Bermudas lucrative shipping registry falls foul of international standards
By the numbers
The shipping and aviation registers are serious cash cows for Government. Each of them earns about double the costs of operation and theres promising growth potential.
Bermuda has four full time ship surveyors, compared to other members of the Red Ensign Group like the Isle of Man which has 17, and the Cayman Islands and Gibraltar which have ten each.
Of Caymans ten surveyors three are based there, six in the UK and one in Greece.
A net revenue earner for the Island, Bermudas register is expected to cost just under $2 million to operate and rake in over $4 million this fiscal year.
The register currently has 168 ships — 28 passenger ships, 44 Gas Tankers, 16 Oil Tankers, seven Chemical Tankers, 29 Bulk Carriers, 16 Container ships, and another 28 other types of ships.
Another 258 yachts are registered here — 14 large commercial yachts and 244 pleasure yachts.
In comparison, 1,900 vessels fly the Cayman Islands flag.
The Department of Civil Aviation which operates Bermudas aviation register is expected to cost $10.5 million and bring in $23.5 million.
There are 702 aircraft registered here, but that figure is expected to increase by nine percent by the end of the new fiscal year.
Bermudas shipping registry has fallen foul of international quality standards and could face restrictions by the UK Government.
And the development of the aviation registry business is effectively on hold, The Royal Gazette understands.
At issue is Bermudas failure to recruit enough of the highly specialised professionals required for the two registers.
Members of the Red Ensign Group — those shipping registers authorised to fly the British flag — must maintain enough in-house shipping surveyors to conduct at least 90 percent of critical safety management inspections of their ships.
Bermudas complement of ship surveyors can only meet 32 percent of the ship inspection requirements, and it would have to double the number of ship surveyors in order to meet international standards.
Were working with the Department of Maritime Administration to rectify the situation and bring Bermuda back into compliance as soon as possible because it [the shipping registry] is an important revenue generator for Bermuda and there are reputational issues involved, Economic Development Minister Grant Gibbons said.
It is not clear where the money will come from to get the shipping registrys staffing complement up to speed — no money was budgeted for the purpose for the new fiscal year.
Dr Gibbons also revealed that the aviation registry also faced a shortage of qualified personnel. That registry is compliant with international standards, according to Governor George Fergusson, but it has ceased accepting new aircraft registrations because of the staff shortage.
The two businesses are highly profitable for Bermuda (see sidebar).
Mr Fergusson said the two registries had been audited recently and audit reports were being prepared.
The two reports are still awaited. If either of them identifies any areas where UK assistance can usefully be provided, I would wholeheartedly support this, he said.
Government has budgeted for an extra five staff members to join the Department of Civil Aviation.
The UKs Maritime and Coastguard Agency audits Bermuda Department of Maritime Administration every four years, but it is unclear how long Bermudas shipping registry has been non-compliant.
During a February 2012 audit of the DMA undertaken by the MCA, the auditors identified the urgent need to engage additional surveyor resources, for the Bermuda Shipping Register to be able to meet its obligations and to function as a Category 1, Red Ensign Group Register in accordance with the agreed REG policies, Dr Gibbons told the House recently.
In fact, the Auditors had such concern about the DMA that instead of waiting a further four years for their next scheduled visit, they arranged to come back again in February 2013.
It was at this follow up meeting that the UK auditors recommended that the DMA should double its surveyor resources in order to maintain its current fleet, to the required international standards, and specially, if it wishes to expand the fleet in the future.
Learning of this in February was too late to put in appropriate provision into the budget for fiscal year 2013-14.
As a category one register, the Island can register vessels of any size or type, but staffing requirements are dependent on the number of ships of various categories on the register.
UK authorities could impose limits on the number of ships in Bermudas fleet — thwarting plans to expand the business — if the issue is not addressed.
Government also plans to open a satellite office in London to be able to provide shipping inspection services at a lower rate and promote the registry in Europe, the Middle East and the Far East.
The Royal Gazette understands that it is not uncommon for shipping registers to fall into non-compliance with international standards.
Shadow Economic Development Minister Glenn Blakeney said the former Progressive Labour Party Government had worked to increase the number of qualified surveyors but faced significant challenges.
It is not just about having the budget to comply with international standards, it is also about the global scarcity of qualified people.
There was certainly a desire to resolve the in-house challenge of being understaffed but the time to train up Bermudians to achieve the required level of expertise, takes significant time and that is why in some areas of speciality, there is reliance on highly qualified and experienced overseas talent.
Mr Blakeney added that Government had been considering merging the Departments of Maritime Administration and Civil Aviation to make better use of combined resources and suggested the new Government examine such options.
Such a move would do little to address the immediate problem, said Dr Gibbons who described cost savings from a merger as marginal at best and noted that the functions of aviation and nautical surveyors do not overlap.
A merger between the DMA and DCA would not solve the immediate problem which is a deficit of in-house, qualified professionals in both areas which stems from a lack of sufficient investment, recruitment and hiring over the last few years in both registries.
The current Government will continue to explore all options with a view to realising efficiencies and savings in operations and expenditure, including the potential merging of the two Departments. In addition, efforts are underway to address the deficits in qualified professionals in both Registries.