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KERRY O'BRIEN: A month ago, Transport Minister, Laurie Brereton, claimed the Government's shipping line, ANL, was worthless.

LAURIE BRERETON: It's not a case of privatising ANL; you couldn't give it away.

KERRY O'BRIEN: But a generous deal involving trade protection and tax concessions paved the way for the ALP National Conference to approve its sale. Will investors take the plunge on the ailing shipping line? And does it matter whether Australia has a shipping industry or not? Ships for sale - that's our story tonight.

The Labor Party's National Conference in Hobart, today, gave the green light for the sale of Australia's national shipping line, ANL. While privatisation may provide the Government with some useful revenue, the driving force behind the push to sell public assets, we're told, is to create greater competition and greater efficiency. But with ANL there's been serious dispute over whether the sums or the rhetoric make sense. Just one month ago, Transport Minister, Laurie Brereton, said you couldn't give ANL away; two weeks later, he brokered a deal after a costly union strike that could cost the Government anywhere between $28 million and $40 million a year. The aim: to get the company back on its feet and attractive to prospective buyers.

The deal has incensed the Opposition who claim it's another deal for Labor mates. They say the unions have not made enough concessions to boost efficiency in the industry and to make it more internationally competitive. All this begs the question: who will buy ANL? So far, the only group really showing interest is the Maritime Union which is trying to put together a consortium to make a bid.

In a moment, we'll be joined by a key union official and a tough critic; but first, Mark Corcoran backgrounds the process.

MARK CORCORAN: In the cut-throat world of international shipping, Australia is struggling to catch up. Reform is the buzz word; greater efficiency - the goal. But it all came to a shuddering halt during the recent five-day shipping strike when the Maritime Union locked horns with Industrial Relations Minister, Laurie Brereton, over the future of the government-owned Australian national line.

The strike was triggered by union fears that ANL would be liquidated and that the exclusive preserve of coastal shipping would be opened up to cheaper foreign ships and crews, as recommended by a recent government shipping efficiency report.

Wharfies and seafarers finally returned to work only after a remarkable agreement was struck - one that on union estimates will cost the Government up to $40 million. Under the deal, international seafarers become tax exempt; shipowners can claim greater depreciation on their vessels; foreign fleets will be kept out of our coastal trade; and foreign seamen off our ships.

The Maritime Union also announced it would form a consortium to bid for ANL, which will now be sold by tender. Acceptance of the deal was an amazing backflip for Laurie Brereton, as only last month he'd virtually scuttled ANL.

LAURIE BRERETON: It's not a case of privatising ANL; you couldn't give it away.

MARK CORCORAN: Brereton's assessment was based on a due diligence report by accountants Salomon Price Waterhouse. The report highlighted operating losses averaging $19 million over six of the last seven years, and company debt of $180 million. The sale of ANL, said the report, would lose the Government between $75 and $118 million. This contradicted other estimates that calculated that ANL was worth as much as $100 million. The damning report came despite attempts by ANL to increase efficiency. Over the past decade, its fleet has shrunk from 33 to 13 ships. Only four of those work on international routes. Crew sizes have also been steadily reduced.

Ten years ago, Australian vessels had on average 32 crewmen on board each ship. With the reforms, this has now been reduced to only 18. But still this may not be enough. According to government estimates, each Australian ship costs on average an extra $2 million a year to run when compared to foreign vessels, largely crewed by underpaid seamen from Third World countries.

The new tax breaks agreed to by the Government will go some way to narrowing the gap. Under the agreement, crewing on new ships will be further reduced to 14. But the unions say it's still difficult to compete against cut-price flag of convenience operators who spend next to nothing on maintenance and pay their crews a pittance.

MARK BYRNE: In Australian dollars, some of these people don't even earn $100 a month. They get fed rations that are barely adequate to keep body and soul together and the hygiene on some of these ships is atrocious.

MARK CORCORAN: ANL has a modern, well-maintained fleet with highly skilled crews. But setting the standard keeps overheads high. In a bid to remain competitive, some of the world's leading maritime nations are now cutting corners.

MARTIN BYRNE: The national fleets of countries, traditional maritime countries like the United Kingdom and Norway, have plummeted because of the flag of convenience operators. And the response of those countries has been to set up second registers where the conditions and standards aren't necessarily maintained quite so tightly, and where a variety of other factors are used to give the ships under those second registers financial advantages over traditional national flag fleets, such as the Australian flag fleet.

MARK CORCORAN: Also contributing to ANL's woes - the vast Chinese and Russian fleets now muscling-in on the international market. ANL lost $25 million last financial year; $18 million of that in only six months on the north Asia and European routes where the Chinese line, Cosco, has even undercut flag of convenience operators.

Cosco's share of the lucrative north-Asia market has nearly tripled to 30 per cent in only 12 months. It could extend to half the market by next year.

MARTIN BYRNE: It's important to realise that they are effectively arms of the state in both those countries, and those countries are desperate for hard foreign currency, and so they'll do anything to get that.

MARK CORCORAN: Australian shipowners acknowledge that ANL is not the only line in dire financial straits.

LACHLAN PAYNE: Look, I think ANL is beset with problems that are besetting many, many shipowners around the world. It's a tough marketplace out there and it's very difficult for people to make a substantial .. a reasonable return on investment.

MARK CORCORAN: The recent strike cost shipowners more than $60 million, but their criticism of what they regard as union bovver boy tactics is tempered by the fact that the ANL deal benefits the whole maritime industry.

LACHLAN PAYNE: What the union has done has probably introduced a baseball bat into the equation that, of course, is something that the shipowners .. is beyond their contemplation. We'd been talking to Government about these issues, but the MUA has taken up a different issue and accelerated the whole question.

MARK CORCORAN: Unions and owners find themselves in rare agreement that in attempting to save ANL, the Government may now be forced to put the whole maritime industry on a more competitive footing.

LACHLAN PAYNE: I think the outcome of the discussions that will now take place will result in an international shipping policy. If you said to somebody that would it be sensible for Qantas to operate without an Australian international airline policy, I think you'd get laughed at; but that's what shipping has been doing, it's been operating in that policy vacuum.

MARK CORCORAN: Today's motion at the ALP National Conference endorsing ANL's privatisation was little more than a formality. The real challenge lies in convincing potential buyers that a line that only last month couldn't be given away, is now suddenly worth something.

KERRY O'BRIEN: That report from Mark Corcoran, and now our studio guests. John Howard is the Shadow Minister for Industrial Relations, a position he's held since 1990. He was Treasurer in the Fraser Government for five years and was Opposition Leader for four years. Tony Papaconstuntinos is National Secretary of the Maritime Union of Australia which has 10,000 members. He was a seaman for 20 years before becoming a union official in 1985. He's on the ACTU Executive and is a member of the Shipping Industry Reform Authority. We invited Transport and Industrial Relations Minister, Laurie Brereton, to participate in tonight's program; he hasn't responded.

Tony Papaconstuntinos, what now is the totality of your deal with the Government? Is it still just tax concessions and faster depreciation on ships, and will those concessions apply regardless of who buys ANL?

TONY PAPACONSTUNTINOS: Well, the concessions, Kerry, were reached in terms of agreement by the Government and the ACTU, and those concessions include a commitment from the Government and certainly a commitment from the unions themselves. And those commitments obviously will depend largely on whether the overall agreement is put into place. But I think it's fair to say that it's in everyone's general interest to make sure that those commitments are met.

KERRY O'BRIEN: And what about the fuel excise that you also wanted cut?

TONY PAPACONSTUNTINOS: Well, in terms of the fuel excise, we had understandings about the fuel excise policy when we had a meeting with the Government on 12 September. Now, obviously, there was some sort of misconception or some sort of misunderstanding, and when we again met with Transport Minister Brereton last Friday, we settled the issue and the issue was that he wasn't able .. Treasury wasn't able to meet the concession. The Government argued, by way of Laurie Brereton, that the fuel excise is linked to cabotage and we were certainly not keen to see cabotage go to have fuel excise put in. However, we will make application to the Government to see whether we can get it back to what it was prior to the Dawkins' Budget; whether we're successful or not is an entirely different thing.

KERRY O'BRIEN: Okay. But initially when the package was first formulated, you were talking about a value of up to $28 million in government concessions, but more recently you've talked about that deal being worth, say, $30 to $40 million. So what's the extra money for?

TONY PAPACONSTUNTINOS: Well, in terms of the cash aspect, I haven't got a fair and square number rounded off. I haven't done the numbers. I'm only going on my own experience. If you have a look at the accelerated depreciation and the value of that to new tonnage that will be introduced and the Ships Capital Grants Act as well, taking also into account the aspects of the PAYE, it will certainly hold Australian shipping in good stead. But one other thing that needs to be understood is that the loss of Australian Stevedores from ANL certainly put a hole in what the overall value of ANL was. And I think what we've been able to recoup by way of concessions from the Government will fall short of meeting the loss from the sale of Australian Stevedores.

KERRY O'BRIEN: It's very much a case of you scratch my back and I scratch yours deal, isn't it? The shipowners first tried to get tax concessions about six years ago. You bung on a strike and threaten trouble at the Labor conference and suddenly you've got this $30 million deal.

TONY PAPACONSTUNTINOS: Well, I don't think it's a question of scratching one another's backs. The shipowners weren't in isolation of asking for those particular things. I recall some years ago - as a matter of fact in the late '70s - when a Liberal government was in office and Sir John Crawford was put in to look at the shipping industry and restructure the shipping industry, and there were various things that were put by both the unions and also the employers, because they were things that were available to other operators that we were competing against, and it's been going on for quite some time.

KERRY O'BRIEN: Well, very briefly, how close are you to putting a consortium together? Who are the likely players in that consortium? And how tough do you think that the tendering process is likely to be for ANL?

TONY PAPACONSTUNTINOS: Well, in terms of the players within the consortium I can't disclose that, obviously for commercial reasons. But in terms of putting it together, I'm fairly confident that we'll have it .. the consortium in terms of a package to be able to tender in an open tender process within about eight weeks.

KERRY O'BRIEN: Okay. John Howard, do you have any problem with a union consortium buying ANL, if they do win a public tender?

JOHN HOWARD: No, not at all. They've got just as much right as anybody else. I have some worry about the Government continuing as a minority shareholder, because if it does it will be subject to a combination of industrial and fiscal blackmail down the track if things don't go well. I mean, can't you imagine in 12 months time if ANL is not doing well and if the union consortium is successful, inevitably a demand will be made of the Government, as the minority shareholder, to protect its investment, to put some more money into ANL. And if it doesn't, there could be a threat of another strike. And you could see the Government, thereby, getting on the treadmill of sinking more and more money into ANL in order to protect its investment and being particularly vulnerable from the industrial point of view to that kind of pressure and that kind of blackmail.

But as a matter of principle, I have absolutely no argument. I'd have no right to have any argument with a union winning a fair, open public tender.

KERRY O'BRIEN: Well, I'll come to Tony Papaconstuntinos in a moment about that other element of your concerns about a blackmail, but in your terms is ANL salvageable, and for that matter is it worth saving? How important is it that we have our own shipping industry, or is it all about competition?

JOHN HOWARD: Well, as to the salvageability, I'm reminded of Winston Churchill's famous remark about the Soviet Union. I mean, it's a riddle wrapped in a mystery inside an enigma. I mean, I don't know. I don't think anybody knows. We had this extraordinary situation where the Audit Office in October of last year signed off on the company being fairly stable, and then within rapid succession in August you get a good submission to the Audit Office, and then over a weekend you get the due diligence report by Price Waterhouse and Salamon Bros which suggest otherwise. You had the Minister doing this backflip with double pike saying on the one hand you couldn't give it away, and the next breath it's good.

Now, as to the question of whether we should have a national shipping line or not, I mean the answer to that must be: it depends on the price. I mean, you can never say that it is always in the national interest to have it. As I understand it, ANL has about 30 per cent of coastal shipping; it has about 1.5 to 2 per cent of international trade, as far as Australian exports are concerned. That's not very big. I find it hard to believe that with 1.5 to 2 per cent it has an enormous impact on international competition. There is little doubt that despite the fact that there has been a reduction in manning levels on Australian vessels, that if you take the crew to berth ratio, which is a more contemporary way of comparing international shipping lines now, we are still behind the OECD average. To maintain one seaman, we have to effectively have 2.1 going over a given period of time. The OECD average is 1.6, and this is a direct consequence of the relatively better conditions.

Now, I'm not .. I mean, nobody begrudges, looked at in isolation, good conditions for Australian workers or Australian seamen, but the fact is that we are competing against OECD shipping lines that have a mixture of national and international crews, and you don't compete against your past in these things; you compete against your present. And it's not a sufficient answer to say: Well, it's more efficient the manning levels are down and this is improved on what it was in the 1960s or '70s.

The ultimate judgment is how is it going compared with the lines and the nations against which we have to compete in the 1990s? And that really is the simple .. well, that's not a simple answer, it's a very long answer, but that is the answer to your second question. I mean, it depends on the cost. If the cost is a bottomless pit of more and more money being sunk in, then the answer is no. If, on the other hand, this can work, I will be the first to congratulate Mr Papaconstuntinos and his colleagues for making it work, because I would like to see an ANL. But it's a question of the price you have to pay and whether you are prepared to treat other sections of the community in the same sort of manner that the shipowners and the MUA has been treated on this occasion.

KERRY O'BRIEN: Tony Papaconstuntinos, we'll come to those more complex points of John Howard's, but firstly his expression of concern that if you're in business with the Government that that will give you the scope to effectively blackmail them with industrial muscle in terms of they're protecting their investments in the future.

TONY PAPACONSTUNTINOS: Well, it's not a question of blackmail. We've never set out to blackmail anyone, be it the Labor Government or any previous Liberal Government. The bare facts are that it's wise and it's certainly important to have at least some government involvement in a national flag carrier, as ANL is considered to be the maritime flag carrier of Australia, equally as Qantas is the aviation flag carrier. It's wise to have some Government involvement because, internationally, people feel more safe to be able to do business with a particular carrier that has some government involvement. You have a look at a line like Orient Neptune Line, which is by and large owned by the Singaporean Government, it's been able to effectively operate internationally because it's considered that it's stable, that there is backup, et cetera.

Now, in terms of what John said earlier that there's going to be a bottomless pit where you have to put money in after money for ANL, I don't believe that to be the case. For years the Australian National Line when it was initially established, it was providing services to the most isolated regions in Australia and assisted in the development of those regions. And the Government provided the capital for the operation of those ships, principally because the private operators didn't see those trades as being profitable. And on that basis, there had to be some sort of service, because there was no road or rail.

Now that the circumstances have changed within the '80s and the '90s, equally, the unions, the employers have changed effectively as well, and Australia requires a national flag carrier or shipping company, because getting back to the point that John made, if there was no ANL, what would there be for other Australian operators to retain the Australian flag and employ Australians? They wouldn't. Obviously they'd flag out and do just about everything else that other foreign operators have done.

KERRY O'BRIEN: But on the question of competition, particularly international competition, how can ANL with its four ships internationally compete with those shippers who are operating under flags of convenience with the big Russian fleet and, particularly, the Chinese that are belting us around at the moment? How can you hope to compete? And if you can't, what's the point?

TONY PAPACONSTUNTINOS: Well, there's more than four ships trading internationally that ANL has; there's six that I know of that are in regular trades; and there's others within the fleet that trade internationally from time to time, depending on the availability of cargo, et cetera. Now, in terms of Cosco and some of the other commonwealth of independent state operators, they are out there trying to compete for as much of the hard currency as they possibly can get, but that doesn't necessarily mean that you can't effectively compete against them.

Now, other operators that are in competition with them, they're subsidised to some extent either directly or indirectly by their governments, and they've been doing it for years. It's now the very first time that we've been given an opportunity to be able to effectively compete with them, without our hands tied behind our backs. Now, you're not going to get away from the fact that the hard currency is what's driving Cosco and the other operators and the aspect is, and the question that most service users ask, is it wise to ship with these particular people or is it wise to ship with others, such as ANL and other more reputable operators where they know the cargoes would be safe? They know their cargoes arrive at the other end, and it's a door-to-door service as opposed to a mishmash operation that Cosco and others provide at a very cheap rate.

JOHN HOWARD: Could I just pick up that last point that Tony made about the competing, the cost disability. The Taylor report which has sort of been the benchmark in the whole of this debate, which examined the things that made ANL uncompetitive, calculated that there was an uncompetitiveness factor of about $2 million a ship. And it said that you needed to do a number of things: you needed to have tax concessions; you needed to have accelerated depreciations; you needed to have company employment; you needed to have a second register; and you also needed to do something about cabotage which is, in a sense, unrelated to the direct ANL problem. Now what has happened is that the Government has picked two of them - you know, I have to say the politically easy ones - and that is the PAYE tax concession and the accelerated depreciation. Tony's union has said no, a flat no to company employment and certainly a no to a second register. So, you really have a situation where the sort of the arms' length Industry Reform Authority - the independent report that everybody has been bouncing off in this debate - has said very clearly you've got to address all of those things.

Now, if the Government had addressed all of them, then our attitude might be different, and anything that we've ever said in the past about financial assistance has always been in the context of there being an aggregate package. Now, it seems to me self-evident that if you don't tackle the harder industrial relations issues, that within a short period of time you're going to be back at the negotiating table and you're going to have this pressure to give us more money to save the previous investment. I think that is the great dilemma that most people see in the deal that's been stitched up, and that's why we're cynical about it.

KERRY O'BRIEN: Well, what about that Tony Papaconstuntinos, that you've taken a part of the recipe and discarded the rest?

TONY PAPACONSTUNTINOS: No, that's not correct at all. Firstly, I dispute the gap - the competitive gap that was used in the Taylor report in terms of the $2 million. The $2 million has come about by way of comparing an Australian vessel with a flag of convenience vessel. Now, there's no way known that Australian seafarers or any seafarers from national flag carrying countries can compete with wages such as $US100 a month, as Martin Boon(?) had pointed out, and some of the deplorable conditions that they live in. And the mere fact of the matter is that those operators who register their ships in these tax havens, they don't meet the national, let alone international conventions, et cetera. So, it's not a fair comparison to say that the competitive gap is $2 million; it's well less than that. Now, it has been....

KERRY O'BRIEN: But there is a reality, isn't there? There is a commercial reality about that, and even countries like Britain have now adopted second registers.

JOHN HOWARD: That's right.

TONY PAPACONSTUNTINOS: Well, the reason that Great Britain has adopted second registers is most of their vessels are flagged out to flag of convenience. Second registers came about to give some sort of respectability to flag of convenience, bring people back to their national flag state. There is some sort of contribution now made back into the economy. Now for Britain and other countries that initially let all the shipowners go, they're now wooing them back because of the economic loss that they incurred, and one way to get them back was by way of second registers. As a matter of fact, in Sweden, the second register there provides various incentives to the shipowner by way of PAYE tax incentives, accelerated depreciation, ship construction bounties, et cetera, et cetera. And there's greater incentive for those operators, under their second registry that employ nationals as opposed to non-nationals.

JOHN HOWARD: I don't mean to interrupt, but would you accept a second register?

TONY PAPACONSTUNTINOS: No, I don't. I don't, John, because....

JOHN HOWARD: But you've just lauded the virtues of it in relation to other countries. I'm puzzled.

TONY PAPACONSTUNTINOS: Well, I just gave you an example of what there is actually there in the marketplace internationally. Now just because other countries actually create a situation of a second register doesn't mean that it's good. One thing that I think that Australia needs to be able to make its own mind on: are we going to be setters of examples or whether we're just going to be mere followers of various other things that have been put into place, and finding out down the track that 'Oh yes, that there was a mistake made but we did it because we followed suit with another country'. Now, I don't believe that that should be the case. We're smart enough and we're certainly experienced enough to realise that Australia as an island continent is vastly different to those countries in the continent of Europe that are fairly easily accessed by way of road, rail and also in short sea distances. Australia is in a vastly different position.

KERRY O'BRIEN: John Howard, do you make any concession at all, do you make any allowance for Australia's geographic position?

JOHN HOWARD: Oh, well, yes, but in a sense that reinforces my point. The fact that we often have to send exports long distances means that the cost of shipping is more important to us than countries that have to send their exports short distances. Look, I don't like a lot of the things that happen in international shipping and I sympathise with Tony and his members in their distaste for some of the practices. But, I mean, we ultimately have to live in a real world of very fierce competition and you won't sort of change that simply by wishing it were otherwise.

KERRY O'BRIEN: But in terms of the shipping around Australia's coastline where you would want that to be deregulated and you want all the ships of the world to be able to trade around Australia's coastline with whatever crews in whatever conditions and whatever appalling wages that....

JOHN HOWARD: No, no, well, I don't. It is not our policy to say whatever conditions is not .. it's not....

KERRY O'BRIEN: No, no, I'm not suggesting....

JOHN HOWARD: No, no, no....

KERRY O'BRIEN: But if you talk about realities?

JOHN HOWARD: Yes, well, but not an utterly open-ended situation. But once again you have to look at the consumers of shipping services and the only way you can get a realistic handle on this is to look at the comparative cost of shipping things on ANL and other Australian vessels and international vessels, because at the end of the day that is what Australian exporters and Australian importers are concerned with. And if I can just go back to the Taylor report, I've had a look at it, with respect, I can't agree with Tony that it was just a question of looking at flags of convenience. I mean, they were talking about the totality of our competition, and they worked out a figure of $2 million, and that cost disability could only be removed by doing all of those things, and not just picking the politically and industrially convenient eyes out of it and saying we'll give you the PAYE tax, but we won't ask you to do anything about the crew to berth ratios, we won't ask you to do anything about the others [...], won't ask you to address the second register. I mean, it's ironic that this strike should have occurred at a time when there was great national focus on the plight of our farmers. I mean, for 30 years we have said to Australian farmers....

KERRY O'BRIEN: Very briefly, John, because we're nearly out of time.

JOHN HOWARD: ....that you have to live in a very, very difficult environment by becoming more efficient. We don't give them the subsidies that other farmers have got, and yet we seem to be willing with this particular industry to give it what it wants without obliging it to accept the competitive regime that other countries have imposed upon their shipping industries.

KERRY O'BRIEN: Tony Papaconstuntinos, a very brief response, if you would and we're out. Very brief.

TONY PAPACONSTUNTINOS: Well, in terms of the Ray Taylor report, I indicated that it was not comparing apples with apples. We were compared with flag convenience operators, not OECD level. In terms of the farmers, as John indicated, we've never objected, nor would I object, to farmers getting assistance, be it by way of some of the difficulties that they've got now. But farmers have received a substantial amount of support for years in terms of fuel assistance and various other depreciation aspects on their equipment, so on and so forth. Now, you can't .. we want, as far as the maritime industry is concerned, is some assistance also because it means a great deal to Australia as a community.

KERRY O'BRIEN: Okay. We're out of time, I'm afraid. I'm going to have to cut you off, but thanks very much to both of you.