Article written by Capt. Abdelfattah Bouzoubaa, MIIMS
Can Morocco do without a national merchant fleet? Knowing that 98% of the country’s foreign trade is carried by sea, the answer to this question may seem obvious: No. However seeing the continuous decrease of this fleet and the lack of a governmental policy to reverse this trend, one can be led to think that the answer is: Yes.
A LITTLE RECENT HISTORY
The Moroccan citrus fruits and vegetables export board (OCE) had suffered during the 1960’s from the upward pressure on freight rates exerted by foreign reefer ships owners. To escape the grip of these owners, OCE which was then responsible for all exports of citrus fruits and vegetables, had for some years paid a freight bonus of 10% to Moroccan ship owners to encourage the build up of a national reefer vessels fleet. In the early 1980’s, this fleet consisted of 19 vessels and carried up to 85% of OCE exports. The freight rates charged by the Moroccan owners were 20% to 30% lower than the market.
In 1973 the world’s first exporter of phosphates and fertilizers (OCP), engaged with the help of the national shipping line, Comanav, in an acquisition program of chemical tankers to allow the sale of phosphoric acid to south east Asia countries on a C&F basis. A decade later, Marphocean, the ship owning arm of OCP, was among the world’s top players in the chemicals transportation market. The now defunct Marphocean carried about 40% of phosphoric acid exports of the country and participated in other trades, such as the carriage of palm oil from south east Asia to Europe.
Unlike many developing countries, Morocco has not enacted legislation on liner traffic sharing on the model of the Unctad Code of Conduct of Liner Conferences. Thus, the Moroccan ship owners won their fair share in the liner trade with European countries after fighting expensive but experience-rich ‘freight wars’. Market shares won – 30% on average – had allowed keeping freight rates for the liner trades under control, especially in Morocco-Europe trades which absorb two-thirds of Morocco’s foreign trade. Incidentally, the exporters of low value commodities were able to benefit from promotional freight rates.
In the mid seventies Comanav introduced container shipping to Morocco and bought five container vessels and handling equipment allowing it to be the country’s first container terminal operator.
The then prevailing policy that Morocco must have a merchant fleet had ensured continuity of trade of the country in times of crisis. For example, during the re-negotiation of the fishing agreement with Spain in the late 1990’s, Spanish fishermen from time to time blocked the access of Moroccan vessels to the port of Algeciras, causing the cessation of transit via this port of exports of fish and citrus / vegetables by trucks. At the request of the government, the Moroccan owners increased sailings to French and Italian ports to circumvent the blockade and prevent the deterioration of whole cargoes of perishable foodstuffs in the port of Tangier.
PALPABLE RESULTS OF A POLICY
It is estimated that the incentives granted by the Moroccan government under the Maritime Investments Act of 1973 amounted to a total of 100 million US Dollars over the period 1973-1983 i.e an average of 10 million US Dollars per year. This incentive has helped increase the fleet from 20 vessels (60,000 DWT) in 1973 to 61 vessels (600,000 DWT) in 1987. The number of Moroccan owners increased from 4 to 18 and the tonnage they carried annually rose from 920,000 to 7,800,000 metric tons, i.e a share of 25% of foreign trade. Their annual turnover was approximately 300 million US Dollars.
The shipping companies which were established have allowed the emergence of an operational know how in shipping and the training of professionals encountered today in all businesses related to maritime transport.
A NEW MARITIME POLICY?
Considering the full fledged liberalization of the maritime transportation sector engaged by the government in 2007 and the continuing decline of the Moroccan fleet, one is tempted to think that it has been determined that the reasons which prompted the Government to promote the establishment of a merchant fleet no longer existed and that Morocco can rely entirely on foreign shipping for the transport of its trade.
While until recently the erosion of the market share of the Moroccan owners essentially concerned the containers and bulk trades, it has now also reached the passenger and ro-ro trades where enviable positions were still held by the Moroccan owners. Due to various reasons, the 11 Moroccan flag passenger ships of Comarit which were trading between Moroccan and Spanish, French and Italian ports are now all stopped and some are under arrest by creditors. More than 1.000 seamen have been left without a job.
The Moroccan government authorized the Italian owner GNV to serve some of the lines previously served by Comarit. The situation of this company will not be helped by the decision made in November 2012 by the Spanish anti-cartel authority (CNC) to impose heavy fines amounting to a total of 88,5 million Euros on six Moroccan and Spanish ship owners for having allegedly operated between 2002 and 2010 a cartel in the Spain- Morocco passengers trade. These fines include about 28 million Euros for Comarit and 8 million Euros for another Moroccan owner, IMTC. The Moroccan (still) trading fleet now consists of 14 vessels only.
A SIZEABLE MARKET AND NO FLEET
The foreign trade of Morocco amounts to 70 million tons per year and the freight paid for the transport of this tonnage is about 3 billion US Dollars. About 2 years ago the government devised a national logistics plan and one can legitimately expect all the positive impacts that it is said this plan will have on trade as a whole. However if the “island of Morocco” does not control to a certain extent its maritime links with the rest of the world, the expected benefits of the plan can be greatly reduced. Indeed, without ships in time of need, the continuity of the links between Moroccan and foreign ports cannot be guaranteed and the flow of goods exchanged cannot be maintained.
Morocco has benefited since the beginning of the liberalization of its maritime transport sector in 2007, from a dramatic decrease in freight rates due to the global shipping crisis which has commenced in 2008 and is still continuing.
However, without a reasonably sized fleet, what means will Morocco have to mitigate the impact on exports and imports of the rise in freight rates which will not fail to happen when the crisis fades away? Besides the negative impact on the competitiveness of Moroccan exports and the higher cost of imports, an increase of 10% only of freight would mean an additional freight cost of 300 million US Dollars. Therefore, it would be a sound policy to promote the participation of Moroccan ship owners in the transportation of foreign trade.
DID ANYTHING CHANGE?
Geography being stubborn, Morocco is still “an island.” Maritime transport still accounts for 98% of foreign trade and ships carry nearly half the 8 million persons who visit the country annually. Foreign trade depends entirely on maritime transport and shipping remains the umbilical cord that allows the “island of Morocco” to exchange with the rest of the world. Therefore a sound maritime policy objective should be to determine the size and type of the fleet which should be maintained under the control of Moroccan interests, but not necessarily under Moroccan flag.
“OPEN SEA” POLICY
The Moroccan fleet was stalled for some years already when the government commenced the deregulation of shipping in 2007. The repeal in 2010 of the Maritime Transportation Act of 1962 completely liberalized the shipping sector. No measures were taken by the government to allow Moroccan owners to adapt to these dramatic changes.
In the absence of such measures, the liberalization of the shipping sector has proven to be for the exclusive benefit of foreign ship owners because the Moroccan owners are not on the same footing as their competitors with regard to regulatory, administrative, fiscal and social aspects.
Moreover, the privatization of the national shipping line, Comanav, in 2007 was not followed by the development of its fleet promised by the buyer CMA-CGM. On the contrary its fleet was dramatically reduced.
The transport of dry bulk (grain, phosphates …) and liquid bulk (hydrocarbons, oils …) has always been open to foreign owners, but whereas previously Moroccans owners occasionally participated in the transportation of these commodities, over the last few years they did not carry a ton of the 5 million tons of cereals and not a barrel of the 10 million tons of oil imported annually.
A NECESSARY CHANGE OF COURSE
It is estimated that about two-thirds of the world merchant fleet fly the flags of open registries. There is no country from USA to China, which has not allowed its owners to make use of open registries. Other countries have created “Bis” registries to provide the owners with facilities equivalent to those offered by open registries.
Almost all the ships calling at Moroccan ports fly open registries flags. Even in the passenger trade Spain-Morocco, vessels controlled by the Spanish ship owners fly other flags than the Spanish flag and their crews are not just Spanish. The Moroccan owners do not operate under the same conditions.
A number of incentives are necessary to allow the Moroccan owners to play their role, and the first measure must be to put them on the same footing as their competitors. These competitors pay to the flag State only a tonnage tax and are not subjected to income tax and VAT or other taxes. The sea farers they employ do not pay income tax. No rigid requirements are imposed on them regarding nationality of shareholders, company location or nationality of crew. These owners can operate their vessels from the location that offers the best administrative, financial and communications facilities and they can freely choose the Captain and crew – regardless of nationality – to whom they entrust their ships.
For those in government who are unaware of how international shipping operates, these requirements may seem drastic, but it is the way in which the majority of the world fleet is operated today. The only ships that still operate under national flags are those assigned to cabotage or to other reserved or subsidized traffics or that are under State ownership.
In the absence of measures to put the remaining Moroccan owners on the same footing as their foreign competitors, they cannot long resist the pressure of competition and they will certainly not be here to participate in the strong increase in demand for shipping which is projected for the near future. In November 2012, the new government commissioned a strategic study of the maritime transport sector. It is hoped that this move will open the way to the re-birth of ship owning in Morocco.