Cover Story: Cyprus round table debate

Moderated by SMI Editorial Director Sean Moloney, the panellists included: Andreas Hadjipetrou, Managing Director of Columbia Ship Management; Nikolaos Kretsis, Fleet Director for Bernhard Schulte Shipmanagement Cyprus; Capt Eugen Adami, owner of Mastermind Ship Management; Dieter Rohdenburg, CEO of Intership Navigation Co. Ltd; Thomas Kazakos, Director General of the Cyprus Shipping Chamber; Capt Eberhard Koch, Chairman and Partner of Osterreichischer Lloyd Shipping Group; Andreas Chrysostomou, Chief Strategic Officer for Tototheo Maritime; Thanos Korfiotis, Project Director from Interorient Shipmanagement; Sunil Kapoor, Director at Fleet Ship Management

Sean Moloney
The appointment of a new Deputy Minister of Shipping has been seen as a positive move to grow the Cyprus Cluster. But what are the areas of proof to show that Cyprus is growing as a cluster and what are your personal wishes as far as the future growth strategy of the country is concerned?

Thomas Kazakos
The Shipping Deputy Ministry has been set up to achieve two goals: to develop the national shipping strategy and to provide even better and more industry-oriented services to the clients of the Cyprus shipping cluster and to the ‘Cyprus shipping’ product in general. 

When it comes to strategy, we would like to see a focused structuring of the Deputy Ministry, bearing in mind we are not starting from scratch. The emergence of the Deputy Ministry is not reinventing the wheel but is improving what we have been working with for several years now. This can take the form of elements we might not have developed as much as we would have liked, such as digitalisation and innovation. Of course, we also have to preach the Cyprus cluster gospel in an even more orchestrated manner and strengthen marketing internationally.

The specific elements which will help the cluster to grow further include aspects such as maritime education. We have already achieved some tangible progress over the last couple of years but we believe that through vehicles such as the Deputy Ministry and the ‘Cyprus Foundation of the Sea’ to be created soon, and by focusing on maritime education and training and research, we can improve services provided by the Cyprus maritime administration and Cyprus in general as a hosting country. This will be achieved by turning this vehicle into a truly one-stop shipping shop. 

Sean Moloney
You talk about international marketing of the cluster, but a lot of the other clusters are very effective in promoting themselves worldwide. How can Cyprus promote itself internationally and what and who do you want to attract?

Thomas Kazakos
Through a targeted promotion approach I would say. We must fine tune the ‘Cyprus Shipping’ product in a proper but not reactive way. Wearing my other hat as a member of the Cyprus Investment Promotion Agency (CIPA), we have a huge opportunity now to develop our own vehicle for shipping and to take initiatives in conjunction with CIPA and work together. It is even more important for this national strategy to fine tune the Cyprus product as soon as possible, and knock on the doors of the industry and prove to them that this is where we now want to go and where we want to take the industry in the next five, 10, 15 and 20 years.

Sean Moloney
Andreas, let me bring you in and thank you for hosting us today. What are your thoughts especially with the appointment of the new Deputy Shipping Minister, and how do you see it benefiting the cluster itself?

Andreas Hadjipetrou
I fully agree with Thomas as this represents the common we want to move forward as local shipping community. The appointment of the Deputy Minister is something that has been promised to the Cyprus shipping sector for a few years now. It is a fact that during the last few years Cyprus has been attractive to foreign companies wishing to establish their base here which is good news because it shows continuity of our attractiveness as a homeport for shipping companies. Moving forward, I would like to see more action rather than meetings and discussions moving forward. It is great that we now see the position of the head of the Cyprus flag filled, and as far as the Chamber and individual companies in the cluster are concerned, it is good that we are living in an environment where it is easy and welcoming to cooperate in an environment that all stakeholders work closely together. 

Dieter Rohdenburg
I agree with what Thomas has said in connecting the new Deputy Ministry of Shipping and CIPA because the mistake we must not make is to focus too much on shipowning and shipmanagement as the core of the Cyprus cluster. As the word cluster suggests there is a lot more to it than just the core. But when you compare Cyprus with the main traditional shipping hubs, we lack a few elements. We have very little on the commercial management side and the same can be said for financial, so I think there are opportunities that lie outside shipowning and shipmanagement and it will take more than just a new figurehead to achieve this, but targeted marketing efforts. There are big opportunities, when you look at chartering. We have trading companies here who act as charterers and are currently not part of the cluster. 

Sunil Kapoor
There are not many supporting systems here in Cyprus: for instance, we cannot bring ships here for layup. And when you compare us to Singapore or Hong Kong there is also a lack of engineering capability or facilities for crew change. Looking at the role of Government, are they changing the systems to make life easier for us, because our growth as shipmanagement companies is determined by the number of people we can hire and bring in. That is one area where there is no transparency of legal help from the Government. There are many things that need to be taken care of to make Cyprus a better place for its cluster of shipping companies to work. 

Sean Moloney
To what extent can Cyprus grow from being a shipmanagement operation and management centre into something different?

Capt Eugen Adami
It is already happening. We have established workshops here working for the offshore supply sector, and we have German turbo charger and main engine maintenance workshops setting up on the island and they are bringing in technology from Germany. But when it comes back to your question about tangible proof, Cyprus is a unique place because we have a flag state, a port state and we also have a coastal state. And all these three governmental functions are to be taken care of within the one Deputy Ministry. Our new industry, oil and gas, operating within the Exclusive Economic Zone, is part of the coastal state side. There is a lot of work the Government has to provide so oil and gas companies can carry out their exploration in a safe environment. But for that to happen, we had to set up a coastguard system where their vessels can be properly berthed. In the past we made a lot of mistakes in Cyprus because we failed to look at the overall picture which is of an integrated maritime policy which brings all these stakeholders together. The new Department of Merchant Shipping has completely shaped its approach towards legislating the cluster in the future. It is now formed all around the integrated maritime policy which is the main pillar where everything starts. From there, it goes to the automation of the registry as well as upgrading the services of the flag. In the past the Government had to go through series of tender processes, but now we have an independent budget where we can spend almost instantly to fund things like the digitalisation platform. This is a very tangible asset for us now. This translates to the next pillar which will be the one-stop-shop scenario for every activity which touches the water. We now need employees who can handle digitalisation, who can carry out research so they can perform better in their own profession. Two weeks ago, the Government awarded the first ever Cypriot Certificate of Competency for an integrated Marine Engineer. So, there is very close cooperation between the Government and Academia and professional and academic training is being married now which creates a very flexible workforce for the future. 

Sean Moloney
Nikolaos, brining you in, touching on what Capt Adami has said, shipping has got to attract the young and talented into the industry if it is to embrace a completely different future as far as artificial intelligence and smart technology is concerned. How difficult is this going to be?

Nikolaos Kretsis
The appointment of a Deputy Minister gives a positive outlook for Cyprus. But there needs to be a clear strategy for all activities related to maritime, and that includes oil and gas because there is a lot of interest here, not only with development of the oil fields around Cyprus, but the political risk. Nevertheless, there is a huge potential for growth but there is no correct infrastructure in place to provide the support for oil and gas, in particular, and for the maritime sector going forward. So, from my point of view, a clear strategy as to how we need to work and the infrastructure needed, is necessary at this stage. Regarding digitalisation, our industry has traditionally found it difficult to implement new concepts, and a lot of us are reluctant to use new technology because of concerns over reliability.We need young people in our industry and the Deputy Ministry can promote this more efficiently. There are a lot of opportunities for industry and academia to work together to create the foundation for us to plan our future. 

Capt Eberhard Koch
The new Shipping Deputy Minister to the President has been in charge for 69 days now and we normally give politicians a grace period of 100 days. Giving us a Shipping Minister gives a very clear message of support from the political side. We believe the new Shipping Deputy Minister is able to significantly increase the contribution of the shipping sector to the Cyprus GDP, and to increase the maritime cluster. She has done a brilliant job in CIPA but we have to act quickly. Other European flag states are becoming very competitive and our main sales argument is, among other things, the quality of the ex-Department of Merchant Shipping, now the Deputy Ministry. In my opinion the Shipping Deputy Minister has to ensure she is increasing the offerings of qualified staff in the Ministry if we are to become a one-stop-shop concept. 

Thomas Kazakos
We are on the right track but we need to move steadily but quickly towards our goal. The basis is there for us to compete within the EU and outside the EU but we need to make structural advances in the services we provide. 

Andreas Chrysostomou
This is the first time the Cyprus maritime cluster has been recognised by being given a political home so the goal of creating a one-stop-shop has to materialise something that other clusters such as Singapore did in the early 1990s. But to achieve this you need to have effective policies, you need effective institutions and an effective infrastructure. The problem is that we live in 2018 and we need to move very quickly to adapt. It is not just about tax incentives is about providing the holistic environment for the cluster to flourish and expand. The goal remains the same ‘grow the cluster and put Cyprus at the heart of the maritime map’ in order to do that we need we need to make Cyprus a modern 2018 maritime product. 

Thanos Korfiotis
As we know, governments work in an interconnected way, they talk to each other and decisions are taken codependently and we will cooperate with the Deputy Ministry, acting as a vehicle between the different government bodies and agencies, to push forward for a solution. 

Sean Moloney
I want to come onto the issue of digitalisation and artificial intelligence. Looking at it, where do you see its role beginning and finishing and how can it interact with what is a traditional shipping industry. Andreas?

Andreas Hadjipetrou
Quite a coincidence, but this morning I was reading an article on this subject and I jotted down the following words: smart navigation, unmanned ships, smart ships, cyber security, blockchain, artificial intelligence platforms and big data. And this was a publication issued by one of the German banks which said that after the financial crisis, companies around the world have been forced to invest in technology and naturally there will be an impact on shipping. 

The article referred to the ship as an asset and to the shipping industry in general, so my view is that whether we like it or not, data, automation and digitalisation are here to stay and we have to look at them as essential for the future. Each company individually, is being forced to look to technology more seriously than in the past, not necessarily at the same speed. 

A few years ago, if we took a core business element such as technically managing the ship, a lot of emphasis was placed on planned maintenance. Software companies created planned maintenance programmes so shipping companies could see how the maintenance was being carried out onboard their ships. Data was inputted manually from the ship with data communicated to the office initially by mail and thereafter by email, typically on a monthly basis. In recent years it has become obligatory for this data, especially relating to tankers, to be communicated with the office on a daily basis and this was only made possible because of the availability of cheaper means of communicating with the ship. In the future, and what we all know this is already happening,  a lot of maintenance is now being carried out in a preventative way, by means of sensors and others. So, the technology is forcing us to progress and it’s available to all, many companies have invested in sensor technology. But what is going to happen the day after tomorrow? It may well be that you don’t need planned maintenance or even sensors but that vessel maintenance is carried out through the cloud, algorithms etc. This is just an example where a core business of ours has changed dramatically during the last 10 to 15 years. And it will change in the future as well.

So, this will have an impact on our overall operations in all areas we are involved in, including for example, how we communicate with our clients. In the past, clients were happy to receive information once a quarter, but now they want information as it happens, on spot. This means that shipping companies will have to change the way they operate if they are to meet this time sensitive demand. It’s only a question how fast each company will adopt change. 

Dieter Rohdenburg
I am happy your question said shipping and not shipmanagement. Regarding shipmanagement, I believe we will see gradual technical evolution but no real disruption in the way we do business until we have autonomous ships which I strongly believe we will. But if I look at it from a shipowning point of view, the biggest threat to the way we operate today is that today we pride ourselves with the close relationship we have with our charterers and our industrial partners. In the future, I strongly believe personal relationships will disappear, and we will have systems and web-based applications where others will take over such as a ‘Shipping Uber’; where you have smart systems that will reorganise shipping as we know it today. And my concern is that at the end of the day, we as ship owners, we will be nothing more than Uber drivers. 

Sean Moloney
Is the world of digitalisation the domain of the larger shipping companies who can draw on the financial reserves to utilise this option?

Capt Eugen Adami
First of all, I believe that Big Data, smart ships and all the buzz words are only buzz words. Any changes in shipping through digitalisation is very far away from us. You mentioned that Maersk can detect the temperature and quality of cargo in their containers. Fair enough. Container shipping as a whole is 30% of the shipping industry and that means that 70% of ships are conducting business without cargo checking going on. The amount of data that is transmitted on a daily basis to monitor one main engine and two auxiliary engines and one steering gear onboard a ship is less data than your fitness watch uses in a day. Shipping data is very small data. Decades ago we were discussing broadband technology, no one ever gave us a definition of what broadband actually was. And digitalisation is the same, we talk about this word digitalisation, but what does it all really mean for shipping?

Due to changes to connectivity on the land side, we will have different relationships with our clients, our bankers and our suppliers. However, there will be zero change to what is happening today onboard our ships. I ask you, go out and find out how many ships today are still operating without a computer? And how many computers are operating on very early versions of Windows? This may be as much as half of the fleet. I don’t believe that blockchain technology will be taken up by the whole industry. It may well be there for containers or intermodal transport, but when you have 40,000 tonnes of iron ore being shipped and one bill of lading, you don’t need it.

Thomas Kazakos
The important thing for smaller companies is that they have to start prioritising and looking at what they can achieve. To do this, they have to create the necessary digital culture in order to build up specially trained people within the companies to provide these specialised services. Also, people point to the improvements in digitalisation but you also need to look at the risks associated with this such as cyber security. The more intelligent systems become, the more challenging the digitalised environment also becomes.

Dieter Rohdenburg
Just because we don’t like digitalisation doesn’t mean it’s going to go away. And it will happen and somebody else will come in and disrupt us unless we do it ourselves. Look at taxi drivers and Uber; taxi drivers didn’t think anything would disrupt them 10 years ago. Hotels are now facing competition from Airbnb and they didn’t think anything that will happen 10 years ago. So, things happen even though we don’t like them and we have to be prepared.

Nikolaos Kretsis
If you look at it all holistically, the reality is somewhere in the middle because you have different stakeholders with different interests. Maersk, as an owner, of course, would benefit from digitalisation and that is why there is a drive towards it. Smaller shipowners would struggle to cover the additional costs of artificial intelligence and automated ships. It will come, I agree, but there is an additional cost. The technology developed in the aviation industry could be adopted in shipping, but at what cost. 

Andreas Chrysostomou
Looking around the table here we all have phones, whether Samsung 9 or iPhone 5 or iPhoneX, they are all touch phones but not of the same technology level. What I am trying to say is that every phone has its own technology but we all use the phone for the same reason. I think it was Dieter who said we need digitalisation. I agree, digitalisation is here and will stay. We are living in a new era and we are transiting into the fourth industrial revolution. It took only 20 years to move from horses to automobiles. I agree with Capt Adami that not everyone will use the full array of what digitalisation offers, but eventually we will not be able to stay away from it. The shipping industry has a big lesson to learn from the 1970s when European shipbuilders closed down because they used automation to automate manual practices while the Japanese used automation to innovate.  The result was that by 1982, shipbuilding in Europe was in general collapse and never revived. The benefit of artificial intelligence is that it will create different ways to undertake your work, and will provide many different ways of doing things in order to make cautious decisions and minimise risk. 

Sean Moloney
Andreas, let me bring you in because digitalisation is being seen by the big shipmanagement companies as essential but it must be seen as a way of driving down cost surely?

Andreas Hadjipetrou
The problem we have in our industry is that we are not using the same systems. Each company around this table has their own tailor-made systems. We haven’t been able to talk enough amongst ourselves to create synergies that would lower costs for the fleets we manage. I believe a way we can look forward is how we establish bigger platforms where we can work together, learn from each other, create synergies and effectively lower the per vessel costs.

Sean Moloney
Gentlemen, thank you very much.

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