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FINANCIAL TIMES-World Reports / Cyprus 2002,OCTOBER 9, 2002
2002-10-09 23:49:50

Shipping industry: Reforms are advancing steadily
By Gillian Whittaker and Yiota Gousas
Published: October 9 2002
Cyprus has made good progress with cleaning up its shipping industry, although it will miss a deadline of December 31, set by the European Commission for full compliance with EU shipping regulations.

From small beginnings in the early 1980s the Cyprus flag became one of the most active open registers in the world, allowing owners from other countries to register their ships in Cyprus through brass plate companies.

Cyprus has the world's sixth largest fleet with 1,500 merchant ships amounting to gross tonnage of 25 million flying the island's flag. But the number of Cyprus-registered ships has fallen as the registration of yachts and very small vessels that were the registry's starting point was encouraged to dwindle.

Cyprus rejects the "flag of convenience" label, but it has stuck, because of the very small number of Cypriot or Cyprus-based shipowners. However, the prospect of EU entry in the first wave of enlargement has served as a catalyst for reform.

The Department of Merchant Shipping (DMS), based in Limassol, has worked under pressure to improve the image and track record of the Cyprus registry.

The government has pushed through parliament as many as 19 laws and seven regulations in the past five years, to improve the standards of ships flying the Cypriot flag. These reforms are starting to bear fruit.

The rate of detentions imposed on Cyprus-flag vessels by port state control authorities has fallen below the average for ships detained in European ports.

According to recent statistics from the Paris Memorandum of Understanding for port state control, the detention rate for Cyprus-flag vessels in 2001 was 8.85 per cent against an average of 9.09 per cent for all flags.

Cyprus is now fourth from bottom on the blacklist issued by the Paris MOU group, an umbrella for 19 maritime administrations covering the waters of the European coastal States and the North Atlantic basin from North America to Europe.

However, Willem de Ruiter, head of EU Commisions's Marine Safety Unit, says: "The below-average detention rate of the flag does not mean it is white- listed by the Paris MOU."

In all, 4,100 Cyprus-flag ships were inspected in foreign ports between 1999 and 2001, of which 397 were detained. A detention figure of 319 vessels would have enabled the country to slip off the blacklist.

Serghios Serghiou, head of the DMS, says: "There has also been a decreasing trend of detentions in US ports, while the Cyprus flag has been removed from the Tokyo MOU target list for inspections."

Efforts to improve the Cyprus register's track record have included additional auditing, as well as an increase in the number of ship inspectors based in foreign ports. Thirty-two inspectors are based in 23 ports covering 13 countries.

The aim of the DMS is to increase the number of inspectors until 40 ports are covered. A poor safety record, together with the DMS's failure to make public the results of accident investigation results, were seen as indicators that the Cyprus register served as a haven for substandard ships. The failure of the Cyprus maritime administration to keep pace with rapid growth in the register also damaged its reputation. As part of the reform effort, additional surveyors, as well as legal and administrative staff have been appointed.

Several serious casualties, involving loss of life, further undermined the reputation of the Cyprus flag. In 1997, two small bulk carriers sank within a 10-day period, claiming a total of 45 lives.

The most recent major casualty suffered by a Cyprus flag vessel was the sinking in December 2001 of the 183,000-tonne bulk carrier Christopher which went down with all hands, with the loss of 27 lives.

Cyprus has issued tougher instructions to the international classification societies, the independent surveying bodies that carry out inspections of ships, while the register has cracked down on vessels it considers are not up to the required standards.

Mr Serghiou says the registrations of 10 general cargo ships have been revoked in the last four years. However, the Cyprus authorities prefer to avoid this practice for active ships and take a more diplomatic approach.

Two years ago, the register issued an internal target list calling for enhanced inspections of 103 handy-size bulk carriers (ranging between 20,000 and 35,000 dwt) which were over 23 years old. Mr Serghiou says 56 of these vessels were deleted from the register, with most owners opting for a voluntary exit when faced with the costs of compliance with Cypriot legislation.

"Many of the owners, of course, would protest that they withdrew for different reasons," he says. An Athens-based shipping company recently decided to remove its vessels from the Cyprus flag, two years after its safety management certificate was revoked by the registry. Averoff Neophytou, communications minister, says: "Not many countries delete ships from their registries, but we do."

While a decline in the number of ship registrations combined with additional costs involved in a larger administration may reduce revenues from the shipping industry, Cyprus can demonstrate the increasing maturity of its flag as the industry becomes more strictly regulated.

Gillian Whittaker and Yiota Gousas are correspondents in Greece for TradeWinds, the international shipping newspaper.

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