The shipping operations policy formally sets out the Bank’s strategy in this sector. Previous to the approval of the policy, there was a Shipping Guidelines document, approved by the Board in December 1994 (BDS 94-161). The shipping operations policy was approved by the EBRD board on 31 October 2001.
Since the early 1990s, the Bank has been active in financing the Shipping Sector and has been catalytic in introducing western financial institutions to shipping companies in the region. The Bank’s role continues to be relevant because many banks are still unable or reluctant to consider investing or providing long-term finance directly to companies operating in the region without the comfort and involvement of the Bank. This is demonstrated by the fact that out of a cumulative commitment to-date of Euro 664 million, assisting a total investment cost of Euro 1.19 billion, the Bank has mobilised more than 50% of its total financing, involving 22 commercial banks, in its co-financing efforts.
The Bank’s involvement has so far concentrated on debt financing for the acquisition and construction of various types of cargo vessels. The Bank will continue to finance deep-sea shipowners, including its existing clients, in their on-going efforts to modernise their fleets. However, the Bank will also seek to diversify its portfolio to finance the renewal of other types of vessels including passenger and river ships. The majority of the shipping fleet (including river vessels) in the region are in imminent need of replacement and this renewal process is critical for the sector if it is to maintain or improve its competitiveness, and eliminate sub-standard vessels in order to improve crew safety and address environmental concerns. All Bank financed shipping projects should comply with IMO standards for safety and protection of the environment and ships should be operated in open and commercial markets.
Although the Bank has reviewed several proposals from a number of shipyards, it has not completed any operations in this sub-sector to-date. The Bank is intensifying its efforts to develop appropriate structures for projects in the shipbuilding industry.
Besides acting as a catalyst in channelling long-term financing to the region, the Bank’s involvement will provide the opportunity to achieve its transition goals. For the Bank’s future operations in the Sector, the following transition objectives have been identified:
- Promotion of competitiveness through fleet renewal
- Promotion of privatisation and restructuring
- Transfer of technical know-how and management skills
- Promotion of good corporate governance and best business practice
- Promotion of safety and environmental consciousness
- Development of appropriate regulatory and legal framework
- Facilitation of regional trade
These objectives will be appropriately adapted depending on the transition stage of the relevant country. Russia, where most of the Bank’s existing shipping projects have been located, will continue to be an important country for the Bank's operations. However, in order to expand and diversify the country profile in this Sector a new focus is being developed in other countries of operation, notably in the Baltics, Caucasus and Caspian regions.
The Bank will face a considerable challenge in the river shipping sub-sector in which companies operate along many of the large inland waterways located in the region. This is because domestic legislation governing mortgagees’ rights in this sub-sector has still to be fully developed.
In shipbuilding, the Bank will continue to explore and structure projects that are not only sustainable, but also encourage the much needed and invariably difficult restructuring process. In shipbuilding, including conversion and repair, the Bank will not finance projects which receive state subsidies in excess of levels permitted under any applicable (EU, WTO and OECD) guidelines. In this sub-sector the Bank will seek to identify shipyards which have either benefited from strategic investors, have proven strong management or where the relevant national government has a clear commitment to the restructuring and privatisation of their shipbuilding activity.
The Bank is aware that this sub-sector is of significant social importance in many of its countries of operation and provides employment to a large workforce. Accordingly, any significant job loss and its concomitant social impact will have to be carefully considered and mitigation steps agreed with the relevant authorities.
The Bank recognises the challenges ahead, both in the Early and Intermediate Countries and the Advanced Countries and will be flexible in adapting its stated transition objectives. The Bank will build on its experiences, including lessons learned so far, in this highly complex sector and treat its transition goals as the platform from which the Bank's contribution to the transition of the Shipping and Shipbuilding Sectors can be further enhanced.
