Logistics And Frieght Forwarding

Landlocked Switzerland latest victim of shipping downturn

Landlocked Switzerland’s history as a seafaring nation is neither glorious nor even recognised. But the affluent Alpine country known for its lakes and mountains not rolling seas, has nevertheless succeeded in becoming the latest victim of the global downturn in international shipping. Embarrassed Swiss government ministers this week were forced to seek parliamentary approval for SFr215m in write-offs on the sale of 13 ships in Switzerland’s deep sea fleet.

Defending the losses was “unpleasant, damned unpleasant,” admitted Johann Schneider-Ammann, economics minister. The losses highlight the extent of Switzerland’s unlikely exposure to a shipping industry[1] hit since the 2008 global financial crisis by extensive overcapacity and sputtering global trade. The Swiss government does not own its fleet.

Since 1959, however, it has guaranteed bank loans taken out by private owners to buy ships which are then at the disposal of the Swiss government at times of emergency. After the latest sales, Switzerland will still support 28 ocean-going vessels, with guarantees worth SFr512m. Switzerland’s naval ambitions are not about exercising power but ensuring the neutral country’s independence at times of international war or political conflict.

With few natural resources except for hydroelectric power, Switzerland[2] relies heavily on global trade. It is one of the few western countries still with a conscription army to defend its homeland. Mountain troops are trained to defend vital transport routes across the Alps.

The deep sea fleet, established in the wake of the Korean war, is meant to ensure the security of food and other essential supplies in crises — assuming goods could still be transported from seaports in neighbouring European countries via road, rail or the Rhine river. “You can’t compare us with Great Britain and its naval history. As a landlocked country it is unthinkable that we Swiss would be a military power on the high seas.

The Swiss fleet consists of freight ships,” says Bruno Lezzi, former Swiss army colonel and former defence correspondent at the NZZ newspaper. Officials in Bern confirmed to the Financial Times that no ship in the fleet has actually been deployed on the government’s behalf since 1959. But if the idea of a Swiss merchant navy seemed out-dated, it was not a problem before 2008.

Whilst the shipping industry[3] prospered, there was no recourse to the state guarantees. But the losses caused since the financial turmoil of 2007-2008 have raised not only questions about whether Switzerland needs its own ships — but also about its financial competence. “The main issue is the state guarantees we gave,” says Thomas Aeschi, a prominent politician in the conservative Swiss People’s Party. “One might assume that the banks were not critical enough.

Some credits might have been given too easily.” Beat Flach, a Green Liberal parliamentarian and former Rhine river boat sailor, said it might have made sense in the past to prepare for crisis scenarios — but the potential costs of the guarantees should have been spotted much earlier. “It annoys me that we only noticed so late,” he said. “The controls did not work.” Mr Schneider-Ammann told parliament that a government “recovery team” had been working since mid-2015 to minimise the recent losses.

Meanwhile government investigations into the affair would be stepped up, and could result in legal action. “That will have to be clarified in the second half of the year,” he said. Meanwhile, the system of guarantees is being phased out. In December, Bern decided that existing contracts would be honoured — the last expires in 2031 — but new guarantees would not be offered.

To ensure essential supplies at times of future global emergencies, Switzerland did not need to go beyond its existing obligations, the government said.

References

  1. ^ shipping industry (www.ft.com)
  2. ^ Switzerland (www.ft.com)
  3. ^ shipping industry (www.ft.com)



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