Baird Maritime editorial – September 2011
A short ferry ride south of Singapore lies the Indonesian island of Batam. What was once a sleepy tropical paradise in the fabled Riau Archipelago has become an increasingly bustling and prosperous shipbuilding and repair centre.
With rising costs and labour shortages handicapping Singapore, more and more of its heavy metal activity is being moved to welcoming Batam. There, land and labour are significantly cheaper. Very importantly, deep water frontage land and enthusiastic labour are still readily available.
Over the past twenty or so years I have visited Batam many times and have enthusiastically followed its development. My most recent visit in early August, however, was after an interval of about four years. The development in the intervening period was amazing.
Without a great deal in the way of road or port infrastructure, the development has been driven by human ingenuity and enthusiasm. This makes the dramatic progress all the more impressive.
Having seen many other shipbuilding "precincts" in both developing and developed countries, I have to say that Batam is easily one of the most impressive. A wide variety of shipbuilding and repairing companies including local Indonesian, Singaporean and from Dubai are conducting a wide range of activities.
On the building side vast numbers of tug and barge sets – each comprising one simple, twin-screw tug and two barges of 8,000 to 10,000DWT – are being churned out. They are supplemented by anything from small aluminium crew, patrol and ferry boats through modern AHTSs to FPSOs, drilling rigs, jackets and smallish cargo vessels.
The repair and re-building yards are being rapidly expanded and developed. Innovative new dry docks have been installed, quickly and at minimal cost. Practically any kind of repair and refurbishment can be carried out there. Obviously, prices must be reasonable as the whole place is buzzing.
It does the heart good to see such obviously profitable activity being carried out on such a large scale. It was also good to learn from subsequent discussions with naval architects and owners who have had work done there that, despite the pace of activity, they are generally satisfied with both the quality and value of the work.
Batam is an inspiring place and certainly well worth a visit and review by anyone contemplating building a smaller cargo vessel, tug, OSV, barge or a complex project for the offshore market.
Subsidy reductions to hurt Europe
The current financial turmoil in Europe will inevitably lead to a return to fiscal rectitude or at least reality. Europe's politicians will eventually realise that you cannot continue to spend what you haven't got. Common sense always beats socialism in the long run.
One of the inevitable results of this dawning reality will be savage cuts to unsustainable expenditures such as shipbuilding subsidies. Another likely victim will be the defence industry which also includes a lot of shipbuilding. Even if they have to be forced to behave rationally, finance ministries will realise that many nations have been spending obscene amounts of money quite irrationally on defence. Their cutbacks will be brutal.
Many "make work" schemes have created "sacred cows" from industries such as shipbuilding. The politically perceived view is often that losing the support of the workers in such industries will bring down governments. Well, the unreality of this approach is finally being realised. Subsidies only buy time, they are never a practical, long-term solution to problems of economic rationalism.
The fact is, though, that many European shipbuilders and marine equipment manufacturers will survive and even thrive without subsidy. In Britain, for example, some years after the almost total disappearance of its non-defence ship-and-boat building industry, we are seeing an encouraging resurgence. In fact, one company is even exporting aluminium catamarans to Australia!
As well as the mighty Damen Group which continues to power ahead globally, there are many other small to medium-sized European yards that remain internationally competitive. Through productivity, efficiency or internationalisation, or a combination of the three, they continue to sell vessels all over.
They will survive and, in all probability, flourish because they have rarely, or only insignificantly, sucked at the teat of subsidies. Even some of the subsidised yards will survive sans subsidy, if they are forced to.
Nevertheless, shipyards that are dependent on subsidy for up to fifty percent of their revenues should begin preparing for the inevitable.
Neil Baird
