A maritime industry in a landlocked country: is this really a sound idea? Funnily enough, it just might be.
Not so long ago, the Luxembourg government decided upon a number of priority sectors to diversify its financial market-dominated economy. The logistics and shipping sector were amongst those selected for special attention.
As a flag state, Luxembourg has considerable experience in the registration and administration of seagoing ships and is seen as a reliable partner by players in the maritime industry. As a result of sustained efforts and a continuous drive for quality, more than 250 seagoing ships now fly the Luxembourg flag and some 300 affiliated companies are registered members of the shipping sector. A number of shipping companies have chosen to significantly expand their Luxembourg operations over the past few years, contributing to the strengthening of the maritime sector in the country.
A competitive edge
In the not too distant past, the European Commission started to put pressure on member states to re-flag their ships under European regimes so as to remain eligible for certain tax treatments. When coupled with Luxembourg’s business-friendly environment and the government’s willingness to develop this sector, this could constitute a unique opportunity to give a significant boost to Luxembourg’s maritime industry. In addition to the fact that Luxembourg has proven the quality of its ships by now appearing on the much sought-after Paris White List, there are many other factors giving Luxembourg an edge: the country is ranked highly in terms of stability, safety and security and has a track record of providing sound infrastructure for businesses in this sector. Many industry associations, like the Cluster Maritime, exist to support companies seeking to establish operations in Luxembourg.
Opportunities for financing
One of the main challenges for the shipping industry worldwide is the availability of finance. To date, the financial crisis has already led to a severe shortfall in financing for new ships and operations. Almost all shipping companies have been affected and face serious issues, to the extent that some may be forced to close down their operations. As a long-time financial hub, Luxembourg provides a variety of possible sources and instruments of finance. Besides being the leading location in Europe for investment funds, Luxembourg is home to numerous banks and other financial institutions that are able to serve this industry. Walter Koob, Audit Partner at KPMG Luxembourg, recently published an article on this subject in the Börsen-Zeitung, the main German newspaper for financial markets. The article explains the many finance options on offer and in particular ship mortgage bonds and specialized investment funds. The present surplus liquidity, searching with visible impatience for higher return-investments, might contribute to promote ship finance in Luxembourg.
New favorable regime: the Special Limited Partnership (SLP)
Walter also points out a further advantage for those coming to Luxembourg: a newly introduced Special Limited Partnership. This new regime aims to enhance the existing partnership system by allowing for greater legal flexibility as well as full tax transparency. As a result, it may be especially attractive for the abovementioned specialized investment funds and further stimulate new sources of finance.
Luxembourg is currently in a prime position to broaden its economy by embracing the maritime sector. The right infrastructure exists, so all that’s now required is hard work on the part of institutions and the service industry to promote these opportunities to the maritime world!
- Luxembourg, a safe harbor for shipping companies (English)
- Luxembourg,ein sicherer Hafen für Reedereien (German)
- Made in Luxembourg: Limited Partnership