Felicity Landon reports on Singapore’s strengths in an increasingly competitive region
The Maritime and Port Authority of Singapore (MPA) describes Singapore as ‘the Asian gateway for global leaders in ship financing, ship broking, risk management and marine insurance’.
Singapore is the fifth largest ship registry in the world. It is home to more than 130 international shipping groups, as well as leading players in shipmanagement, finance, broking, insurance, law and arbitration; at any one time, there are about 1,000 vessels in the Port of Singapore; and, although Singapore does not produce any oil, it is the world’s top bunkering port.
And yet, there are clear challenges that go beyond the impact of the global downturn. In a rapidly expanding region, Singapore cannot take its ‘number one’ spot for granted, and some key developments in the past year confirm that the MPA and wider maritime sector recognise this, and are acting accordingly.
Last September (2016), the MPA established the International Maritime Centre 2030 (IMC 2030) advisory committee, to review Singapore’s development strategy and identify new growth areas to enhance its long-term competitiveness and value proposition as an IMC. Chaired by Andreas Sohmen-Pao, Chairman of BW Group, the committee has 22 members drawn from the maritime and related sectors, whose ‘brainstorming’ will lead to a strategy document in the first quarter of this year.
“The rapidly evolving global economic environment poses both opportunities and challenges for Singapore’s development as an IMC,” said the MPA. “Emerging trends in the maritime and logistics sectors such as smart ships and ports, data analytics, digital platforms and other new technologies are disrupting traditional business models and creating new value chains. To be better positioned for future growth, Singapore would need to stay nimble and adapt to new industry paradigms.”
The IMC 2030 committee will focus on these new developments and identify cross-sector growth opportunities, says the MPA. Alongside this initiative, Singapore instituted a number of other landmarks in 2016. In April, the first 28m tall caisson for the Tuas Terminal Phase 1 development was launched, a significant milestone in the development of Singapore’s new generation container terminal. Tuas Terminal will be developed in four phases over 30 years, with Phase 1, to provide 20 deepwater berths with annual capacity of 20m teu, scheduled for completion by the early 2020s. The entire mega-terminal will have a total handling capacity of up to 65 million teu.
In June, BIMCO opened a new office in Singapore. In October, DNV GL signed an MoU with the Technology Centre for Offshore and Marine Singapore (TCOMS) at the launch of the centre. TCOMS is a national Centre of Excellence established by the Agency for Science, Technology and Research (A*STAR) and the National University of Singapore (NUS) to spur research excellence and advance Singapore’s marine & offshore engineering. It will house a Deepwater Ocean Basin, due for completion in 2019, which will be equipped with wave and current generation systems to simulate harsh ocean environments, including those in ultra-deep waters.
In November, Singapore Exchange Limited (SGX) completed its acquisition of The Baltic Exchange Limited, to combine the strengths of Singapore and London, two of the world’s most important maritime centres.
And later in the same month, the Singapore Registry of Ships marked its 50th anniversary; at the last count, the Singapore-flagged fleet exceeded 4,700 vessels with a total of more than 87m gt.
“Singapore’s success has been attributed to a confluence of many factors, including its strategic geographical location, a consistent, pragmatic and transparent legal and regulatory framework focusing on competitiveness, sophisticated port facilities and shipyards, its status as an international business and financial hub, and its attractive position as a launch platform for companies seeking to develop and expand business in ASEAN and Asia,” said Esben Poulsson, President of the Singapore Shipping Association (SSA).
“These factors have been supported by a conscious decision to develop and nurture a comprehensive ecosystem of maritime establishments and businesses to meet the varied and diverse needs of owners, operators and other players in the shipping and offshore marine supply chain – today, we have more than 5,000 companies that are linked to and support the maritime sector.
“For our part, the Singapore Shipping Association’s position has always been that government should help companies help themselves. To that end, most of our focus has been on measures and initiatives aimed at reducing costs and improving operational efficiencies. Given the importance of people, we have also spent considerable time and effort promoting initiatives aimed at training and retaining people in the maritime sector, especially seafarers who are considering second careers ashore.”
Given its position in the global marketplace and its reliance on global trade, Singapore is facing the same problems as everyone else, points out Mr Poulsson.
“We do not expect to be able to buck any trends, but we hope to be able to at least mitigate the worst effects of a slowing global economy. For one, there must be constant collaboration and dialogue between industry and regulatory bodies to anticipate and address potential problems in a pragmatic fashion. To this end, we hope to be able to promote measures that will reduce costs and improve operational efficiencies for the industry.
“For another, we are fortunate that local and regional trades are still going strong – the growth of ASEAN and Asian economies has helped us tide over the worst of the doldrums facing the global shipping industry.”
The Baltic Exchange deal and the establishment of a larger BIMCO presence in Singapore are very gratifying, said Mr Poulsson. “As they join other international associations with a presence in Singapore such as the Asian Shipowners’ Association (ASA), the Federation of ASEAN Shipowners Associations (FASA), the International Bunker Industry Association (IBIA), the International Marine Contractors Association (IMCA) and the International Association of Independent Tanker Owners (INTERTANKO), we see it as more proof that the years of hard work aimed at positioning Singapore as a cosmopolitan, pro-business maritime hub have borne fruit.
“I think that the message is that Singapore is ideally situated to serve as a platform for organisations seeking to expand in Asia, not only because of its geographical location, infrastructure and favourable regulatory and legal framework, but also because Singapore is aware of, and sensitive to, the needs and traditions of organisations with long histories such as BIMCO and the Baltic Exchange.”
It’s a tough market for everybody in marine and offshore, said Colin Jarraw, Shipping Partner in the Stephenson Harwood (Singapore) Alliance. “Much has been written about trends – but one I would highlight is Big Data. Singapore is trying to position itself to being a ‘smart nation’ by 2030. Of course it is going through a rough patch with its shipping sector – but an interesting development has been the joint effort between A*STAR and the National University of Singapore to create the Technology Centre for Offshore and Marine Singapore.
“The government put aside $107m to set up this centre. Obviously people say this is to bolster the shipping and offshore industry, but I think there is more to it than that. This is an example of Singapore’s ability to be nimble-footed. Another big thing is the new high-tech port at Tuas.”
With China investing heavily into Malaysian port and rail infrastructure, Singapore might not continue to be the dominant player it once was in terms of shipping, says Mr Jarraw. “It is healthy to have competition. Will Singapore be left by the wayside? I don’t think this is the case. Singapore has a healthy banking and finance structure; although China is able to build ports and other infrastructure overnight, it has taken us generations to build up our ‘no nonsense’ banking and finance sector in Singapore, and that element of our economy is our strength.”
In November 2017, Singapore will hold its second annual finance technology symposium, and the drive for financial technology is strongly backed by the Monetary Authority of Singapore, he said.
Daryll Ng, also Shipping Partner at the Stephenson Harwood (Singapore) Alliance, said: “This is a particularly challenging time for Singapore’s maritime sector. I think the gains that many companies made pre the financial crisis of 2008 allowed them to power through the intervening years with a certain amount of liquidity. But I believe that has now all come home to roost; the market hasn’t improved and margins are still very low.
“There are many companies in the market where it is pure survival. The cash made in the good old days is now coming to an end, and we saw quite a few insolvencies in 2016 – including Hanjin, where we (Stephenson Harwood) have been involved on a very large level.”
The tough market has delivered a large amount of maritime work for lawyers ‘but not in the way people might think’ said Mr Ng. “It isn’t settling huge numbers of disputes. It is more restructuring of debt and similar work.”
However, he warned: “While we are seeing very good work and discrete bits of work, I can’t see this powering the legal industry in Singapore in the longer term.”
There is, he said, pressure in this area; a number of international law firms have come into the Singapore market from London, for example, “really because the work in Europe is not doing so well, so they are looking to Asia”.
This has led to a price war and smaller slices of the cake all round.
Taking the broader view, he said there are really significant factors in Singapore’s future development. “Singapore is small enough and has the financial and government might to make changes very quickly. When they say they are going to do something, they will do it. For example, 10 years ago they said they would make Singapore an arbitration hub and very arbitration-friendly, and they did it. If we look at what Malaysia is doing, yes, there is a lot of Chinese money flowing in, but Malaysia isn’t as nimble-footed as Singapore in making regulatory changes to make things happen.”
Singapore will continue to be relevant, he said, although the gap between Singapore and its neighbours will narrow.
His colleague, Colin Jarraw, agreed. “Singapore has been used to being number one for a very long time, but the competition is all around us,” he said. “However, our banking and finance sector remains strong. We don’t have issues of corruption. Companies like to be based here.”
As one of the main Asia Pacific locations for international shipping companies, and home to many BIMCO members, Singapore was a sensible place to open a new office and further strengthen BIMCO’s footprint, said Maite Bolivar Klarup, who is heading up the new BIMCO office in Singapore.
“Singapore is one of the primary markets for BIMCO. It is an area that is constantly developing and growing and where there are always new business projects to consider and new potential members to offer our expertise,” she said. “During the current challenging market, it is important to be close to our members and give them the best advice in developing best practices and to provide operational support. With offices in both Shanghai and Singapore we can now offer a better service to members in Southeast Asia.”
In Asia, BIMCO has members with very broad interests ranging from very large to very small, managing ships of all sizes and from all segments of the maritime industry, says Ms Klarup. “We host networking events for our members to meet, to exchange knowledge and experiences. BIMCO is stepping up its activities in Singapore – this reflects a growing membership and the high level of development in the region.”
Maritime Singapore is developing so rapidly it will be one of the leading transshipment hubs, she predicted. “Singapore continues to invest in port infrastructure to accommodate the future needs of the maritime industry.”
She highlighted PSA Singapore’s Pasir Panjang Terminal; this $3.5 billion project, to be completed by the end of 2017, will allow Singapore to handle 50 million teu annually when fully operational. The longer-term plan is to shift port activities away from Tanjong Pagar and Pasir Panjang, to the new mega port being developed at Tuas.
Meanwhile, to be ready for the supply of LNG as an alternative fuel, the MPA and PSA Corporation have awarded two LNG bunker supplier licences and are proactively working with stakeholders to develop LNG bunkering standards and procedures at national and international level.
In addition, as from January 2017, Singapore now mandates the use of Mass Flow Metering (MFM) for measuring the transfer of marine bunkers between the supplier and buyer, instead of the traditional tank gauging method. By mid-December 2016, 128 bunkering vessels were fitted with meters, out of a total of 223 ships licensed for bunkering.
MPA has also put in place incentive schemes to ensure a continued pipeline of talent into the maritime sector.
Ms Klarup said BIMCO has established a collaboration with the MPA to enhance BIMCO training programmes in Singapore in 2017. “Both our masterclass and eLearning programmes will aim to support the industry’s manpower and business developments in Singapore,” she said. “BIMCO’s eLearning courses have just been approved by the MPA to participate in Maritime Cluster Fund (MCF) training grants for 2017.”
The Baltic Exchange deal and BIMCO’s decision to open a new office in Singapore should both increase Singapore’s reputation as a regional hub for maritime services with global aspirations as well, said Nick Shaw, chair of law firm Reed Smith’s global shipping industry group.
“Over the last five years, we have seen increased activity in terms of the numbers of shipowners, chartered and operators in Singapore, leading to the P&I Clubs increasing their presence in the jurisdiction,” he said. “In turn, this has led to an increased number of law firms showing an interest in Singapore.”
Reed Smith has steadily expanded its presence in Singapore since opening its office there in 2012. It now has a team of 18 lawyers. Last February admiralty and casualty response lawyer Richard Lovell joined the office from Ince & Co, where he was head of shipping and managing partner of the firm’s Singapore office.
Reed Smith launched a Formal Law Alliance (FLA) with Singapore law practice Resource Law, to expand its offering and its ability through the FLA to service clients’ requirements in handling multijurisdictional transactions, disputes and cross-border work involving Singapore law.
The market remains very competitive on the legal side, said Mr Shaw. At Reed Smith, he said: “Construction disputes, newbuilding disputes and restructuring have all been busy as the markets continue to ride along the bottom.”
The Singapore Ministry of Transport and PSA Corporation have signed agreements with two automotive companies, Scania and Toyota Tsusho, to design, develop and test-bed an autonomous truck platooning system for use on Singapore’s public roads.
“With this, Singapore moves another step closer towards autonomous freight transport,” said the MOT.
Truck platooning involves a human-driven truck leading a convoy of driverless ones; in the Singapore trials, the trucks will transport containers from one port terminal to another.
Mr Ong Kim Pong, PSA International’s regional CEO for Southeast Asia, said: “As PSA prepares for our future terminals at Tuas, it is timely that we move on to the next steps in developing autonomous truck platooning technology.”
The first phase of the trials will be conducted by Scania and Toyota in their research centres in Sweden and Japan. Depending on the outcomes, one of the two companies will be selected by the MOT and PSA for phase two, which will consist of local trials and some development of the technology in Singapore. The phase two trials will initially involve inter-terminal haulage between Brani Terminal and Pasir Panjang Terminals and may eventually be scaled up for haulage within the port area, as well as between Pasir Panjang and Tuasa Port.
Just as Singapore has taken pains to grow a maritime ecosystem, so has the Singapore Shipping Association, said President Esben Poulsson.
“Unlike many other national associations, our membership is not restricted solely to shipowners – whilst shipowners may often drive the agenda, we have always recognised that port agents and shipmanagers are also essential elements of the shipping industry, which is why over 12% of our membership is made up of companies that have identified shipmanagement as one of their core businesses,” he said.
“Additionally, we have a considerable number of other associate members consisting of banks, law firms, ship brokers, insurance brokers, P&I clubs and other relevant industry service providers – in other words, our membership is really a case of ‘The Big Tent’! By ensuring that all the stakeholders have a seat at the table, we are able to propose pragmatic and holistic solutions that benefit the industry as a whole.”