January 21, 2010

Beyond body shopping

I left an Indian shipping firm for a foreign one in 1981 and never worked on an Indian ship again. At the time I left, there were just one or two fledgling manning agents in then Bombay whom I chose to ignore for my own reasons. The profession was almost unknown; few folk in the rest of the country, including cities like Delhi, a big centre in the ship manning business today, had even heard of the merchant navy.

It wasn't easy. In a time of prohibitive international phone call rates and no emails, looking for a job abroad involved posting many laboriously typed letters- cold- to addresses found with great difficulty. Not all that many employed Indians, although the market was opening up. Most did not even bother to reply. I was lucky to get a break; the German ship I eventually landed up on had to suddenly sign off the Chief and 2nd Mates at the same time and so I was in the right place at the right time, for once. This, as it turned out later, was around the beginning of the recession, and I was lucky again, being one of the few who had 'foreign company' experience when I had to look for another job a year and a half later.

Incidentally, I was hardly the only Indian who left an Indian setup just after my first ticket, but we were a minority. Today many of us claim, with some pride and justification, that we were amongst those that contributed to the breaking of the glass ceiling on foreign flags; many started employing Indians when they employed us. But this is just part of the story; there were other reasons we can hardly take credit for. We must realise that the very same reasons that worked for us work against Indians today, and we must therefore recognise the threat to our present ship manning enterprises before it is too late.

What also happened at that time was this: Firstly, shipowners from developed countries flagged out many ships to 'FOC's' to save taxes and crewing costs, besides for the more relaxed Flag State regulation and control. Meanwhile, the merchant navy was not a favoured career choice for many of their citizens, what with salaries ashore being lucrative (in well paying jobs anyway, but also in others) and that too without a sailor's hardships. The few who did come out to sea from developed countries left within a decade or so. This cycle fed itself: lower salaries attracted the youth of these countries less and less; people of higher academic calibre obviously ignored the profession; Flagged out ships meant owners could now look for crews from elsewhere who were cheaper anyway; and so opportunities at sea for the citizens of developed countries started drying up. Incidentally, this process continues even today, with Maersk looking for up to 280 'voluntary' officer redundancies from the UK and Denmark two months ago. The company wants to replace these seafarers with cheaper Asian crews.

In India, on the other hand, the career, as well as the foreign salary package, was very lucrative; shore opportunities were fewer and paid much less. This attracted people of much higher academic calibre; equally importantly, the culture and the economics of the time dictated that most of these (us) seamen intended to make the merchant navy a long term career choice.

It was no contest, really. Lower calibre and dissatisfied seafarers from developed countries could hardly compete with hungry and higher calibre seafarers from India; their pie was shrinking and the Indian cake expanding.

The battleground threatens to invert on its head today. Although we claim to account for 6% of the global seagoing workforce, the long term commitment of most new entrants is in doubt. The reasons are the same ones that grew Indian seafaring, but the shoe is on the other foot now. Salaries are high ashore in India, and comparable (in good jobs, but many others too, after a few years). Sailor hardships have actually increased; onboard facilities and working conditions have not kept pace with time, and in some cases have regressed. With the dollar under long term and international pressure, there is no huge foreign exchange advantage now (The rupee was less than eight rupees in the late seventies when I came out to sea. It went up six times during my seagoing life). Global tonnage may be on a long term uptrend, present overcapacity issues notwithstanding, but Indians are struggling to maintain present manpower market share. Seems to me a matter of time before the scales tip decisively against us, as they did for the Europeans, the North Americans, the Japanese and some others not all that long ago.

In addition, we have one unique disadvantage: China, and on many counts. Firstly, it is a country with population demographics high enough to compete directly for marine jobs with Indians. Secondly, its own tonnage (for which it will hardly need foreign seafarers) is slated to explode as it marches with inexorable certainty to 'next economic superpower' status. Thirdly and critically, it is antagonistic to India and has a direct conflict of interest with us when it comes to a projection of its maritime strength. The strength of the merchant navy is likely to be a strategic pawn in that great game; successive Indian governments may be doing a huge disservice to the nation by continuing to be slothful about this country's tonnage. Ignoring this issue will not make it go away.

But it is not just China. Six percent of the global seagoing workforce is a large number but still one that can be whittled down reasonably easily. A few African countries with decent education systems can halve this within a decade. Then, countries like Bangladesh have not really exported officers to the extent possible, and the Philippines is a dark horse: it should be possible, given their English language advantage, for them to upgrade the quality of their officers without huge difficulty.

Be that as it may, I don't see Indian seafaring numbers going up substantially in proportion to increasing global tonnage. We might find maintaining the six percent figure an uphill task in itself, although I am sure many of us will find creative ways of trying to make the industry attractive to a higher calibre and more committed bunch of new entrants compared to the ones on display today. Even if we do that, though, I wonder how many of the new entrants will be around a decade from today in the industry. If they are elsewhere, who will staff the offices ashore? MBA graduates with little idea of the complexities of seafaring? Heaven forbid.

I must say that though reducing manning market share will create inevitable upheavals in the industry, I do not see this as the biggest issue: It is a natural consequence of a country's overall prosperity. A bigger problem that I think we face can be summarised by looking at some of the same countries whose nationals we displaced on ships, and who grew the industry in their nations in many simultaneous directions regardless. That India has not moved up the maritime value chain is a reflection of the state of the industry as a whole: we have no equipment manufacturers worth the name, no global insurance or reinsurance presence worth talking about, no large international level marine consultancy firms or maritime legal companies and no high end research facilities of any kind. This is an endless list. We are low down the food chain, which means we can be gobbled up or replaced that much easier.

Our expertise seems to end at the lower levels of data entry and the management of ships. And that, frankly, is as simply handled anywhere by finding a few good people and some decent infrastructure. Given that, I can probably set up a ship management company in a week anywhere in the world if I have that, so why should I choose India if she cannot provide me the appropriate people in required numbers, either afloat or ashore?

Our comparative advantage lay in the mariners we produced; that quality has dwindled and will inevitably be under increasing pressure as India progresses economically. It is perhaps too late to increase our mariner market share substantially, but there may still be time for the industry to ascend the value chain; as we proved to the world when it came to working on ships, we have the brains and the will to do so. We could very well give European countries a run for their money.

What we do not have, thus far, is either commitment or appropriate leadership; what we require is a calibre of professionals with unblinkered and forward thinking vision; what we need is to transmigrate up the chain to services and research that will sustain our industry beyond the perhaps inevitable reduction in the manning business. There is far more to shipping than just body shopping.