Ideology of self-reliance for shipbuilding
In Russia, some officials are hatching an idea to ban the placement of large shipbuilding orders with foreign shipyards without the approval by an ad hoc government commission. Today, only an oral instruction of Dmitry Rogozin is effective.
Substitute, compete and win
Understandably, after the fall in oil prices and the introduction of international sanctions against Russia, the country's leadership embarked on import substitution policy in some sectors, including shipbuilding.
In his message to the Federal Assembly in December 2015, Russian President Vladimir Putin said that Russian companies should acquire abroad only "really unique equipment."
At a meeting of the Marine Board of the Russian Government in Sevastopol, April 1, 2016, Russian Deputy Prime Minister Dmitry Rogozin slammed the shipping companies that had placed orders for shipbuilding orders with foreign shipyards.
"The purchase of equipment abroad is possible only after obtaining the approval of the Government of the Russian Federation," Mr. Rogozin said then.
In the near future on behalf of the Russian Security Council, the Government can make changes to legislation to authorize that all marine equipment contracts worth over 1 billion rubles placed with foreign shipyards should be subject to approval by a government commission. "Actually, the import substitution commission should monitor any attempts to transfer some shipbuilding orders abroad", said the deputy head of the government.
However, Dmitry Rogozin didn't wait for introduction of these changes to the regulatory framework and has verbally forbidden to place such orders abroad. "I forbid you directly to transfer from the country lucrative shipbuilding orders. I'm not going to warn you again!", he stressed during the meeting of the Board. At the same time it was unclear what the legal force of the unofficial ban and whether it applies to orders of value less than 1 billion rubles.
The initiative of Dmitry Rogozin triggered anxiety among the country's shipping industry. Several sources of IAA PortNews from major market players have told IAA PortNews, the transfer of authority to take decisions on the placement of orders to some governmental structure can harm business operations of companies and reduce their competitiveness. To some extent, this is a step toward a planned economy, sources said.
Meanwhile, at the moment Russian shipyards do not have sufficient capacity for all purposes. For example large-tonnage shipbuilding complex in Bolshoy Kamen has not yet been put into operation and largest domestic shipyards are kept busy executing both military and civil orders. It would be good if they will cope with what awarded contract.
For example, the construction of diesel-electric icebreaker Viktor Chernomyrdin falls well behind schedule with delivery delayed for years. The vessel's superstructure was planned to be built in Germany at the facilities of Nodic Yards, but eventually it was decided to build it also at a yard of United Shipbuilding Company's (USC). Besides, Nodic Yards has been sold recently to an Asian company, because among others the Germany based group lost its hope to secure Russian shipbuilding orders. The new owner will reportedly use these shipyards for cruise fleet construction.
Another example: only Russian fishing companies have announced the need for the construction of a total of 364 fishing vessels, including 91 large-tonnage ones. These orders alone exceed the capacity of all Russian shipyards.
Furthermore, life does not stand still and while the legal framework has yet been updated, the above unwritten ban on placing orders with foreign shipyards leads to various mishaps and can disrupt the already announced tenders.
On the other hand, it's a good time for import substitution in the shipbuilding industry contributes as ruble depreciation, according to various estimates, has reduced the cost of ship construction at Russian enterprises versus USD slumped by 1.5 times.
The current global division of labor in the shipbuilding industry was evolving for decades, while the Russian shipyards after the collapse of the former Soviet Union have been running down for years. To catch up, it is urgent to conduct a large-scale modernization of existing facilities, enterprises and construction of new ones, restoration of qualified personnel, as well as adopting advanced foreign technology. It's hardly possible to solve these problems overnight. The best way to bring customers to Russia is to provide them with competitive bids on prices, quality and terms of execution of contracts. On the other hand, for all this shipbuilders will need to secure shipbuilding series. It turns out kind of vicious circle, and the government hope to solve the dilemma only by the administrative measures obliging Russian customers to go to domestic shipyards.
Vitaly Chernov.
