Panama Seeks to Hold Registry Market Lead
The Panama Registry looks to maintain its position as the world's leading flag, introducing incentives and evaluating the macroeconomic factors which could affect its competitiveness in the global market, a recent Fairplay feature reports.
Panama: Flag prepares more incentives
Registry faces increased competition and the possible elimination of bearer shares, along with the status they carry
Despite the tempest besetting owners, the Panama Ship Registry continues to sail comfortably through the storm, with tonnage rising by 6–7M tonnes/year.
At the end of 2012, the registry had grown to 220.4M tonnes, up from 214.4M tonnes the year before, according to Lloyd’s Register.
The Panama Maritime Authority’s (AMP’s) department of merchant marine, which oversees the flag, has issued a series of incentives that have boosted registration of groups of vessels and reduced fleet age. “We are going to publish another set of aggressive incentives to alleviate shipowners’ troubles, which should be implemented in the coming months,” Panama Ship Registry head Alfonso Castillero told Fairplay.
The flag has tightened its inspections and quality standards to comply with international conventions on maritime safety. Improvements have attracted more newbuildings to the registry, which has been included in the Paris MoU White List since January 2011.
The registry has also speeded up the opening of technical offices in Asia, opening Segumar-Singapore and Segumar-Korea last year.
Japan’s share of the registry is increasing and “we have been giving them good support by improving the services we offer in Tokyo and reducing costs,” said Castillero. “Our Tokyo office has the largest number of employees and we will have upgraded to a 24-hour service by the end of 2013.”
Panama representatives travel to Japan three or four times a year and “always come back to Panama with new ideas that make them happy. In other words, we deliver,” said Castillero. But competition is fierce. He explained that some registries try to convince owners to “change flags by offering free registration ... and fine print” that is customised to individual owners.
Another current issue involves a tax reform approved by the Greek parliament, which may affect Greek shipowners, who control about 16% of the world’s merchant fleet. Taxes paid to foreign flags have been tax-deductible. The Panama registration form specifically states that “taxes and fees are deductible.”
Greek owners represent the second-largest customer base of the Panama Ship Registry, with Panama being their third or fourth most preferred registry as it offers advantages to Greeks, including no restrictions on shipowner nationality and a low tonnage tax.
The Greek rules relating to tonnage tax will take effect in 2015, while the other shipping tax legislation will take effect immediately. The tax reform may affect Panama’s registry; Greek shipowners may be tempted to look for cheaper registries to compensate for the increase in locally levied taxes on their operations.
Meanwhile, another problem has arisen on the domestic legal front, creating a black cloud over maritime lawyers and, indirectly, the Panama Ship Registry. The Panama government is discussing the elimination of Inter-national Business Corporation bearer shares as part of a requirement from the OECD.
Early this year, the government presented a bill to the National Assembly to immobilise the bearer shares in Panamanian companies, but the bill was later discarded. The executive branch has not yet said what its next move will be to satisfy the OECD. The elimination of the bearer shares “could have a negative impact on ship registration since shipowners want a simple transaction that includes the constitution of an offshore company in addition to the registry’s requirements,” said Castillero. The bearer shares give the owner of a corporation an offshore financial status regarded by many as ‘protection’.
“While there are other registers that offer bearer shares, Panama must seriously consider the repercussions it could have on the flag registration,” Castillero continued, noting that if competing registries also eliminate bearer shares, “that’s fine – we would compete on an equal basis and a level playing field.”
Other ship registries such as Liberia and the Marshall Islands have bearer shares and shipowners that register their own vessels, while at the same time corporations in those jurisdictions where they do not must reveal their ownership. Castillero fears that if Panama abolishes this legal facility but others do not, the ship registry may lose its edge.
