Turkish Shipbuilder’s Association Chairman Murat Kıran: We should take the lead in building new shipyards in the Mediterranean

MDN İstanbul

Murat Kıran

GISBIR Chairman Kıran has evaluated the past year for the industry and shared his future expectations exclusively with MarineDeal News readers

The importance of the shipbuilding industry in Turkey is indisputable. Could you briefly assess the year 2017 in figures?
2017 has been a very busy year. At GISBIR, we have made efforts to explain the achievements of our industry, our people and the gains the industry has made over the short-term and the long-term to both state representatives and the public at various platforms. We have demonstrated the importance of the shipbuilding industry for the country’s economy and defense industry and in the international flag-race, both in terms of figures, and in terms of the entirely national and domestic projects we have carried out. By identifying the fundamental problems of the Turkish shipbuilding industry and preparing action plans, we have been able to solve the problems that have been going on for many years by tackling these issues one by one, holding meetings, arranging various visits and putting serious efforts into solving them. On 9 November 2016, we became a member of the Active Shipbuilding Experts Federation (ASEF), which includes some of the world’s leading shipbuilding nations such as China, Japan and South Korea. Thanks to our membership, we gained the ability to closely monitor the developments in the Asian shipbuilding industry as an active actor. ASEF membership has also increased the visibility and awareness of GISBIR both at IMO and international platforms.

Moreover, we have become a member of Sea Europe (European Ships and Maritime Equipment Association), a significant actor in the European shipbuilding industry. This will enable us to have close contact and to exchange information with sectoral organizations and equipment sellers of Europe, and to strengthen our sector through international collaborations by increasing our recognition in Europe just like in Asia.

Ship and Yacht Construction industry exports stand at $1.34 billion. This figure does not include the foreign currency income arising from maintenance and repair activities of approximately $600 million per year. It doesn’t include the savings made on the military vessels we built domestically rather than buying them abroad as we used to do in the past.  However, official export figures do include revenues in foreign currency from second-hand sales of vessels that we have. We are still lagging behind the exports volume of US $ 2.65 billion, which we had reached in the pre-crisis period.

Do you expect to see improvements in 2018 after a long time?
Let’s take a look at the problems we wanted to solve. These were tackling the decrease in demand for new shipbuilding due to the global crisis, the financing problem that emerged under heavy competition and additionally and  Turkey being negatively impacted by the adverse developments occurring in the neighboring regions of the Middle East, Balkans and Caucasus.

Despite all of this, we foresee that the supply-demand imbalance in the shipbuilding industry will evolve into a balanced state, which will be due to shipyards closing around the world because of the crisis. We expect those shipyards, which can make themselves effective in terms of investment and production costs, to survive and gradually become winners. Depending on the political stability in Turkey’s region, we expect to see an increase the use of existing idle production capacity.

Employment levels which shrunk at our yards during the crisis have picked up and now risen to around 30 thousand people, close to the levels we had prior to the crisis. Moreover, this employment figure, along with the side industries, includes about 150 thousand people. There is still no significant increase in the demand for new ships. We can say that ship maintenance-repair activities are the insurance of the shipbuilding industry, enabling it to stay on its feet.

The decline in demand for newbuilds was balanced by a flexible strategy focusing on maintenance-repair in the defense industry. In this context, we continued our activities by concentrating on building defense vessels as well as energy ships, a wind turbine maintenance ship, new-generation of tugboats, fish transportation ships, chemical tankers, platform support vessels, vehicle and passenger transport ships and yachts. We came to the end of the global crisis but there is still time to see an upward momentum in 2018. We expect 2018 to be more or less the same as 2017 for ship repair-maintenance and also for the level of demand for new builds.

What are the future trends you expect to see in the shipbuilding industry?
I can say that in line with global trends, the importance of Green Ships; ships that are environment friendly and that are low on fuel consumption will gain more importance. Our shipbuilding industry continues to show maximum sensitivity to the protection of the environment in the areas where it manufactures these environmentally friendly vessels. Construction of green, fuel-efficient vessels will increase. Also, offshore structures that have been stagnant in the last decade can be revived due to rising oil and gas prices. New generation ships with advanced designs and autonomous systems with reduced need for manpower have begun to appear as potential new members of the world trade fleet.

Can you evaluate the developments in Turkey’s shipbuilding industry in terms of quality over the past 20 years?
Firstly, defense industry tenders have moved to private shipyards, resulting in increased cost efficiency in production and development of the supporting industry. This situation has also benefited the construction of commercial ships and quality production has increased. With vocational training and new regulations in this area, our workforce has become more qualified. Especially in the last 15 years, environmental factors were attached higher importance, and our shipbuilding industry has created example practices in this area.

What are the strengths of Turkey in shipbuilding? What are the country’s goals?
Speaking about the areas where we are strong, I would like to underline our geographical location in the first place. We are the connecting point between Asia, Europe and Africa, and our proximity to Europe puts us in an advantageous position. Of course, our quality workforce in an industry with a background of centuries gives us considerable strength over other shipbuilding countries. In the past 15 years, we have proved our success with naval platforms delivered to Turkish Naval Forces in various defense industry projects. We are now strong in this area all over the world. Important ground was covered in R & D work in niche sectors such as the construction of LNG ships, which have clean and energy-saving systems that save environmentally and economically. Innovative projects also provide support to our shipbuilding industry with the support of technoparks. We also attach importance to our promotional activities to build new ships at Turkish shipyards for the countries that need to renew their fleet, mainly Russia and Ukraine. Our efforts to export ships produced for our defense industry have also started to bear fruit.

The Russians need fishing vessels and river vessels. If our Ministry of Economy can persuade Russia to work with Turkish yards, payments of such vessels to be built by Russian shipowners can be deducted in rubles or lira from Turkey’s energy purchases from Russia. In a sense, a barter system can be created to provide business for the shipbuilding industry. The Turkish Petroleum Corporation’s (TPAO) need for a marine fleet for oil-gas exploration and extraction can easily be met by the Turkish ship industry. We will continue to produce specialized vessels, which are considered niche products in EU countries where labor-costs are high, and as such we will continue to protect our achievements by relying on this strategic power we have.

What is your 2018 strategy and action plan to set out a roadmap as GISBIR?
We will continue to enhance our marketing and promotional activities. We will continue to participate in important trade fairs and events in almost every part of the world, including Singapore and the US. Another goal is to focus on Africa as  a new market through the Foreign Economic Relations Board (DEIK).

What are some of the most important problems that must be solved for the shipbuilding industry?
First we have to solve the financing problem because we want to compete on equal terms with our competitors, Far Eastern countries. Those countries are able to provide long term financial support to businessmen under appropriate conditions. This provides serious convenience for shipowners seeking to build a ship. We must find ways to possess the same advantages.

There are yards in South Korea that can deliver 94 ships in a year. That figure seems difficult in the case of Turkish companies, even if all the yards joined forces. What are the reasons that leave us behind others in shipping? To what extent has the global crisis affected new investment and modernization efforts in the Turkish marine industry?
Although there are advantages to large-scale building work that arise from automation and serially producing vessels of a similar type and size, there can also be disadvantages in times of crises, such as loss of business and even closure. In such periods, smaller-scale yards can fair better in the face of a crisis.

The most important problem preventing new investment in the sector was the briefness of the rental period for yards and the uncertainty that came with it. This was resolved with the government issuing new lease contracts for a duration of 49 years for Turkish yards. This problem has been solved superbly, with the rent amount being fixed at one per thousand of the trade volume. Now, depending on the demand, shipbuilders will be able to make new investments. We hope to see higher demand for new builds in the near future with regional problems coming to an end soon.

To build a ship, many materials are required including steel, paint or air conditioning and furniture. Can we compete with world brands with domestic products in spare parts in both terms of quality and price?
This sector has improved greatly in terms diversity and quality due to the requirement of local production and labor for military vessel projects. It should not be forgotten that the selection of the material used in commercial ship production is made by the shipowner. Two factors are at the forefront in this preference of the shipowner; after-sales service network and branding. If these needs can be met, more owners will go for domestic producers. We know that domestic products in the shipbuilding industry are competitive in terms price and quality.

There has been some oil exploration operations in the Mediterranean in the recent period, and the geopolitical importance of the region can not be denied. Should Turkey take the lead in this region, what are your initiatives in this regard? Could you explain with reasons?
The Turkey Petroleum Corporation (TPAO) has already taken the lead in this area. The mobility in the Mediterranean originates from its strategic location, especially the importance of the Suez Canal, and from its potential for underwater energy sources. That we take the lead in our region bears great importance for the future. The offshore park which we are planning to create for the TPAO is one of these initiatives. The modern ships we built for the Naval Forces Command in order to protect our rights and interests in the region should be regarded as a contribution from the Turkish shipbuilding industry. Of course, the need for building new yards in the Mediterranean is something we are considering.

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