European Shipbuilding Industry
The “EU-14 shipbuilding industry” countries are Croatia, Denmark, Finland, France, Germany, Greece, Italy, Malta, The Netherlands, Poland, Portugal, Romania, Spain and the United Kingdom. Among NATO countries, Turkey also has a significant shipbuilding industry. The European shipbuilding industry is very diverse in company size and structure. The company workforces range from tens to thousands of employees. Some shipyards focus on new building of ships, others on repair and maintenance. Some shipyards focus on specific innovative ship types, others focus on process innovation, building a variety of ship types. Some shipyards build for commercial clients, others for consumers or governments.
The rapid consolidation of the American defence industry since the 1980s caused political leaders and heads of industry in Europe to go down the road of continent-wide industrial convergence. The process turned out to be far more difficult than in the United States, where restructuring and mergers have taken place between national firms for motives concerned solely with profit.
The move towards consolidation initiated by the US government and propelled forward by private shareholders' desire to see defence groups increase their profitability in the short and medium term, has been further encouraged by the Administration taking a fairly lenient attitude towards anti-trust machinery and offering generous financial incentives. Moreover, the government agreed to reimburse the cost of such mergers if they could subsequently produce a much higher volume of savings for the Pentagon than the initial outlay.
Europe on the other hand, and this is particularly true of the European naval defence industry today, has to contend with the existence alongside one another of companies of different nationality, subject to different rules and with ties in certain cases to different governments. Market pressure alone is not enough to bring European companies closer together: to make large-scale reorganisation happen, government intervention is necessary.
For mergers across Europe's naval defence industry to be genuinely successful two essential conditions have to be met: firstly, industries need to have the legal capacity to merge with one another and governments have to make it possible for such mergers to work by bringing standards into line, creating opportunities for technology transfer and the like. The LoI (Letter of Intent) addresses these issues and should make their resolution possible.
Questions such as operational convergence and harmonisation of procurement and budgets are more sensitive and have been the subject of research over many years, particularly in WEAG (Western European Armaments Group) and POLARM (the EU working group on armaments policy), without any all-round acceptable solution having been found. Operational convergence and procurement policy are determined by countries' own military culture, their international areas of interest and national defence budgets and, very often, by purely industrial concerns.
Indeed, operational convergence and procurement standardisation are not a structural problem as such in Europe since cooperation programmes have already been implemented successfully. However, they are still a major inhibiting factor to any industrial cooperation. There is a need for countries to reach agreement on common minimum capabilities, which takes time, and on a virtually simultaneous allocation of equipment budgets. The countries concerned must therefore have the same equipment requirements, at the same time, for the same missions.
In short, it is within the European Defence Agency (EDA) that such questions will need to be resolved if a satisfactory outcome is to be achieved for all concerned. This can only be in the medium and longer term. Indeed, the report from the Agency Establishment Team (AET)3 and Annex A to the report (proposed priorities for early activities) puts forward, in the section dealing with the defence industry and market, measures of a general nature, namely: to work on the follow-on to the publication of the Green Paper on Defence Procurement, to launch studies regarding the European capacities of the Defence Industrial Base, to define with LoI (Letter of Intent) nations the use and spreading of selected LoI rules within the EU as a benchmark for how to promote use of the small and medium-sized businesses (SMEs) in the EDEM (European Defence Equipment Market).
The current situation of the defence industry in this area, with overcapacities, subsidies and unclear demand priorities should be addressed. The EDA's 2005 work program, adopted by the Steering Board4 on 22 November 2004, provides inter alia that by the end of the year the agency will have investigated the scope for adding value in as many as possible of the following areas: the Naval Defence Technological and Industrial Base (DTIB); review of anticipated future demand and capacity and current national strategies, and to have made proposals to the Steering Board.
There is a need to give thought to what extent it is in Europe's interest to be reliant on a naval defence industry based on at least two major competitor groups, which, moreover, needs to be able to stand up to transatlantic groupings and at the same time meet countries' requirements and, it goes without saying, ESDP goals. The major players in the field - the industry, the member states and the European Union itself - must all be involved in a project on which both the survival of the industry and the success of the European Security and Defence Policy will depend.
By 2008 the Spanish Shipbuilding industry was healthier than ever. Although the pay-roll employment amounted to about 8,000 workers, the number of subcontractor employees directly involved in the shipbuilding was high and growing rapidly. The total number of pay-roll employees plus subcontractor employees reached the figure of 15,000 to 17,000 persons. So about 100% of the workforce is also employed in the industry through subcontracting.
The Italian shipbuilding industry had the largest technical workforce in the European shipbuilding industry below 40 years of age (67%) as of 2008. There were many skilled workers between the ages of 25 to 40 with only 3% of the employeesolder than 55 or younger than 25.
Romania is one of the European countries where shipbuilding has a very good image. According to the Romanian shipbuilding association Anconav, the need for skilled workers in Western Europe and the United States of America as well as higher wages have led to a substantial demographic move of shipbuilders towards these countries. In 2006 and 2007, Romania lost about two thousand skilled workers per year due to this trend. The high percentage of young people in Romania is therefore considered with some reservation, since it usually takes about five years of working experience in order to become a skilled worker.
Royal Netherlands Navy
The RNLN as is stated in the most recent Defence White Paper always had an expeditionary capability. However, with the end of the Cold War, a requirement was set to increase this expeditionary capability and introduce new equipment for conflict prevention, crisis response and allied territorial defence. The Netherlands fleet is composed of modern platforms carrying excellent sensors and systems the majority of them designed and manufactured locally. Some of the main Dutch industrial players in navy shipbuilding are leaders in technology on a worldwide scale.
http://www.ufs.ph/2009-10/11121014NF Philippines Defense Spending For decades, the AFP had virtually engaged all of its resources in internal security operations, since the presence of the United States (US) in the country many years ago served as an effective deterrent against external threats. Consequently, the AFP has become less focused on external defense to the point that its capability to operate with other armed forces and to address contemporary threats remained in a dismal status and continue to lag behind that of the neighboring armed forces. There is a need, therefore, for the AFP to focus its efforts in building up a capability suited to the changing scenarios of the international security community. Recent years have witnessed how countries in the region exert effort in projecting credible military power in order to instill regional balance of power. After steadily declining defense spending during the early 1980s, the defense budget grew in the latter half of the decade. Military spending in 1988 totaled 14.14 billion pesos, or US$680 million, about 1.7 percent of the country's gross national product (GNP). The 1988 budget represented a greater than 50 percent increase in real spending for defense (adjusted for inflation) over 1985, the last full year Marcos was in office. Defense spending as a proportion of national government expenditures also grew during Aquino's tenure, from a 1985 low of 7.7 percent, to 9.1 percent in 1989. Still, the military's share of the national budget, like total military spending, did not approach the peaks reached during the Moro wars of the 1970s. In 1979 the Philippines spent more than P17 billion (US$806 million) in comparable 1988 pesos for defense, a figure that represented almost 17 percent of the government's budget. Budget figures do not include United States security assistance, which represented a substantial portion of total spending on the Philippine military. United States military aid increased significantly after Aquino came to power, accounting for 80 percent of military spending on procurement, operations, and maintenance in 1989. United States military aid that year amounted to US$127.6 million. Most of the assistance--US$125 million--was provided as a grant under the Military Assistance Program whereas the US$2.6 million balance funded training for Filipinos under the United States International Military Education and Training Program. During the 1988 review of the Military Bases Agreement, the United States pledged its best efforts to increase grant aid to the Philippine military to US$200 million annually in 1990 and 1991. The thrust of United States security assistance efforts in the late 1980s was to help the Philippine armed forces better combat the communist insurgency. Improved tactical mobility and communications and better equipped soldiers were top priorities. Between 1986 and 1989, the United States sent the Philippines almost 2,900 military vehicles, nearly 50 helicopters, more than 1,650 radios, approximately 225,000 military uniforms, and more than 150,000 pairs of combat boots. Other assistance items included assorted infantry weapons and ammunition and medical equipment. Despite growing budgets and increased foreign military aid, the armed forces still was described in 1989 as one of the most poorly funded militaries in Asia. Philippine defense spending on a per capita and per soldier basis remained the lowest of the Association of Southeast Asian Nations (ASEAN) countries, despite an active communist insurgency. One study of the military concluded that the armed forces suffered from major resource problems. The author cited serious shortages of vehicles, helicopters, radios, basic infantry equipment, and spare parts. Food, medicine, and clothing also were said to be in chronically short supply. Shortages were compounded by an inefficient logistics system hobbled by red tape and corruption. Soldiers' poor living and working conditions often were mentioned as underlying factors in the military's discipline problems. Top AFP leaders acknowledged many of these shortcomings and were attempting to correct the mismanagement of resources. Apparently, a modest modernization program was the first step necessary to gain respect from the Philippines' neighbors and be a worthy member of any security alliance. Once the Philippines was able to project a credible armed forces, it could then work in synchrony with the armed forces of other countries in deterring would-be military adventurism and in performing peace operation efforts for the international community. In addition, a credible armed force would mean a capable force that could effectively support the Philippine government’s diplomatic efforts in addressing contemporary security concerns as territorial conflicts and maritime disputes, as well as threats of transnational nature such as piracy, poaching, smuggling, and environmental pollution. The defense budget for 2005 totaled US$840 million, or 5 percent of the proposed government budget of US$16.5 billion. Almost half of the defense budget was designated for the army. Viewed another way, 80 percent of the budget was slated for personnel and almost the entire remaining amount, for maintenance and operating expenses. Thus, less than 1 percent was available for desperately needed procurement. The United States and the Philippines have a mutual defense treaty that has been in effect since 1952, but it does not extend to territorial disputes involving the Spratly Islands. In 2003 the United States designated the Philippines as a major non-North Atlantic Treaty Organization ally. Total U.S. military assistance to the Philippines rose from US$38 million in 2001 to US$114 million in 2003 and a projected US$164 million in 2005, which would make the Philippines the fourth largest recipient of U.S. foreign military assistance. Australia reportedly also a major source of military assistance. http://www.ambsingapore.um.dk/ Philippines Defense Industry The Self-Reliant Defense Posture (SRDP) program, initiated in 1974, took the development of a domestic defense industry as its objective. Defense officials contracted SRDP projects with the government arsenal and local manufacturers, encouraging the use of indigenous raw materials and production capacity. Projects included domestic production of small arms, radios, and assorted ammunition. One of the most significant SRDP operations was the manufacture of the M-16A1 rifle under license from Colt Industries, an American company. According to a 1988 statement by the Philippine armed forces chief of staff, the SRDP not only increased Philippine self-reliance, but also cut costs, provided jobs, and saved much-needed foreign-exchange funds. With an external defense program considered in the early 1990s, it would be a significant contribution to economic development if the fledgling Philippine defense industry was developed to assist in building weapons for external defense. The country can produce small arms equipment and supplies, but needed to concentrate on upgrading its arms production status. The point is, major weapon systems need to be produced in order for the Philippine economy to benefit from its external defense initiatives as well as any long range modernization efforts. For the near term however, with the number of Philippine nationals employed at both Subic Bay and Clark Air Base, the Philippines had been content to provide only maintenance and produce small items only. It would be prudent for the Philippines to embark ona long term plan to implement programs for building major weapons. A procurement of some type of fighter aircraft in substantial numbers could lead to coproduction in country. Although an expensive weapon system, the F-16 was an example of a multi-role aircraft for the Philippine Air Force. The reason for focusing on the F-16 is the fact that other ASEAN countries have purchased the F-16 in small numbers. The Philippines could serve as a depot type location for repair and overhaul ofthose F-16s in theater. If the F-16 were cost prohibitive from the Philippine perspective, perhaps a less expensive aircraft such as the F-5 or a resurrection of the F-20 could be given consideration. In fact, the F-5 was ultimately abandoned, leaving the Philippine armed forces with no fighter aircraft. In an effort to provide the Filipino soldier with adequate equipment he needs in his quest to uphold the sovereignty and preserve the patrimony of our country, the Congress passed Republic Act Number 7898 in 1995, otherwise known as the AFP Modernization Act. From then on, the Armed Forces of the Philippines continued to strive hard in laying the groundwork for the implementation of the AFP Modernization Program. Despite the adverse external factors that hampered the smooth execution of the Program such as political and economic instability; volatile security climate, and limited budgetary allocation, it did not inhibit us from pursuing its objectives. “We taught and we have learned our lessons well that we should never build our defenses on the shifting sands of mutual defense agreements, and it is time we build it on firmer foundations. For while we have faith in our allies, we should not be completely dependent upon them. For while we believe in their courage and their capability, they also have their own national interest that may sometime conflict with ours. For in matters of defense the guarantee of friends can be modified to suit their needs and interest, as the history of nations vividly show.” These words of President Ferdinand E. Marcos, President of the Republic of the Philippines, laid the foundation of a vigorous attempt to develop a defense system of a self-respecting, independent nature, relying solely on the country’s capabilities and resources: The Self-Reliant Defense Posture Program (or SRDP) of the Republic of the Philippines. I. A Brief History of the SRDP In its early years after the enactment of Commonwealth Act Number 1 – the National Defense Act -- the Armed Forces of the Philippines received a good number of Defense Equipment from the United States under the RP-US Defense Assistance Agreement of 1947. The acquisition of these equipment was funded out of a US aid grant called the Foreign Military Funding (FMF) -- the fund used to name what otherwise would have been payment for the use of Philippine land to house bases. Acquisition of military hardware was sourced solely from the U.S. government through a system called the Foreign Military Sales (FMS). With these funds and systems in place, U.S. Defense Industries monopolized the inventory of the Armed Forces of the Philippines. In the early 70’s, the escalation of the Muslim secessionist movement in Mindanao and the immediate need for military hardware came as a wake up call for the Philippine Government to provide its own Armed Forces with the necessary materiel to accomplish its mandate of upholding the sovereignty of the state and protecting the national territory. In 1974, the Self-Reliant Defense Posture (SRDP) Program was conceptualized and implemented through the enactment of Presidential Decree 415, otherwise known as the SRDP law. The program envisioned the attainment of local production capability for war materiel while conserving foreign exchange and, in the process, spur industrial and economic growth. The underlying concept of the program was the development of a local defense industry that can support the materiel requirements of the AFP. The underlying concept was to produce locally, when feasible, materiel for our defense forces through partnership between the military and civilian establishments, while importing those that cannot be locally produced with the ultimate objective of acquiring the technology for the production of these materiel. Paramount to this objective is the primordial role of the military and government agencies of providing technical and financial assistance to civilian defense manufacturers. To effectively implement the program, the Joint Staff for Materiel Development and its implementing arm, the Research and Development Center, were established. Project managers were also designated to manage the various projects. A memorandum of agreement between the Department of National Defense and the Department of Science and Technology provided the network for the support of the program, which also included the Department of Trade and Industry and the Department of Finance. To pump-prime the Defense Industry, an annual appropriation of at least 100 Million Pesos was legislated. This provided the needed financial support to fund research and development projects, which were done in cooperation with industry. Tax holidays and other investment incentives were also afforded to those undertaking production of defense materiel. With the entire support infrastructure in place, there were bright prospects for the birth of several industries. Rise and Decline of the Defense Industry The early years of the program ushered in several success stories in the AFP’s drive to provide a medium for the development of the industry while meeting its basic requirements for materiel. Notable among the industries developed in line with the SRDP Program were: (a) the military vehicle industry where the Delta Motors Corporation, in a joint venture agreement with Toyota of Japan, produced the Mini-Cruiser, a ¼-Ton all-terrain light vehicle most suited for AFP ground forces which provided a worthy substitute for the M151 (Kennedy vehicle); (b) the communications industry, specifically with the establishment of Veterans Electronics (VETRONIX) – under joint venture partnerships with several communications industries of UK and the US -- manufacture UHF and VHF radios for the operating troops; (c) the firearms and ammunitions industries with ELITOOL, ARMSCOR, CRESER to name a few, designed and manufactured rifles, pistols, small arms ammunition, and fuses for mortar and other ammunition with export markets all over the world; and, (d) the textile industry which now supplies close to 100 percent of the AFP’s clothing requirements like the Office and Fatigue uniforms, shoes, and other individual equipment. There were a total of 15 corporations registered as members of the Philippine Defense Industries. These companies were producing materiel for the Armed Forces of the Philippines, from Combat Rations to Track Assemblies, and from small arms ammunition, radio sets, to Assault Rifles. After more than two decades and a little over four billion pesos spent for various SRDP Projects, the program, apparently, failed to achieve its main objective. Several industries that were already established were not sustained. The decrease in the Annual Appropriations for Capital Equipment and the continuing depreciation of the Philippine Peso forced the AFP to rely heavily on the items that were made available via the US Foreign Military Sales. Therefore, several multi-year manufacturing supply contracts were not renewed to replace existing inventory, which were approaching the disposal stage. As a result, fledgling industries found it difficult to sustain production due to the pressures of economics of scale. The very first activities that faced attrition were the Research and Development Activities. This gave rise to problems of obsolescence and therefore reduction in demand. Some studies conducted about the program attribute this failure to the lack of clear strategic direction, and to either excessive political intervention or lack of support from the national leadership. There was also a decline in the appropriations for the SRDP Program towards the middle of the 1990’s. Additionally, the office in the AFP primarily tasked to manage and implement the program, the Office of the Deputy Chief of Staff for Materiel Development, J9, was deactivated in 1999, relegating its main function to a division of the Office of Deputy Chief of Staff for Logistics, J4. Although manufacturing and assembly plants were growing at an enormous rate, the technology of upstream industries were not able to cope with the demands for specialized materials such us high-grade metal alloys and rubber, to name a few. Thus the local defense industries were hostage to the prices of raw materials in the global market despite the abundance of ores and other natural resources in the country. Although the SRDP Law contained the underlying objectives and basic principles of the SRDP program; and the Department of National Defense Circular 24 prescribed policies, organization and procedures in the management of SRDP Projects, there is a perceived lack of an explicit program that defines priority areas for development and the manner by which these areas are to be addressed. There is also a gap between the development stage and the independence stage of the industry where fledgling companies are weaned from government subsidy so that they can evolve into a globally competitive entity. Corollary to this is the lack of an effective monitoring system on the part on the management of the program. The pullout of the U.S. Bases in 1992 and the subsequent withdrawal of Foreign Military Funding (FMF), which the AFP heavily relied on for capital equipment and maintenance support, resulted to the continuing decline of the operational readiness status of its inventory, and consequently its operational readiness. With the FMF funds for FMS items ebbing, there was a popular clamor to fund a modest modernization program for the Armed Forces of the Philippines. Thus, in February 23, 1995, Republic Act 7898, otherwise known as the AFP Modernization Act, was enacted, declaring as a state policy to modernize the AFP to a level where it can effectively and fully perform its constitutional mandate of protecting the people, upholding the sovereignty, and preserving the patrimony of the republic. The total cost of the modernization programmed was 331 Billion Pesos spread over a period of fifteen years. The AFP Modernization Program With the implementation of the AFP Modernization Program, new demand is created for existing industries. This has also raised the prospect of a rebirth of old industries, or the creation of new ones. Article 3.6 of the Modernization Act explicitly declares, “A self-reliance policy shall as much as possible, be pursued in materiel and technology development for the country’s defense requirements in order to reduce dependence on foreign sources and at the same time boost the local defense industry.” Furthermore, the same article stresses that, “The acquisition of major equipment and weapons systems, shall, wherever feasible, provide arrangement for the production of lead items by the foreign manufacturer in the country of origin, and the subsequent production in country (Philippines) of the rest of the series under such schemes as transfer of technology; joint venture, or co-production.” To add teeth to this declaration, the Republic Act 7917, amending Republic Act 7227, otherwise known as the Bases Conversion Act, allocates 35 percent of the proceeds of the sale of Military Camps, Bases, and other Real Estate Properties “to primarily finance the self-reliance and modernization programs of the AFP, . . . . and the modernization of the government arsenal.” Recognizing the need to revitalize the SRDP Program and the opportunity that the AFP Modernization Program offers, the Department of National Defense has declared as one of its major thrusts for the next 5-10 years, the pump-priming of the Philippine Defense Industry, in cooperation with local and foreign industry partners. Further realizing that a sustained AFP Modernization Program is hinged on a robust SRDP Program and a responsive local defense industry, the Department reactivated the Office of the Deputy Chief of Staff for Capability, Materiel, and Technology Development, J9 as one of the members of the Joint Staff of the AFP. The objective was to integrate and consolidate the strategic efforts towards modernizing the AFP and at attaining a Self-Reliant Defense Posture. In as much as the successful implementation of the SRDP Program is essential to the sustainability of the AFP Modernization Program, the DND-AFP has embarked on a study for a comprehensive assessment of SRDP Program and the strategic environment in which it operates. Benchmarking studies were also being conducted to identify areas where the Philippine Industries can focus to address niches in the regional market. This provided the basis for the 20-year SRDP Strategic Plan published in June of last year. An audit of the Research and Development Centers of the Armed Forces of the Philippines reveal that these units tasked to manage SRDP Projects had strong Organizational Motivation due to a strong and clear internal leadership structure that was able to provide a clear strategic path; however, lack of strategic guidance from higher echelons and the bureaucracy weaken the R&D Capability of the AFP. Limited funding continued to plague the RDCs resulting in inadequate infrastructure and technological resources for it to effectively undertake significant Research and Development activities. In the light of these concerns, the RDCs failed to strengthen their linkages with other R&D organizations, thereby negating opportunities for collaborative R&D efforts for defense. Several assessments of the SRDP Program and its impact on the defense industry show that the defense industry that was developed two decades ago retained a considerable portion of its capabilities. However, progress in terms of materiel and manufacturing technology was rather slow. A study conducted by Col Sylim categorizes the Philippine Defense Industry as belonging to the Second Tier of the Supply Chain Pyramid. The 20-Year SRDP Strategic Plan. The studies conducted by the AFP to assess the strategic environment of the SRDP program led to the formulation of a 20-year SRDP Strategic Plan, with the vision of attaining a “Self-Reliant Defense Posture through a Local Defense Industrial Base that is sustainable, competitive, and responsive to the defense needs of the country”, and a mission of “Orchestrating the development of the Local Defense Industrial Base that can provide and sustain the materiel and technology requirements of the AFP.” The accomplishment of the mission and the attainment of this vision is hinged on key concepts which, we believe, will be the foundation of our efforts to revitalize the SRDP Program. A centralized management structure has been identified as a viable structure in the management of R&D and production, which is capital intensive, has long-gestation and is high-risk in nature. Collaboration and Partnership has been identified as a catalyst for effective R&D by increasing the level of participation of the private sector in the local defense industry. A major trend in the global defense industry is the consolidation and focus of resources and R&D efforts. This is in response to the declining operating profitability of the industry due to reduced defense spending, increases in capital investment required, and heightened competition. Core Technology Development is one concept recognizing that resource constraints dictate that technology development shall be focused on core technology areas that will provide significant impact on defense operations. Lastly, the concept of Consistency and Predictability in the management systems and policies of the SRDP program will stabilize the business environment in the local defense industry and encourage more defense investors. Following these strategic concepts, a comprehensive effort to orchestrate the development of the Defense Industries requires the accomplishment of certain strategic goals. First, is an Effective, Efficient, and responsive SRDP Program Management Structure through organizational reengineering and networking. Second, is a Positive Environment for the Development of the Local Defense Industrial Base. This will require collaboration and partnership with the defense industry, policy interventions, the formulation of clear and consistent policies, and strong public support. Third, is the Capability to Address the Materiel and Technology Requirements of the AFP by focusing on critical capability areas to optimize meager resources, and by developing local service and production capabilities in these critical areas. Fourth is the Enhanced Defense Technology for R&D and Production, by implementing defense technology acquisition programs, and undertaking collaborative R&D with public and private entities. Fifth, is the acquisition and mobilization of Adequate Resources to Support the SRDP Program. Developments in the domestic and regional environments call efforts for the promotion of research, development, and innovation for the benefit of national wealth and self-sufficiency. However, in our efforts to attain this objective, domestic as well as regional players, should not venture on competition, but rather, on the establishment of ecosystems that will create demand, foster cooperative undertakings for products and services, enhance core competencies in the business as well as public sectors, improve the quality of products and services, and ultimately benefit the components of the ecosystem. This is the essence of the new direction of the SRDP Program. We now realize that not only new strategic directions are necessary, but equally important is strategic thinking where we will be able to continually re-invent ourselves and our environment. The AFP SRDP has been afforded a new lease at its own survival with the advent of the AFP Modernization Program. http://www.marina.gov.ph/default.aspx">Maritime Industry Authority (MARINA) The Philippines overtook European countries and became the world’s fourth largest shipbuilding nation in 2010, following South Korea, China and Japan, in terms of newbuilding completion volume. This was attributable to the expanded construction volume of the local Philippine shipyards. The major shipyards in the Philippines are Japan’s Tsuneishi Heavy industries (Cebu) Inc. (THICI) in Balamban, Cebu operated by Tsuneishi Holding Corp. and South Korea’s Hanjin Heavy Industries and Construction (HHIC Philippines established by HHIC at Subic Bay. The Philippines manifested a unique presence in the market as a production base of shipyards from developed countries. According to IHS Fairplay statistics (formerly Lloyd’s Register), 19 newbuildings of 710,000 gross registered tons (GRT) were completed in the Philippines from January to June 2010 alone. As for the major shipbuilding countries in Europe, Germany completed 490,000 GRT, while Italy and Romania completed 470,000 GRT and 320,000 GRT respectively. Newbuilding completions in Taiwan, Vietnam and Turkey also shrank, driving the Philippines to surpass these countries. South Korea, Japan and China will remain the three shipbuilding giants in the industry. The First Philippine shipbuilding industry development program, a program for progressive ship manufacture drydocking and repair of ships and manufacture of ship components, was prepared by the Philippine Shipbuilders Association and the Private Development Corporation of the Philippines in 1975. The MARINA was created on 01 June 1974 with the issuance of PD 474 and started functioning as an agency attached to the office of the President (OP) on 29 August 1979 with the issuance of PD 761 mandating the agency to integrate the development, promotion and regulation of the country’s maritime industry. In 1979, MARINA, pursuant to EO 546 dated 23 July of the same year, was made an attached agency of the Ministry of Transportation and Communications (MOTC) for policy and program coordination. The country’s ship building and ship repair sector provides vital support and complementation for the country’s maritime transport/shipping sector, which in turn serves as the lifeline and linkage for the movement of cargoes, products and people between and among the island-economies of the archipelagic environment. The safety and efficiency of domestic ships primarily depends on the availability, capability and capacity of our ship repair industry to maintain their seaworthiness, especially for repairs and during a ship’s drydocking. Considering the age profile of most second-hand domestic ships, their repair and maintenance are basically dependent on the country’s ship repair sector, in order to comply with safety standards and requirements.On the other hand, domestic demands for new ships, in line with the country’s domestic shipping modernization efforts, would need to be catered to by the ship building sector. Out of 557 licensed entities, 116 are engaged in ship building/ship repair using shipyard facilities, 234 are afloat ship repairers not having any shipyard facility, and 207 are boatbuilders. This profile alone shows that the sector is dominated by entities catering to ship repair and construction of motor bancas. Out of the 116 licensed shipyards, only ten (10) would have facilities catering to the construction and/or repair of big ships, only 15 for medium-sized ships, and the rest would only be able to service smaller ships. . Thus, the SBSR sector currently thrives primarily from the business of ship repair of the country’s domestic fleet, and sporadic ship building projects limited to small ships and motor bancas, except those from Tsuneishi Heavy Industries Inc. and FBMA Marine Inc. which cater to the export market. Foremost and critically pivotal was the inability of the country’s SBSR sector to effectively compete with neighboring foreign shipyards (i.e., Japan, Korea, Singapore, China, etc.) in catering to both national and international demands/ requirements for newbuildings and ship repair projects. There was a prevailing preference to neighboring shipyards for ship building and ship repair projects due to cheaper costs, greater efficiency thereby reducing construction or drydocking time and more extensive experience in undertaking such activities. The local shipbuilding projects undertaken for domestic demands were limited to small ships. A latent strength of the sector which still needs to be fully taken advantage of is the country’s strategic location to the shipping routes of oceangoing ships serving the Asia-Pacific region. Such strategic location could be translated into the country becoming a hub for ship repair and drydocking of oceangoing ships, including fishing vessels operating in international waters. For this latent strength to be realized, the country’s shipyards would need to be capable and competitive with neighboring foreign shipyards, in servicing the drydocking/repair requirements of oceangoing ships. A more concrete strength of the sector is the readily available cheap and easily trainable technical and skilled manpower for shipbuilding and ship repair works in the country. Many Filipino workers have inherent skills for shipyard-related jobs like welding, pipe fitting, molding, etc., including technical/engineering competence. With comprehensive training programs, a pool of skilled shipyard manpower would easily become a basic asset of the sector, not only for local shipyard requirements but also for foreign-based shipyards. Another strength currently favoring the sector is the support being provided by the government for shipyard operations in terms of exemptions from import duties and taxes, income tax holidays, accelerated asset depreciation, etc. under R.A. No. 9295 and the Investments Priorities Plan (IPP), all geared towards stimulating investments and attracting more players both locally and from abroad, as well as helping the sector become more competitive with their foreign counterparts. On 08 December 2006, President Gloria Macapagal Arroyo signed Executive Order No. 588 entitled “Strengthening The Philippine Ship Building and Ship Repair Sector and Instituting Measures To Promote Its Growth and Development”. Pursuant to Sec. 4 of such E.O., an Ad Hoc Committee was established, with the mandate of formulating a comprehensive development plan for the shipbuilding and ship repair sector of the country. The strengths of the sector would be highlighted in attracting foreign shipyards to come in, or promote the country as an investment area for ship building and ship repair operations. The Comprehensive Development Plan for the Philippine Ship Building and Ship Repair Sector was finalized and adopted by the Ad Hoc Committee on 16 October 2007 for indorsement and submission to President Gloria Macapagal-Arroyo. The arrival of foreign shipbuilders in the Philippines has introduced the country’s shipbuilding industry in the international market. Philippine shipyards are now building more ships for export than for domestic use. Majority of these ships are of large tonnage capacities like bulk carriers, container ships and big passenger ferries. By 2009 the export market, which is dominated by three foreign shipbuilders, accounted for more than 98% of the total turnover and the number was expected to further increase.
- The Tsuneishi Cebu shipyard, operated by Japan’s Tsuneishi Holdings Corp., in partnership with Cebu’s Aboitiz Group had produced about 77 ships by the end of 2007. Starting in 1997 with the 23,407-DWT M/V Sea Amelita, a log/bulk carrier named after then-First Lady Amelita Ramos, the company proceeded to make history in the local shipbuilding industry.
- Hanjin, which started building its shipyard in early 2006, has increased the momentum of big ship production recently. After launching its first ship - the first container ship to be built in the Philippines - in July of 2008, three other ships were launched in a few months later. The huge capacity of Hanjin’s dry dock in Subic, where four vessels can be built at a time, resulted in faster production. Hanjin expects to launch more than 15 vessels in 2009.
- Keppel, which started operating its shipyard here in early 1994 with a capacity of 28 vessel per year. Now Keppel expanded its operation in the Philippines by fabricating tugboats and oil rig hull which is the current demand in the world market presently. Keppel operates three (3) shipyards in the Philippines namely – Subic (350,000 DWT), Batangas (50,000 DWT) and Cebu (35,000 DWT). Keppel offers a complete solution for your every need in offshore rig construction, shipbuilding, shiprepair and conversion, with a full range of drydocks in its three shipyards strategically located in the Philippines, which is along the main trading route in the South China Sea and Pacific Ocean.
Tsuneishi Heavy Industries Cebu Inc. (THICI)
Tsuneishi Heavy Industries Cebu Inc. (THICI) is based at the West Cebu Industrial Park (WCIP) in Balamban, Cebu. The Tsuneishi Cebu, a partner of Tsuneishi Group of Japan and the Aboitiz Group has the capability of building ships of up to 80,000 DWT. Tsuneishi Heavy Industries (Cebu), Inc. is the biggest investment by the Tsuneishi Group outside Japan with a total investment of P17.5 billion. The company was established in 1994 and its main facilities are located in a 147 hectare land in Barangay Buanoy, Balamban Cebu. By late 2010 11,700 workers were employed at the shipyard. Balamban is a western coast town in Cebu that faces Oriental Negros and a two-hour pleasant drive from Cebu City via the trans central highway, this town is the home base of a world-class ship building facility of the Aboitizes-the fast craft manufacturing company of the FBMA Marine Inc., and the bulk-building Tsuneishi Heavy Industries-Cebu, a joint venture between the Aboitiz group of companies and the Tsuneishi group of Japan and another Aboitiz owned company, Metaphil. All these companies are located in the West Cebu Industrial Park (WCIP), an economic-industrial zone established in Balamban sometime in 1996. According to Mayor Binghay, Balamban could still accommodate medium to heavy industries inside the WCIP, a special economic zone that grants incentives to new locators and pioneering ventures such as metal fabrication for industrial purposes, production of construction materials, cement manufacturing, Agro-processing, assembly of machinery or consumer products, power generation and the like. By 2007 it had already built more than 46 bulk ship carriers in Balamban. Bulk carriers are ships that carry heavy materials such as copper, gold, coal, iron and cement. Tsuneishi and Metaphil are locators of the West Cebu Industrial Park in Balamban. Tsunesihi started its operation in 1994 and it hopes to be among the top 3 shipbuilding companies in the world by 2010. Aboitiz said in 2007 they were mulling on a $200M shipyard expansion which will make it more competitive in the international market that will put Cebu and the Philippines on the world's shipbuilding map. According to the Aboitiz Group, the expansion of the Balamban shipyard will create an additional estimated employment of 3000 workers such as welders, fitters among others in the western part of Cebu. As of 2007 THICI employed about 4000 people that made Balamban one of the booming towns in Cebu, if not in the region. Balamban Mayor Alex Binghay, in a media interview said, its local government unit has required large companies such as THICI and FBMA Marine Inc. that 70% of their employment are locals from the Balamban area. Binghay noted that many of Cebu's 3rd district residents have come back to their hometown because of the employment opportunities the shipbuilding industry had created. Hoegh Autoliners, a subsidiary of Leif Hoegh & Co. has commissioned THICI to build four (4) pure care and Track Carriers (PCTCs) with a capacity of about 5,200 cars vessel. Two of the 4 PCTCs, Hoegh Brasilla and Hoegh Sydney were completed and delivered on March 2007 and August 20, 2007 respectively. The 3rd vessel, Hoegh Manila that was christened by President Arroyo, is expected to be completed on December this year while the 4th ship, Hoegh Oslo will be launched on November 2007. President Benigno S. Aquino III led the naming and delivery ceremony of the ship Tenshu Maru at the shipyard of Tsuneishi Heavy Industries (Cebu), Inc., in Barangay Buanoy, Balamban, Cebu. The Tenshu Maru is a 180,000 deadweight metric ton type cape size bulker, which is the first of its kind and the biggest to be constructed in the country. Tsuneishi Heavy Industries (Cebu), Inc. was commissioned to build the ship which was started on July 2010. Philippine Navy Modernization One area providing opportunities for more ships to be locally constructed or repaired is through the Philippine Navy Modernization Program. As mandated by R.A. No. 7898, otherwise known as the AFP Modernization Law, the Philippine Navy has initially embarked on modest vessel acquisition and upgrade projects in order to fulfill its mandated missions and objectives. Although the mode of procurement under the PN Modernization Program is through open and competitive public bidding, pursuant to R.A. No. 9184, greater participation by our local shipyards would lead to the further realization of the objective of having more ships locally constructed or repaired. As such, local shipyards would need to be continuously aware and informed on the PN ships needed to be acquired or repaired, hence the action plan of holding meetings/dialogues with them by the Philippine Navy and the conduct of promotional campaigns relative to the opportunities being provided under the PN Modernization Program. Among the PN ships scheduled for acquisition/upgrading where local shipyards could participate are; ? Landing Craft Utility (LCU) – acquisition • Fast Craft Ferry - acquisition ? Riverine Assault Craft (RAC) - acquisition ? Rigid Hull Inflatable Boats (RHIB) - acquisition ? Rigid Raider Craft (RRC) - acquisition ? PKM-Fast Attack – upgrade ? Patrol ships – upgrade Bangladesh has a strong shipbuilding tradition. In Bangladesh more than one hundred shipbuilding and repaire yards (including three public shipyards) exist within various locations. Out of these shipyards, approximately 80% are located in and around Dhaka. These yards are mainly engaged in building and repairing of inland and coastal vessels, up to 3,500 DWT (Dead Weight Tonnage). More than 100,000 skilled workers and 150,000 semi-skilled workers are employed in the shipbuilding industry. At present more than 10,000 inland/coastal ships are plying all over the country, carrying more than 90% of total oil transportation, 70% of total cargo transportation and 35% of all passenger transportation. Recently few of these firms specially Ananda Shipyard and Slipways Limited (ASSL), Dhaka and Western Marine Shipyards Limited (WMS), Chittagong have attained the capability to manufacture ships to international buyers. At present Bangladeshi component manufacturers can manufacture 50% of the total material, machineries and equipment of the inland/ coastal vessels built. This proportion for an international classed vessel to be built in Bangladesh is at present 10% and there is a strong need to build the backward linking industry if the Bangladeshi shipbuilding sector is to gain a higher world share of all new buildings. Bangladesh already stepped into international arena. On 15 May 2008 a ship of 2.900 DWT was handed over from the local producer to a Danish company. This ship was valued at US$ 7 million. A second ship was handed over in early 2010 and the Danish buyer has placed further ship orders in Bangladesh. Also German, Dutch and Finish buyers has placed orders in Bangladesh of ships up to 6.000 DWT. The first ship to one of the German buyers was handed over in summer 2010. Before the financial crises the international ship builders were reluctant to build smaller vessels of up to 25,000 DWT. This created an opportunity for countries like Bangladesh to make a breakthrough in the ship building industry. And Bangladesh succeeded in doing so – and have shown that it can be done very cost effectively. In a long term perspective shipbuilding is both a promising and a challenging industry. Until very recently the average increasing rate of ships in tonnage was approximately 21 million GT (Gross Tonnage) per year. Considering US$ 7,620 as construction cost per GT, total market size is US$ 1,600 billion. If only 1% market share can be captured by Bangladesh it will be equal to US$ 16 billion. In worst case if Bangladesh can grab only one per cent of the global order for the smaller vessels the local value could be US$ 4.0 billion annually. Scopes for adding value for Bangladesh? Bangladesh has few thousands of SMEs (Small and Medium Enterprise) which are mostly land based, which if supported and trained would be able to contribute in the manufacturing and supply of components and services required for manufacturing of ships. Bangladesh have some comparative advantage which makes the country a good place to attract foreign investment in shipbuilding sector: ¦Cost-effective human resources in comparison with other shipbuilding nations ¦simple importation facility of raw materials ¦duty free market and access for Bangladeshi ships to other countries etc. ¦enthusiastic entrepreneurs willing to invest in shipbuilding industry On top of that, Bangladesh Government has taken initiatives and expressed keen interest to promote this sector with a view to including a new item in the export basket and considering its huge capability to develop country’s multi-dimensional production base as linkage industries. The government has declared shipbuilding as a priority area and is set to declare a 5 years tax holiday for the industry with the aim of transforming the industry into a major export earner. A Green Channel method of clearance has also been sanctioned in favour of the sector which allows an easy and quick import for different items against any export order. Due to massive mismanagement in Vinashin and the impact of the global financial crisis on the shipbuilding industry, the shipbuilding sector has lately had difficulties attracting foreign investors and exporters. In the future, however, there might again be good opportunities for Danish companies in this sector. Croatian government extended tender bidding for privatisation of six shipbuilding companies until 19 May 2010. The government decided to extend the bidding period to allow potential buyers to carry out due diligence and quality preparation of documentation. It is expected that as a result, quality of bids will improve. The sale included Brodotrogir, Brodogradiliste Kraljevica, Brodosplit, 3.maj, Uljanik and Brodogradilista Specijalnih Objekata. http://books.google.com/books?id=mD8EAAAAMAAJ">Ancient ShipsClassical Greek shipbuilding
Up to the introduction of steam, the tendency of the Mediterraneans was to build sailing boats rather than sailing ships. The very conditions that prompted naval architecture at all limited their scope. Whereas along the coasts washed by the Baltic, the North Sea and the English Channel, the sea-farers had either to build a ship or nothing, the case in the Mediterranean was different. The treacherous waters of the North Sea or Baltic, the existence of dangerous sand banks and rushing tides, were an unfair match for delicately designed craft accustomed to sun-speckled seas. Although the Viking craft had their full complement of rowers, yet they were far abler ships than the over-oared boats of Greece. Homer, who lived 1000 BC, gives, in his "Odyssey," an account of ship-building in his time, to which antiquarians attach much importance, as showing the ideas then prevalent in reference to geography and the point at which the art of ship-building had then arrived. Of course due allowance must be made for Homer's tendency to indulge in hyperbole. Ulysses, king of Ithaca, and deemed one of the wisest Greeks who went to Troy, having been wrecked upon an island, is furnished by the nymph Calypso with the means of building a ship, that hero being determined to seek again his native shore and return to his home and his faithful spouse Penelope,— "Forth issuing thus, she gave him first to wieldA weighty axe, with truest temper steeled.
And double-edged; the handle smootli and plain,
Wrought of the clouded olive's easy grain;
And next, a wedge to drive with sweepy sway;
Then to the neighbouring forest led the way.
On the lone island's utmost verge there stood
Of poplars, pines, and firs, a lofty wood,
Now toils the hero; trees on trees o'erthrown
fall crackling round, and the forests groan;
Sudden, full twenty on the plain are strewed
And lopped and lightened of their branchy load,
At equal angles these disposed to join,
He smoothed and squared them by the rule and line.
(The wimbles for the work Calypso found),
With those he pierced them and with clinchers bound.
Long and capacious as a shipwright forms
From space to space, and nailed the planks along.
These formed the sides; the deck he fashioned last;
Then o'er the vessel raised the taper mast,
With crossing sail-yards dancing in the wind:
And to the helm the guiding rudder joined
(With yielding osiers fenced to break the force
Of surging waves, and steer the steady course).
Thy loom, Calypso, for the future sails
Supplied the cloth, capacious of the gales.
With stays and cordage lust he rigged the ship,
And, rolled on levers, launched her on the deep."
One has but to read the narratives of Polybius, of Caesar, and of all the military historians of those days, in order to be struck with the small size of the ancient ships as compai'ed with those of modern times. Caesar, indeed, tells us that when he ordered his lieutenants to besiege Marseilles, both by land and sea, he had no fleet whatever, and that he hastily ordered fighting galleys to be built at the shipyards at Arles, and these galleys, he says, were ready and armed in thirty days. The Phoenicians invented the bireme and the trireme and adopted the Egyptian stern and rigging for their ships, handed these features on to the Greeks, and they, in turn, to the Romans. The earliest Greek ships were afloat in the thirteenth century BC, and by about the year 800 BC maritime matters had taken the greatest hold on the dwellers in the Greek peninsula and the western coasts of Asia Minor. The earliest kind of ships had fifty rowers seated on the same level, and was undecked. These penteconters were used as war-ships first by the Phocaeans, who settled Marseilles; this use survived even after triremes had been invented. The vocabulary of old Greek navigation is almost free of non-Greek elements. Greek shipbuilding must have had a separate development of its own, and cannot have been learnt from the Phoenicians, because all the nautical terms in Greek are native words; none are Semitic. The Latin terms are nearly all Greek, because the Romans learned navigation from the Greeks. The Greek coloring of the Roman nautical terms, which were borrowed along with the methods of Greek shipbuilding, argue that some form of Greek was current among seafarers generally from the first moment at which the early Greeks victoriously launched their vessels upon the Mediterranean. Greek was, therefore, from very early times in the Levant a lingua franca of which Homer preserves a highly developed form. The war-galleys were called longships, and the merchant vessels roundships. This aptly describes the chief difference which separated them. Whilst the former were essentially rowing-snips, depending on oars only as auxiliaries, the merchant ship was primarily a sailing vessel. Nevertheless she carried twenty oars, not so much for progression as for turning the ship's head off the wind, and perhaps for getting under way and in entering harbour. These trading ships were generally built throughout of pine, while the war galleys were of fir, cypress, cedar, or pine, according to the nature of the forests at hand. The merchantmen had keels of pine, but were provided with false keels of oak when they had to be hauled ashore or put on a slip for repairs or other reasons. In the days of Homer, the Grecian ship of war was a large open boat, capable of carrying from fifty to one hundred and twenty men. When the wind was fair and moderate, a sail was hoisted, but the ordinary mode of propelling these vessels was by oars. At that early period the rowers sat in a single line along each side of the vessel, but afterwards the Corinthians invented the trireme, a species of galley, which had three benches or tiers of rowers, and was decked like the larger craft of modern times. The trading ships were generally built throughout of pine, while the war galleys were of fir, cypress, cedar, or pine, according to the nature of the forests at hand. The merchantmen had keels of pine, but were provided with false keels of oak when they had to be hauled ashore or put on a slip for repairs or other reasons. It was the custom, however, to keep the merchant ships afloat. We have already pointed out that the galleys, on the contrary, were usually hauled ashore at night, and since the friction of their keels would tend to split the wood it was customary for these latter to be of oak. The masts and yards and oars were of fir or pine. The timber for the keel was selected with especial care, as indeed with so much hard wear and tear it was necessary. Among other woods that were also used may be mentioned plane, acacia, ash, elm, mulberry and lime—these being employed especially for the interior of the hull Alder, poplar and timber of a balsam tree were used also. Like the Koryaks and the very earliest inhabitants of Northern Europe, in some outlandish districts of the Mediterranean the sides of the ship were of leather instead of wood, but this would be only in cases where the inhabitants were still unlearned or there was a scarcity of timber. The ancients did not allow the timber to season thoroughly, because it would become thereby too stiff to bend. Steaming boxes apparently had not come into use in shipbuilding. However, after the tree was felled it was allowed some time for drying, and then, when the ship was built, some time elapsed for the wood to settle. The seams were caulked with tow and other packing, being fixed with tar or wax, the underbody of the ship being coated with wax, tar, or a combined mixture, the wax being melted over a fire until soft enough to be laid on with a brush. Seven kinds of paint were used, viz., purple, violet, yellow, blue, two kinds of white, and green for pirates in order that their resemblance to the color of the waves might make them less conspicuous. Nails of bronze and iron, and pegs of wood were used for fastening the planking, the thickness of the latter varying from 2jto 5^- inches. In order to fortify the warships against the terrible shock of ramming, she had to be strengthened by wales running longitudinally around her sides. Xenophon wrote [Polity of the Athenians, II, 11] "As to wealth, the Athenians are exceptionally placed with regard to Hellenic and foreign communities alike, in their ability to hold it. For, given that some state or other is rich in timber for shipbuilding, where is it to find a market for the product except by persuading the ruler of the sea? Or, suppose the wealth of some state or other to consist of iron, or may be of bronze, or of linen yarn, where will it find a market except by permission of the supreme maritime power? Yet these are the very things, you see, which I need for my ships. Timber I must have from one, and from another iron, from a third bronze, from a fourth linen yarn, from a fifth wax, etc. Besides which they will not suffer their antagonists in those parts to carry these products elsewhither, or they will cease to use the sea. Accordingly I, without one stroke of labor, extract from the land and possess all these good things, thanks to my supremacy on the sea; whilst not a single other state possesses the two of them. Not timber, for instance, and yarn together, the same city. But where yarn is abundant, the soil will be light and devoid of timber. And in the same way bronze and iron will not be products of the same city. And so for the rest, never two, or at best three, in one state, but one thing here and another thing there. Moreover, above and beyond what has been said, the coast-line of every mainland presents, either some jutting promontory, or adjacent island, or narrow strait of some sort, so that those who are masters of the sea can come to moorings at one of these points and wreak vengeance on the inhabitants of the mainland." The Trireme It was at Corinth that the earliest improvements in Greek shipbuilding, and the first construction of the trireme or war-ship with a triple bank of oars, was introduced. It was probably of Korkyra from Corinth that this improvement passed to Korkyra, as it did to Samos. In early times, the Korkyraean navy was in a condition to cope with the Corinthian; and the most ancient naval battle known to Thucydides was one between these two states, in 664 BC. The largest of these vessels generally carried a crew of about two hundred men, consisting partly of sailors and partly of soldiers, or, as would now be called, marines. In sea-fights these marines stood on the deck of the ship, and assailed the enemy with darts or javelins; and when the vessels came close to each other, they fought hand to hand with the sword and spear. The earliest had no upper protection for the rowers. Later a wooden protection was devised, but complete decks were as yet unknown during the Persian Wars, so that at Salamis there was room for only four bowmen and fourteen hoplites in each trireme. The need of transporting soldiers in warships to distant fighting grounds led to Cimon's improvement, by which the ships were given broader beam, and the decks at bow and stern were joined by bridges on which a considerable number of marines could be brought into action. Such ships, however, were chiefly employed as transports for men and horses. For the men-of-war such as were in use in the Peloponnesian War, a narrower beam was better in maneuvers, and they accordingly held even fewer hoplites than the ships engaged at Salamis. Being ten in number, the hoplites could effect little and were regarded anyway as landlubbers. The ship itself was a mighty weapon in the hands of the rowers; with its powerful ram it was so maneuverd as to sink the enemy, or at least snap off his oars. For such manoeuvres a trireme was necessarily long and relatively narrow; they were therefore called "long boats". The average dimensions may be roughly guessed from the ruins of dock-yards in the Piraeus. These have a width of over nineteen feet, and a length varying from about one hundred to one hundred and twenty feet. Hence the width of a trireme is supposed to have been about fifteen feet, its greatest length about one hundred and twenty feet. Besides being narrow, they had a low board and drew but little water, hardly three feet; hence operations could be carried on in very shoal water and far up a stream. The oars must have made a rather small angle with the water's surface; in close encounters they were sometimes snapped in pieces by a passing ship. Their exact length is unknown; neither can we tell how far apart were the oars in the same row. The rowers sat on benches arranged in three rows, each only slightly higher than the other. It is a mistake to suppose that the trireme rose very high out of the water. Its light draft proves that the hold was not much more than seven feet deep, the distance from the water-line to the deck being between three and four feet. The men in the top row, called thramtai (OpaviTai), wielded, of course, the longest and heaviest oars, and received the highest pay. It is impossible, from scanty evidence, to measure the speed attained by a trireme. Modern estimates vary greatly, from three and a half to fifteen miles an hour. With a fair wind the Greeks under Xenophon were able to sail from Cotyora, on the Euxine, to Sinope, one hundred and fifty miles away, in a day and a night. Although the trireme appears to have been the war vessel in most general use, there were many galleys of a still larger scale, enormous vessels, which, however, were built rather for show than for use, had as many as thirty or forty benches of rowers. The prows of Grecian ships were usually ornamented with sculptured representations of gods, men, or animals, like the figureheads of modern vessels. From the lower part of the prow there projected what was called the beak, which was a piece of wood, armed with a spike of brass or iron. This was of great use in damaging or sinking vessels—it being an important part of an ancient commodore's tactics to attempt to run down the enemy by striking his ship's beak against the side of the hostile vessel. Another maneuver, frequently resorted to for compelling an engagement, was to bear down obliquely upon the enemy's line, so as to break the oars of his vessels, and thereby render them unmanageable. The ships were then brought close together, and the personal conflict which ensued decided the fortune of the day. The larger the number of rows, the greater in consequence was the length of the oars, but still they were able to build and control ships of fifteen or sixteen rows. Of course, the larger the ships the greater the number of oarsmen required, since the number of rows would be greater; a "trireme" was rowed by 174 men, a "quinquereme" by 310, the arrangement being that each higher row had two men more than the one below, because the bulk of the ship was broadened towards the top. The splendid ship of Ptolemy Philopater is said to have had no less than forty rows, and the length of the highest oars was 18£ yards; but this was not a ship of war, and was only used in calm water. In fact, a modern authority on seafaring regards the whole description of this forty-decker as a satire, the statement must be taken cum grano salis. Historically, Odense Steel Shipyard (Lindø) has had a very special role in the A.P. Moller - Maersk Group. Since the early 1990s, competition from Japan and South Korea in particular has caused severe problems for the building of new ships in Danish shipyards. Only Denmark’s largest shipbuilder, Odense Steel Shipyard belonging to the A.P. Møller-Mærsk Group, has been able to stay ahead through intensive investment and development of robot technology. The industry is nonetheless bursting with optimism. Due to the expansion of the yard capacity in low cost countries in the Far East and most recently with China’s determined endeavours of becoming the world’s largest shipbuilding nation, the competitive situation for the shipbuilding industry has become increasingly difficult in recent years. Regardless of the even huge effort to improve the yard’s competitiveness with investments in new technology and streamlining of the production, the yard has run up very considerable annual deficits and must today realise that it is impossible to attract orders, which are commercially sound. In this light the Board of the yard decided in August 2009 to discontinue the shipbuilding activities, when the contracted orders have been fulfilled. Thus the present workforce will be continuously downsized to accommodate production. The contracted orders (five bulk carriers, seven Ro-Ro ships and three frigates) extend to August 2010, November 2011, and February 2012, respectively. The first redundancies of approx. 175 employees are expected to take place from the end of August this year. ”We have to realise that it is impossible for Lindø to attract new orders. The Board has therefore decided to make it absolutely clear that Lindø will not be building more vessels, once the contracted orders have been delivered,” says Lars-Erik Brenøe, Chairman of the Board, and continues: ”We will continue the process of attracting clients to the business unit, Lindø Industrial Services, and in that connection we strive to ensure a considerable number of jobs. We will in the time to come work closely with all relevant parties to provide the best possible assistance to the employees who will be leaving Lindø during the next few years.” As the shipyard’s orders are fulfilled, capacity for Lindø Industrial Services will increase. This means that both Lindø Industrial Park and Lindø Industrial Services have increased capacity to sell to other clients, and that Lindø Industrial Services' business areas are no longer strategically essential and can therefore be sold as independent businesses. Lindø Industrial Services' business areas comprise operation of mooring space and cranes, including the gantry crane, steel storage and handling, internal transport of heavy equipment, production of pipes and steel components as well as letting of ocean-going transport barges. With the discontinuation of the shipbuilding activities at Lindø, there is no longer a need for ownership of the Lithuanian shipyard, Baltija Shipyard. The company is therefore put up for sale. Danske Markets Corporate Finance will act as Lindø's financial advisor in the sales process. The sale will not have any effect on Lindø’s and Baltija’s contracted orders. Also the design- and engineering company UAB Baltic Engineering Centre in Lithuania is put up for sale. Vietnamese Shipbuilding The shipbuilding industry is one of the main priority sectors of the Government of Vietnam. The country has more than 60 shipbuilding and repairing yards owned by the Ministries of Defense, Fisheries and Transport. The Ministry of Transport owns the largest number accounting for more than 70% of building capacity of the sector under the umbrella of Vietnam Shipbuilding Industry Group (Vinashin). Due to a recent huge financial, management, and dept crisis in the state group, Vinashin has had to split up into several separate organizations, and the outcome is still unclear. But Vinashin seems to remain its control of the majority of shipyards in Vietnam in the years to come. Vinashin builds bulk-carriers, container ships, oil tankers, car carriers and cement carriers. The biggest shipyards Nam Trieu and Halong in northern Vietnam and Dung Quat Shipyard in the Centre are able to build tankers up to 150,000 DWT and vessels up to 105,000 DWT. The group is employing more than 80,000 people. Vinashin has capabilities in repair, conversion and modification of all double hull ship size. Hyundai-Vinashin shipyard, a joint venture between Korea’s Hyundai Mipo Dockyard and Vinashin has the capacity to repair ships up to 100,000 DWT. The joint venture is now the largest ship-repairing yard in Southeast Asia. Vinashin is developing support infrastructure and industries to reduce its reliance on foreign imported marine equipment and accessories. Products vary from steel, welding materials, gen-set, crane, deck equipment and interior equipment. Several cooperation agreements with Danish companies have been made, including main engines assembly with MAN Diesel, boilers with Aalborg Industries and control panels with Callenberg. The economic downturn made a grave impact on the shipbuilding industry in general and Vinashin in particular. Orders from foreign ship-owners decreased sharply in 2008-09. In the summer of 2010 grave financial problems and lack of the group’s ability to take care of unpaid debt was uncovered involving mismanagement in the top and involving the political leadership in Vietnam. Vinashin had unpaid debts of more than 10 times its ownership capital. Top management has now been fired and is being prosecuted due to financial mismanagement, and the group is undergoing a restructuring process. Foreign shipyards include Strategic Marine (Australia) and STX Europe. Strategic Marine’s 136,500sqm facility at the Dong Xuyen Industrial Zone in Vung Tau, Southern Vietnam employs more than 1,100 staff including fabricators, welders, production supervisors and management staff. The yard, which has nearly 20,000sqm of workshop and machinery shop space has been fully equipped to produce sizeable steel vessels. The facility has manufactured the steel base pontoon of the AUS 57 million Australian Marine Complex’s floating dry dock and has won orders for two 143m Diving Support Vessels and one Well Stimulation Vessel from Singapore company Marfield Limited. The yard is also building a 23.9m new generation compact tug from the Port of Napier in New Zealand – the company’s first ever tugboat signing and MODEC FPSO refit. STX Europe officially announced in January 2007 as a joint venture between STX Europe (70%) and Amanda Group (30%). STX Europe is an international shipbuilding group comprising 15 shipyards in Finland, France, Norway, Romania, Brazil and Vietnam. Its headquarter in Norway is holding 100% share of STX Europe. STX Europe invests USD 16 million in a shipyard in Vung Tau. Though Vinashin is still in the middle of a crisis and has to overcome a financial and management crisis, the Group claims to be planning upgrade and expansion of its existing shipbuilding facilities with the aim to build crude oil tankers of up to 300,000 DWT, bulk carriers with capacity up to 180,000 DWT, container carriers of up to 5,000 TEU and rig oil platform as well as Floating Production, Storage and Offloading (FPSO). Whether and when this might happen remains to be seen. In the future, Vietnam is again likely to be a promising market for shipbuilding and technology transfer. So far imported equipment generally consist of marine diesel engines, electronic-hydraulic steering gear, cranes up to 120 ton, air compressors, crankshaft grinder, plasma cutting machine, welding machines and other equipment on board. By 2011, Vinashin aims to strengthen support industries such as steel, paints, speed engines, hatch cover, crane, mechanical products and blasting plants. Technology transfer in the sector is another common cooperation with foreign partners that local shipyards see as an option to improve themselves. www.oss.dk http://www.vaerftshistorisk-selskab.dk/eng/index.htm"> History of Shipyards in Frederikshavn
Denmark Shipbuilding
Apart from the short land border in the south, Denmark is surrounded by sea. The total length of the coast is 4,605 km. No point in the country is further than 50 km from the nearest sea or fjord. Shipping is one of the largest export industries in Denmark, with foreign currency earnings of approximately DKK 140 billion (almost € 19 billion) in 2005 coming from the sector. Shipbuilding accounts for 6,524 jobs. Total employment in the Danish shipbuilding industry - including both the building of new ships and repair work - has been reduced by two-thirds since 1985, when it numbered 15,400 employees. The marine industry has always been an essential part of the Danish industrial tradition. Ever since the Vikings constructed the world’s fastest and most seaworthy ships centuries ago, Danish shipbuilders have left their mark on technological development. The world’s first diesel marine engine was developed in Den-mark. The world’s first diesel driven cargo ship was built in Denmark. Denmark used to be one of the leading shipbuilding nations in the world. At the start of the 20th century, Burmeister & Wain (B&W), along with with Carlsberg brewery, was Denmark's largest industrial enterprise, a position it held for most of the century. It was famous for its products abroad, and had a reputation domestically as one of largest workplaces in this country with very strong trade union traditions among its members. Since the oil crisis of the early 1970's, Denmark's shipyards demonstrated their capability to adapt to changing market conditions by building a wide variety of ships and equipment for infrastructure projects. Most Danish shipyards had very flexible operations that allowed them to build a range of different products, including ships and equipment for infrastructure projects, as well as powerplant and offshore equipment. One reason Denmark was more successful in surviving the worldwide shipbuilding slump than many other European nations is that many of its yards were owned by shipping companies and most orders were placed by domestic owners. All Danish shipyards were privately owned. Industry sources cited this fact as the rationale for the yards becoming more competitive and for eliminating unproductive yards. Denmark had 10 shipyards that had the shipbuilding and repair capacity for commercial ships over 1,000 grt. Eight of these were members of the Association of Danish Shipbuilders and accounted for approximately 90 percent of production. The two largest shipyards were Odense Staalskibsvaerft A/S and Burmeister and Wain (B&W), which concentrated mostly on newbuilding. Since the mid-1970's, the major Danish shipyards underwent significant expansion and modernization of both repair and shipbuilding facilities. Capital expenditures for land, equipment, and buildings have amounted to between $10 and $20 million per year. Danish shipyards insisted that they must continue to invest heavily in new technology and to concentrate on building highly efficient, modern ships in order to remain competitive. The industry diversified into the manufacture of offshore equipment, superstructures, cranes, and boilers. Danish shipyards were also optimistic about opportunities in connection with the North Sea hydrocarbon exploration activities. The privately owned Danish industry received no production subsidies from the Government. The Government extended preferential loans to domestic and foreign owners under 0ECD guidelines to purchase ships; however, this support was limited to an interest rate subsidy. The Home Market Arrangement allowed the Danish Ship Credit Fund (DSCF) to make loans covering 80 percent of the contract value at an interest rate of 8 percent for 12 years, with a 2-year grace period if the ship is ordered before year-end 1984 for delivery before yearend 1987. The Arrangement was established in 1977 to meet increased competition from foreign government subsidized shipyards and applied only to purchases of ships by Danish owners in Denmark or in the other European Community (EC) countries. Danish builders benefited by large infusions of private capital as a result of generous tax deferment rules applicable to investors who gain immediate depreciation benefits at values far above the capital investment. Production subsidies are subject to income tax, but depreciation may be made on the full purchase price. 4/ Profits, established on sales or losses of vessels, may reduce the basis of depreciation on other vessels. Anticipated depreciation on vessels is permitted on and after that year in which the contract is made but may not exceed 30 percent of the adopted purchase price. The yearly maximum depreciation is 15 percent, and the building cost may be at least DKR 200,000. After delivery, the anticipated depreciations that had been made are deducted from the purchase price. At the time of assessment of the taxable income, owners may make fiscal depreciations on vessels that are used for trade. Odense Staalskibsvaerft accounted for close to 60 percent of production in 1979, 1980 and 1983. B&W, however, accounted for at least 50 percent of deliveries in 1981 and 1982. Each of Denmark's medium and large shipyards employed between 300 and 3,000 workers. From 1979 through 1982, employment at Danish shipyards remained relatively steady between 14,000 and 15,500 workers. However, due to the closure of the large Helsingor shipyard in mid-1983 and the temporary reduction in employees at the Nakskov yard, employment dropped to about 13,600 by the end of 1983. By the end of 1985, employment was expected to drop sharply to 11,200 persons. Denmark's shipyards were increasingly basing their production on subcontracting, both domestic and foreign. It is estimated that about 10 percent of total shipyard employees annually are involved with ship repair and rebuilding work. By the end of the 1990s, the once powerful Danish shipbuilding industry, which had thousands of employees and yards in all regions of the country, has witnessed a fatal decline in orders for new ships, and many shipbuilding yards have shut down over recent decades. This is mainly due to severe competition from South Korea, which Denmark, together with the other shipbuilding countries in the EU and the trade unions, accuses of unfair competition in form of state subsidies and unrealistically low prices. However, new modern industries are growing where shipbuilding once ruled, and Danish shipyards are being taken over by the windmill industry. About six weeks before the turn of the century theÅrhus Flydedok shipbuilding yard was sold by auction. All equipment and usable items were sold, from lathes to mobile cranes, from notice boards to paintings of local landscapes. A little further north, in Frederikshavn, Danyard- which is owned by the Lauritzen company - delivered its last new ship on 14 December 1999 and was then closed down. France, like all other European countries, was restructuring its shipbuilding industry in the 1980s. Massive mergers consolidated France's five major yards into two were undertaken. The three biggest yards at Dunkirk, La Ciotat and La Seyne were merged into Chantiers du Nord et du Mediterranee. Alsthom-Atlantique de 1'Atlantique's operation at St. Nazaire was combined with Dubigeon-Normandie. There are several powerful maritime associations in France. The major one is the Association of French Marine Industries. Other organizations include GENEMA, the French shipbuilders' export association, and SIRENA, the French ship-repairer's association. These associations are expected to become more powerful because the demotion of the Ministry of Sea within the French Socialist Government. The shipbuilding associations were concerned about Government intrusion in the form of regulations and taxation. They also did not approve of the Government's plans for expansion when the industry is struggling just to remain competitive. One area where French shipbuilders have met with success is in cruiseship construction. In 1983, two cruise vessels were to be delivered from Chantiers de 1'Antique, and one was under construction at La Seyne. The French earned a reputation for supplying a wide variety of marine equipment to overseas markets. Alsthom Atlantique and SACM in Mulhouse build some of the world's most powerful diesel engines. SACM diesels have been ordered for vessels ranging from inland waterways craft to high speed patrol boats. SACM has also built the world's largest platform and semisubmersible for offshore work. Sales' volume for marine equipment has been rising steadily for 5 years. At the end of 1983, employment in the French shipbuilding industry totaled 24,000. At that time, the Government planned further restructuring in the industry, therefore, job losses were expected. Instead, the Government proposed shorter working time, a freeze on new recruitment, and early retirement. The Government also planned reductions in subcontractors and more training to improve flexibility within the work force. Innovation, design capabilities and workmanship are the hallmarks of Australian-made marine products. The industry is renowned for providing practical solutions for challenging marine situations. Defence-related shipbuilding is the largest sector, following by commercial shipbuilding (ferries and catamarans) and commercial repair and maintenance, which is on the rise. Australian shipbuilders have an impressive record of efficiency and innovation and Australian-made ferries, super yachts, patrol boats, fishing boats, recreational vessels and marine equipment are used worldwide. Australian-built craft are very competitively priced in the world market. Australian vessels – from kayaks and canoes through to state-of-the art catamarans and cruisers – are popular in domestic markets and are increasingly making a mark in the international marine scene. Australian craft and marine products are exported to a range of countries including New Zealand, the Pacific Rim, USA, Europe, South America and the Caribbean. Australian marine equipment and accessory manufacturers have also gained global recognition for a diverse range of marine hardware, components and accessories, including marine ropes, radars, winches, barbecues, buoyancy aids, autopilots and dock flotation systems. On March 15, 2011 the Northrop Grumman board of directors approved the spin-off of Huntington Ingalls Industries, Inc.Huntington Ingalls Industries, Inc. (HII)
Northrop Grumman Corporation (NYSE: NOC) today announced that its board of directors has approved the spin-off of its wholly owned subsidiary, Huntington Ingalls Industries, Inc. (HII), to Northrop Grumman stockholders, subject to final U.S. Securities and Exchange Commission (SEC) clearance, and set the distribution ratio, record date and distribution date for the spin-off. "We have determined that a spin-off of our shipbuilding business will best serve our shareholders, customers and employees. The separation will enable HII and Northrop Grumman to focus more intently on their respective customers," said Wes Bush, chief executive officer and president. The Northrop Grumman board of directors approved a pro rata dividend of HII common stock owned by Northrop Grumman on March 31, 2011, (the "distribution date") to Northrop Grumman stockholders of record as of the close of business of the New York Stock Exchange (NYSE) on March 30, 2011, (the "record date"). On the distribution date, Northrop Grumman stockholders of record will receive one share of HII for every six shares of Northrop Grumman common stock they hold. No fractional shares of HII common stock will be distributed. Fractional shares of HII common stock will be aggregated and sold in the open market, and the aggregate net proceeds of the sales will be distributed ratably in the form of cash payments to Northrop Grumman stockholders of record who would otherwise be entitled to receive a fractional share of HII common stock. The distribution of HII shares will be made in book entry form and no action or payment by Northrop Grumman stockholders is required to receive HII shares. No physical share certificates of HII will be issued. An information statement containing details of the spin-off and important information about HII will be mailed to Northrop Grumman stockholders prior to the distribution date. The HII spin-off has been structured to qualify as a tax-free distribution to Northrop Grumman stockholders for U.S. Federal tax purposes. Cash received in lieu of fractional shares will, however, be taxable. Northrop Grumman stockholders should consult their tax advisors with respect to U.S. federal, state, local and foreign tax consequences of the HII spin-off. Northrop Grumman shares will continue to trade "regular way" on the NYSE under the symbol NOC through and after the March 31, 2011, distribution date. Any holders of shares of Northrop Grumman common stock who sell Northrop Grumman shares regular way on or before March 30, 2011, will also be selling their right to receive shares of HII common stock. Investors are encouraged to consult with their financial advisers regarding the specific implications of buying or selling Northrop Grumman common stock on or before the distribution date. HII common stock is expected to begin "when issued" trading on the NYSE under the symbol "HII WI" beginning on March 22, 2011. On March 31, 2011, the distribution date, "when issued" HII WI trading will end and "regular-way" trading under the symbol HII will begin. The CUSIP number for HII common stock will be 446413 106 when "regular way" trading begins. Before the spin-off, Northrop Grumman and HII will enter into a Separation and Distribution Agreement and various other agreements related to the spin-off. The distribution of HII common stock is subject to the satisfaction or waiver of certain conditions including but not limited to the Registration Statement on Form 10 for HII common stock being cleared by the SEC and HII common stock being accepted for listing on the NYSE. HII common stock has been accepted for listing on the NYSE. Northrop Grumman and HII expect that all other conditions to the spin-off will be satisfied on or before the distribution date. Northrop Grumman is a leading global security company whose 120,000 employees provide innovative systems, products and solutions in aerospace, electronics, information systems, shipbuilding and technical services to government and commercial customers worldwide. Japan's six major shipbuilders Mitsubishi Heavy Industries Ishikawajima-Harima Heavy Industries Kawasaki Heavy Industries Hitachi Shipbuilding Mitsui Engineering and Shipbuilding Sumitomo Heavy IndustriesJapanese Shipbuilding
Although market conditions have become increasingly competitive, Japan has remained among the world's largest commercial shipbuilder. Japan's share of world ship completions (by gross tonnage) rose from 22 percent in 1960 to a majority 53 percent share of world completions by 1984. Through 1994, Japan's share held relatively steady at 45 percent of the world's completions; however, according to Japan's Institute of Marine Industries (IM!), Japan's share of orders dropped to 38 percent in 1995. Korea, now considered Japan's principal competitor, increased its position substantially, rising from less than 1 percent of completions in 1975 to nearly 22 percent of completions in 1994. Also according to the IMI, Korea's position improved sharply to 32 percent of world orders in 1995. By comparison, West European yards, which build a large number of passenger vessels, but fewer container, tanker, and bu1kships than Far Eastern yards, have collectively maintained a smaller percentage of the world market.
Despite lower prices and substantial competition from Korean shipbuilders, the Japanese shipbuilding industry attempted to retain its competitive position through production rationalization and cost-cutting efforts. A shipbuilding analyst has suggested that marginal companies may be eliminated from the Japanese industry because, at 1995 exchange rates, Korean yards reportedly had an estimated 6-percent cost advantage over Japanese shipbuilders. To compensate, Japanese shipbuilders attempted to improve productivity and lower costs by importing more production equipment at reduced prices, by using series production techniques, and by improving manufacturing processes. Japan had hoped to maintain its superior position with respect to Korea by winning orders for vessels on the basis of better technology and better on-time delivery records. In addition, country consortia began to play a role in capturing competitive vessel contracts.
The Japanese shipbuilding industry, following a period of relatively sustained growth during the 1950s and 196Os, faced a rather abrupt change in fortune as a result of the 1973-74 oil crisis. Unlike the textile industry, which has experienced a slower, steadier erosion of comparative advantage over a period of years, the shipbuilding industry was forced to adjust to a drastic worldwide drop in demand for ships, notably tankers. The Japanese industry was by then launching roughly 50 percent of the world's new shipping tonnage, so it was particularly hard hit. The Japanese Government employed a series of measures to enable the industry to adapt to these changed economic circumstances. A scrapping program was instituted to reduce shipbuilding capacity; shipbuilders agreed to temporary production cutbacks; and the government helped to generate demand for new vessels. The industry rationalization program achieved some success in enabling the industry to scale back production in the face of a shrinking world market.
The Japanese shipbuilding industry was forced in FY 1979 and again in FY 1987 to reduce significantly its production capacity primarily as the result of the two oil shocks of 1973 and 1978, excess worldwide shipbuilding capacity, and the longevity of vessels built during the 1960s and 1970s. The number of shipbuilding companies capable of building a 5,000 gt ship or larger was reduced from 44 to 26, and the number of dry docks declined from 21 to 8 during this period. Japan reached its highest level in available shipbuilding capacity at 9.0 million cgt in 1975. By 1990 available capacity was reduced to 5.5 million cgt, or by 39 percent. Japan's shipyard and subcontractor workforce stood at 361,000 as of December 31, 1974. It declined by nearly 65 percent, to 126,000 as of December 31, 1990. The Japanese shipyard workforce at yearend 1990 comprised 55,000 workers involved in shipbuilding, 34,000 subcontractors, and 37,000 workers in related industries.9 Japan utilizes subcontractors as a means to expand more easily and to contract its shipbuilding capability according to the demand of the global market. The use of subcontractors has been cited by the U.S. shipbuilding industry as a competitive advantage enjoyed by the Japanese shipyards, and it is a factor overlooked in comparisons of productivity between Japan and other world shipbuilders.
Japan dominated world shipbuilding in the late 1980s, filling more than half of all orders worldwide. Its closest competitors were South Korea and Spain, with 9 percent and 5.2 percent of the market, respectively. Japan's shipyards replaced their West European competitors as world leaders in production through advanced design, fast delivery, and low production costs. The Japanese shipbuilding industry was hit by a lengthy recession from the late 1970s through most of the 1980s, which resulted in a drastic cutback in the use of facilities and in the work force, but there was a sharp revival in 1989. The industry was helped by a sudden rise in demand from other countries that needed to replace their aging fleets and from a sudden decline in the South Korean shipping industry. In 1988 Japanese shipbuilding firms received orders for 4.8 million gross tons of ships, but this figure grew to 7.1 million gross tons in 1989.
It is hard to think of an industry harder pressed to cut costs than shipbuilding, an industry dependent on exports for 60 percent of its sales, and competing with Korea, whose costs were as much as 25 percent below Japan's by the mid-1990s. The price differential to ship builders between Korean and Japanese steel was roughly unchanged from 1987 to 1994, with Japanese firms paying 40 percent more for steel than their Korean competitors. In 1994 the cost of Japanese steel alone put Japanese shipbuilders at an eight million dollar cost disadvantace per oil tanker. The reason steel users paid high prices for Japanese steel and resisted switching to imports is partly that they were committed to commitments to firms but also that they chose to honor a larger commitment to support the entire domestic steel industry. Prices were supported by the steel industry cartel, but they were also supported by buyers’ willingness to pay what it costs to keep the domestic steel industry going.
It did not appear that the price gap between domestic and international prices was due to quality differences between Japanese and foreign steel. Fine gradations of quality are not important for the ordinary grade steel used in construction, which accounted for half of all Japanese steel dermand in the 1990s. One Japanese scholar argued that it was only in 1993 and 1994 that import steel prices had genuinely become attractive to shipbuilders, given the lower quality, lack of fine size gradations, and less convenient delivery of foreign steel. However, 75 percent of the steel shipbuilders used was thick plate, a basically standardized commodity. The steel from Korea's Pohang steel plant was essentially the same as Japanese steel since it was made with equipment supplied by Mitsubishi Heavy Industries.
It is true that Japanese steel makers produced steel plate in some four hundred different sizes for their various customers, and that the shipbuilders valued this. By 1994, however, the shipbuilders were begging the steel companies to standardize these sizes but to give them some price relief in return. Though the large number of sizes was supposed to simplify shipbuilding, some argued that fewer sizes would actually increase shipbuilders’ efficiency and save them more money in building costs than the steel companies would save by standardizing sizes.66 If this is true, it suggests that the proliferation of sizes in the steel market has acted more as a barrier to imports than as a genuine contribution to production efficiency.
People often say ‘Steel is the state’ (tetsu wa kokka nari), or ‘Steel is the rice of industry.’ For most of the major shipbuilders, such as Mitsubishi Heavy Industries, Ishikawajima Harima, or Sumitomo Heavy Industries, shipbuilding is only a small part of their larger operations in industrial machine production. The retaliatory power of the steel companies vis-á-vis these firms is to cut off purchases of new manufacturing equipment or to tell the shipping companies which handle their raw materials imports and steel exports to stop buying ships from particular firms.
Early History The shipbuilding industry in Japan may be said to have originated in prehistoric ages, and the importance of encouraging shipbuilding in this Island Empire had been felt as early as nearly 2 000 years ago, the first Imperial edict in relation, thereto having been issued in 80 BC by the tenth Emperor, "Sujin-Tenno." Most of the ships in those days were undoubtedly of canoe-build, cut from solid blocks of timber, but their form and construction underwent gradual improvement, and they were increased in number and size. It seems quite certain that many of them were engaged in ocean navigation since the latter part of the first century between the home and Korean ports; it is also recorded that as far back as 200 AD a large fleet under the command of the Empress "Jingo" invaded Korea.
At the end of the third century, Korean methods of ship construction were introduced, causing a radical change in Japanese shipbuilding, and more seaworthy ships began to be constructed. Communication with the coast of China was established in the early part of the fourth century, and her modes of shipbuilding were also gradually introduced during the seventh century. Another epoch in the history of Japanese shipping was thus formed, and Japanese ships underwent changes in their construction, becoming a mixture of native, Korean and Chinese systems. The junks had been gradually increased in size, and those greater than 100 ft. in length were not uncommon in the eighth century. Marked differences between war and merchant ships, however, do not seem to have existed in those days.
Japanese ocean shipping was once interrupted in the tenth century, a natural check was given to the growth of shipbuilding, and ships were built only for pleasure purposes. But after the invasion of the Mongolian fleet in 1274 and 1281, in which Japan won glorious victories and the whole Mongolian fleet was destroyed or sunk, the shipping and shipbuilding trades again began to assume great activity. From this period, ships underwent different stages of improvement, mostly Chinese in idea, becoming gradually larger and more seaworthy. Ocean trade was greatly developed during the middle of the sixteenth century.
Restricted to China and Korea in the older days, the foreign trade was gradually extended to Europe and Australasia, and, in the early part of the seventeenth century, the Shogun's government (of the Tokugawa Dynasty) began to give special licenses to ships trading to these countries. In 1617 there were 108 vessels with licenses for ocean trade, including Annam, the Philippines, Siam, Cochin-China and other places. These licensed ships were the best sea boats at that period, from 90 to 120 ft. in length, mostly constructed after the Chinese or western style. Such is a general statement of the growth of Japanese junk building up to the early years of the seventeenth century.
First Ships of Western Type Ships of western style began to be built in Japan early in the seventeenth century, by the first Shogun, Tyeyasu, of the Tokugawa family, under the supervision of William Adams, who was an English pilot, the survivor from a Dutch ship. Though imprisoned for a time, Adams eventually gained his liberty and settled in Japan in 1599. Two ships, one of 80 and the other of 120 tons, were the first built under the direction of this interesting intruder. In one of these ships some Spaniards who had been wrecked on the east coast of Japan were sent to Acapulco in 1610.
At about that time, being alarmed at the progress of Christianity, a strict law limiting the size of ships was passed, which was followed by laws prohibiting foreign trade; and in 1639 communication with other countries was entirely stopped; no foreign ships, except those of China, Corea and Holland, were allowed to enter Japanese port under any pretence whatever. This completely checked the progress of Japanese shipbuilding for the second time, and for nearly 220 years, small and not very seaworthy ships were built for the coasting trade only. During this period Japanese shipping remained quite in obscurity.
After the treaty with the United States was signed, in 1853, the necessity for developing the war and merchant navies was strongly felt, and the laws prohibiting foreign trade and limiting the size of ships were abolished at once, and ships of western type again: began to be built; but, owing to the absence of intercourse with the western civilized nations for nearly two centuries, Japanese shipbuilders were quite destitute of sufficient technical knowledge, and ships constructed according to the so-called "western type" only resembled them in their outward appearance, being in reality nothing but reproductions of old-fashioned junks.
The beginning of the Japanese shipbuilding industry was obtained from the Russians. A Russian war vessel, the Diana, lying at anchor at the Port of Shimoda, and demanding a treaty with Japan, was washed ashore and sunk by tidal waves following the great earthquake of November 4th, 1854. Captain Putiatin, commanding the expedition, having decided to build new ships to take his men home, selected a place on Heda Bay, in the Province of Kimisawa, in Idzu, not very far from Shimoda, and started the construction of two wooden schooners with timber grown in that district. He employed many Japanese ship carpenters to assist his crew in the building of these ships. Thus they became acquainted with the construction of ships of the western type, and, after the completion of the Russian schooners, they built many of similar type, in different places throughout Japan. These vessels were known for some time as the "Kimisawa type," after the place where the first schooners were built. Proper methods of western shipbuilding were thus introduced and spread over Japan. They have had a rapid and striking development in the last forty years.
In 1855 a war vessel was presented to the Shogun by the Dutch Government, being the first war steamer afloat in Japanese waters. In 1857 another war vessel, fitted with a screw propeller, was purchased from the Dutch Navy, and was followed by a few more. These, with a steam yacht presented to the Shogun by the late Queen Victoria in 1858, formed the nucleus of the present Japanese Navy. Warships were also bought by the heads of the different clans.
The Government of the Shogun, being supplied with naval vessels, had formed an idea of having shipyards for building and repairing these vessels. The first shipyard in Japan was started in Akunoura, in Nagasaki Harbour, in 1857. Dutch engineers and shipwrights were employed, and necessary machinery and gear for commencing the works were imported from Holland. Many apprentices were sent to Nagasaki by the Shogun's Government and also from different clans, to learn ship and engine construction. In consequence, it is noticeable that Dutch terms are still often used by old hands in many shipyards and engine works, all over Japan.
Engine works were started in Yokohama in 1865, and also in Yokosuka in the same year. The latter had been planned by a French engineer, M. Verny, and it took nearly four years to construct a dry dock and fit out the dockyard. When completed, the whole establishment had to be handed over to the present Government, owing to the final overthrow of the Shogunate in 1868.
In 1861 permission was given to the general public to own large vessels of western construction. Many ships, both sailing and steam, were built and bought, and at the time of the restoration of the Emperor to power, in 1868, there were forty-six merchant vessels of western type, having an aggregate tonnage of 17 000 tons.
First War Vessels Built in Japan Of the shipyards started by the Shogun and some of the Daimyos, those at Yokosuka, Yokohama and Ishikawajima were transferred to the Navy Department at the Restoration, while the yard at Nagasaki passed to the Industrial Department, under whose superintendence merchant-ship building was commenced. A new shipyard in Kobe was also started shortly afterward, by the last-named department. Again, in 1876, the site of the Ishikawajima Engine Works was leased to a private individual, Mr. T. Hirano, a native of Nagasaki, who was trained at the Nagasaki works. He soon started shipbuilding and engine works under the name of the Hirano Shipyard which was after ward renamed "The Ishikawajima Shipbuilding and Engineering Company." This was really the first private yard of the modern type founded in Japan.
There were, besides, a few yards converted from those building ships of the native type, and also a few started by foreigners in Kobe and other places. Provided with these facilities, ships of western type began to be constructed, and gradually increased in number; they were mostly of wooden build, and of very small dimensions, suitable for coasting trade only. In those days, steamers were quite new to the general shipowners and sailors; the superiority of sailing ships of western type over the ordinary Japanese junks being only too evident, most of the vessels built in the early years were sailers.
The first screw war vessel, the Chiyodapata, was built at Ishikawajima, a small island at the mouth of the River Sumida in Tokio, in 1866, by men educated at the Nagasaki Engine Works; she was the first ship built solely by Japanese hands. After the Restoration, in 1867, the Japanese Navy was organised, mainly with ships confiscated from the Shogun and the other Daimyos (heads of the different clans); it embraced nine or ten ships, ranging in displacement from 200 to 1 000 tons, mostly wooden gunboats or sloopsof-war. The Government then commenced to develop the navy by building new ships, abroad as well as at home.
The first warship built in Yokosuka after the dockyard there had passed into the hands of the Imperial Government, was the Seiki, a wooden gunboat of 900 tons displacement, launched in 1876; this was followed successively by the Amagi, Banjo, Kaimon, Tenriu, etc., of somewhat similar type. The central-battery ironclad Fuso, and the armored composite corvettes Kongo and Hiyei, were the first ships ordered from England, and were all launched in 1877. The composite sloops, Katsuragi and Musashi, of 1476 tons displacement, still on the active list, were launched inYokosuka in 1885 and 1886, being the first and last of this type built in Japan; the Yamato, a sister ship, had been ordered from Mr. Kirby's yard in Kobe, and was the first warship built under contract in Japan. The Takao, a small cruiser of 1 750 tons, designed in 1886 and launched in 1888, was the first iron warship built in Japan.
At about the same time, three iron gunboats of 615 tons were built, the Alago in Yokosuka, the Maya in Kobe, and the Cholcai in Ishikawajima (a private yard). These, with the Akagi, the first steel gunboat, of the same displacement as the Ataga class, launched in 1888, formed an epoch in the history of Japanese warship building. The principal vessels constructed in Yokosuka, before the late war with China, were the Yayeyama, a despatch vessel of 1 600 tons displacement and 20 knots speed, launched in 1889, the fastest ship in the Japanese Navy at that time; the Akitsushima, a protected cruiser of 3 100 tons and 19 knots, launched in 1892; and the Eashidate, a cruiser of 4 300 tons, launched in 1891, the latter forming a triplet with the Itsukushima and Matsusliima, built in France, and then the most powerful ships in the navy.
The Naval dockyards at Kure and Saseho were newly opened a few years before the war of 1894, nnd equipped with shipbuilding and repairing facilities, but no work of importance was turned out before the war. The Japanese Navy, at the time of the war, consisted of four armored ships of small ana inferior classes, seven second-class cruisers, fifteen small cruisers and gunboats, and two torpedoboats, aggregating about 55 000 tons in displacement, of which fourteen ships were home built.
Japanese Navy after the Chinese War
After the war with China, Japan took active steps to embark on an enormous naval extension program, with a total expenditure of about £22,000,000 sterling, extending over ten years. The ships built under this program, with those already building or contracted for at the time of the war, include: 6 First-class battle-ships: 4 of the Shikishima type, 15 000 tons and 16 knots, and 2 of the Fuji type, 12 500 tons and 18 knots; 6 Armoured cruisers, of the Asama type, 10 000 tons and from 20 to 23 knots; 3 Second-class cruisers, of the Chitose type, 4 500 tons and 23 knots; 5 Third-class cruisers: 2 of the Tsushima type, 3 400 tons and 20 knots, the Otowa, 3 000 tons and 21 knots, and 2 of the Akashi type, 2 700 tons and 20 knots; 2 Despatch vessels; the Miyako, of 1800 tons, and the Chihaya, of 1 250 tons; 3 Shallow-draft gunboats; 20 Torpedo-boat destroyers; 63 Torpedo-boats of various sizes. Of these 108 vessels, totaling about 180 000 tons in displacement,only a few were built in the Naval dockyards. Torpedo boats, 63 in all, were built in Yokosuka, Kure, Sasebo and other yards.
In connection with the program, very large extensions have also been carried out in the naval dockyards at Yokosuka, Kure and Sasebo, by building graving docks, erecting new shop3, and by adding machinery of the most modern description. A new dockyard was also started in Maizuru, and small repairing works in other minor naval ports. The Japanese Navy thus possesses all the necessary equipment and facilities for building warships of any description whatever.
The Mitsubishi Dockyard The number of unofficial shipbuilding yards, in 1905, was 216 yards and 42 docks, the principal being the Mitsubishi Docks at Nagasaki (established in 1886), the Kawasaki Docks at K5be, the Uraga Docks, and the Yokohama Docks (the two last established in 1896). Ships aggregating 47,000 tons were built in these various yards in 1902, whereas those built in 1898 had aggregated 24,000 tons only. The Mitsubishi Dockyard built nine ships of 14,000 tons and repaired ninetyfour ships of 185,400 tons in 1908. The ss. Tango Maru, built at this dock to order of the Nippon Yusin Kaisha, is the largest ship in the East belonging to any Japanese company, her tonnage being 7500 gross tons. The building of a vessel of such size in our own dockyard is worthy of special notice in connection with the history of shipbuilding in the East. The total number of private docks in Japan was 42 in 1905. That of the Mitsubishi is 722 ft. in length and 88 ft. in width, being the largest in Japan. The Kawasaki Docks, the Uraga, and the Yokohama are next in size to the Mitsubishi. The Kawasaki Dockyard Co., Ltd. This company, established in Kobe, was originally founded by the Government in the early 1870s, and belonged to the Industrial Department; it was afterwards sold to Mr. S. Kawasaki in 1886, being transferred again to the present concern in 1896. When purchased from the Government it was a barren and unimproved piece of ground, covering nearly 9 acres, while now it has a water frontage of nearly 1 mile, and covers 35 acres of land, of which about 9 acres are occupied by shops and other buildings. It has been extended to nearly three times its original size in the last six or seven years. When under the Industrial Department, wooden ships of smaller sizes were chiefly built, besides the iron steamers Asahi Mara of 500 gross tons and Yoshino-gawa Maru of 380 tons. A few iron and steel vessels and many wooden ships were built by Mr. Kawasaki, and, since the incorporation of the present Company, more than forty steel vessels, varying from 100 to 2 300 gross tons, have been constructed. The principal vessels now in hand are the Chinese river gunboat," of 650 tons displacement, a light-house tender for the Korean Custom-House, 1100 gross tons, a steam yacht for the Siamese Government, etc. By 1907 an enormous development had taken place, and the works could build ships ranging in size from 1 000 to 7 500 gross tons.
The Osaka Iron Works The Osaka Iron Works, Dock and Shipbuilding Yard were started in 1880 by Mr. E.H.Hunter, with several Japanese partners; the latter, however, withdrew, one after another, being uncertain of the prospects of the enterprise at that period, and the whole establishment was left in the hands of Mr. Hunter. To meet the steadily increasing volume of business, the works made successive extensions, more especially after 1895, and in 1899 nearly 16 acres of land, with a water frontage of more than 1 000 ft., were secured at Sakurajima, i mile from the mouth of the Aji River, and lying close to the new Osak,i Harbour. At this spot the shipyard for building iron and steel shivis is now situated. Owing to small demand in the mercantile marine few vessels were constructed by the works prior to 1891, but from 1891 to 1903, 203 ships have been built. Of these, 83 were of steel, and the remaining 120 were wooden vessels of small tonnage.
The river at the spot where the shipyard lies was 1 000 ft. wide and 14 ft. deep, thus restricting the size of the ships which can be built. Consequently, the attention of the management has been directed more to the building of vessels of smaller type, and a specialty has been made in the construction of dredges and shallow draft steamers. Bucket dredges, varying in capacity from 100 to 400 tons per hour, and shallow-draft steamers, 12 to 20 in. in draft, have been built during late years.
There are now eight building berths, ranging in length from 200 to 300 ft., but as soon as the Osaka Harbour improvements, now in progress, are completed, the depth of water at the site will be increased, enabling ships of much greater length and tonnage to be launched from the yard. The yard for building wooden craft was on the other side of the river, and was available for tugboats and steam launches. The Ishikawajima Shipbuilding and Engineering Co., Ltd. This company, formerly called the Hirano Shipyard, was founded in 1876. The site was that of the old shipyard, where a sailing barque, the Asahi Maru, had been built in the late years of the Tokugawa Dynasty, by the Prince of Mi to, one of the Shogun's family, and where also the first war steamer, the Chiyodagata, was built in 1861-05. The works, at their commencement, built many wooden sailing ships, steamers not being so popular in those days. With the intention of impressing shipowners with the superiority of steamers over ordinary sailing ships, Mr. Hirano built about a dozen small steam tufrs (called the Tsu-kwai Maru) for sale or hire, and these were soon purchased by various shipowners. The shipyard had thus been gradually established, and in 1884 the Government Engine Works at Yokohama were purchased and incorporated with it. In 1885 the works were commissioned to build an iron gunboat of 615 tons displacement, the Chdkai, this being the first order entrusted to Japanese private builders. She was completed in 1885, and the works were then transferred to the present owners—the Ishikawajima Shipbuilding and Engineering Company.
To meet the pressing demand for ship repairing, after the sudden expansion of the Japanese mercantile marine in 1894-95, a new graving dock was started by the Ishikawajima Company at the port of Uraga, and was completed in 1898, being provided with complete shipbuilding facilities. The principal vessel built in this yard was the Kotsu Maru, of 1 500 gross tons, launched in 1901. Since then, not much new work of importance has been done. The shipyard was finally amalgamated with the Uraga Dry Dock Company in 1902.
Japanese Shipbuilding - Early Developments
Japan aimed to be the leader of a revived Asia. She advanced along three lines — territorial expansion, increased fighting power, and an aggressive commercial campaign. Two main objects in the commercial campaign were the acquisition of a great shipbuilding industry and the exclusive control of the coasting trade of the Western Pacific. For years the policy of Japan has been directed with the view of building up a strong navy and merchant marine. Her position in the East was, in many respects, analogous to Great Britain in the West, and her aspirations and opportunities both pointed to the sea as furnishing her best defence in case of war, and a profitable vocation for her sons in time of peace. With this object the Government planned regular and systematic additions to the strength of the navy, and sought the best means for the encouragement of shipbuilding. High ship subsidies had long been paid, and any plan which promises to promote the establishment of iron manufacturing plant, and other industries necessary to shipbuilding, received careful consideration.
The growth of Japanese shipbuilding was amazing. When the ancient junk had to make way for vessels of modern type, Japan at first found it necessary to import nearly all its ships. The skill of Japanese carpenters soon mastered the construction of wooden vessels, and Japan has for some time built all the sailing ships she wants. Progress in the construction of iron and steel steamers was more slow. To help it on, the Government offered a bounty varying from £1.4 to £2 per ton of the body of the ship, for suitable iron or steel steamers of 700 tons upwards in size, with an additional bounty of ten shillings per horse power of the engine.
All the principal yards are equipped in the western style, and they are importing every new machine from both Europe and America. Being later in the field than other nations, Japan had many advantages in avoiding experimental stages, and there is always less trouble in adopting the best of the kind. Thus, good inventions or improvements are much more easily and quickly applied in Japan than in places where everyone has been accustomed to older methods for years and years. All the principal yards have been sending their engineers and constructors to Europe and America, one after another, to look around the different works and yards, to enquire into the methods they are adopting and to study the machines they are using. In that way the latest improvements are quickly imported. For example, the use of electricity in shipyards is very prevalent, and most of the principal naval and private yards are adopting or are about to adopt electric power in driving their machines in the different shops.
The progress of the shipbuilding industry was very rapid, and very successful, and nothing was more apparent in this respect than the reduction in the time required to do similar kinds of work. According to practical experience in one of the private yards, a small steamer of 400 gross tons, built in 1894, took 9 months and 14 days from the commencement to the date of launching, while in 1906, a ship of similar type, a little larger in size, was launched after being in hand only 4 months and 14 days.
The want of iron and steel was the greatest drawback to the development of Japanese shipbuilding; it also caused great inconvenience in prolonging the time of completion, as the delivery of material involves a delay of at least five or six months. To remedy this defect, the importance of inaugurating the iron and steel industry in Japan had been recognised for a long time, and the Imperial Government, having decided to start on this industry, has made very elaborate and exhaustive investigations with regard to the quantity and nature of iron ore obtainable in Japan, the manufacture of pig iron and steel, and also the organization of the works. Being satisfied with these preliminary investigations, the scheme of the steel works was submitted to the Diet in 1896-97, and passed unanimously, and the steel works were commenced in 1897 at Yawatamura, near Moji.
There were three leading shipyards in Japan, the Mitsubishi at Nagasaki, the Kawasaki at Kobe, and the Osaka ironworks. These three yards employed altogether about 25,000 men, and are well equipped with modern machinery. They have been for some time quite unable to meet the orders pouring into them, and they are enlarging their accommodation as quickly as they can. The largest dock belongs to the Mitsubishi and measures 728 ft. The heads of these establishments and many of their principal assistants have been trained in British and American yards. It has sometimes been said that all that is done is to piece together material already made abroad, in order to earn the Japanese subsidy. However true this may have been a few years ago, it is certainly not so now. The construction work, to the smallest details, is done in the yards themselves. Japanese mechanics have not yet acquired great facility in handling machinery, and the foreign visitor cannot but be struck by the very large number of men necessary in the yards, probably quite three times as many as would be employed in England for similar work.
It was thought almost incredible when the Hitachi-maru, a ship of 6,000 tons, was built in Japan. In 1906 the Satsuma, 19,200 tons, the largest battleship in the world, was successfully floated at Nagasaki. Merchant vessels of 13,000 tons are now on the stocks, submarines are being completed, and the Japanese shipbuilders are proving themselves especially successful with torpedo-boat destroyers. In spite of the fact that they are hampered by the lack of cheap iron and steel, they are already competing with English yards for foreign orders. Last June I myself saw five boats on the keel in the Kawasaki yards for the Chinese Government; Siam is giving orders to Japan, and merchant vessels are being made even for India. Government assistance to the leading shipyards has extended far beyond the mere payment of official subsidies. There were a hundred ways in which the Japanese authorities can quietly and unostentatiously help the great shipping companies, and they did so, for they realised that ship-building is an essential part of national defence.
During the Great War the Japanese shipbuilders rose to the occasion in a splendid manner and added to registry more than 600,000 tons of modern carriers besides furnishing substantial tonnages to the allied nations. Japanese shipbuilders were faced with innumerable handicaps and difficulties, the chief among them being the steel problem, the insufficient development of related industries, and the lack of technical experience and skilled labor.
Remarkable as has been the shipbuilding achievements of Japan during the war, the very large majority of the ships constructed have been built with imported materials. To what extent the Japanese yards during the past few years have been dependent upon foreign materials may be seen from the fact that the embargo on exportation of steel from the United States compelled practically all of the yards to curtail their operations, and some of the yards had even to discontinue their work altogether.
Among the articles whose exportation from the United States was placed under license control by the President's proclamation of July 9, 1917, were ship plates and structural shapes. The steel conservation program adopted by the Exports Council and the restrictions placed on the exportation of these commodities on August 2, 1917, stopped the exportation of over 300,000 tons of ship plates and shapes which had been purchased by the Japanese. Japanese shipping had prospered greatly as a result of the withdrawal of German and British shipping from the Pacific, and some 270 steel vessels of more than 1.000 tons each, aggregating over 1,000,000 tons in all, were in the course of construction or about to be built. To complete this program Japan had to secure ship plates, shapes, and other ship material from the United States. The Japanese Government therefore immediately entered into correspondence with the Government of the United States for the purpose of securing as much as possible of these materials.
On March 26, 1918, an agreement was reached whereby the Japanese shipbuilders agreed to sell to the United States 12 ships whose dead weight totaled approximately 100,000 tons. The United States agreed, for each deadweight ton of ships delivered, to license the exportation of 1 ton of steel for which contracts had previously been made.
Considerable tonnages of iron and steel had been produced in Japan, and the ship plates and other materials turned out at the mills under government operation had been found most satisfactory. The greatest portion of these materials, however, was required by the Navy and the remainder available for private shipyards is far from being adequate to meet their requirements. The bitter experiences encountered during the Great War have led to the realization that if the Japanese shipbuilding industry was to become really an accountable factor, it must be supported by abundant domestic production of steel materials.
Before the Great War, the development of the iron and steel industries in Japan was considered hopeless on account of the high cost of production. The only undertakings of the character, therefore, were conducted by the government for the purpose mainly of supplying military and naval requirements. For ordinary commercial and industrial uses, iron and steel could be imported more cheaply and quite readily from foreign countries, and there was no special inducement for private capital to undertake such an enterprise. But under the stimulus of the war, many foundries, rolling mills and other works of like nature were started. With the restoration of peace and the return of normal conditions, these enterprises will be forced to meet in an unequal competition the steel and iron industries of America and England. Under these conditions, iron and steel products could be imported much more cheaply than they could be produced in Japan.
Japanese Shipbuilding - Post-War Recovery
The huge Kure naval yard was where the Yamato - the largest battleship ever - was built. In that neighborhood was located a major Japanese shipbuilding company. The naval yards at Kure were part of the industrial complex of Japan that had been designated as reparations to the various claimants against Japan during World War II. Fortunately the US didn't behave like the Russians, who denuded Korea. The US said to the allies, “Look, we designated all this stuff for reparations and if you want it, come and get it.” But how are you going to move a major shipyard? So the naval yard in Kure sat from the time of the end of the war until the Korean War broke out, more or less abandoned.
An outfit called National Boat Carriers, an American company [probably owned by Greeks but registered as American], was involved in tankers and the transportation of petroleum products. The Korean War put an enormous demand for tankers. One minute World War II oilers were a dime a dozen and the next minute they were gold and the demands for them jumped by leaps and bounds. National Boat Carriers wanted to start building tankers to service the Korean War. The National Boat Carriers saw this opportunity and decided they would like to build them in Japan with cheap labor and marvelous facilities.
This required the occupation to release the naval yards at Kure from reparation designation and, among other things, the United States to release steel because the Japanese steel industry was not producing sufficient steel for this kind of thing. The next thing that came up, of course, was that National Boat Carriers decided they didn't want to build tankers of riveted construction, they wanted to build welded ships. This put an entirely different light on things because the Japanese steel industry was not producing any welding steel ship plate and they would have to get everything they needed from the United States. So this required special exceptions. The purpose for which the shipyard was released from reparation designation was to permit the employment of Japanese in the area and benefit the growth of the Japanese economy and the Japanese steel industry. The whole thing looked like a very good deal for the Japanese economy which was still in pretty sad shape. National Boat Carriers turned to Yawata, a big Japanese steel company, and helped Yawata invest money to produce steel of the quality they required. That is one of the foundations that later became a major industry in Japan, namely, shipbuilding.
In the years following World War II, Japan focused on rebuilding basic industries considered central to economic reconstruction and development. The shipbuilding industry was one of those industries accorded priority, and the government instituted a number of measures to encourage the industry's growth. As early as 1947, Japan embarked on a "planned shipbuilding" program. The government announced annual ship tonnage to be constructed under the plan, and those shipyards selected to construct the vessels were then provided with loans from the Japan Development Bank at highly favorable terms; ship purchasers also had access to favorable financing from the Japan Development Bank. This program provided the industry with a stable source of demand and in the 1950s and 1960s accounted for a significant portion of all ships built in Japan for the domestic market. Government support was by no means limited to arranging favorable loans to shipbuilders.
The industry had access to significant tax benefits, including special depreciation allowances and incentives to invest in developing overseas markets. To encourage demand, interest rates were subsidized for shipping companies in Japan to purchase Japanese ships. Perhaps of key importance were the measures employed to encourage exports, notably the financing provided by the Japan Export-Import Bank and the more unusual "link trading" arrangement. Under the latter scheme, shipbuilders were licensed to import raw sugar, which, because of the then-prevailing exchange and import restrictions, could be sold at a lucrative profit on the domestic market. These profits in effect subsidized the shipbuilders' exports of ships.
The shipbuilding industry's access to advantageous financing and other government support, coupled with the availability of relatively low-cost steel and labor, the major cost components in ship construction, contributed substantially to the industry's rapid growth and strong competitive position. In the space of two decades Japan had become the world's lowest cost producer of ships and by the mid-1960s was launching close to 50 percent of all shipping tonnage constructed worldwide.
The industry in the 1970s
The 1973-74 oil crisis precipitated a drastic worldwide drop in demand for ships in general and the collapse of the world tanker market. New building orders worldwide plummeted from 72.8 million gross tons in 1973 to 13.8 million gross tons in 1975, roughly 81 percent over this 2-year period.
To appreciate how severely the Japanese shipbuilding industry was affected by this drastic drop, it is useful to understand the nature of the world shipbuilding industry and Japan's position in that industry. The Japanese shipbuilding industry relies heavily on exports and is therefore particularly vulnerable to changes in the world demand for vessels. This world demand is derived from the shipping industry. In turn, the demand for shipping depends on the volume of trade and on the world gross national product. The size of, and changes inr the demand for shipbuilding were influenced by worldwide economic trends and growth.
Shipbuilding demand has certain characteristics that make it susceptible to fairly wide fluctuations. The annual requirement for new vessels is derived from the difference between the stock of ships the shipping industry holds and the necessary tonnages, which must be projected using the above economic factors. A period of 2 or 3 years is normally required from the time a shipbuilding order is received until construction is completed. Fluctuations in the factors that determine the demand for ships, the long service life of ships, and the long lead time between placing orders and taking delivery can produce large swings in the demand for new ships.
During the early 1970s, a great many speculators were ordering ships, including tankers, because they assumed the demand for oil and other commodities would increase. When the oil crisis hit, shipping companies found they had contracted for too many tankers, so they canceled some of their orders. Contracts on bulk carriers were also canceled due to the worldwide recession that followed the oil crisis. According to one Japanese shipbuilding industry representative we spoke with, Japanese shipbuilding companies lost a lot of money on these canceled contracts because they were forced to sell the vessels in a very soft market at much lower prices than those contracted for.
Because of the 2 to 3 year lag between the placement of orders and ship completions, the full impact of the oil crisis was not immediate; the shipbuilding industry actually "bottomed out" during 1978 and 1979. Japan launched nearly 18 million gross tons in 1975; by 1979, launchings had fallen to approximately 4.3 million gross tons, a drop of 76 percent. At the same time, Japan's share of new ship orders dropped from roughly 35 million gross tons in 1973 to 3.65 million gross tons in 1978, registering a decrease of almost 90 percent.
The 1973-74 oil crisis and the recession that followed severely affected the Japanese economy and caused structural recessions in several major industries, including shipbuilding. Government and industry worked together to develop and implement programs to help the shipbuilding industry restructure itself and adapt to the changed economic environment.
Although initial efforts were made to cope with the effects of the oil crisis-- shipbuilding capacity utilization was adjusted downward for fiscal years 1977 and 1978 --by 1978 it had become increasingly apparent that the industry was facing a structural depression and would require more drastic measures to recover. During this period, after the Standing Committee on Transportation solicited opinions from shipbuilding industry associations and other industry representatives, the Diet adopted a resolution recommending that the government: support measures for structural improvement to stabilize shipbuilding operations; develop measures to create demand for ships: and design measures to improve the employment situation.
In response to the Diet's recommendations, the Ministry of Transport asked the Shipping and Shipbuilding Rationalization Council, an advisory body, to make specific recommendations for rationalizing the industry. The Council, which consists of scholars, labor officials, and industry representatives, made its assessment and presented it in July 1978. The Council concluded that the volume of new construction of Japanese-built ocean-going vessels would never return to the high levels achieved before the oil crisis. It predicted that construction volumes would decrease until 1980, then begin a slight upturn, with the volume of new construction estimated to reach 6.4 million compensate gross registered tons (CGRT) in 1985. In contrast, the aggregated total building capacity of those facilities capable of building vessels 5,000 gross tons or above was 9.8 million CGRT, which would leave a surplus capacity of 3.4 million CGRT by 1985.
To alleviate this supply/demand imbalance, the Council recommended that this excess capacity be scrapped and that special financing measures be provided to small- and medium-sized enterprises to assist them in disposing of surplus building facilities. The Council also suggested that capacity reductions might not be sufficient to resolve the supply/demand imbalance, so demand creation and adjustments in operating levels might also be required.
In August 1978, one month after the Council issued its recommendations to the Ministry of Transport, shipbuilding was designated one of the structurally depressed industries to be covered in the Structurally Depressed Industries Law. The basic plan for the shipbuilding industry was to be the one recommended by the Shipping and Shipbuilding Rationalization Council--to scrap 3.4 million CGRT, or approximately 35 percent, of the production capacity of those shipbuilders equipped with building berths or docks for the construction of vessels of 5,000 gross tons or more.
Various sources indicate that industry and government had difficulty reaching an agreement on how the plan should be carried out. Large and small firms disagreed as to which should bear the burden of capacity reductions. The smaller firms claimed the larger firms could afford to bear a greater portion of the burden, while the larger firms felt all should suffer equally. The larger firms also disagreed among themselves as to the appropriate mix of capacity reductions. One industry representative we spoke with noted it was difficult to reach a consensus because the plan called for the seven major companies (Mitsubishi, IHI, Kawasaki, Hitachi, Mitsui, Sumitomo, and Nippon Kokan) to become guarantors of government loans to the industry and to help in the loan repayments, even though these seven would receive no government assistance.
Nevertheless, the proposed rationalization plan went into effect in 1979, with capacity cutbacks to be completed by March 1980. Capacity cutbacks were determined based on categories of shipbuilders; altogether, 61 firms participated. This scrapping program was developed within two industry associations--the Shipbuilders' Association of Japan and the Cooperative Association of Japan Shipbuilders. These associations represent all but the smallest ship and boat manufacturers, the rationalization plan. who were not included in plan.
To accomplish the objectives of the rationalization plan, the government assisted the smaller firms but not the seven major shipbuilders. The government felt that these companies would financially capable of handling the cutbacks themselves and of be shifting resources into other industrial activities within their own companies. For smaller firms that were to cut back, the Ministry of Transport set up the Designated Shipbuilding Enterprises Stabilization Association, which was administered by the two industry associations. The Stabilization Association purchased nine shipyards, with a total aggregate building capacity of 490,000 CGRT, at a cost of 36.8 billion yen. To finance these purchases, the Stabilization Association obtained loans from the Japan Development Bank and various commercial banks and raised 2 billion yen -- l billion from the government and 1 billion from private sources.
The restructuring plan developed by the Ministry of Transport called for increasing the demand for Japanese vessels as well as reducing existing production capacity. Consequently, the government established a goal of constructing 3 million gross tons of new commercial shipping under a 3-year shipbuilding program beginning in fiscal year 1979. To meet that goal, the government agreed to finance a portion of the construction cost of each new vessel with long-term loans at low interest rates. Moreover, for certain types of vessels, the government subsidized a portion of the interest payments on such loans. To further boost demand, the government accelerated the replacement schedule for governmentowned vessels. Shipbuilders also benefitted from the extension of Japan's territorial limits to 200 nautical miles, which increased government demand for patrol vessels. The value of ship orders placed by the Defense Agency and the Maritime Safety Agency totaled about 104 billion yen in fiscal year 1977, and reached roughly 137 billion yen in fiscal year 1978.
The government also introduced a program to encourage the scrapping of existing ships. The Ship Disposal and Scrapping Promotion Association was set up in December 1978 to provide subsidies for the disposal of ships at 2,500 gross tons or above; subsidies granted by the Association (for example, approximately 1,700 yen per gross ton for ocean-going vessels) are financed by the government and the private sector.
Shipbuilding industry employment declined rapidly in a relatively short timeframe. Total workers, including subcontractors and allied industry employees, declined from 361,000 workers in 1974 to 228,000 in 1979, a decrease of 36.8 percent over this 5-year period. This relatively rapid decrease was due at least in part to the flexibility of the workforce due to the widespread use of subcontractors; between 1974-79 this group experienced a 53 percent reduction compared with 35 percent for regular employees and 24 percent for workers in allied industries. The industry's labor mobility may also be explained by the fact that shipbuilding workers have been losing comparative advantage in wage rates relative to their counterparts in other industries. Both the private sector and government took action to ease the adjustment process. The firms made efforts to retrain and relocate workers; the government instituted employment adjustment programs to aid workers from depressed industries.
Japan's Aircraft Industry
Japan's aircraft industry has a mixed history. From its beginnings in the 1920s the industry grew to become a major international producer of military aircraft. After World War II, the occupation authorities prohibited aircraft R&D and production facilities were either removed or destroyed. The year 1952 marked the resumption of activity, and the industry has gradually increased its production and sophistication since that time.
The government's industrial policy tools for the aircraft industry are both similar to and different from those used for other growing industries. Early government funding to encourage the industry's development focused on producing and marketing domestic aircraft based on existing technology: the major project was technologically but not commercially successful. The type of assistance has changed, but in many ways follows a pattern seen in computers and robotics. The government shifted its support from participating in production to funding research and prototype development of new products and/or new technologies in public laboratories. In many cases, private industry has participated in government-supported projects.
Japan’s aircraft industry was forced to disband after World War II and remained idle until about 1952, when aircraft research and production was conditionally permitted with prior government approval. Because there was no domestic military or civil demand at this time, the industry’s activities were limited to repair and maintenance of U.S. military aircraft. With the establishment of the JDA in 1954, the aircraft industry expanded to include production of mi1itary items. Since then it has been gradually rebuilt and expanded, mostly through licensed production programs, and partial1y through Japan’s own development programs.
In the post World War II period, Japan’s aircraft industry was rebui1t and expanded largely through the licensed production of U.S. mi1itary ciircraft. The Mutual Defense Assistance Agreement between the United and Japan, signed in 1954, provided the basis for U.S. grant-aid, Foreign Military Sales, and coproduction of U.S.-developed weapon systems. Grant-aid funds were terminated in 1964 and today Japan regularly purchases military equipment from the United States and coproduces a number of U.S.-developed weapons. It has been U.S. policy not to enter into coproduction agreements for “significant weapons” except with members of the North Atlantic Treaty Organization, Australia, New Zealand, and Japan. As the economies of U.S. allies have developed, the trend toward coproduction has increased.
U.S.-Japan coproduction arrangements have been in the form of “licensed production.” Under these arrangements, for each coproduction project, an umbrella agreement -- Memorandum of Understanding (MOU) -- is signed by the two governments. Then Japanese manufacturers domestically produce the equipment under technical assistance contracts with the U.S. companies that developed and produced the equipment initially.
Since the mid-1950s when Japan began production of the F-86 fighter and T-33 trainer aircraft under licensing arrangements with North American and Lockheed, respectively, there has been a series of U.S. military aircraft produced in Japan under similar arrangements. These aircraft have included the P2V-7 maritime patrol aircraft, the F-104 and F-4 fighter aircraft, and more recently, the P-3C maritime patrol and F-15 fighter aircraft. These programs have provided aircraft to Japan’s self-defense forces-- and at the same time assisted Japan in developing a modern aircraft - manufacturing capability.
The high cost of Japanese production is due to a number of factors, including licensing and technical assistance fees that must be paid to U.S. companies under the licensing agreements, and limited production runs which do not achieve scale economies. Japan’s self-defense forces have limited requirements and Japan’s current policy prohibits exporting weapons to other countries.
Early coproduced U.S. aircraft included helicopters, jet trainers, maritime patrol planes, and first-generation jet fighters. These coproduction efforts were followed by more advanced fighter aircraft including the F-104J and the F-4EJ, and several typesof helicopters. A Rand Corporation study of these programs found that U.S. industry representatives were emphatic in saying that their coproduction partners had access to any technical information. The study quotes a U.S. aerospace executive who stated: “We were paid to put them in business and we gave them everything we had.”
On June 20, 1978, the U.S. Government approved the F-15 licensed production agreement with Japan. The program originally spread the acquisition and production of the F-15s over an 8-year period. In addltlon to achieving military obJectives being pursued, the-F-15 agreement provided financial benefits to the United States, including export sales, licensing and technical assistance fees paid to U.S. companies, and R&D recoupment ($1.6 million per aircraft) paid to the U.S. Government.
At the time Japan was evaluating the F-15, it was also considering a Mirage of France, the Viggen of Sweden, and the Tornado, jointly developed by Great Britain, West Germany, and Italy. It should be noted that none of these systems involve the technical sophistication or cost of an advanced fighter aircraft like the F-15. Japan would have chosen to coproduce a less-capable aircraft rather than buy the F-15 or develop its own system.
Japan, as a matter of policy, does not export arms or technology directly related to the production of arms. In 1967, Japan formalized its policy against arms exports to Communist bloc countries, countries under United Nations sanctions, and countries involved, or likely to become involved in a conflict. In practice, all arms exports -- which require a case-by-case review by MITI -- are effectively banned with the exception of a few civilian items which could have military uses (e.g., computers, helicopters, and trucks).
http://books.google.com/books?id=8fK3AAAAIAAJ&pg=PA89">RECENT DEVELOPMENTS IN JAPANESE SHIP-BUILDING By DR. S. TERANO, Transactions of the International Engineering Congress, 1915
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
