Greece as a Shipping &

Transportation Hub

Presentation at CAPITAL LINK 14TH Annual Investor Forum – Greece “Building

a New Greece” – New York - November 29th, 2012

George A. Gratsos Ph.D.

President of Hellenic Chamber of Shipping

Greece is centrally located in the

Eastern Mediterranean

Greece is the EU frontier country with the longest coastline in a difficult neighborhood.

Its location gives it great possibilities for economic development.

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The crisis as an opportunity

Potential

Throughout our long history Greeks were known as a dynamic well educated

nation of risk takers and thinkers. We have a uniquely beautiful country in a great

location with millennia of history. Greece‟s topography and polynesia are great

advantages but also create inefficiencies.

Cause of present problems

Greek financial woes are the result of 38 years of misguided policies. Expanding

economic statism (ètatisme), protectionist policies and entitlements increased costs,

destroyed enterprise and productivity.

Example to emulate

Greek ocean going shipping is a world leader because it is cost competitive and

adaptable. It complies with international rules free from government intervention.

Greece has already legislated the necessary structural changes. We

expect immediate implementation.

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The Problems of an Incomplete Union

All of us have lived in Europe for millennia. We know each other inside out.

Greece is a frontier country. The cost of protecting a “Union‟s” borders should be shared equally.

Greece‟s per capita military expenditure is twice that of other EU nations (SIPRI). Our cost of dealing

with illegal immigration is higher. Many are getting a free ride at the expense of Greece.

Some in difficulties were forgiven, or reneged on, high debt burdens but demand their “pound of flesh”

from Greece. Others, profit from higher interest rates charged, pushing debtor countries down further.

Others still, use inappropriate methods to sell their overpriced goods. All this is disappointing. For the

EU to succeed, a level playing field and manifest solidarity must be ensured.

“Growth through Austerity” has failed miserably. Greece was forced to take hasty, Drakonian

actions reducing its GDP by ~16% in 3 years. This caused great unemployment, social unrest and

instability. More importantly it has caused “brain drain”. Many professionals have emigrated, handicapping

Greece but benefiting others.

Growth policies to reduce unemployment are urgently required for Greece to move forward.

The Europeans who emigrated to America put national egoisms and intransigence

behind them in order to create a viable Union. We should follow their example.

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Greece has always prospered when it

embraced the sea

Promoting its comparative advantages, Greece can once again prosper if it develops into:

• The maritime and financial center of the Eastern Mediterranean, attracting international business

• The recreational and boating playground of the European Union, attracting people from all over

the world

• The cruise ship home-porting hub of the Eastern Mediterranean

• The transport hub of Central and Eastern Europe

• A shipbuilding and ship-repair hub

The above create synergies and critical mass. The unstable situation in North

Africa and the Middle East helps.

All are possible with vision and well thought out efficient, stable,

business friendly legislation which will eliminate all present

disincentives.

In this way hundreds of thousand of competitive jobs would be crated and Greece could prosper.

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Greek shipping

Greeks control probably the biggest fleet in carrying capacity (tdw). It is also

the youngest. We have succeeded as cost efficient cross traders

providing competitive transport services for other peoples’ cargoes.

The average size of Greek controlled ships is about 63.500 tdw. The world‟s

average ship is about 24.600 tdw. The average size of world ships,

excluding Greek ships, is about 22.250 tdw.

Greek ships are on average 2.85 times bigger than the rest. It follows

that Greek shipping transports a major share of international, longer

distance trade.

The Greek fleet is considered a reliable, strategic partner for the

transport requirements of all major trading nations.

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19th century Greek shipping

In the 19th century Greeks were mostly merchants based outside Greece. These

merchants financed trusted captains to buy or build ships to service their trade.

By 1870 Greeks had about 5.000 sailing ships of all sizes.

At that time a number of inventions made trans oceanic steam driven shipping

economically viable. Valianos, the biggest merchant, financed about 20 newbuilding

cargo steamships which were built in England. Others financed more steamships.

Shareholding was greatly dispersed in the island communities, with some shareholders

having very small participation. The “Stock Exchange” was the local coffee shop. The

shipowners‟ greater families participated. This continues still today.

The “Global Village” has other “coffee shops”. Stock Exchanges are now formalized but

the concept remains the same. Trust.

Others will invest in your project if they feel you know what you are talking about

and consider that your project has merit.

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Greek newbuildings

Greek shipowners have always invested in new technology. In the past as well

as today.

From 1873 to 1900 the Greek beneficially controlled fleet transited from the sailing to

the steam era. During this period a total of about 200 steam ships were acquired by

Greek interests of which about 45% were newbuildings. They traded under

mainly Greek but also Russian and Turkish flags.

A total of about 200 newly built steamships were delivered to Greeks up to WW I.

After WWII Greeks ordered a very big number of newbuildings, the first of which was

delivered 1948. Greeks got delivery of 523 newbuildings from 1948-1960, 46 of

which, all tankers, were built in the U.S.A. The majority of Greek newbuildings

were built in Japan. A total of 1.265 Greek ships were built there until the end of the

last century.

Energy efficient ship designs are now being developed. Greek shipowners will

surely be interested in them.

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Greek Shipowning’s American

Connection

Many Greek shipowners migrated to New York and other American cities before

WWII to expand their business. U.S. bankers financed much of the Greek fleet.

Insurance company funding was used by Onassis and Niarchos.

The Liberian registry (based in New York) since its establishment was heavily

supported by Greek beneficially controlled ships. During the first two post war

decades until 1970 a total of 579 Greek owned newbuildings were registered

under the Liberian flag. The first ever ship registered under the Liberian flag

was the Niarchos controlled “World Peace” in 1949 which was built in the U.S.

From WWII to 1970 the American Bureau of Shipping (ABS) classed 561 Greek

newbuildings which helped establish it as a key-player. Many Liberty ships

acquired by Greek interests maintained their ABS classification. Today Greek

shipping represents about 26% of the fleet classed with ABS.

Now many Greek shipping companies are listed in American Stock Exchanges

and co-operate with American Capital Markets.

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Hull form is very important- A racing skiff does ~10 kn with 1 M-P

- A rowboat does ~2kn with 1 M-P

Slow speed engines and propellers“Propeller efficiency usually increases with

increasing diameter” … “A reduction of the

RPM tends to be beneficial” “Muntjewerft in

1983 mentions a possible increase of

propulsive efficiency of 10 to15 pct” (PNA-

1988)

In 1981 Burmeister & Wain produced their MKIII

65.000 tdw Panamax bulk carrier with improved

hull, engine and a slow turning 6.9 m diameter

propeller doing 82 RPM @75% MCR, thus

creating a very energy efficient ship.

Its consumption was about 25% less than other

ships built at the time. The ship had excellent

cubic capacity but was a little short on dwt.

THE TECHNOLOGIES HAVE BEEN KNOWN FOR A LONG TIME

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Shipping and the Greek economy

Greek shipping produces inflows of between €13 and €19 billion annually

to the Greek economy depending on market conditions. Ocean going

shipping represents about 7% of GDP. It also directly and indirectly

employs about 300.000 people.

Today there are about 720 shipowning/management firms operating out of

Greece employing about 12.000 people managing over 3.300 ships totaling

over 220 million tdw. Many ships of foreign ownership are also operated

out of Greece.

In view of the numbers and the diversity of ships, the available expertise in

the greater Athens area is second to no-ones. Many international service

providers, foreign banks, P+I Clubs, lawyers, brokers, Classification

Societies and others have regional offices in Greece. More will surely

come.

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Shipping related educationTechnical & Financial Education

The National Technical University of Athens (NTUA) has the largest Naval Architecture and Marine Engineering

(NAME) Department and related research facilities of any university in the European Union. It produces about 50

MSc graduates per year.

The Aegean University, the University of Piraeus, Alba, Deree and other colleges in total produce about 350 BSc and

MSc graduates per year educated in shipping related subjects.

Educating Ship officers

The BIMCO-ISF study of 2010 indicated a lack of 15.000 officers with increasing tendencies going forward.

Greek officers are among the best in the world and in high demand. The estimated officer shortage would create

good employment prospects for many more young Greeks in Greek or world shipping.

Because of extreme (58%) youth unemployment in Greece many young Greeks are seriously considering a sea

career. This year 4.900 applied to the Marine Academies. Due to space limitation only 1.161 were accepted. The

HCS estimates that throughout their approximately 35 year employment to retirement ship officers will earn about

€2.5 million each (average ~€58.000 PA). The total cost of a ship officer‟s education is about €20.000.

Creating more officers to cover the international shortage is beneficial to young

Greeks, the Greek maritime cluster and the Greek economy.

Because of its vast shipping expertise Greece is the prime location for maritime

education.

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Greek FerriesGreek ferries serve 1.566.000 islanders (except Euboea) or 14.2% of the population and 75% of the tourists visiting our

country.

The Greek ferry fleet is the most modern and has among the faster ships in Europe. Ferries:

-execute 2.9 billion PKM (passenger kilometers) per annum

-transport 570.000 busses/trucks and 1.600.000 cars every year

-are a valuable asset in civil emergencies i.e. evacuation of civilians from Libya, the Lebanon etc.

Vision: To make coastal passenger services cost effective

-Implementation of EU directive 3577/92 with no additional restrictions and alignment with the requirements of IMO SOLAS/STCW

regulations. Duration of employment should be adjusted to operational needs.

-Application of a uniform 6.5% VAT rate, as applicable to tourism on both passenger and cargo services, in view of the fact that

the island economies are mostly tourist driven.

-Adopt flexible company co-operation arrangements to meet island transport needs instead of obligatory ship scheduling.

-Ships must be able to adjust speeds and schedules with pre-advice.

HCS estimates that should these measures be applied, they will:

-reduce transport cost by about 30%

-generate additional turnover at the islands which in turn would provide greater total VAT receipts

-create about 100.000 new jobs

-will ensure the viability of the coastal ferries services sector

The Greek government recently passed a bill to create a modern framework for Passenger

Ferries.

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Cruise ships/Homeporting

After years of efforts by the HCS, legislation for cruise ships visiting

Greece is now compatible with European standards.

• Greece, because of its history, rich cultural heritage and the unique

Greek islands, is a prime tourist destination.

• When home-porting of cruise ships in Greece will be fully developed,

this industry will create about 11,500 new jobs and in excess of €1

billion additional revenue per annum to the Greek economy.

• Infrastructure must be upgraded to efficiently service a greater number

of cruise ships homeporting or calling at Greek ports. The purpose is to

better tend to the passengers‟ schedules and needs.

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Yachting

The Greek Archipelago with about 16.000 km of coastline, 1.200 islands and 4.800 islets is the world‟s

best cruising ground.

Greece hosts only about 17.700 pleasure boats of all types and flags, of which about 8.000 are over

12 m. This number includes about 3.500 yachts for charter of which about 500 are manned. The

number of yachts per capita is about 25% that of the E.U. average because of unfriendly legislation.

The HCS is proposing the necessary changes to attract more yachts to Greece.

Yachting in Greece directly and indirectly creates about 40.000 jobs.

Greece has safe, modern marinas with all the required facilities for berthing and off season stay. More

should be built.

Because of its location and unique archipelago, Greece can become the recreational and

boating playground of the European Union attracting people from all over the world who enjoy

this.

With a friendly and safe environment and an enlarged marina capacity to host 10.000 more,

preferably larger, yachts Greece could create a further 30.000 jobs, possibly more.

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Time is money

“Time as a Trade Barrier” by Hummels and Schaur – January 2012

estimates that a one day delay in delivery of a shipment increases the

cost of goods transported by between 0.6% to 2.3%.

For cargo to and from the Far East with destination Eastern Europe, Piraeus

reduces transport time by 4 days or more. This is mainly due to Greece‟s

geographical protrusion in the Mediterranean.

The HCS has been pushing the concept for years. COSCO realized the

benefits few years ago and invested in Greece. Others will follow.

In 3 years the COSCO Piraeus Container Terminal has trebled throughput

while upgrading the terminal. As more companies appreciate the logistic

benefits of Piraeus, container throughput will increase further. The recent

agreement between COSCO, Hewlett Packard and the Greek Railways

shows the way.

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Greece as Central-Eastern Europe’s

transport hubAn efficient railway system linking Greek ports with the European merchant rail system, presently

being completed, could provide faster service between the Far East and Central/Eastern Europe.

Examples:

Shanghai to Budapest, Hungary: Via Piraeus about 23 days

Via Trieste about 28 days

Via Hamburg about 35 days

Shanghai to Warsaw, Poland: Via Piraeus about 24 days

Via Trieste about 28 days

Via Gdansk about 36 days

Via Hamburg about 35 days

Shanghai to Bucharest, Romania: Via Piraeus about 24 days

Via Trieste about 28 days

Via Constanta about 30 days

Greek ports appear to be the natural getaways to/from Central-Eastern European locations and the Far

East by means of an efficient railway system. They could also be a transhipment hub for Black Sea

destinations and the Eastern Mediterranean with feeder vessels.

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Shipbuilding and ship repairs

Greece has four shipyards and extensive repair facilities. Most bigger units

were established by Greek shipowners:-Hellenic Shipyards by Niarchos in 1956 which built 55 cargo ships until its sale to the State in 1985

-Eleusis Shipyards by Andreadis in the mid „60s which built 5 cargo ships until 1975

-Neorion Shipyards by N.J.Goulandris in 1970 which was sold in 1978

-Chalkis Shipyards by J.C. Carras in early „70s which modified 2 ships into cruise ships and was

sold in the „80s

-The Salamis Repair Base by Chandris in the „60s which modified 85 ships into cruise ships

Greek technicians and craftsmen are world class:-after World War II they modified over 200 cargo ships and tankers into ferry boats and cruise ships

-when Chandris contracted to modify the “Galileo” at Meyer Werft he dispatched 500 Greek

craftsmen and technicians to assist

-Greek passenger and cruise ships built in Europe subcontracted substantial work to Greek companies

Now Greek repair facilities are underutilized by the commercial fleet for lack of competitiveness, despite

a good, dry climate and a central position in the Mediterranean shipping lanes.

All this technical potential is being wasted through misguided policies and

union actions since 1974. We must try to re-establish Greece’s importance

in this sector. If other EU countries can build ships, so could we.

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The Greek Maritime economy has

tremendous possibilities

All it needs is farsighted, business

friendly regulations

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Thank you

George A. Gratsos