The industrial and economic revolutions which the shipping industry has passed through during the 20th century are (i) the containers revolution of the 70's, (ii) the electronic revolution, (iii) the advancement of information technology and (iv), the globalisation of the world economy. These revolutions brought fundamental changes in the shipping industry. The implementation of strict rules in shipping through international conventions such as the STCW, MARPOL have become obligatory on the maritime countries.
Elimination of the conventional old ships and bringing in new modern, economically operated ships have changed the ship owners' interests in registering their ships in a flag state. Those maritime nations who fail to meet the requirements of the ship-owners by amending their shipping laws to meet the present day requirements in time fail to gain economic benefits as a maritime nation.
Ship owners prefer to register their ships where they get the best for them. Ship owners want to be left alone to get on with their business. They accept such flag state intervention as they regard absolutely necessary for the organised functioning of their industry and no more.
National as well foreign investors in the ship owning business depend on the efforts that a flag state makes to attract investors in ship owning to register their ships. A flag state has to find out how it can make the ship owners and those who are interested in investing in ships to make their ships in such a flag state.
Therefore, a maritime country has to identify the requirements of a ship owner as well as those who finance the ship owning business. Ship owners before registering their ships in a flag state consider the working of a flag state's administration, its location, infrastructure, experience, the reputation of the administration of the flag state, service speed, convenience, active representation, political stability, the maritime law of the flag state, the mortgage recordation system, the safety record, fees and taxes, availability of skilled seafarers, shipping policy, the incentives a flag state offers and the foreign exchange law of the flag state.
A flag state's role is most clearly described in the 1982 Convention on the Law of the Sea. Article 94 describes the duties of the flag states. Article 217 describes the responsibility of the flag state. A flag state has to review the quality of its administration in shipping, by legislating or amending existing laws and framing the rules for the implementation of the laws so passed by the legislature of such a flag state.
Ship owners and investors in owning ships consider the experience, service and representation of a flag state. Ship owners also consider the fact whether the administration of a flag state has implemented various international conventions and regulations such as the International Conventions for the Prevention of Pollution from ships (MARPOL 73/78), the International Convention for the Safety of Life on Sea (SOLAS), the International Convention on Standards of Training, Certification and watch keeping for Seafarers (STCW 78/95), the Convention on International Regulations for Preventing Collisions at Sea (COLREG) 1972, the International Convention on Load Lines (LL) 1966, and the 1982 United National Convention on the Law of the Sea (UNCLOS).Chapter 4 of Merchant Shipping Ordinance, 2001 (hereinafter referred to as MSO) deals with the registration of ships in Pakistan.
The purpose of Chapter 4 of MSO is to bring the Pakistan shipping industry in line with world shipping and to attract ship owners for registering their ships under the Pakistani flag.
The Federal Government which is responsible for framing rules to implement the provisions of the MSO for better administration of the registration of ships and to maintain the record of such registration, transfer, mortgage etc has done nothing. This is the era of providing the information within the shortest possible time Public documents of the registration of ships are now placed on the web by the flag states so that such documents are accessible to all the concerned.
Other flag nations provide all the information to the ship owners and all others who are connected with the owning of ships through the electronic media whereas even to date the Registration of ship office in Pakistan works on the old system. It is difficult to get information from the ship registration office of Pakistan as the registration of the ship record is still managed by the old manual system.
Ship owners and investors in ships consider the facility for registering a mortgage. A flag state with an adequate maritime infrastructure can provide attractive terms to the ship owners. The infrastructure of a flag state must be large enough and located in the major maritime ports of the country in order to adequately serve international ship owners. A flag state should be able to register and record the mortgages in each of its representative office and provide the information about the registration of ships, the mortgage of the ship etc on the web.
Registration of mortgage of a ship should be centralised. No effort is made by the concerned Ministry of Pakistan to modernise the infrastructure of the ship registration office. No law and rules are made to modernised the ship registration office.
In fact Pakistan registration of ship office is not organised according to the present need, though according to section 16 of the MSO the registration of ship offices are the Port of Karachi, Port Mohammad Bin Qasim, Mercantile Marine Department Karachi and any port the Federal Government may by official notification in the official Gazette, appoint to be the registrar of ships. No such offices are established, nor any forms, documents etc and maintenance of record for the registration of ships are made.
Quality certification of the maritime administration also provides a yardstick for ship owners and lenders in selecting a flag state for the registration of their ships. A competent flag state should have successfully completed the International Organisation for Standardisation (ISO) certification.
This certification provides an opportunity for a flag state to have its management operations and administrative functions documented by internationally recognised unbiased third party auditors. Laws for employing experienced qualified, highly skilled and honest persons in the administration of shipping is to be strictly followed.
Unfortunately there are no experienced personnel to manage the affairs of the registration of ships in the registration office in Pakistan. It is unfortunate that Pakistan does not have a good reputation among the ship owning companies. The office of the registration of ships and related offices have not completed ISO certification. No strict laws for employing experienced, qualified, highly skilled and honest merchant marine personnel in the administration of the registration of shipping are made.
Though the Service law of Pakistan makes the selection of such officers through strict rules, on a permanent basis with constitutional guarantee for security of job, the shipping industry in Pakistan in utter disregard to its own service rules appointed, on a contract basis, non qualified officers to deal with the affairs of shipping.
The result is that all those in shipping who are qualified, highly skilled, experienced in their field avoid serving the concerned government department and preferred to serve that country service offer. There is therefore an alarming brain drain in shipping industry.
Competition among flag states is so great today that a superior level of service should be the norm, not the exception. Ship owning companies prefer to register their ships in a flag state which has an efficient registration process. Ship-owners need to have a twenty four hours, seven days a week communication system to handle any emergency.
In Pakistan the concerned department of shipping is working on an old and out dated system of registration of ships etc; No effective, speedy system to meet the present day requirement is introduced in the office of registration of ships and in the related departments of shipping.
There is admittedly red tapism and under therefore, ship owning companies hesitate to register their ships under the Pakistan flag. The duties of a flag state continue after a vessel is registered. Ship owning companies expect that the flag state role should be proactive rather than reactive.
Ship owning companies expect that an acceptable flag state will function for a ship owner as a facilitator with a variety of forces, including port states, shipyards and classification societies.
Ship owning companies expect that a flag state should not delegate all of its duties to classification societies but have a close working relationship with classification societies. A flag state's duty to enforce the applicable international laws is extremely important in terms of the liability of owners, operators and lenders.
The ship owning companies consider the flag state's participation in the work of international organisation, such as the International Maritime Organisation, and must disseminate any pertinent information from these organisations to ship owners. Pakistan is not participating in the work of all international organisations.
The old system of registration of ships is followed. Pakistan Ship registration does not meet modern requirements. There is unnecessary red tapism in the Pakistan Government Shipping Office as a whole.
Owners of ships are always concerned with the political stability of a flag state. Political stability is essential to ensure continuity in the rule of law and in the flag state administration.
Moreover, instability may lead to international sanctions that could effect a flag state's reputation and inhibit a vessel's ability to trade. If the vessel trades with a particular country, it must also be determined if there are any cargo or flag preference requirements imposed by the country to which the vessel trades.
The ship-owners also consider the existence of Trade Unions of seafarers controlled by some self interested trade union leaders who, for their own benefit create problems for the ship owners, as also a very important factor. No effort is made to legalise trade unions. No law is made to check the negative activities of the trade union leaders who work for their own self-interest instead of working for the benefit of the seafarers.
A ship owner needs to consider whether the maritime law of a flag state contains provisions invoking case law of another jurisdiction, or, in the alternative, offers a satisfactory local body of legal precedent.
The financial institutions encourage registration of a ship in a country where laws are made for the registration of a mortgage of a ship. The financial intuitions encourage the registration of ships in a country where there are laws for the continuation of mortgage and transfer of loan with the transfer of a ship.
The maritime law of Pakistan invoke case laws of another country. The courts in Pakistan has also developed case laws on maritime laws. MSO has a provision for the mortgage of ships registered under Pakistan's flag. The MSO has also delegated powers to the Federal Government to make rules. No rules have been made for the mortgage, continuous mortgage, transfer of mortgage alongwith the transfer of ships.
Heightened safety and environmental demands and increasingly onerous port state inspection practices render it potentially costly for lenders, insurance underwriters and owners to register their vessels with a flag state that fails to enforce rules uniformly.
Mal-administration, the corruption, nepotism and appointment of persons not qualified and experienced in survey and inspection of the flag state ships in the concerned department of shipping are negative factors. Pakistan's safety record is not in accordance with the international standard.
The appointment of surveyors and other officers who have to meet the requirements of safety, on a contract basis, in violation of the service law of the country discourage experienced, highly skilled marine engineers to serve as surveyors and inspectors. The concerned department of shipping does not follow STCW convention in letter and spirit.
No commercial man in his senses is going to carry out commercial transactions except on the condition of paying the smallest amount of tax involved. A flag state's vessel registration and tonnage tax fees and direct taxes are important to both a ship owner and a lender.
While deciding to register a ship in a flag state, ship owners as well as lenders, makes comparisons of fees and taxes that is to be paid to a flag state. Ship owners prefers to register their ship in a flag state where the fees and taxes that has to be paid is less as compared to the other flag state. A flag state is in business to make money. Its registration and tonnage fees and taxes must remain competitive.
Ship owners compare and "shop" among flag states. However, the Latin expression caveat emptor, "let the buyer beware," should be heeded; if not, the expressions "you get what you pay for" and "it's too good to be true" may end up haunting ship owners. Ship owner have to carefully review all the expenses, not just the published flag state fees taxes and charges but also hidden costs such as document translation expenses or legal fees from a local law firm within a flag state's jurisdiction.
Moreover, a ship owner must take into account the fact that the cost of registering a vessel also includes the marine safety and inspection systems and their accompanying infrastructure in the flag state. Pakistan as a flag state has made suitable amendments in its registration fees, income tax law other charges and fees payable by a ship that is registered in Pakistan but it is not competitive as compared to other flag states.
Availability of skilled crew and qualified experienced officers to serve on board ships that may be registered is also one of the considerations for the registration of ships in a flag state. No sincere effort is made by the Ministry concerned to have institutions for training crew and officers in line with the present day requirements.
Some efforts are made by private institutions. No law has been made to regularise such private institutions. Such institutions are not provided facilities. The fees for obtaining training in such institutions being very high, serving the sea becomes less attractive. Proper laws should be made to encourage institutions that educate and train seafarers, cadets and apprentices so that they may be available to the ships that are registered in a maritime country.
Such institutions should be subsidised by creating a Fund. Education on ship management, marine law, training to serve on board a ship should be introduced in universities. As a flag state country, Pakistan has to consider the ship owners' requirements and to legislate laws to overcome the problems of ship owners and investors in the shipping industry.
The intention of a flag state legislature has been to create a responsible, quality ships' register that complies with the stringent requirements of the United Nations. The Government should frame rules for establishing training institutions for the merchant marine and to create a fund for such institutions under section 595 of the MSO.
The Government should without any delay constitute Maritime Advisory Committee by notification in the Official Gazette so that the representatives of ship owners and the representative of seamen may give advise to the Federal Government on better relations between ship owners and seamen representatives and other related matters. The Government should constitute a National Welfare Board under section 246 of the MSO
Availability of cargo for transportation by sea is also the most important factor for the registration of ships in a flag state country. Pakistan has cargo preference law. First preference is given to ships owned by Pakistan National Shipping Corporation (PNSC). PNSC owns old obsolete cargo vessels and cannot meet the 5% of import and export cargo of Pakistan. It has monopolistic right to import oil and petroleum products in Pakistan. It does not have a sufficient number of tankers.
The tankers that it owns are more than twenty years old single hulls and are to be scrapped or replaced by double hull built tankers by 2007. It is an admitted fact that cargo preference laws cost the government and the citizen of the flag state additional money. It is a hindrance in maintaining a strong merchant marine industry.
The cargo preference policy has to be changed. The PNSC should be kept on equal footing with that of the other ships registered in Pakistan. Let all the ships registered in Pakistan compete among themselves in the carriage of goods of Pakistan in international trade.
Such cargo preference law will not only get a strong fleet of merchant ships registered in Pakistan but it will also provide jobs to the Pakistan citizens as seafarers, ship management. It will provide the seafarers of Pakistan an opportunity to acquire modern knowledge of shipping.
The cost of goods transported will be reduced and it will in turn benefit not only the industries in reducing their cost of product but will also benefit the common man.
The income of the Government will also increase by way of taxes and fees that the ship registered in Pakistan will pay. The burden of payment of foreign exchange to the foreign ships for the carriage of import and export goods will also be saved.
Ship owners before registering their ships in a flag state consider efficiency administration and transparency. They also check whether the flag state has institutions to check maladministration and corruption in the shipping industry. Pakistan as a flag state and maritime nation has given no proper attention to check maladministration and corruption in the shipping industry.
The Tax Ombudsman office has proved a very effective institution to check maladministration and corruption in taxation. The Shipping Ombudsman law has to be legislated in line with tax ombudsman to check maladministration and corruption. Alternate Dispute resolution for resolving disputes between the concern a departments of shipping and the parties aggrieved is to be introduced through legislature.
Pakistan as a flag state in order to remain as a maritime labour supply country and to have more ships registered in its flag requires that the above be considered. The Government should make rules under the delegated power under the MSO without delay, skilled personnel must be appointed on permanent basis in the departments of Shipping.
Modern electronic media and a information technology is to be used in the ship registration office, Cargo preference laws should be amended allowing all the flag state registered ships to have a preference in cargo in Pakistan. Law should be made for the Seafarers Unions Shipping ombudsman and a law to eliminate maladministration and corruption in the shipping industry as a whole.
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