Events | Number 3, December 2003 | Need to Ship Your Goods?

Need to Ship Your Goods?

A Afkhami, Chairman of the Board & Managing Director, IRISL

The Islamic Republic of Iran Shipping Line (IRISL) is one of the greatest achievements of the Islamic Republic. It is a company that has rapidly grown in both size and efficiency during turbulent years of war and the hard times of the early reconstruction period that followed the war. In fact the company is unique among all Iranian business entities – private or public – as far as the rate of growth is concerned.

It is also unique for the service it provided the nation during the war with Iraq. When Iran was under economic sanctions, when few shipowners dared to send their ships to Iranian waters, IRISL and its people daringly faced the dangers of war, bombs, missiles, mines... Many lost their lives, many were disabled, but they persistently
continued their efforts.

Today IRISL is an international entity that operates worldwide, independent of the Iranian state and nation. From modern offices in a colossal building it operates internationally and controls its ships across the globe. To find out more about shipping in general and IRISL in particular we interviewed Mr Ali Ashraf Afkhami, the
Managing Director of IRISL who is generally considered to be one of the best Iranian managers.

Events- The shipping and shipbuilding industries are not very well known in Iran as they are in a country like Britain, say, where these industries are effectively a part of everyday life. We at EVENTS believe that it is necessary for our people to know a lot more about ships and shipping than they know at present. Do you agree with us, and if so would you tell our readers what you think they should know?

Ali Ashraf Afkhami- I certainly do agree with you and will try to tell your readers what I think they need to know. Let me first talk about shipping as a forgotten or neglected industry, a very important industry whose significance is lost to almost the entire nation.

Few people know that 95-96% of our imports arrive in the country by ships and by sea, including such strategic food items as wheat, or raw materials for our production plants, or spare parts that are vital for the maintenance of our industrial units… But all this takes place on the outskirts of the country, mainly in the remote parts of the south.

People in Tehran, Tabriz or Yazd don’t see ships discharging cargo, or sailors working hard on board ships… not the way they often sea aircraft captains and crews when they fly to Mashhad or Isfahan… They have never
physically been close to a ship the way they “feel” a train or see a truck going by… Besides, shipping in the modern sense of the word, is relatively new to Iranians.

Until forty years or so ago our shipping was confined to the small dhow locally known as lenje, which, by the way, still operates in the southern waters. The largest dhow may carry up to 250 tons of cargo at the most.
This is negligible in comparison with vessels of 25,000 tons which are nowadays considered as small oceangoing vessels. Anyhow, we started with a small fleet of modern vessels about 40 years ago and this
fleet grew rather slowly for many years. After the Islamic Revolution, however, because of the conditions created by the war with Iraq and the sanctions imposed against the country we had to invest heavily in the
industry and the fleet grew from a total dead weight capacity of 500,000 to 3,300,000 today.

Some years after the Revolution IRISL became financially independent, at a time when almost every major organization in the country was a financial burden on the state. In fact, today, not only we are not a financial burden for the state but we are actually an important tax payer. Again IRISL has been ignored in that respect too. I mean the state does not seem to be aware of the importance of the company as a major tax payer.

Besides, we are treated in our country just like any foreign shipping line. We buy fuel at the same price and in hard currency; pay port duties at the same rate and in hard currency; we repair our vessels anywhere in the world that is more convenient because we do not receive any discount in our country where we pay the charges and costs of parts, again in hard currency.

The shipping industry also provides a good number of job opportunities. IRISL group, which comprises of a holding company and a number of subsidiaries, employs about 7,000 people directly. So the industry is of considerable help to the country’s economy in this respect as well.

E- You seem to indicate that your main work is to carry our imports from their origins to our ports. Is that so?

AA- Till four or five years ago this was so. The fleet had been procured and was running mainly to bring in our imports and take out what little goods we exported. So long as the company was state-owned the view prevailed that we needed ships to bring in our imports. When the company became independent of the state, however, there was a significant change in our point of view, which resulted in a new strategy.

First the organizational structure of the company was changed from vertical to horizontal. Then there was a change in our approach. When we were state-owned we were a monopoly: every Iranian importer had to bring in
its imports by means of our ships, by our company. But when we became independent, we lost this monopoly
and we had to compete with other shipping companies. This forced us to become competitive and to look for other markets, to try to become independent of our own country’s exports and imports.

From the year 2000 we began our efforts at an international level. In 2000 we carried one million tons of non-Iranian shipments (cross-trade); in 2001 this quantity doubled; in 2002 it reached the 4.5m level; and in 2003 we estimate the total quantity to be over 6m tons. During these years Iran’s imports of wheat dropped considerably because of favorable climatic conditions in Iran which resulted in larger crops. Had we not entered the international shipping market we would have faced a serious problem, a crisis even, for shortage of business. But instead of facing a crisis we obtained business from the outside and brought in foreign currency.

We actually had to buy many new ships. Our net currency income of $23 million in 2000 has reached $140 million today and IRISL occupies a significant position in the international shipping market. Without overnment
recommendations, we have managed to become recognized as a credible shipping company in the world market.
In 2001 we took a step which could be considered as a turning point in the history of Iranian shipping and shipbuilding. We spent an unprecedented amount of 200m USD on new ships to be built in our own country, in
Bandar Abbas. So we went beyond shipping to help develop our country’s shipbuilding industry. Now large ships are being built by ISOICO shipyard in Bandar Abbas – for the first time – in cooperation with a reputable German company and this will be a great experience and lesson for our shipbuilding industry. We are also finalizing another contract for 135m dollars for ships to be built locally.

There are also two passenger vessels being built for 13m $, by Arvandan Shipyard. And we are going to place more orders with foreign shipbuilders as our local shipbuilding capacity is not enough to meet all our demand.
We intend to expand our fleet from 3.3 million tons to 5.5m tons over a 3-5 year period, a medium-term plan.

E- What problems are you faced with?

AA- Decision-making in our public sector is very slow indeed. This makes shipbuilding in Iran rather difficult. We can easily place an order for a ship to be built outside Iran. Banks are prepared to put forward the financing with only the ship itself as collateral.

But within our own country it takes months and months for the financing to be arranged and even then at very high interest rates. And we cannot get financing from foreign banks because our shipbuilders do not have much experience in their work and are not considered as “reputable business partners” for financing.

Some time ago IRISL placed an order with a foreign shipbuilder for six ships. The first was delivered to us nine months later and the rest are being delivered within the following seven months.

E- Is shipping undergoing change?

AA- The most noteworthy change is from the traditional system of shipping in bulk carriers, to containerized
shipping. To keep up with the times we have established two container lines that work on regular basis, one line going eastward to the Far East and another to Europe. Each line calls at certain ports, making a loop, and comes back on a round trip. These lines have been very successful so far. In fact we are very busy everywhere in the world and are making use of our container ships to 95% capacity which is unusually high.

E- What do you expect from the state?

AA- For IRISL, nothing more than other countries are doing. But if we are to develop our shipbuilding industry we must have the state’s full support. Even in Korea, the world’s biggest shipbuilder, the industry is still supported fully by the state; so is the industry in Japan after 100 years of experience, and in China which is a huge and rapidly developing economy.

Our authorities must consider the matter as serious and urgent. They must fully support the industry so that people like myself will be willing to have their ships built in Iran rather than abroad. But I must admit during the last three years our government has paid serious attention to the issue and has taken measures.

E- Apparently then you do not see any serious problems as regards actual shipping?

AA- Of course there are problems with shipping as well but they do not concern IRISL directly or solely. We have the problem of our ports to begin with. In many parts of the world today a container ship can be loaded or discharged within hours while it takes days in our ports and with our facilities. The other problem concerns the poor transportation facilities, by road and rail, from the ports to final destinations in the country, and to neighboring countries in case of transshipments. No matter how efficient our ports become, it would be useless without rapid and efficient land transportation.

Finally we are faced with unnecessary bureaucracy and red tape. But this is a problem we Iranians face in all sectors of our economy, even in everyday life, and which I hope will be resolved soon, and in a professional manner.