Industry Analysis: Philippines maritime manning industry

The Philippine Maritime Manning Industry

An Industry Analysis Submitted to the Faculty of the Graduate School of the University of Santo Tomas

In Partial Fulfillment of the Requirement for the Subject Strategic Management

Submitted by: Baby Nina Alfonso Lorraine Aquino Kristel Lynn Garcia Jeffrey Julian Jeanelyn Lulu Estrella Que Sherwin Rafael Amy Sablaon

December 2016

The Philippine Maritime Manning Industry

Maritime transport is the most efficient and cost effective method of transportation either domestically or internationally. Around 80% of global trade by volume and over 70% by value is carried by sea, as per the UNCTAD estimate. Because of the high percentage of domestic and international commerce, travel and tourism are by air and sea, the aviation and maritime transportation has become increasingly critical to growth and competitiveness. The maritime industry is a vital component in attaining growth to the Philippine’s socio-economic growth. Per the NTPP study estimate, in 2006, the predominant mode of transport is by road carrying about 1.71 billion passengers (93.14 %) and 25.9 million tons of freight (58 %), with water transport at 1.22 % and 42 %, respectively. In 2012, domestic shipping posted 74 million tons of cargoes and 50 million passengers. Seafarer’s remittances US$4.8 billion also contributed to the Philippine economy.

90% of the volume of the trade in the Philippines is carried at sea. There are around 30% compromised Filipino seafarers of the ships manned by Seafarers worldwide. 400,000 Filipino seafarers deployed annually with a ratio of 1 out of 5 seamen in the world are Filipino. From 1996, there were 250,000 Filipino seafarers. Wiith the growth rate of 84% after 17 years, last 2013 total of 400,000 Filipino seafarers.

Analysis of Societal Environment Socio-Cultural Variables Many of the Filipino seafarers try their luck in the maritime industry to uphold the life of their families. Their main objective in working in the maritime industry is to support the family’s living expenses and secure their children’s future. Being a family-oriented man is one of the Filipino culture that affects the seafarers and inspire them to support the family needs. It has been perceived that social and economic factors made the maritime nations to shift from their oldfashioned manning and organizational practices in ship operations. The, the main way out was new changes in keeping an eye on and working practices in zones of motor rooms automation and consolidation of exchange aptitudes in appraisals. To enhance the personal satisfaction adrift, measures were actualized to allow families to be ready on development toward changeless and legally binding work of sailors and endeavors to support group permanency through longer-term vessel venture. The provisions of a good social atmosphere on board ships like locating engaging and other shared spaces midway, making the lodges more attractive, and putting officers' lodge halfway, the withdrawal of office and living spaces could give the groups a feeling of spatial and passionate division from their work when taking a break. All with the point of enhancing the nature of nautical life amid off-hours in this manner lessening dejection and fatigue in this manner increment efficiency, wellbeing, and confidence. Political-Legal Variables The Philippine maritime manning industry is governed by domestic and international body: The Maritime Industry Authority (MARINA) - made on 01 June 1974 in accordance with PD No. 474, also called the Maritime Industry Decree of 1974, to incorporate the development, progression and control of the sea business in the nation. Determined to viably deal with an incorporated and supportable oceanic industry, the MARINA the Philippine registry requires: 60%-40% outside value interest; 100% Filipino team and physical nearness of candidates to ensure the livelihood of Filipino seafarers. They also regulated the following: 1. Comply/implement international obligations relating to the human element of shipping under various conventions, protocols and codes (e.g., IMO, ILO) 2. Shipboard Training for Graduates of Recognized Maritime Programs

The International Maritime Organization (IMO) – Is the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships. The International Maritime Organization (IMO), known as the Inter-Governmental Maritime Consultative Organization (IMCO) until 1982 was established in Geneva in 1948 and came into force ten years later, meeting for the first time in 1959.

Headquartered in London, United Kingdom, the IMO is a specialised agency of the United Nations with 171 Member States and three Associate Members.[3] The IMO's primary purpose is to develop and maintain a comprehensive regulatory framework for shipping and its remit today includes safety, environmental concerns, legal matters, technical co-operation, maritime security and the efficiency of shipping. IMO is governed by an Assembly of members and is financially administered by a Council of members elected from the Assembly. The work of IMO is conducted through five committees and these are supported by technical subcommittees. Member organisations of the UN organizational family may observe the proceedings of the IMO. Observer status is granted to qualified non-governmental organisations. IMO is supported by a permanent secretariat of employees who are representative of its members. The secretariat is composed of a Secretary-General who is periodically elected by the Assembly, and various divisions such as those for marine safety, environmental protection, and a conference section. IMO is the source of approximately 60 legal instruments that guide the regulatory development of its member states to improve safety at sea, facilitate trade among seafaring states and protect the maritime environment. The most well-known is the International Convention for the Safety of Life at Sea (SOLAS), as well as International Convention on Oil Pollution Preparedness, Response and Co-operation (OPRC). Others include the International Oil Pollution Compensation Funds. It also functions as a depository of yet to be ratified treaties, such as the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996 (HNS Convention) and Nairobi International Convention of Removal of Wrecks (2007). IMO regularly enacts regulations, which are broadly enforced by national and local maritime authorities in member countries, such as the International Regulations for Preventing Collisions at Sea (COLREG). The IMO has also enacted a Port State Control (PSC) authority, allowing domestic maritime authorities such as coast guards to inspect foreign-flag ships calling at ports of the many port states. Memoranda of Understanding (protocols) were signed by some countries unifying Port State Control procedures among the signatories. On the other hand, the International Labor Organization was created in 1919 to drive social equity and add to the arrangement of general and enduring peace through the advancement of social and financial prosperity of the seafarers by respectable expectations for everyday comforts, appropriate states of work and pay, and satisfactory business openings. The principle exercises of the ILO are: 1. Formulation of a universal plan to enhance working and living conditions, upgrade business openings, and advance seafarers' rights; 2. Creation of universal work benchmarks for national powers to apply in putting this convention to activity 3. Implementation of a program of universal specialized collaboration 4. Use of training education, research and publishing activities to help advance all these efforts. International Labor Organization convention concerning the recruitment and placement of seafarers

Article 2 of the ILO empowers the member state to enact a national policy for the operation of a free public recruitment and placement service to meet the needs of the seafarers and ship owners, however, this can be worked but the Government of private associations. The

following are the measures that are given by the ILO: 

Measures ought to set up to keep away from undue expansion of private recruitment and arrangement of benefits. The convention further authorizes states to apply laws and regulations to ships flying her flag on matters of recruitment and placement of seafarers.

  

Absolute right of seafarers to practice their essential human rights including creation of labor union The state must determine the conditions took into account the enrollment and situation associations to place or select seafarers abroad, with accentuation ideal to security and confidentiality All recruitment and placement services bodies must ensure that any seafarer recruited or placed by them is qualified and holds the appropriate document, documented contract of employment and agreement in line with the applicable laws, regulations and collective agreements, and all aspects of their rights and duties must be clearly described.

GUIDELINES FOR INTERNATIONAL COMPLIANCE The ILO mandated all manning services and placement services to adhere to the following:  New Seafarer’s Hours of Works and the Manning of Ships Conventions, 1996 – establishes specific daily and weekly limitations on hours of work, or, conversely, daily or weekly minimum rest periods for seafarers with the aim of preventing fatigue associated with excessive work  Protocol to the Merchant Shipping (Minimum Standards) Conventions, 1976, (No. 147)  United Nations Convention on the Law of the Sea (UNCLOS) refers to the duties of flag States to ensure safety at sea with regard to labor standards.

Economic Variables The creation of an international market for the maritime labor paved the way to the rise of the Philippine maritime manning industry. The industry is directly affected by the economic status of the country where the ship-owners and vessel companies reside. The economic situation forced some of the ship operating companies to adopt cost-cutting measures by crewing their ships with national from low wage, developing nations, while others reduced the number of their shore side personnel. In addition automation on board ships and other advanced technologies in ship design aimed at labor savings were used. Unfortunately, unions in all the affected countries had no option than to cooperate with the shipping companies to preserve some jobs. Technological Variables

Recent record shows that Philippines is the largest supplier of seafarers in the world. (Marina, 2014). The country has about 475,000 registered seamen, out of which 200,000 are employed in foreign ships. The rest are either with the domestic fleet of are awaiting employment So as to meet the required principles of STCW 95 tradition, the nation has established measures to enhance the oceanic organization and arrangement of preparing and accreditation. This incorporate the conclusion of substandard schools and training centers, while existing ones are upgraded with modern facilities and equipment and the curriculum created in accordance with the SCTW 95 norms. The capacity of Filipinos to speak good English language, their fondness for the ocean, their capacity to function excellently with different nationalities show a high level of loyalty to their employers places them at advantage over other nationalities. To improve the competitiveness of Filipino seafarers, the Government through the local crewing industry has now revised the standard seafarers contract to discourage the filing of tort claims overseas. In addition, the crewing industry is funding government project of establishing an integrated e-documentation system, as well as one-stop documentation centers to reduce bureaucratic red tape and irregularities.

Task Environment The development of the Philippine Maritime Industry ties up to national economic growth in terms of investment opportunities, employment/job creation, industrial development, increased government revenues, among others, as well as the enhanced role and image of the Philippines in the international maritime community. Growth in the maritime industry links up to the increasing demand in manpower. There are 408 valid POEA licensed recruitment Maritime Manning companies in the Philippines as of 2014.

Industry services Maritime Manning Industry typically offers certified and experienced personnel to number of companies operating to vessels, ship owner, or charter; whether nautical, technical, hotel and catering management services. Company gives training and education to aspiring employees. Aside from recruitment, Maritime Manning Industry also offers high-quality management and corporate solutions, new building management and ship management.

Competitive Environment Stakeholder

Major Players 1. Magsaysay MOL Maritime, Inc Established in the Philippines in 1948. Initially providing Filipino seafarers to just 57 vessels in June 1997, Magsaysay MOL today deploys more than 4,000 seafarers to 176 MOL vessels, serving the crew management needs of its 10 MOL Principals located in Japan, Hongkong, Singapore, Oman and Netherlands. The company aims to man 200 vessels and target to build a solid pool of more than 5,000 seafarers. 2. CF Sharp Crew Management, Inc. The C.F. SHARP GROUP was established in 1937. In the 1960’s, Don Antonio V. Rocha bought out the interests of Mr. Chester F. Sharp and the Company became a 100% Filipino owned corporation. A decade later Don Antonio retired and turned over the day to day management of the Group to his sons. Today, the C.F. SHARP GROUP has expanded from its original business of Liner and Husbanding Agencies, to being a leader in the fields of Crewing, Travel, Freight Forwarding, Brokerage, Air Cargo, Airline GSA, Land-based Recruiting and Training.

3. OSM Maritime Service Inc. OSM is established in Arendal, Norway, by Bjørn Tore Larsen together with partners and friends Jan Morten Eskilt, Jan Ove Dalsøren and Erling Bjørn Wik in the year 1989.In 1991 OSM wins its first crew-management contract. OSM’s first vessel under full management joins the fleet last 1994. In the year 2003, OSM acquires shuttle-tanker and offshore-rig operator Rasmussen Maritime Services. Today, the company employs more than 10,000 skilled and motivated employees from around 30 nations who are dedicated to serving a significant number of customers worldwide. Supply: Filipino Seafarers are the most in demand in the world With the Filipino’s quality of flexibility, reliability, hard work, command in English language and technical training and experiences; the Philippines is the world’s manning capital in the maritime industry. Out of 1.2 million mariners in the world, 30% are Filipino seafarers. According to Philippine Overseas Employment Administration (POEA), Philippines is the top supplier of maritime officers in the world. Ship owners prefer Filipinos seafarers because they tend to stay in the profession with an average of 5-10 years and it would be more cost efficient on the company. Worldwide, there is a deficit of 16,500 officers which is projected to increase to 92,000 by 2020. The supply - demand indicates steady supply of officers except for few positions such as Engineer Officer- Management Level and officers for specialized ships such as LPG, LNG carriers and chemical tankers.

Strategic Key Issues Training Academy Key component is the training and development of the seafarers. Different accredited agencies provides training like Basic Training, Proficiency in Survival Craft and Rescue Boat, Fire Fighting, Medical First Aid, Medical Care, Ship Security Awareness Training and Seafarers with Designated Security Duties and other technical training specific on the job. MARINA issues certificate of proficiency to the accomplished training as a requirement.

Maritime Manning Agency provide additional skills training aside from the mandated training by Marina. This is to ensure competitive advantage and to meet the client's expectations and standard procedures. Specialized training such as Deck Courses, Dynamic Positioning, Engine Room Training, Soft Skills, CBT Training and others.

Partnership Academy providers of highly technical graduates such as culinary school, front office, maritime services, etc. create partnership with maritime manning agencies. This strategy would give both parties to attract the right people to the right job by academy providers teaching technical skills to the possible employees of the maritime agency.

SWOT Analysis Strengths: The Philippines as a quality and strong sovereign flag of choice; global request for Filipino maritime personnel. The new nations for recruitment has over years spent much effort also to educate and certify higher officers. Officers are now recruited to international ships both from Eastern Europe, India and the Philippines. Tradition of quality personnel; well-educated and experienced officers Sustained development of globally-competitive maritime manpower

Weaknesses: Limited cooperation between crewing agencies and ship operators makes it difficult to plan for long term employment and career development for the individual seafarer. Today seafarers are experiencing some difficulties in their line of work. There is no possibility for any kind of career planning and implementation of long term contracts. For the time being most of the seafarers are not employed on long term base. The timeline of the employment contract and career development is normally a part of the contract only for key personnel like top officers and not for ratings that have ambitions to build a seafarer career. Opportunities:

Existing training institutions and services have an opportunity by internationalization of their market and recruitment arena for students. The request for longer term employment, social security, and career development might be a good opportunity to develop a new type of sustainable crewing agency. Such functionality will also request further development of education and training facilities. With increasing unemployment in the provinces, an international naval career could be promoted more strongly. Threats: Most ship operators want to carry on recruitment in an opportunistic manner and not take responsibility for longer term cooperation for education of new officer candidates. The term “salary” varies a lot. Crew cost (salaries, insurance, etc.) are different from company to company and very connected with nationality of a seafarer, for example: Commanders’ wages can be from 6000 to 25000 USD per month when onboard and nothing when on leave. Possibility for a longer term employment is that same salary can be divided during the whole year in order to have salary every month. The salary will depend on where the seafarer comes from (Scandinavians, Croatia, Philippines, Vietnam, etc) for the same position. In addition the salaries are dependent on workmanship and quality of work. Because of international competition the salaries as discussed above varies a lot and are related to market mechanisms like supply/demand, qualifications and expertise, and experience of the seafarer. Selected Financial Accounts (2013) (we can try to ask sherwin for info)

Please note: Let us keep all the references that we have and data from 1996 to 2013 only. Also we need to finish the draft document within this week so we can ask sherwin to double check.

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