(SWZ article) The Dutch Minimum Wage Act may in fact be a serious threat to the Dutch merchant fleet.
In his latest "Maritieme markt" column in SWZ|Maritime's February issue, editor-in-chief Antoon Oosting explains why. Read his full column (translated into English) below or download the Dutch version here.
As the largest maritime service provider in the Netherlands, Boskalis has long been ahead of the game and has placed its entire fleet under a non-Dutch flag (particularly Cyprus and Malta). Even though this may hurt a right-minded Dutchman's feelings, it is understandable nonetheless. After all, what if the Dutch government refuses to support you in something as important as safety, but instead requires you to abide by the Dutch Minimum Wage Act which make it impossible for you to compete internationally?
No Private Security
For almost ten years now, the Dutch shipowners' community has been waiting for the government's permission to allow private security to be taken on board its ships. Often no more than a few warning shots are enough to prevent pirates from hijacking the ship. Almost all other European seafaring nations allow this type of security, but a legislative proposal approved by the House of Representatives has been waiting for formal approval by the Senate for a year now.
Minimum Wage Act
While still grappling with the threat of piracy, the Dutch merchant fleet is already confronted with the next problem. This one is called the Minimum Wage Act (Wet op het Minimumloon) and the question is to what extent all seafarers on Dutch ships, in particular the non-officers, the so-called ratings such as cooks and sailors, must be paid according to this Dutch law. The minimum wage in the Netherlands is one of the highest in the world, but should this also apply to seafarers on Dutch ships who sometimes almost never call at a Dutch port?
International Minimum Wage
Incidentally, an international minimum wage for seafarers does exist. At the end of November, the International Transport Workers' Federation (ITF) and the International Chamber of Shipping (ICS), the world's largest shipowners' association, agreed on raising the minimum wage for seafarers by USD 27. This happened in Geneva at the Joint Maritime Commission Subcommittee on Seafarers Wages. This increase equals a 4.5 per cent raise over a period of three years compared to the current minimum wage of 614 USD. In the Netherlands and many other European countries, it is impossible to make a living from this, but in the countries of origin of many of the lower-skilled seafarers, such as the Philippines, Indonesia and Ukraine, this is a very decent income.
Fines for Struggling Dutch Ship Owners
Since last year, it has become clear that the Inspectorate of the Ministry of Social Affairs and Employment now fines shipowners that operate ships under the Dutch flag and do not pay their seafarers in accordance with the Dutch Minimum Wage Act. This has led to a great deal of commotion among Dutch shipowners, because in recent years, earnings in shipping have already been extremely poor.
Several shipping companies such as Flinter, Navigia and Abis Shipping went bankrupt because banks like ING completely withdrew their loans for shipping companies in multi-purpose shortsea shipping. Other shipping companies such as Koninklijke Wagenborg have been subjected to extra strict conditions for new financing. A shipowner like Vroon has to sell a large part of its fleet on the orders of its banks.
Many Greek shipowners, who can operate almost entirely tax-free in their own country, have become very rich in the past, but this has not been the case for Dutch shipowners in recent years.
Push to Switch Flags
In addition to the interest costs of investing in the construction of a ship, fuel and crew are the highest costs when operating a ship. When a Dutch shipowner is forced by the government to pay the Dutch minimum wage to all his personnel, this could well be the last push to switch flags for his ships and thus select a country where he does not have to fear overzealous civil servants.
Dutch Officers
Of course, the minimum wage for seafarers primarily applies to the lower-skilled positions on board. Officers receive a considerably better wage and a graduate of a Dutch nautical college earns one of the highest salaries of starting higher education graduates. And Dutch officers are still sought after by many shipowners because they are known to be well educated, reliable and less prone to indulge in alcohol than officers from some Eastern European countries in particular. Of course, it is wrong to generalise, but the captain and two helmsmen who parked their Wagenborg ship on a Swedish island against a lighthouse in February 2009 did come from Russia and Ukraine.
Breeding Ground for Maritime Jobs Ashore
Instead, it has proven rather difficult to find enough Dutch officers for the ships under the Dutch flag, because the supply is so limited and because Dutch people often only want to stay at sea for a few years and then prefer a well-paid job ashore. And Dutch officers are still in great demand for the many maritime jobs ashore. This means the Dutch merchant fleet is also a breeding ground for many maritime jobs ashore.
Flying the Dutch flag
All this could come to an end if Dutch shipowners choose different flags for the vessels that currently still fly the Dutch flag. At the moment, the Dutch fleet (vessels wholly or partly owned by the Netherlands) still comprises about 2000 vessels. As of 1 January, 1220 of these vessels fly the Dutch flag.
Incidentally, several dozen ships of foreign owners, particularly Swedish (including Thun), American (HAL) and German owners (such as BBC Chartering), also sail under the Dutch flag. These foreigners have opted for the Dutch flag because it is still regarded as a quality flag. Inspections on Dutch-flagged ships are relatively few and far between. This offers advantages, because it means that Dutch ships are inspected less often in ports and run less risk of incurring fines, or, worse, of being forced to remain in a port for prescribed necessary repairs or adjustments.
A condition, of course, is that as a shipowner you do everything you can to comply with the regulations. Crucial here is not only the quality of the crew, but also the shore organisation of the shipping company or management office. An example of a shipping office that apparently has its affairs in order is MF Shipping Group in Farmsum (near Delfzijl) that manages the fleet of the Swedish shipowner Erik Thun.
Economic Impact
However, the moment shipowners with Dutch-flagged vessels run into fines for "evading" the Dutch minimum wage, this can quickly come to an end. Why shouldn't these shipping companies follow Boskalis' example and bring their fleets under more shipowner-friendly flags? When that happens, it is no longer necessary to have Dutch officers on board and you can replace these "expensive ones" with cheaper officers from Southern and Eastern Europe, for example. Nautical schools in the Netherlands will then become redundant.
Moreover, shore personnel at the shipping company offices in the Netherlands will disappear to the new flag states. This will also remove all ties that many Dutch shipping companies still have with their Dutch suppliers, advisors, consultants and other maritime service providers and specialists.
What this means, is what many of the Dutch officers on the five Fairmount tugboats have recently experienced. When these were taken over by Boskalis, the crewing – the management of the crew – was outsourced to Anglo-Eastern Ship Management and the ships were brought under the flag of Malta, resulting in the majority of the Dutch officers to lose their jobs. The Dutch are being exchanged for Eastern Europeans and Asians, meaning you also do not need to seek your supplies in the Netherlands. The ships disappear from the Netherlands and lose all ties with this country. Because when a Dutch ship is brought under a foreign flag, part of the shipping office also has to move to the new flag state. And if personnel are recruited in the new flag state, all ties with the Netherlands are gone.
Maritime Cluster at Risk
Such a development is anything but imaginary. The Singapore Ambassador has already proposed to Boskalis CEO Berdowski to move the company's head office to the Asian island state in exchange for many facilities. A maritime superpower like Singapore has a lot to offer in the form of perfect government support in order to attract a world-famous maritime service provider such as Boskalis. This would be disastrous for the Dutch maritime cluster, because apart from the foreign flag on a large part of the fleet, Papendrecht is still Boskalis' home base with a large port for maintenance and equipment of the ships. Many of these dredgers are developed in cooperation with other Dutch companies.
Dutch Civil Service Decimated
Despite the fact that some foreign shipowners have placed their ships under the Dutch flag, critics note that the Dutch government has been neglecting the Dutch shipping register and the Dutch flag state for years. The civil service responsible for Dutch shipping has been decimated in recent decades. The issuing of crew certificates has been outsourced. In order to represent the Netherlands at the IMO, the Dutch government must rely on the knowledge of the KVNR and NMT. The services provided by the Dutch government to the shipping industry have now been eroded to such an extent that, as far as the KVNR is concerned, everything can now just as easily be privatised.
Flag states such as the Marshall Islands and Liberia show that it is perfectly possible to leave the supervision and representation of the interests of your merchant fleet to private companies.
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