The long and the short and the tall
Posted on | May 13, 2010 | 1 Comment
Here’s what has happened since the Grand Bureaucratic Bailout of last weekend (GBB for short):
As far as the shipping sector goes, the shortage, or rather the lack, of capital (politely called liquidity) is now really striking home. Even prosperous and successful brands are being affected. The effect on the quality of much of the world fleet, over time, will be striking and very harmful.
Europe’s nearly 750 billion euro bailout package is intended to stabilise just about everything. While we hope that it will work for Greece and Portugal over the long run, it won’t help the shipping industry in the short one.
The reasons are simple: lending, on reasonable terms, to respectable medium-sized businesses, must be revived. This is definitely a tall order. It isn’t happening.
When the United States bailed out its banks with TARP funding, two years ago, easy credit conditions loosened capital restrictions.
This hasn’t occurred this week, in Europe, where banks are still reluctant to lend to one another, and certainly to shipowners.
Hopefully, an expanding sovereign debt crisis has been stopped. But shipping, like some other industries, faces a growing need for investment at a time of desperate, cheese-paring, cut-to-the-bone, in-the- short-run fiscal tightening.
For the shipping supply chain, regulatory pressures are however now placing a growing premium on quality.
Today’s horrific scenes from the Gulf of Mexico already show how regulatory pressure follows bad environmental news.
For a capital-intensive business, requiring long-term investment in hardware and human resources, these are therefore hard times.
And there’s more. The junk now coming out of Asian yards is unlikely to meet environmental standards that will be set by the international community (the EU, IMO and the USA), for long.
Opening the “lending window” to small and medium-sized businesses, like most shipping companies, would require courageous action by governments. “Green” loan guarantees, for example, aimed at environmental or “green” designs, would be a modest but useful start.
But that sort of idea would not match well with the commitment, as expressed for example in the coalition agreement between Britain’s Conservative Party and Liberal Democrats, to “deficit reduction as a means of achieving economic recovery”.
So, not much hope there. The long and the short of it is that the wave of fairly horrible public spending cuts that is about to come down, while probably necessary to stave off national bankruptcy, will discourage just the sort of investment climate that we need, to renew and enhance the quality of the world fleet.
What we will probably be stuck with instead is a great deal of aging and shoddy stuff, built by shabby yards for shady asset players, for years to come.
I don’t need to draw a detailed picture of what that means for quality, for safety at sea, and for protection of the marine environment. In the short, as well as the long, run, it’s a shame.
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December 13th, 2010 @ 5:19 am
certainly, the environmental news theses days are not so good but there are other good news too like opening of new forest reserves “;`