by Michele Labrut, Panama correspondent | 19 April 2017

There are no major festivities planned to mark the occasion, but nonetheless, the Panama flag’s centenary offers “food for thought for what we want to do next, not only for maintaining our leadership position, but for improving performance and pursuing objectives in the long run”, says the country’s minister of maritime affairs and Panama Maritime Authority (AMP) administrator Jorge Barakat Pitty.

Panama had been an independent nation for just 14 years when Law 63 was enacted on 15 December 1917, creating the national registry for merchant ships – and it is very unlikely that the politicians of that bygone era ever imagined Panama would someday reign as the world’s largest ship registry.

In its early years, Panama quickly became a favoured flag for US companies and shipowners in search of a tax-free business environment. It became more popular during World War II as a neutral ‘fleet of refuge’ for vessels of Allied countries, including those of the US. During the post-war years, Panama increased its tonnage even further with the addition of so-called ‘Liberty ships’ that were mass-produced during the war.

Following new regulations drafted in the 1960s and 1970s by the recently created International Maritime Organisation (IMO), the Panama registry adapted, conducting a complete makeover and adding numerous features. It became the world’s largest registry of merchant ships in 1993, a title it has held ever since.

Today, with more than 8,100 vessels totalling over 220 million gt, the registry is an important contributor to the national coffers, bringing in USD162 million in fees and taxes per year as well as an additional USD250 million in annual indirect economic benefits, including revenues to the legal sector.

The road to success has not been without controversy. The register is handled by a government entity that changes hands every five years. This is a cause of uncertainty among some customers and critics, but Barakat counters that it gives “a strong backing to our customers who feel they are supported by a state and able to rely on embassies and consular offices around the world”.

Many of Panama’s lawyers periodically espouse the idea that the register should be independent and free from government interference, but Barakat maintains that the advantages of being within a government body outweigh those of using a private concessionaire. “The key to success is to better train our people and give them job security, modernise our systems, and directly market our services to the industry,” he explains.

“We have made progress and transformed the AMP into a modern, transparent and open entity with a culture of service that is responding to the demands of the international maritime industry – but there is still much to do to maintain our leadership.”

Barakat has a policy of regularly meeting with his staff, customers, and ship owners around the world. “I believe in direct contacts that create a personal relationship with our clients and shipping lines,” he tells Fairplay. “If we meet face to face, it is almost certain they will tell us what’s good, bad or ugly, what they need and want us to improve. It has given us very good results. Moreover, we have been able to cut some red tape thanks to their suggestions and they appreciate visits from the top executives, particularly in Asia and Europe.” 

Barakat is a great listener and his cosy and receptive style is well-received on both domestically and overseas. During his tenure, he has established co-operative agreements with other maritime administrations and re-enforced collaboration with the IMO and the maritime administrations of the US, Europe and Asia. And as a litigator and maritime lawyer who is acutely aware that safety is a key factor for the register’s customers, he has placed particular emphasis on technical aspects, multiplying the register’s technical offices [known as Segumar] worldwide and upgrading the digitalisation of all systems.

“Today, whether you are a seafarer [there are around 600,000 seafarers on Panama-flagged vessels] or a ship owner, a ship manager or lawyer, you can obtain your certificates, make all transactions and pay all online,” he says. “To me, it is the most efficient manner to combine transparency and unified access, while we keep the edge on competitiveness. After 10 years in the making and several unsuccessful trials, we can now say that we have an all-digitalised process for ship registration and seafarers.

“I also believe in technology for breaking the notorious chain of corruption and influence-peddling that prevailed in past administrations [for concessions and seafarers’ licencing] and [I believe in] a constant dialogue with the private sector, which did not happen before,” says Barakat, who adds, “If changes have to be made, they should be done in consultation with the private sector instead of relying on who has more access to the president’s inner circle. That eliminates favouritism in decision-making.”

When he was deputy administrator of the AMP in 2009–11, Barakat was called upon to put his master’s degree in negotiation, mediation and arbitration into practice. His task: to negotiate, after others had failed, with Panama’s private port operators and obtain an increase in the container movements fees. “I explained to them the purpose of the proposed increase and that it was going to finance social projects of importance, starting a mutual public-private compromise. That turned into the first successful dialogue between the two sectors, and the ports accepted an increase to USD12 from USD9 on each container move.”

Under the present structure, the AMP oversees the operations of a number of small domestic ports. However, since the 1990s, Panama’s container terminals have been privately owned and run through long-terms concessions.

This year, the AMP is moving forward with a major new port project of its own: the construction of a cruise terminal on the Pacific entrance to the canal. “After talking with the principal international cruise operators, we decided that we will administer it and keep it open to all cruise lines without restriction,” he says, noting that “we have signed a co-operation agreement with the Hamburg Port Authority, which will provide assistance and operational know-how”.

“It is part of the vision I have for the AMP,” he explains. “If we set up an adequate framework, the entity will become an administrator of our main resource: our strategic location.

“I am reluctant to talk about legacy. It seems pompous. But when l finish my administration, I want to leave behind a modern ship registry that is well-adapted to the technologies of the 21st century and a competent and technical staff who will have nothing to learn from a privately-owned register in terms of marketing and the latest novelties. And of course, I want to leave behind a living entity that will strive for decades in the future, keeping its place of world’s leading international register.”