PEER REVIEW OF THE JAPANESE SHIPBUILDING …

1 peer REVIEW OF THE JAPANESE SHIPBUILDING INDUSTRYPeer REVIEW of the JAPANESE SHIPBUILDING industry 2 FOREWORD This report was prepared under the Council Working Party on SHIPBUILDING (WP6) peer REVIEW process. Delegates discussed a draft at the WP6 meeting on 30 November 2012, and were invited to submit any final comments to the Secretariat by 14 December 2012, after which time the report would be prepared for declassification. No substantive comments were received and the report is now declassified. The report will be made available on the WP6 website: OECD 2016 Cover photo courtesy of IMABARI SHIPBUILDING CO.,LTD Applications for permission to reproduce or translate all or part of this material should be made to: OECD Publications, 2 rue Andr -Pascal, 75775 Paris, Cedex 16, France; e-mail: This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

2 peer REVIEW of the JAPANESE SHIPBUILDING industry 3 TABLE OF CONTENTS FOREWORD .. 2 1. Introduction to the study .. 5 2. An introduction to Japan s SHIPBUILDING industry .. 6 3. Structure and features of the SHIPBUILDING industry in Japan .. 9 4. JAPANESE government policies affecting the SHIPBUILDING industry .. 17 5. The performance of the JAPANESE SHIPBUILDING industry .. 23 6. industry challenges and responses .. 37 7. Summary and suggested questions for discussion .. 40 NOTES .. 42 REFERENCES .. 45 Tables Table 1. Japan's largest SHIPBUILDING companies .. 6 Table 2. Production record (type of vessels built) in Japan .. 10 Table 3. Yard capacity - dock statistics .. 11 Table 4. Geographic location of shipyards .. 11 Table 5. Changes to construction facilities.

3 12 Table 6. Publicly listed SHIPBUILDING companies in Japan .. 13 Table 7. Support measures to the SHIPBUILDING industry .. 21 Table 8. Total world orderbook .. 29 Table 9. Delivery schedule .. 29 Table 10. Composition of the orderbook .. 30 Table 11. Domestic/export production mix in Japan .. 31 Table 12. Orderbook, by nationality of buyer .. 31 Table 13. Productivity performance - summary statistics .. 34 Table 14. Comparing productivity performance .. 35 Figures Figure 1. SHIPBUILDING in the JAPANESE economy .. 7 Figure 2. Ratio of SHIPBUILDING sales to GDP .. 7 Figure 3. Employment in SHIPBUILDING .. 9 Figure 4. Monies committed each year .. 20 Figure 5. Maximum financial exposure at year-end .. 21 Figure 6. JAPANESE SHIPBUILDING completions.

4 24 Figure 7. Share of completions, by selected shiptype .. 24 Figure 8. Vessel deliveries by value .. 25 Figure 9. Average value of vessels delivered .. 26 Figure 10. Average value of vessel deliveries, by DWT .. 27 Figure 11. Share of quarterly orders reported .. 28 Figure 12. Japan's share of world orderbooks over time .. 28 peer REVIEW of the JAPANESE SHIPBUILDING industry 4 Figure 13. Productivity in JAPANESE SHIPBUILDING .. 32 Figure 14. Annual change in real value added per employee .. 33 Figure 15. Change in unit labour costs in JAPANESE SHIPBUILDING .. 34 Figure 16. Change in unit labour costs in German and Korean SHIPBUILDING .. 36 Boxes Box 1. OECD data on the JAPANESE SHIPBUILDING industry .. 8 Box 2. industry associations - objectives.

5 16 Box 3. The "New Comprehensive Policy on the SHIPBUILDING industry " .. 18 Box 4. Boosting demand - the Japan Ship Investment Facilitation Co. Ltd .. 19 Box 5. Recovering from the 2011 earthquake - the role of government .. 22 Box 6. Technological developments in JAPANESE SHIPBUILDING .. 39 peer REVIEW of the JAPANESE SHIPBUILDING industry 5 1. Introduction to the study The OECD s Council Working Party on SHIPBUILDING (WP6) has introduced a peer REVIEW process, focused on support measures provided by governments to their SHIPBUILDING sectors. Under this process, economies participating in the WP6 will each undergo an in-depth study of their SHIPBUILDING industry and related government measures. Non-WP6 economies may also join the process and be the subject of a WP6 peer REVIEW .

6 The main goal of the peer REVIEW process is to strengthen the identification of government policies, practices and measures affecting the SHIPBUILDING sector and to support discussion of these within the WP6, so that the impact of government support measures on the SHIPBUILDING sector can be better understood. The WP6 already compiles an inventory of government support measures, which covers a range of subsidies and non-subsidy measures and is regularly updated and presented for discussion at WP6 meetings. However, the peer REVIEW process aims to provide a deeper analysis of support measures at the country level, accompanied by contextual detail of the industry , so as to enable a richer discussion of SHIPBUILDING policy and its impact by the WP6.

7 A key element of the process is the peer REVIEW stage, where WP6 participants will have the opportunity to actively debate and discuss preliminary drafts of the studies, with a view to promoting transparency and experience-sharing within the group. This element of peer REVIEW differentiates this process from other recent WP6 economy-level analyses, such as the studies on China and This first WP6 peer REVIEW analyses the JAPANESE SHIPBUILDING industry and related government support policies. Japan volunteered to be the subject of the first WP6 peer REVIEW and played an important role in developing the general procedure and questionnaire that underpin this and future WP6 peer reviews. The report is structured as follows: Section 2 briefly introduces the main actors involved in Japan s SHIPBUILDING industry and describes the general role of SHIPBUILDING in the JAPANESE economy; Section 3 looks at the structure and features of Japan s SHIPBUILDING industry ; Section 4 then describes JAPANESE government policies affecting the SHIPBUILDING industry ; Section 5 investigates industry performance; Section 6 discusses challenges and strategies in the JAPANESE SHIPBUILDING industry ; Section 7 concludes, with a short summary and some suggested questions for discussion by the WP6.

8 The information in the report is drawn from public information sources, statistical series available to the Secretariat, and the JAPANESE government s response to the generic peer REVIEW questionnaire that was agreed by the WP6 for the peer REVIEW process. The Secretariat thanks Japan for volunteering to be the subject of the first WP6 peer REVIEW and for its co-operation in developing the report. peer REVIEW of the JAPANESE SHIPBUILDING industry 6 2. An introduction to Japan s SHIPBUILDING industry Data from the JAPANESE government suggest there are currently over 1 000 shipyards in Japan. Some of these yards are privately owned ( unlisted) individual enterprises, while others form part of larger private or public (listed) companies that operate multiple yards.

9 The three biggest enterprises in JAPANESE SHIPBUILDING , measured by current orderbooks (in compensated gross tonnage CGT), are Imabari SHIPBUILDING , Tsuneishi Holdings, and the Oshima SHIPBUILDING Company. These three companies, as well as Universal SHIPBUILDING , Mitsubishi Heavy Industries and Namura Zosensho, also feature in the top 30 shipyard groups worldwide, as measured by orderbooks (Clarkson, 2012a, p. 25). Table 1 lists the yards in Japan controlled by these six shipbuilders. Table 1. Japan's largest SHIPBUILDING companies Yards controlled SHIPBUILDING company/group Yards in Japan controlled by company/group Imabari SHIPBUILDING Imabari Shipyard I-S Shipyard Co. Iwagi Zosen Co. Koyo Dockyard Co. Marugame Headquarters Saijo Shipyard Shimanami Shipyard Co.

10 Shin Kasado Dockyard Co. Mitsubishi Heavy Industries (MHI) Nagasaki Shipyard and Machinery Works Kobe Shipyard and Machinery Works Shimonoseki Shipyard and Machinery Works Yokohama Dockyard and Machinery Works Namura Zosensho Imari Shipyard and Works Oshima SHIPBUILDING Company Oshima Shipyard Tsuneishi Holdings Tadotsu factory Tsuneishi factory Universal SHIPBUILDING * Ariake Shipyard Innoshima Shipyard Keihin Shipyard Maizuru Shipyard Tsu Shipyard *At the time of writing, Universal SHIPBUILDING was in the process of merging with IHI Marine Limited, to form a new company Japan Marine United . The eventual date of merger was 1 January 2013. Source: Compiled by the Secretariat. Japan s shipbuilders exist within a wider maritime cluster that provides crucial upstream and downstream products and services.