ensure that the right accreditation to specialised degree and diploma courses is offered to prospective students.

I am confident that the shipping industry is quite resilient and is accustomed to operate under high pressure. The industry knows through first-hand experience that tomorrow’s market opportunities are spurred from those past threats which once endangered their very own existence.

But with every cloud there comes a silver lining. Within this context, digitalisation can be one of the few collateral benefits of the covid-19 pandemic. During the crisis, resistance to change subsided, as did various companies’ unwillingness to take the plunge over digitalisation issues as they were left with no other option other than moving forward with implementing their digitalisation strategies.

The shipping industry is quite resilient and is accustomed to operate under high pressure

Consequently, this digital transformation brings about a wide range of transversal benefits across all sectors in the maritime industry, ranging from increased operational efficiency, safety and (cyber) security improvement, costs reduction and carbon footprint decrease.

GREENING THE BLUE
If we think that land is overused and roads congested, environmental experts concur that this is but small fry when compared to the exploitation of the sea. Indeed, in the 170 years or so since sail gave way to fossil fuel driven ships, the sea has become increasingly choked. In spite of all the advancements in technology and transport, shipping has remained a backbone of international trade and the global economy. What is termed as the blue economy represents a gross value added of over €500 billion per year whilst providing approximately 5.4 million jobs, and these figures continue to grow. This is why all efforts must aim to ensure that this industry continues to maintain and even raise its quality standards, whilst also ensuring a high level of safety and environmental protection.

Malta continues to actively promote policies that safeguard the marine environment and the maritime industry in a safe and secure manner. Today our nation is facing the challenge of shaping a safer, greener, and more secure shipping sector which at the same time continues to contribute economically. We must ensure that the delicate balance of practicality and effectiveness is sustained globally in the maritime industry and in fact, only a few months ago, we were reflecting on the many ways in which the blue economy could contribute to a greener Europe.

Some concerns which Malta faces in this regard include decarbonisation and clean energy. Maritime industry stakeholders were at the forefront in devising long-term strategies on the sustainable management of maritime resources and space. Plans were in place for new strategic guidelines for sustainable aquaculture, a strategy on algae and new marketing standards for fish; prompting the blue economy to take a sprint towards a more sustainable future. All of this still holds true, but now of course we have to deal with a fresh layer of complexity.

It is disconcerting that most of the blue economy sectors – transport, ports, tourism to name but a few – were hit hard by the mandatory COVID-19 pandemic lockdown. Apart from striving to recover huge financial losses, industry players must adapt to new regulations imposing physical distancing and protection devices amongst other things.

This new reality gives the industry the opportunity to devise a new reality by building it from scratch in a more sustainable way, rather than adapting old, at times imperfect economic models. We all know that we need to adapt to a low-carbon economy by 2050, shift to biofuel and liquefied natural gas for shipping, electrification of port infrastructure and use a mix of ecosystem-based, hybrid, and traditional engineering solutions for coastal protection. Within this context, the responsible use of natural resources, the ensuring of social inclusion and the adopting of circular economy concepts could be the founding notions for a sustainable blue revival.

We must ensure that the delicate balance of practicality and effectiveness is sustained globally

By reconciling economic recovery with social and environmental recovery, a sustainable blue economy would be even more of a driver for jobs and social inclusion in coastal areas and especially in the maritime sector holistically.

STEADY AS SHE GOES
Attracting quality shipping to Malta has always been the primary objective of the Maltese Government and for years Malta has been established as one of the largest shipping registers in the world. The strategy that Malta embarked upon is one of growth through quality. Over the past years, the Malta Ship Registry has diligently developed an excellent reputation for being one of the most trusted ship registries in the world. With a registered gross tonnage of over 83 million, the Malta Flag is the largest registry in Europe and the sixth largest registry in the world.

Attracting quality shipping to Malta has always been the primary objective of the Maltese Government

Maritime experts concur that one of the major determinants of growth is the Registry’s ability to address the particular ship registration needs of its customers without compromising the quality of service provided; and this by strict adherence to the applicable regulations and standards. Within today’s competitive environment, ship owners know what to expect from different jurisdictions and pro-actively choose what is right for their shipping needs.

Although cost matters are always at the forefront of customers’ consideration, flag selection goes well beyond that. Trusting one’s valuable assets with the Malta Flag gives ship owners the necessary peace of mind that the asset is safe and managed cost effectively.

The Registry also enjoys the backing of a maritime nation well known for the quality of the services provided by its maritime community and for its robust legislation. Moreover, Malta is always at the forefront during high level discussions in international and European fora to promote safe shipping whilst advocating for the provision of practical solutions to the ship owner, and we are determined to keep it that way.

The sector enjoys the concrete support of a Government that is adamant to promote the whole sector as an international maritime service centre of excellence.

THE NAVEL OF THE MEDITERRANEAN
With its unique geopolitical location, the maritime industry has always played an important role within the islands’ economy. This Government strives to support the industry by enabling, regulating, and promoting all sectors; with the aim to further develop Malta’s role as a container transhipment, ship repair and bunkering centre, a thriving maritime legal hub and a home to Europe’s leading flag. Malta’s success story in the maritime sector is the direct result of the ability of the various stakeholders to work together to establish several niches and clusters that build upon the nation’s inherent advantages such as location, language, climate and legal infrastructure.

Creating the right business climate is also a major prerequisite for the successful development of the industry. The sector enjoys the concrete support of a Government that is adamant to promote the whole sector as an international maritime service centre of excellence. This is done by giving the much-needed peace of mind that foreign investors need. The Government ensures that Maritime Malta remains at the forefront of the industry by providing a respectable, serious and efficient regulatory framework for the maritime sector. This also gives the local stakeholders the necessary impetus to tap into new markets and invest further.

The Government ensures that Maritime Malta remains at the forefront of the industry by providing a respectable, serious and efficient regulatory framework

PLANNED IMPROVEMENTS

A strong Malta flag is vital for the long-term success of the Maltese maritime industry, but its success is highly influenced by the collective, as well as individual, performance of each and every player within the Maritime Malta brand. Whilst the provision of an efficient and timely service remains the backbone of the Registry’s success story, ship owners value the stable and concrete vision of the Flag which gives the much-appreciated peace of mind to the industry.

The recent successes achieved in the registration of specific niche markets have all stemmed from the fact that the Authority, following necessary assessments and consultation with the industry, implemented legislative changes to adapt its offer. Classic examples of this approach are the inroads made by the Registry in registering super yachts, newly built state of the art cruise liners and some of the world’s biggest container ships. LNG carriers is another sector that the Authority managed to penetrate during the past years as the Authority adapted itself to respond to the needs of these highly specialised niches.

A DELICATE BALANCE
Close to the main shipping routes, Malta’s evolution into a major hub for transhipment, cruise, ship-repair and offshore support and services is obviously interlinked with its location. Since its establishment in 1988, Malta Freeport has registered remarkable growth and is now a major transhipment port in the Mediterranean region enjoying positive international recognition with global carriers as a reliable and credible port. Malta Freeport Terminals amalgamate the activities of container handling and industrial storage and focus on the ‘hub’ concept’, whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent feeder vessels.

The government’s challenge in this regard is to find the right balance between the needs of the local community whilst safeguarding the successful operations of enterprises that bring value added to the Maltese economy. This dilemma is practically present in all port areas around the world and through proper dialogue with all stakeholders, stringent adherence to agreed operational standards and by establishing multilateral agreements on footprint limitations, the government’s role is to ensure that the right balance is found and implemented.

A RANGE OF ACTIVITIES
Malta provides a comprehensive range of services to the maritime sector. Operating with the highest standards amongst the industry, Transport Malta ensures that all bunkering companies follow a strict code of practice. Whilst ensuring the right regulatory and oversight framework, the Authority also breeds initiatives to create opportunities for the private sector to invest and grow further. Both Transport Malta and the Ministry for Transport, Infrastructure and Capital Projects, as the regulators for maritime affairs in Malta, are committed to facilitate the sustainable investment in the bunkering and logistics sectors and to promote internationally opportunities within these sectors. By creating the right stimuli and by providing the industry with the necessary promotional platforms, the Government is committed to consolidate Malta’s position as a maritime centre of excellence. While welcoming the presence and commitment to quality of existing operators, I believe that there are further opportunities for growth in this area. This does not necessarily mean attracting new operators.

EDUCATION QUALITY
The recent investment in new training centres that were established to tap the huge potential in maritime education is a clear illustration of Malta’s ambitions on the global stage for this particular niche. The government, particularly through Transport Malta, is in constant liaison with educational institutions such as MCAST, Maritime MT and University of Malta to ensure that the right accreditation to specialised degree and diploma courses is offered to prospective students. The industry has invested heavily in specialised equipment, and Malta also offers a wide range of other training courses that range from STCW and seafarer training, courses for shorebased personnel in port operations, as well as other specialised courses that deal with safe mooring and berth allocation.

Industry consolidation has transformed the shipping sector, resulting in a number of mergers and acquisitions, as well as new shipping alliances. This has led to the rise of a smaller number of large companies dominating the market.

By providing the industry with the necessary promotional platforms, the Government is committed to consolidate Malta’s position as a maritime centre of excellence

With greater economies of scale, these companies are operating at reduced costs and are driving freight and charter rates down across all shipping sectors. The ability to manage fuel emissions is another major challenge for the industry. Following the recent introduction of the International Maritime Organization (IMO) CO2 emissions regulations, all shipping companies had to adapt to more stringent regulations related to fuel and emissions. Although various companies opted for different solutions to meet the new standards, with differing implications on the company’s balance sheets, the major challenge lies in adopting medium-term regulations set for 2030. Longerterm regulations set for 2050 will be impossible to achieve without drastic new technological breakthroughs, with some industry leaders comparing the technological challenge to the change from sailing ships to steam power.

Given the complexities of both adapting and introducing regulations in the shipping industry, another concern is whether regulation will keep up with technology. The IMO is currently reviewing the necessary regulations to identify possible legal issues that may arise from the existing international conventions to regulate such ships. Data collated on voyage times, weather, traffic, repairs, and so forth can be used to determine patterns and predict outcomes.

This will have a huge impact on the day-to-day operations of vessels as well as on planning for future journeys. Big data analytics could be used to develop automated procedures and functions onboard vessels. This technology will allow decisions to be made more quickly and efficiently, and reduce the overall risk attached to voyages, making the shipping industry safer.

This is where Malta’s first-mover advantages, knowledge and experience gained so far in this sector may be aptly developed further to make inroads in rather specialised sectors like shipping and maritime. Malta is arguably at the top of its game in this sector. Education and, perhaps more crucially, adaptation and foresight are inevitably the keys which will keep this sector growing. The agility in response to changing technology and the country’s willingness to adapt will also be measured against its ability to safeguard the sea from further pollution so that the goose that lays the golden eggs remains very much alive and kicking.