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Back to 22/2008
The Blue North has it all
Photo: Hurtigruten ASA.
Considering the small population and their economic impact, the Nordic countries hold an important position: They control 15 per cent of the world fleet, 20 per cent of the maritime insurance market, they are the second largest in offshore marine services and possess some 10 per cent of the global market for ship technology and equipment. The Nordic region is consequently the home of several leading maritime brands from Maersk Sealand and Wallenius Wilhelmsen to DNV, Gard P&I, Hempel, ABB, TTS, Rolls-Royce Marine Technology, Framo, Kongsberg, Wärtsilä NSD, to name a few.
Considering the small population and their economic impact, the Nordic countries hold an important position: They control 15 per cent of the world fleet, 20 per cent of the maritime insurance market, they are the second largest in offshore marine services and possess some 10 per cent of the global market for ship technology and equipment. The Nordic region is consequently the home of several leading maritime brands from Maersk Sealand and Wallenius Wilhelmsen to DNV, Gard P&I, Hempel, ABB, TTS, Rolls-Royce Marine Technology, Framo, Kongsberg, Wärtsilä NSD, to name a few.
It is not hard to detect ship operations or maritime suppliers of Nordic origin in any major port across the world. In fact, the maritime cluster must be the most successful Nordic business cluster in terms of employment and global standing.
The competitive advantage
The point is that geographical concentration of related businesses may increase the productivity and competitiveness of each individual company. This model was advanced by economic theorists like Paul Krugman and Michael Porter in the 1980s, with Silicon Valley as its prime example. The idea of a maritime cluster of related businesses was adopted by Maritime Forum in Norway in 1991 and quickly established as a model for understanding the dynamics and interrelations of the maritime businesses.
Though it has its opponents, the cluster concept has been widely accepted in political circles in the Nordic countries and even in Finland. The virtue of the cluster is the close links between demand and supply, between discerning shipowners and innovative suppliers, and with the element of seagoing experience thrown in. Together, the Nordic maritime clusters employ directly somewhere in the region of 250,000–300,000 persons and indirectly three times as many.
Michael Porter’s main point is that nations should accentuate what they already are good at and seek to stimulate and benefit from these competitive advantages.
“The Greeks may have the steel,
London its financial and chartering operations,
the Dutch their patch of ship technology,
the Germans are high in container shipping and ambition,
but the Blue North has it all.”
Broad range
Everybody knows that the Nordic region spans several connected maritime clusters, differing from one country to another. Denmark is strong in commercial shipping, ship operation and supplies. Norway has much of the same, with an adjacent maritime and offshore technology cluster. Sweden has a broad range of maritime competence, particularly in tankers and ro-ro, and Finland boasts a technology cluster of shipyards, ship design and niches like navigation in ice. Companies within ship design, propulsion, marine electronics, e-learning, etc, are found in all four countries.
Commercial shipping or maritime services is considered to be the driving element of the cluster, involving ship and offshore technology providers and also everything connected to cargo handling, traffic control and safety. Lately, environmental issues have affected almost every aspect of sea transportation and thus created a new market for products and services.
The cluster has, however, changed and developed over time. Sweden used to have the leading edge in shipbuilding, only to be undercut by Korea as a shipbuilding nation in the 1970s. Since then, a large sector of hardware manufacturing has been sourced out from Northern Europe, but largely replaced by the development of software systems.
Since the 1960s, when the Nordic countries took the lead in ship development and sophistication, a major aspect has changed – the input from national seafarers. To a large extent it was the contribution by the officers on board who helped to bring about innovation and improvement. Today more of the innovation is done ashore, and a large number of former seafarers are employed with software companies to ensure users’ functionality.
Photo: Hurtigruten ASA
Cost control crucial
Nobody knows the effects the current recession will have on world trade and energy prices, and hence on the demand for ships over the coming five years. But whatever happens, it will be safe to assume that cost control will be essential in the future. Surely this will strengthen the trend for out-sourcing, particularly for hardware equipment, and also for software to places like India.
The main aspect, however, is the business relation with the customers, and these are still to be found through the maritime cluster at home. It may well be cheaper labour somewhere else, but nothing could replace cultural aspects of the cluster. Out-sourcing makes sense, re-location not.
Some sectors may be in for a shock, though. The vast order book of the Norwegian shipyards of 76 billion NOK will have to come down to a more realistic level of 6–10 billion. This will doubtless cause problems for the subcontractors, and it shall be interesting to see whether the Polish ones will be the first or the last to go.
In the longer term the future of the Nordic maritime cluster will depend on the shipping markets in general. The offshore-related businesses may be better protected than the shipping-related, simply because of the higher level of sophistication.
Varying ambitions
Will national political ambitions make a difference?
Denmark has its stated political goal of becoming the leading maritime nation in Europe by 2015. True, the Danes are skilled and clever. You may find Danish shipping executives all over the world. There is a large commercial network and they know how to play it. But whether the Danes are going to rely on their own cluster of related industries like shipbuilding, engine developers, ship design, equipment, paints, insurance and finance is a different matter entirely. Also whether they will manage to keep a high share of national seafarers on board DIS ships.
The Norwegian government has a more modest objective, to keep Norway amongst the leading maritime nations. The conditions have never been ideal and will never be, but the sheer extent of the maritime cluster seems to have some sort of self-generating effect. The Norwegian fleet, however, will never be able to compete with the majors in tons due to the increasing share of small specialized units, though it ranks higher in financial commitment.
Sweden is still stumbling on its way to a tonnage tax system, and the sale of Broström to Maersk is not the best of signals. In Finland the politicians have finally woken up to find its major shipping lifelines sold to foreign companies, and this may in turn perhaps bring competitive conditions to the remaining local owners. The nation may be more worried about the future of its shipbuilding industry.
But in total, from Bergen to Hamina and from Hammerfest to Sønderborg and Ystad, the Blue North displays an impressive maritime cluster in extent and diversity.
The Greeks may have the steel, London its financial and chartering operations, the Dutch their patch of ship technology, the Germans are high in container shipping and ambition, but the Blue North has it all.
Dag Bakka Jr. Editor, Norway.
Latest update 21-10-2008
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2008