ECONOMIC RELATIONS BETWEEN THE STATE AND SHIPYARDS: THE SEARCH FOR CONSENSUS

ECONOMIC RELATIONS BETWEEN THE STATE AND SHIPYARDS: THE SEARCH FOR CONSENSUS 

Оlena Zhukova, Candidate of Economic Sciences, Associate Professor of the Department of Intellectual Digital Economy, Admiral Makarov National University of Shipbuilding, Executive Director of the Ukrainian Maritime Cluster,  eyzhukova@gmail.com  

Volodymyr Parsyak, Doctor of Economic Sciences, Professor of the Department of Intellectual Digital Economy, Admiral Makarov National University of Shipbuilding, volodymyr_parsyak@nuos.edu.ua  

Abstract. The report is dedicated to the substantiation of the relations between the state and shipbuilding enterprises of Ukraine, which would finally lead to an understanding between them and ensure a combination of efforts for its status restoration as a maritime state. Examples of relevant cooperation from foreign experience have been provided. 

Key words: sea economy, shipbuilding, economic mission of shipbuilding, state economic policy, national strategy, motivation of business activity, world experience. 

Introduction. Day by day the understanding of the World Ocean role in ensuring the existence of the Homo sapiens biological species on the planet becomes clearer for humanity. Therefore, we do not get tired of calling on scientists, public circles, the government, and the leaders of territorial communities to face with the problem of business development, which make up the structure of the marine economy [1, 2, 3]. This is the reason why the flag of the Faculty of Marine Economics, the only one in Ukraine, which is celebrating its 10th anniversary this year, flies proudly on the academic field. At the same time, it must be recognized: the marine economy cannot develop without the corresponding fixed capital – vessels, equipment for mining, energy generation, fishing and cultivation of biological resources. The purpose of this report is to explore the relationship between the governments of coastal countries and shipbuilding enterprises, in ways that could contribute to the rise of shipbuilding, and hence the Blue Economy in our country.  

Main part. The shipyards of coastal countries continue to fulfill the orders of shipowners despite everything. This testify the direct relationship between the scope of the Blue Economy and the rise of the shipbuilding industry, that became possible due to the state’s care. Let’s try to find confirmation of the declared working hypothesis. It all started with state protectionism. Let us recall Jones’s Merchant Marine Act [4], which has not lost its validity since 1920. An important thing for us there: all cabotage traffic must be carried on by American-flagged vessels, such as are owned by American citizens or companies, with a crew of at least three-fourths are citizens of the country. And, most importantly, built here. And also government guarantees for banks to reduce interest rates on loans for the implementation of shipbuilding projects. Shipowners receive loans for amounts up to 80% of the contract value with a repayment period of 8-15 years or more at a minimum interest rate under government guarantees [5]. We will add tax and customs preferences for imported ship equipment, financial assistance during the reconstruction of shipyards, payment of the difference between the cost of construction and the purchase price of the ship, R&D support. The given illustrations are associated with strategic management methods. This is characteristic of countries with a high level of entrepreneurial culture, experience of cooperation between business and government institutions, and a developed shipbuilding lobby. In addition, if there are many problems, they appear simultaneously and are intertwined with each other, or the industry is reviving after adverse events, a systemic approach from the state management cannot be dispensed with. Take the example of EU, where shipbuilding is treated as an important industry segment [6]. At the same time, Europeans understand the threats and challenges that arise (reduction in orders, uncertainty of prospects due to competition from Asian shipyards and protectionism of the Chinese government), and therefore created a system to take care of it. It consists of several stages: 

1. Research on the competitiveness of the shipbuilding industry and the economic policies that affect it (environment and safety at sea, research and innovation, intellectual property and maritime clusters).
2. Defining the vision of the industry.
3. Outline of priority strategies for the implementation of the vision.
4. Mobilization of the EU potential and participating countries for the implementation of relevant strategies.

But the Federal Republic of Germany, in accordance with the highlighted procedure, allocates millions of funds every year to make shipbuilding more sustainable, smarter and more profitable. It is expected that the use of artificial intelligence and the creation of digital product models with its help, which reflect the entire process of the ship’s life cycle, will reduce the cost of hull production by up to seven percent. The federal government is encouraging the construction of zero-emission ships and therefore climate-neutral shipping. The solutions are the result of the cooperation of the Ministry of Economy and Energy, other federal ministries, the governments of the concerned states, industry associations, universities, research institutions, trade unions, politicians united by the platform “LeaderSHIP Deutschland”. Every two years, they gather at the Maritime Conference to work out measures that will help strengthen the country’s position in the global maritime economy. The result of their cooperation is the “National Master Plan for Marine Technologies” [7], which is part of the “Marine Agenda until 2025” [8]. Another important detail: the attention of the governments of economically developed countries is focused on investments in improving production processes, increasing the competences of personnel and raising innovative technologies of shipbuilding enterprises. This is expectedly: high technology, supported by people with modern knowledge and skills, has a positive effect on production costs, and such enterprises attract more and more orders.  

Canada’s experience is instructive. In 2000, the participants of the National Shipbuilding Forum in St. John’s expressed the desire to act together to solve the problems of the industry: lack of investment and innovation, current business practices, limited federal budget for financial support and procurement. And this is how the government behaved [9]: 

1. Launched the “National Shipbuilding and Industrial Maritime Partnership Project”. 
2. Conducted national consultations that were supported rather than directed by him.
3. Analyzed proposals and recommendations from interested parties. 
4. Developed and published the “Policy on Shipbuilding and Maritime Industry”

The final text of the “Policy” was the result of processing ideas generated by shipyard owners and managers. The emphasis was not on “subsidies and industry protection”, but on innovation, investment, competitive advantages and market opportunities. The government has promised to consider each proposal based on its capabilities and the country’s international obligations. It was emphasized that everything useful will be accepted, everything ambiguous will be corrected (changed), the rest will be rejected, with explanations and justifications. As a result, companies felt the honest, open, professional attitude of the country’s leaders. But they did not put an end to this, publishing the “National Shipbuilding Strategy” in 2010, which covered the state “umbrella contact” for 20-30 years regarding the construction of large and small ships, their repair, conversion and maintenance projects, ship engineering and modernization infrastructure of shipyards. The scale of the Strategy is evidenced by a contribution of 13 billion dollars. USA in GDP, creating or maintaining 12,000 jobs each year during the term. Therefore, the mobilization of the internal potential of shipyards due to the “Policy on shipbuilding and maritime industry” was supported by a long-term state order for equipping and re-equipping the fleet, the coast guard service. In this way, the maritime industry was restored, stable jobs were created, sovereignty was preserved and Canadian interests were protected at home and abroad. Implementation of the Strategy is under the control of the Office of the Auditor General and the Standing Committee of the House of Commons on State Accounts. 

Let us turn now to the experience of Great Britain. Last year, the “National Shipbuilding Strategy” was adopted here. We emphasize that industry representatives were involved in its development, and the amount of funding is more than four billion pounds. The main sections of the strategy [10]: 

1. Government order over the next 30 years to build more than 150 new warships for the Royal Navy and allied navies, as well as civilian vessels.
2. Motivation of current scientific research. In particular, the allocation of £206 million to finance research and development of zero-emission vessels and infrastructure.
3. Improvement of the organization of management of the industry through the creation of the National Office of Shipbuilding to coordinate the activities of the government in relation to the shipbuilding industry.
4. Improving shipbuilding financing procedures, due to a credit guarantee scheme to level the playing field for domestic ship orders compared to competitors’ export credit guarantees and give British shipbuilders the chance to win the contracts they want.
5. Expansion of sales markets through coordination of joint work of government and industry for new export opportunities.
6. Establishing a UK Shipbuilding Competence Taskforce to work with educational institutions across the country to identify and address relevant skills gaps.

We could make other examples of shipbuilding care from the practices of Vietnam, Australia, Brazil, Norway, and many other maritime states. But what has been said is enough, from our point of view, to make sure of the correctness of the formulated assumption: the rise of shipbuilding requires productive economic relations between the government and business. 

Conclusions: 

1. Most countries have recognized the role of the world ocean in providing their industries with raw materials, residents with food, jobs, conditions for treatment and recovery of physical and intellectual forces. It is an environment for the movement of a huge amount of cargo and passengers.
2. The needs of the maritime economy cause the development of shipbuilding. Shipyards are the only place where unique technologies, fixed capital, personnel competencies are combined, which in interaction create vessels, other engineering structures that enable economic activities on water and under water. Naval ships are being built here, capable of protecting Blue Economy enterprises from encroachment, ensuring the safety of personnel, the inviolability of material assets, and the preservation of mined and manufactured products. 3. Paying due attention to the mission of vessels and ships, maritime states take care of the preservation and development of domestic shipbuilding. The signs of this guardianship are systematicity and continuity. Governments are focused on key tasks: concluding contracts for the construction of warships, financing scientific research on the development of engineering and construction technologies, providing shipyards with personnel, equalizing the economic positions of domestic product manufacturers in competitive competitions.

Literature: 

1. Parsyak V., Zhukova О, Vashchylenko А. Blue economy of Ukraine: potential and perspectives of integration into the european space. Three Seas Economic Journal, 2023, Vol.4, № 1, р. 58-63.  
2. Парсяк В.Н. Экономіка моря. Херсон, Видавничий дім «Гельветика», 2018, 395 с.  
3. Парсяк В.Н. Теорія інституціоналізму та майбутнє суднобудування України. Суднобудування та морська інфраструктура, № 2, 2015, с. 173-188.  
4. Jones W.L. The Merchant Marine Act of 1920. Proceedings of the Academy of Political Science in the City of New York, Vol. 9, № 2, American Foreign Trade Relations (Feb., 1921), pp. 89-98.  
5. Bari А. Financing shipbuilding. The Financial Express, 26 July, 2023. URL: https://thefinancialexpress.com.bd/views/views/financing-shipbuilding-1614784491  
6. LeaderSHIP 2020. The Sea, New Opportunities for the Future. European Commission. Brussels, 20th of February 2013. URL: https://ec.europa.eu/docsroom/ documents/10504/ attachments /1/translations  
7. The National Masterplan for Maritime Technologies (NMMT). Blue Growth Maritime Technologies Sustainable Solutions, 2011. Federal Ministry for Economic Affairs and Energy. URL: https://www.bmwk.de/Redaktion/EN/Publikationen/-nationaler-masterplan-maritime-technologienflyer.pdf?__blob=publicationFile&v=1  
8. Maritime Agenda 2025. The future of Germany as a maritime industry hub, 2017. Federal ministry for economic affairs and Energy. URL: https://www.bmwk.de/Redaktion/EN/ Publika tionen/maritime-agenda-2025.pdf?_blob=publicationFile&v=1  
9. Focusing on opportunities. Minister’s Message, 2012 Government of Cаnada. URL: https://ised-isde.canada.ca/site/shipbuilding-industrial-marine/en/focusing-opportunities  
10. National Shipbuilding Strategy A refreshed strategy for a globally successful, innovative and sustainable shipbuilding enterprise, 2022. National Shipbuilding Offcie. URL: https://assets. publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1061201/_CP_60 5___National_Shipbuilding_Strategy_Refresh.pdf  

Theses are printed in the collection of materials of the XIV international scientific and technical conference “INNOVATIONS IN SHIPBUILDING AND OCEAN ENGINEERING”