By Angelos Anastasiou
MERCHANT shipping may well be Cyprus’ greatest commercial success to date. By any measure, a tiny Mediterranean island achieving super-powerdom in any field – let alone a globally competitive high-stakes entrepreneurial vista – seems improbable at best, and the resilience this industry has exemplified during times of both soaring booms and devastating busts is the stuff of business textbooks, but even more astounding are the growth prospects it now presents.
Cyprus-based shipping companies boast a fleet of over 2,500 ships, with a combined capacity of 50,000 tonnes. Almost half of the boats bear the flag of Cyprus. This ranks Cyprus 10th in size globally, and 3rd in the European Union. In other areas, Cyprus is politically insignificant – in shipping, it plays with the big boys. In fact, it is one of the big boys.
“I sometimes joke with the guys over at the foreign ministry that they may run 50 or 60 embassies, but 1,000 ships under the flag of Cyprus calling in ports in every corner of the world 24 hours a day, 365 days a year is a continuous recognition of the Republic of Cyprus,” said Thomas Kazakos, director of the Cyprus Shipping Chamber.
“But seriously, the mere size and importance of our shipping industry can be a great help to the government in international organisations. Whereas no one might consider Cyprus a super-power, in global shipping it can be considered one.”
The Cyprus Shipping Chamber is the professional association of shipping and shipping-related companies based on the island. It was founded in 1989 by 17 ship-owners, growing to a present 174 – and counting.
“We registered new members in 2013 and 2014, in the midst and aftermath of the chaos caused by the banking crisis – and this without soliciting business,” Kazakos said.
They did much more than that. Since before the March 15, 2013 Eurogroup decisions that were the end of the Cyprus economy as the world knew it, the chamber worked hard to make sure the shipping tax framework was modern, flexible and transparent – so much so that, when the crisis did come, policymakers agreed there was no need to mess with a successful system.
But this was only one part of a three-pronged strategy employed by the chamber while in crisis-management mode.
“Immediately after the Eurogroup decisions were announced and the banks closed, the chamber engaged with the Central Bank and the finance and the transport ministries, and in direct contact with the Troika, and, through sensible policy arguments, we were able to persuade them of the urgent need to avoid operational interruptions in the shipping industry,” Kazakos said.
“And when the banks reopened, we tasked a team with managing the negative impact on many of our members that suffered blows – in the form of so-called ‘haircuts’ on deposits running in the millions. Again, in a clear, transparent and legal way, we were able to contain such negative impact.
“We also took it upon ourselves to inform our international partners responsibly of the true picture of what was going on in Cyprus at the time. The end result was that none of our members left Cyprus, even among those that suffered haircuts.”
There is, apparently, a simple explanation for such effective crisis-response. By design, Kazakos argued, the shipping industry is quite used to managing crises. Its day-to-day is a struggle against nature and the elements, which are completely unpredictable, and so it has readied itself to deal with uncertainty and unpleasant surprises.
But this is one of those situations where the principle of Occam’s razor – whereby the simplest explanation is the correct one – misses the mark by a laughable margin. The Cyprus Shipping Chamber is obviously a highly professional and fiercely meticulous body that leaves little – if anything – to chance, and no one best personifies the chamber’s attributes than its director.
Thomas Kazakos could only be described as a ‘big-picture’ guy. Much like a Sorkin character, he tends to speak in lofty, broad, fast-paced and well-versed terms, breaking the pattern only to refer to specific examples or throw in the odd joke – always strictly related to the subject matter at hand. He thinks strategy, and every argument must fall within or without of the scope of the grand design in his head.
“When the going gets tough, it’s not necessarily the tough who get going, but the well-prepared,” he mused at one point during the interview.
The Cyprus Shipping Chamber’s director is certain the industry has much more untapped growth potential, which can materialise without substantial cost. All it takes is sound planning and the political will to solve problems, he claimed. The theme of political support is a recurring one in Kazakos’ views – though he credits Transport minister Marios Demetriades’ positive attitude towards the industry, his thirst for more of the state’s attention seems unquenchable. Then again, he is a self-described lobbyist for the interests of his business.
“We are glad, and we publicly praise minister Marios Demetriades – a young, smart, active, private-sector graduate – for diagnosing early on that shipping is one of the most profitable sectors under his watch,” he said.
“He realised that being 10th globally for the last 10 years could be a sign of stagnation, and that is why he commissioned a study called The Future of Cypriot Shipping, with the aim of helping the shipping industry grow.”
The study recommended some basic measures, like strengthening the Department of Merchant Shipping so it can resolve problems as they come up – “not a month later” – and cut through bureaucracies and inefficiencies, and devising short, medium, and long-term strategies, and has already entered the implementation phase.
With a little luck, and the Turkish embargo to Cyprus-flag ships notwithstanding, the future of Cyprus merchant shipping could be brighter than its glorious past. In what Kazakos deemed a “star alignment”, unfolding developments in the region could spur unprecedented growth.
“With or without a solution to the Cyprus problem, we believe that proper political support – strengthening the Department of Merchant Shipping to swiftly address day-to-day operational hiccups – will contribute to further growth of the industry,” he said.
“Add to that a possible solution to the Cyprus problem, where shipping will be the first sector to implement the agreement, because we are already internationalised. The next day, so to speak, we will be able to operate under the new regime. The cherry on top, of course, would be the proper development of our natural wealth, where shipping companies already have the infrastructure to transport it anywhere in the world.”
A Sorkin character would never waste a good simile, and Kazakos thinks “shipping is like New York – it never sleeps”.
“Shipping knows no Ramadans, no Christmases, and no Easters,” he said.
“It works 24 hours a day, 365 days a year. It is directly responsible for 4,500 jobs in Cyprus – not counting its impact on other industries like the property market, accountants, lawyers, telecommunications, etc. – and 55,000 more on the ships themselves. It makes a contribution of 7 per cent to Cyprus GDP, compared with an average 1.5 to 3 per cent in other countries seriously engaging in merchant shipping.”
Though probably not the most glamorous entry in the business arena, shipping could find itself driving Cyprus’ new economic model. Not only did it survive the creative destruction that continues to trouble many industries, it proved itself a contender for best-positioned to steer the economy’s ship to safer, more stable waters. Indeed, maybe all that’s left is for the right stars to align.