Regional Focus – Singapore: delivering the complete package

According to the MPA’s International Maritime Centre 2030 Strategic Review, Singapore will become “the place to be” for global maritime businesses to access multiple opportunities within an innovative and interconnected maritime cluster.

This strong vision for the future, driven by a series of five proposed strategies – expanding and deepening the maritime cluster; strengthening inter-linkages and network effects; developing a vibrant maritime innovation ecosystem and promoting digitalisation; developing a multi-skilled maritime workforce with a global mindset; and establishing Singapore as a global maritime standard bearer – will, the report believes, create Singapore as a centre of excellence for shipping, port, offshore, and maritime-related businesses.

“It will have strong inter-linkages to adjacent sectors such as commodity trading and logistics. Anchored on a strong port and international maritime cluster, Singapore will leverage cutting-edge systems and infrastructure to serve as a key node in a globally-connected network of maritime activity. It will be driven by strong innovative players and a talented workforce equipped with future-ready skills and a global mindset,” the report says.

And despite the slowdown that is being seen in world trade, there are clear opportunities, with the rise of the global middle class, especially in emerging markets, and Asia as a key growth driver for maritime business in the next 15 years and beyond. 

“Technology is transforming maritime business models and value chains. Ships are becoming smarter and increasingly connected. Ports around the world are becoming more automated in the face of growing labour constraints. Maritime companies are leveraging developments in both hardware (e.g. advanced sensor systems, sea-to-shore connectivity, robotics) and software (e.g. data analytics, artificial intelligence) to better optimise their operations. With technology blurring traditional industry boundaries, new players and maritime start-ups (e.g. Xeneta) have emerged to provide technology-driven solutions that deliver new value and challenge traditional business models.”

But while competition has intensified among both established and emerging IMCs (International Maritime Centres), to remain competitive, a key differentiator for Singapore will be the ability to create and sustain value propositions that will help to grow and anchor the Singapore maritime cluster. Singapore needs to explore ways to strengthen the network effects within the maritime cluster and explore new cross-sector growth opportunities in related sectors such as logistics, commodity trading, and technology.

According to the report, within its borders, Singapore also needs to contend with domestic shifts and challenges. Managing business costs and long-term productivity growth are issues that need to be addressed. With a maturing population, forward-looking manpower policies and continuous human capital development will be needed to build up a globally-oriented and multi-skilled workforce that is agile, resilient, and competent in order to take on higher-value job roles in the future economy,” it says.

As Andrew Tan, Chief Executive of The Maritime and Port Authority of Singapore (MPA), said the MPA “is committed to working with the maritime industry to ensure that our business environment remains conducive for the maritime community. We will continue to invest in infrastructure, technology and manpower capability to drive the digitalisation of our port and international maritime centre. Our vision for the Next Generation Port is a Smart Port that deploys technology intelligently and in an integrated manner to provide comprehensive connectivity, efficiency and reliability. In the long run, our container terminal operations will be consolidated at Tuas with the capability and capacity to handle up to 65 million TEUs of containers from smart ships and mega vessels.”

As John Gibson, Partner and Marine Engineer at Brookes Bell Singapore, said: “Although I have only been based in Singapore since 2012 I have known the port in maritime terms since 1979.  It has always been a significant maritime cluster even before the term had been coined.  In my opinion, the business-friendly environment and the government incentives gives it the ability to thrive where other clusters may stall.  Combined with the relatively peaceful atmosphere, and the closeness of its like-minded community, I believe this means that Singapore is perfectly placed to be, and to remain, at the top of not only the Far East markets but also on the world stage.

Being a major port on the crossroads between the Middle East and Asia Pacific, it has always been well positioned to supply the shipping industry with marine services.  Singapore, remains one of the major bunkering stations for world shipping and, indeed, is gearing itself up to be a major provider of LNG bunkers in the future.  Singapore remains a perfect pit stop for ships and so long as vessels are required, or find it easy, to pass her doors I believe Singapore will remain so.  While other major marine clusters such as Dubai, Hong Kong and Shanghai clearly have benefits to the marine industry, the location of Singapore, combined with the ease at which business can be done, will, I believe, keep Singapore in the forefront

John Forrester, Partner in the law firm HFW, believes that for a shipping hub to be successful it has  to have a broad range of shipping professionals with expertise that can be exported out across the wider region. “It’s about people rather than just ‘hardware’ such as ports and shipyards. I think the offering is enhanced when those professionals are drawn from across the globe and can pool their expertise and experience. That is why Singapore is such an attractive place to work. There’s a great mix of nationalities here with locals and expats from around the world working across a broad range of service sectors such as shipping company operations, port services, shipmanagement, insurance, broking, finance and law. Other than Hong Kong, no other major maritime city in the region can match that diversity of nationalities and skills. 

“Another thing I love about Singapore – and it sounds such a trite thing to say – is the sheer number of ships here. I just opened the “Ship Finder” app on my phone and it shows 1,000 visible ships on the page! Of course, most of these ships are just passing through, but every ship needs an owner, a manager, a classification society, an insurer, a financier and, dare I say it, a lawyer. There’s a lot of potential work for these service industries tied up in the fleet sitting off the coast of Singapore,” he said.

“Looking at Asia Pacific specifically, the other major shipping hubs competing with Singapore are Shanghai, Hong Kong, Tokyo and Busan. They all have their strengths and, in a large geographical region, there is a place for each of them. But I believe that Singapore will remain the preferred location for international shipping companies and their service providers in the region. I use the word ‘international’ advisedly. Although the Japanese banks are active internationally, the cluster in Tokyo has a heavy domestic focus. I think the same can currently be said of Busan.

“The three Korean policy institutions (KEXIM, K-sure and Korea Development Bank) have all relocated their shipping desks to the Busan International Finance Centre, and the Korea authorities are pushing Busan hard as a maritime centre, but I see no evidence that international companies are joining the move. It sounds silly, but a complaint I have heard several times about Busan is that there are no direct flights there from Singapore. Instead, you have to fly up to Incheon and catch another flight (or take the train) back south again. It adds at least a couple of hours to a six-hour journey. 

“There is more to being a shipping hub than having a big port and having good (non-marine) transport connections is important too. Contrast that with Singapore which has a fantastic airport which is quick to get through and which is only a 20 to 30 minute drive from the Central Business District,” he said.

In a shipping and a legal context, Hong Kong is perhaps being squeezed a little bit, according to Ian Short, a director of the Singapore office of Campbell Johnston Clark. “You have Singapore on the one hand and then of course you have Shanghai, which is becoming increasingly influential in the region. But more and more shipping companies and P&I clubs are opening-up here in Singapore and we have been very busy this year at CJC. Which shows that Singapore is still holding its own in a difficult market.”

But it is Singapore’s role as an arbitration centre which is of increasing interest. And while London is streets ahead in terms of the amount of maritime arbitration it does, Singapore is a viable alternative, Mr Short believes. And that is whether you have Singapore law or English law applying. “If you have parties that are based in Asia, it makes sense to have arbitration in Singapore. Your choice of arbitrators is not dissimilar to the choice you have in London.

“London is still the number one arbitration centre and that is partly because default clauses in a lot of contracts stipulate arbitration in London. There’s comfort in this and in most cases companies don’t want to upset the apple cart. So, it is a case of people deliberately inserting a Singapore arbitration clause at the drafting stage,” he said.

Is Singapore cheaper as arbitration alternative?

Mr Short again: “It can be when lawyers and clients are in the region but it is usually about the same. The Singapore International Arbitration Centre (SIAC) model isn’t the best for pure shipping disputes because with the SIAC model, there is quite a lot of upfront cost, which is not ideal in the current market. The better set of rules for shipping disputes would be the Singapore Chamber of Maritime Arbitration (SCMA) rules but the parties have to agree to these applying. They are not dissimilar to the LMAA but even then, within the SCMA, I am seeing arbitrators adopt a similar approach to the SIAC in terms of making sure their fees are paid in tranches upfront. CJC are seeing more Singapore arbitration and we are seeing more clauses appearing in charter parties and contracts so it is a case of persisting and being that viable alternative within Asia to London.”

Steffen Pedersen, Partner with Thomas Cooper, Singapore, added: “Generally the trend is upwards in terms of caseload for the SCMA – the bespoke maritime arbitration centre here in Singapore. SCMA was added to BIMCO’s standard dispute resolution clause for instance after what I understand was quite intense lobbying. Some companies are also using the SCMA clause, more and more. With this upward trend, and the fact that Asia is the economic powerhouse, no doubt over time once the market improves, Singapore might see a significant jump in maritime arbitrations. Hong Kong may too. 

“Bringing disputes here is the first stage of the battle; the second is to handle those arbitrations well so people return the second time. It seems to me that Singapore is well placed to achieve this,” he said.

Denis Petropoulos, President of Braemar Asia, added to the debate: “Where Singapore is very well placed, and will become more important, is its geography and particularly the massive trade which passes Singapore – I am guessing at around 70% of world trade. The massive importance of its ship services now, and especially in the next couple of years, will be its predominance in the bunkering sector. It is one of the world’s most important bunkering centres and it will be even more so with the ability to supply low sulphur bunkers as required. Not all ships will take sufficient bunkers to perform their voyage so you need to have provision for low sulphur bunkers to meet their emission requirements. So, Singapore will be important in that all the traders trading the fuel markets and product markets are going to be increasingly active.”

Kumeran Balachandran, Managing Director of Unimarine, believes that Singapore has always played a leading role in the supply of bunkers and lubricants for the global marine market. “Singapore has had a long-term view on most parameters especially shipping and the infrastructure and regulations being enforced currently is to provide a more sustainable approach for shipping market to continue using this cluster as their prime hub for supply.

“Despite being one of the busiest trading terminals in the world, the local cluster may take a slight hit due to the proliferation of Chinese mainland ports at Shanghai and Ningbo for an example. However, this is not something that can happen overnight as infrastructure cannot be built overnight and nothing beats the geography of Singapore being the epicentre of trade routes.

“Singapore is the global lubricants centre in terms of lowest pricing and high demand/supply ratios which enable the former to provide the type of costing it does in Singapore. It is no secret that Singapore is almost used as an index these days for pricing regardless whether the vessel trade routes pass Singapore or not.

“The strengths are certainly that it provides a huge supply landscape to enable economy of scale for the manufacturers. On the flip side, this index has also causes a bidding war between manufacturers that now have to offer a price in Singapore that is most often below the cost of manufacturing itself but it’s a necessity since superior Singapore pricing for lubes becomes almost a mandatory criterion for any supplier.”

Capt Rahul Choudhuri, Managing Director, Asia ME & Africa at Veritas Petroleum Services, also shone a light on the issue of fuel management, which he believes “is not something that can be ignored as it cuts across all ship types and ship operations. As long as you need to burn fuel, you need to manage it. All marine fuels are blends in one form or the other and optimising the use of this fuel remains an important strategic and operational decision for any ship owner and operator.

“Future fuels are likely to be distillate blends and they come with their own set of operational usage challenges whether this is high pour point and related cold-flow properties, low flash point, reduced lubricity. There has also been a rise in the uptake of the 500CSt residual fuel over the past year, where the key driver has most probably been the lower price in relation to 380 CSt and 180 CSt, with the added advantage of less blending, so potential lower quality issues.

“But you first need to ensure that you test your fuels, and do this correctly by a recognised and established testing laboratory. This is where we will continue to play a key role. Apart from this regular fuel testing, we have seen an increase in our proprietary chemical contamination screening service which is a proactive risk prevention step for ship operators primarily because post damage to vessel’s engine can be very costly,” he said.

“Singapore is the biggest bunkering port in the world supplying more than 45 million tonnes per annum. This is a position they intend to maintain and grow. The introduction of mandatory Mass Flow Meter (MFM) use in Singapore has been done to make this a game changer in bunkering practice. What is not appreciated is the forward planning that was done. The MPA gave the bunker industry three years’ notice in 2014 to prepare for the MFM implementation that took place on 1st January 2017 this year. The TR48:2015 (Technical Reference for Bunker Mass Flow Metering) that governs the work of the MFM itself took seven years to develop and shows the detailing that was needed to make MFM work.”

Mr Petropoulos again: “Singapore has also been clever in increasing awareness and education about shipping and MPA initiatives have really produced some quality shipping people. Singapore looks after Singapore youngsters and the level of awareness about shipping there is far greater than when I first went there. The institute of Chartered Shipbrokers remains active there and the established shipping companies in Singapore are taking internal training schemes very seriously.

“As this cluster grows it needs other service industries to service its own needs so pure volume of traffic the service and volume of services has to evolve. The London maritime sector is agile enough to support those services and underpin them,” he said.

According to Stephen Fletcher, Commercial Director at AXS Marine, companies like to be able to conduct financial transactions through Singapore “and if you are required to have an office here in order to put your charter parties through Singapore, then that is what you will do. There are benefits to being here and the fact that a lot of people are here adds to its lustre. And because shipping is a people’s business this is a perfect place to be doing this.”

And as Vijay Rangroo, Managing Director of MTM Ship Management, said: “The strength of Singapore is the accessibility to the regulators and to the authorities. They are there – whether to answer a question or to clarify something. You won’t get any favours but you can easily get assistance on how to resolve issues. The cluster is becoming more diverse now.”

But while clusters like Singapore and Hong Kong may not, by themselves drive shipping out of this recession once and for all, looking for opportunities and delivering on your promises are what matters.

Capt Himanshu Joshi, CEO of Singapore-based Seven Oceans Consulting, is not shy about his ambition about being one of the biggest players in the delivery of commercial software and applications via the cloud and becoming a very big player in the mobile freight applications market.

“We are pure software solutions providers, and in our case, we started as commercial solutions providers and today we offer the most comprehensive set of software solutions for traders and charterers. At Seven Oceans, we have extended our suite of software to handle commodity contracts as well. As you may know,  the typical shipping software will have freight contracts such as charter parties, but we have extended the supply chain all the way to the mine.

“On the commercial side we have succeeded well and on the technical side we are big on the quality shipmanagement side of things. But where are we going? The industry on the commercial side is pretty much there but if we can give more analytical and decision-making capability to the practitioners then they will be happy.

“Onboard ship, the biggest problem is data entry as no one want to enter data. So, if no one enters data then nothing comes ashore. In order to address this, the industry wants to embrace the IoT. Gradually the technical side of shipping will start to embrace this. We will roll out our planned maintenance this year and we have already incorporating condition-based monitoring,” he said.

Darren Ellis, Head of Stena Marine Far East, believes growth in business is all about driving in bigger volumes. While the margins are smaller, “we are growing with giants as the phrase goes. Apart from expanding our base here in Singapore, we have set up in China. Six years ago we had no business in China but our vessels traded in and out of Chinese ports and we been doing newbuild supervision in Chinese yards for the past 15 years. We were using a lot of local Chinese companies to support the projects and we weren’t getting what we needed, so in six years we have gone from having no offices in China to having five companies in China and two in Hong Kong. And these companies replicate everything that we provide in the Singapore companies – agency, supply and support services.”

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