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Singapore's Performance In 2009 And First Quarter 2010
March 2010 | Maritime | Multidisciplinary Practices | Maritime | Litigation & Arbitration | Maritime | Finance | Starboard

2009: collapse in world trade

Global trade shrunk 12% in 2009, said Pascal Lamy, World Trade Organisation's director-general, speaking at the European Policy Centre in Brussels, describing this as the sharpest ever decline since the end of the Second World War.

Singapore, having a small and open economy, was not spared. Cargo and container throughputs suffered year-on-year decreases of 8.9% and 13.5% respectively, the first volume reductions since the dot.com recession in 2001. Transport Minister Raymond Lim, speaking at the Singapore Maritime Foundation, acknowledged that global economic uncertainties, falling freight rates and tightening liquidities made 2009 a challenging year.

2009: not all bleak news

Despite an adverse year, Singapore remained the busiest box port in the world, ahead of Shanghai and Hong Kong. Singapore also maintained its global lead in vessel arrival tonnage (growth of 10.1% to 1.78 billion gross tons) and bunker sales (growth of 4.2% to 36.4 million tonnes).

The Singapore Registry of Ships recorded a 4.4% increase in ships registering under the Singapore flag, totalling 45.6 million gross tons.

Singapore also managed to attract international law firms and Protection and Indemnity Clubs to establish their operations here.

The Maritime and Port Authority introduced relief measures, including concessionary port dues and defrayed bunker surveying accreditation costs.

2010: a China-led recovery?

SMF's new chairman Michael Chua (for a summary of the new chairman's plans for SMF, click here) predicted the maritime industry may take longer to recover compared to other industries, but anticipates benefits as the shipping sphere of influence moves from West to East.

His anticipation appears to be borne out by shipping indices, which record increasing traffic to the Far East from Europe, while Europe and North America lag. Container volumes rose nearly 10% in December 2009 and traffic in iron ore, coal, grain and other raw materials from Europe to Asia surged by 47%.

The WTO cautioned that Chinese growth may be slowing even while the present China led recovery increases movement of goods in Asia. Demand from China recovered thanks to the huge government-directed stimulus measures to tackle the financial crisis. Recently, however, the Chinese government has been applying the brakes.

2010: increased government investment in the maritime sector

Michael Chua described this underrated sector as a pillar of Singapore's economy. By 2006, Singapore's maritime cluster had overtaken all other sectors in terms of annual turnover (S$90 billion), economic value add (S$17.6 billion) and number of workers (120,000 people).

In apparent agreement, Finance Minister Tharman Shanmugaratnam introduced tax incentives in the 2010 budget which industry observers describe as apt and timely. These incentives, which include extending port dues concessions for another six months to lower business costs and enhancing tax incentives to grow services, will further strengthen Singapore's position as an international maritime centre. Budget measures include:-

• extending the Maritime Finance Incentive;
• incentives for ship brokers and forward freight traders;
• categorising ship management fees as qualifying income exempted from tax; and
• extending the Goods and Services Tax remission for listed Registered Business Trusts in infrastructure, ship leasing and aircraft leasing

Singapore's tax incentive schemes have so far attracted 120 international shipping groups, spending of S$2.8 billion annually, and six ship financing companies managing assets of S$3.5 billion. Port dues concessions which are currently enjoyed by ocean going ships (10% concession for port stays not exceeding 10 days) and commercial harbour crafts (20% concession) will be extended to end September 2010.

During a recent Committee of Supply Budget debate in Parliament, Lim Hwee Hua, Minister, Prime Minister's Office, and Second Minister for Finance and Transport, expressed cautious optimism for the rest of 2010. Despite an excess of vessels and difficulties in financing newbuilds, Mrs Lim cited increased cargo volumes and freight rates as indicating an eventual upturn, provided the economic recovery is sustained.

The continued improvement can be seen in the Maritime and Port Authority of Singapore's statistics. From a very low base in 2009, the MPA reported 2.18 million standard-sized boxes were moved this February, up from 1.85 million in the same month last year. This 18% increase is part of a monthly year-on-year rise, which began in November 2009. Investment analysts also noted a year-on-year increase in container ports throughput exceeding 10% in January 2010 in China and Hong Kong.

In addition to the budget measures mentioned above, the government is also preparing for continued growth by expanding the Pasir Panjang Terminals and making other infrastructure investments to expand port size and connectivity.

Singapore should also raise its profile to that of a globally recognised maritime knowledge hub, according to Sven Ullring, Keppel Corp director and chairman of the 3rd Maritime R&D Advisory Panel. He said Singapore risks losing out to strong Asian competition from Japan, China, South Korea, Vietnam, India and the United Arab Emirates and he called for more government investments in maritime research, development and education and the development of international financial and maritime services at a recent lecture.

In a related development, MPA and the Nanyang Technological University recently launched a Centre for Maritime Energy Research programme offering S$15 million from the MPA's Maritime Innovation and Technology Fund for research into cleaner shipping technologies.

Business news

Sembawang Shipyard, a unit of SembMarine, won its second contract, worth S$130 million, from Australia's North West Shelf LNG Venture to upgrade a LNG carrier, the Northwest Snipe tanker ship.

Otto Marine has entered into a 3 year charter, with an option to purchase, of a 300-person work barge to Malaysia's Petra Resources, for US$34.2 million.