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How to become a shipowner
Six years ago, Hansatee – operating
under the Tallink brand – had no vessels of its own. Now, in May
2002, there are seven of them. This amazing development is to a great
extent the work of Enn Pant, chairman of the management board of Tallink
Group (former Hansatee Group). In this interview, he talks about the past
and the future.
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Enn Pant, chairman of the management board of Tallink Group. |
 Until
November 1996, you were the chancellor at the Ministry of Finance. How
did you adapt yourself from being a financial analyst to being a shipowner?
I am still a financial analyst! Each business requires the
skill of handling money. I think that a person is rich when he or she
feels that he or she has enough money all the time. You have to live up
to what you can afford, then you will always have enough money.
A company should act the same way. You have to shrink expenses during
not-so-good-times, while it may even be possible to take a vacation during
better times. This is a question of self-discipline and company discipline.
You have to make the right decisions at the right time.
The previous management was more at home with navigation, while you are
more at home with financial operations. Was it due to your experience
as a financial analyst that according to the balance sheet, you could
turn a loss into a profit within one year by making the financial structure
of the company more expedient?
To a certain extent – yes. However, a loss is not a
paper thing, generally. A skilled accountant is able to design as required.
For
a company, a loss, in a direct sense, means that a certain amount of money
falls short, and it is specifically about cash.
The
issue of cash – this cash flow thing – is more important for
larger companies than the matter of having a profit or loss in the books.
It is important to have enough real funds to cover your own expenses.
But
how can it be that you reached profit a year after the loss of about USD
9 million?
Shrinking expenses was the first thing. Secondly, large
expenses, such as rents for vessels which were disproportionately large
for the Estonian Shipping Company, were renegotiated.
Remedies also included disciplinary issues, the implementation of internal
control. Because tax-free sales and the sale of services on board amount
to 60 per cent of the total income, the disappearance of 10 per cent can
also be felt clearly.
Internal
control, which didn’t even exist earlier, is now one of the largest
departments – not because of too much fraud, but we just have so
many vessels. And the preventive effect of ongoing control is much better
than catching somebody specifically.
This entire complex of remedies has had an impact in getting over the
loss.
People
who come from another area to work in shipping companies start to like
maritime matters, as a rule. There’s no doubt that you do, too.
When I came, the situation was in fact really lousy. There
were only two chartered vessels “Georg Ots” and “Tallink”.
The first vessels were expensive for us. First, we bought “Tallink
Express I” for about EEK 20 million (USD 1.4 million).
For
us, the arrival of Normandy was a new era in the development of the company.
Never mind the fact that it was chartered! It provided the hope that the
company would be capable of surviving. This vessel was not productive;
the profit of the entire period of it’s being here was one million
kroons. But it was an investment in the future; it was how the customer
base was created.
By that time, it was clear that I was to be buried here in shipping for
quite a long period. And then came “Fantaasia”, which was our
first real “own” vessel.
Where
one can see your favourite colour…
Well yes, in the sense that “Fantaasia” was the
first vessel to be rebuilt extensively – and there are many of my
ideas in it. Not just mine, however; the whole Hansatee participated in
the project.
Also,
all decks on the new vessel were sketched by us in a way that we thought
would be appropriate. There was no interior architect – this role
was performed by the management of the company. Of course, there were
interior designers who had the final say. The shipyard, of course, did
the technical part.
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Tallink’s newbuilding “Romantika” left the
shipyard for sea trials in April 18, 2002. |
Long
ago, you planned a vessel that took the Finnish customs rules into consideration.
However, now we often hear that Estonia may give up tax-free.
Now, there has been talk about a 6.5 year transition period.
I believe that within that period, it should be possible to change products
and start thinking about something else. An alternative is that a corresponding
sum would be returned to us as a subsidy. I have understood that the government
has a sufficiently positive approach and that a compensation mechanism
is being created. To a great extent, Tallinn has been built up thanks
to the money that Finns have left here, so this is not just an issue of
one shipping company. Vessel traffic as such will of course be retained
here, but how many vessels and what would the ticket cost? Finns have
been so spoiled by the prices of Silja and Viking that a price difference
of 1–2 Euros will be a big factor…
Overall, you are still quite optimistic.
Nothing is over yet. We are not in the European Union yet.
We haven’t even come to the point where we have declared a referendum.
A lot may change in public opinion during the time we have left. I think
that this is not only an issue of tax–free, but much more is at stake.
Does
the Estonian shipowner have considerable advantages, since it is claimed
that the work is extremely cheap?
What advantages? Let’s compare our labour costs to
the sum paid by Finland directly to Silja and Viking during this last
year – it was probably FIM 240 million. This is a larger sum than
our total salary fund – by far. I believe that when they subtract
the sum to be received from the salary fund, they are paying zero salary.
Earlier,
there could be some advantages but after these subsidies, there’s
no way. Because of the Estonian flag, we are also paying more fees in
Finland.
By
the way, the Estonian flag is not that cheap. We are paying our crews
gross wages of about FIM 100 million annually. The Finns may pay 2 –
2.5 times more, but if we consider the subsidies of the state, it works
out the same. If we then consider the advantages that they have due to
the Finnish flag, and, why not, the advantages of their blue-white brand…
Compared
to them, our sole advantage is that we have an extremely professional
and small-sized shore personnel. Where we have one person, they have a
whole department. I think that we achieve effectiveness primarily by saving
on shore costs.
How much do you feel the influence of the trade union?
I think that the trade union in shipping is strong enough
in Estonia. The worst thing is that they learn from Finland and Sweden
– places where nothing can be learned from in this matter. Trade
unions are afraid that if there is no war, they probably don’t exist.
If
we are doing something good for our employees, they don’t even notice.
The opinion is – how can it be that you did it yourself, it’s
not logical. An enemy must be behind it!
There
is a lot of talk about our shipping having no support, while everyone
else in the neighbourhood has. Why can’t we hear the complaints of
shipping companies that the state doesn’t support them – for
instance, that no advantages are provided in labour taxation or port fees?
We have talked about taxation a lot but we have not reached
anywhere yet. Unfortunately, I know enough about economics and finances
of the state to understand that nothing can be taken away from social
taxes. The social side is so underdeveloped in the country.
Although the corporation tax has been abolished in Estonia, we are still
being skimmed by port fees. The port has officially declared that the
passenger traffic in Vanasadam brings in EEK 180 million (USD 10 million)
a year in profit.
Consequently
we, Viking, Silja and Eckerö are paying EEK 180 million in corporate
tax per year, and we have calculated that this corresponds to a percentage
of about 45 per cent – not 26 per cent as it used to be.
Therefore,
a double notion of abolishment of the tax burden exists.
If
we wanted to, we could hire advocates and reach the point where since
the Port of Tallinn paid 300 million in dividends to the state, we claim
the respective sum back since the state has declared that there is no
corporate tax.
//Madli Vitismann
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