Christakis P. Papavassiliou, Managing Director of shipping and freight forwarding agent Shoham Cyprus Ltd, explains what sets Cyprus apart in the transshipment business, the key characteristics of the industry, and what the third generation of a family business needs to know before it takes the helm.
Before going into the economic upswing that Cyprus is experiencing and your insights into the Cypriot shipping industry, we would like to know more about the people behind Shoham and the story of a company created by your father almost 70 years ago.
Shoham is already towards the end of the second generation, and the third generation will take over hopefully soon. My father started the company in 1946, in Famagusta, right after the Second World War. He started this small business, together with his partners, working as a shipping and forwarding agent. The company developed when we became the agents of ZIM Israel Navigation Company Limited in Cyprus. We believe we are possibly the first ZIM agent nominated by ZIM in another country, so our relationship with ZIM is more than a business relationship. Of course things change over the years, and people change; new people come so we adapt ourselves. ZIM is nowadays a big global company – much bigger than when we started – so everything is on a different scale. Cyprus is a small country and we should not forget it because many people in Cyprus tend to forget that.
Despite its small economy, Cyprus has a geostrategic location and has achieved stable economic growth after emerging from economic collapse in 2013, and now it is on a new path of prosperity. What’s going on now from your perspective?
We cannot say that Cyprus has not achieved anything because it’s not true. Cyprus has achieved for its people a good standard of living. It’s not that we don’t have problems, but we have a fairly high standard of living compared with many other countries around us.
The terrible economic crisis that hit Cyprus recently should teach us a good lesson. We must work hard to correct mistakes and introduce changes, structural changes, that will assist the economy to develop in a more orderly and disciplined manner.
Having said that, I am an optimist that things are improving and there is a very simple reason for it. As small an economy as it is, the economy of Cyprus can easily change. It takes a small effort to bring about good results quickly and I think this is what is happening now in Cyprus. So with a little effort and a little focus on the things we should do, soon we should be able to leave this crisis and hopefully return to growth and prosperity.
Coming to shipping and the port industry of Cyprus, as you may know, the government is proceeding with the privatization of the commercial activities of the port of Limassol. In many countries the port privatization process meant labor unrest and long-lasting strikes. For example, the port of Barcelona closed for about a year because of the change. In Greece, more recently the privatization process of Piraeus and Thessaloniki caused about 18 months of strikes. However in Cyprus, the port labor issue has been dealt with in a way that so far we have avoided port labor unrest. We have avoided creating anxiety in the workforce. With dialogue both with the unions and the government, peace in the labor force during this change has been achieved. In Cyprus we have only one major port, Limassol, and being an island, we cannot afford the luxury of closing our ports through strikes even for one day.
Another important factor that we should take into consideration is that the in ports of Cyprus there already exists a high level of private activity by the ship agents with other groups that are involved in the port operations. Privatization therefore is already present and this of course assists in shaping the process. Of course the government is not only interested in transforming the port to a private one, but also to make it a profitable operation for all the stakeholders. And in this regard, Limassol is a good place for investment for other related activities that will yield high revenues.
Do you think that the government is taking the right steps in order to turn Cyprus into an international business hub where shipping aims to play a vital role?
The government aims to bring a lot of work into the port, and in order to do this we must get organized properly and further invest in the port facilities in order to attract transshipment business, and take full advantage of our a geostrategic position in the region and in southern Europe. Especially if we take into account the gas discoveries in our economic free zone and on the coasts of Israel and Egypt.
Certainly we cannot do everything, and we cannot attract all the business of the world to Cyprus because we have decided to become a transshipment hub. On the contrary, we must be aware that transshipment is a very competitive business and certainly the other countries are also interested in it.
What I believe is that we should rather look into specializing in an activity that is “creating and being active in a niche market”, something that we do better than the others, something that where we can add value to the customer. Maybe we’re not the center of the Mediterranean, but we can be the center of our area. If we become a regional hub, and not just one for the whole of the Mediterranean, this will be a successful story for Cyprus. And the time is now. We need to take full advantage of our geographical position and get specialized to provide services to the shipping lines serving our neighbors Lebanon, Syria, Israel, Egypt, the Black Sea, and of course Turkey, when hopefully we shall have the long-awaited solution of our political problem.
This applies not only for cargo and containers but also to the energy sector. The energy locomotive has started to make noise in all the area. We could be developed into a hub for the oil and gas industry. Not only for storage but it can also be for servicing the supply vessels, repair shops, warehouses… This is happening in other parts of Europe. Take for example Scotland: the port of Aberdeen is a major hub for the vessels serving the oil platforms in the North Sea. Here of course we’re not as big, but Cyprus could become one of the service centers for the energy industry of our region.
Of course the other most important maritime services sector in which Cyprus excels – and can develop even more – is that of ship management, where Cyprus is already among the three or four leading centers in the world. This is obviously another big sector which can be expanded.
You have been working in the sector for around 60 years, so from your point of view, which are the competitive advantages that Cyprus should put together for foreign investors, taking into account the intense competition between ports in the Mediterranean Sea?
I believe this is not only a question of cost, of prices, but also a question of efficiency, a question of administration, a question of services given to the various customers. In this respect Cyprus has a significant advantage because as a country we have a high percentage of well-educated people, good working practices, an experienced workforce that can communicate in English, which is the international language of not only business but also shipping. Cyprus can provide good administration, a strong banking sector, and a developed legal system and services. You have to add to this an attractive fiscal regime and services. At the same time, the government should encourage investment in upgrading our port infrastructure. In my view, for all this to work we need to concentrate efforts to succeed in the market niche that is the market of our surrounding region.
And within that market niche, what role does Shoham aim to play? Which services can you offer and how has this company been adapting itself to the new times?
We’re a family company and of course this gives us a special character. We’re very involved and we try to maintain a kind of family feeling among all the employees as much as possible. Our pride as a company is that most of our employees start and finish their career in the company. Of course, shipping by its nature is a business where you need time to learn, you need experience to handle it, and I don’t believe that somebody who comes into a company and stays two years and then goes somewhere else can gain what he needs to be involved in shipping.
I like to describe our company like a family business that deals with the movement of goods and people. This needs a great deal of skill. Logistics, transport logistics, is a fascinating field and we pride ourselves of being experts in this. Tell me from where to where you need to send your cargo and we shall do it for you. We know how to adapt to each client’s requirements through an efficient and tailor-made approach.
The other thing that you must bear in mind is that shipping is one of the oldest activities in the world. From the time that people started moving goods, they always needed a ship, but they also always need the ship agent in various ways. So it is a very traditional profession and also a very conservative profession. Conservative in the sense that we don’t like to change very much, but on the other hand, we are always forward looking enough to be willing to modernize and try better methods.
It is more than obvious that you have strong relations with the French market, not just for being the honorary consul of the Republic of France in Limassol, but also because of the importance of the shipping industry and the ports of Marseille and Calais. Could you tell us about this relation?
As you know, France is one of the largest trade partners of Cyprus. Number five or number six in order of importance. And of course a lot of goods are imported from France. My personal feeling is that there is more to be done. More trade and certainly more synergies must take place. The trade potential between both countries has not reached the optimum.
As one of the pillars of the Cyprus economy is the services industry, we should add value to those services and sell them in the French market, including the tourism market. Cyprus is not a major tourist destination of the French for many historical reasons, but we have everything that a French tourist aims to find when choosing his or her next destination: sun, history, gastronomy, art and a welcoming atmosphere, as most probably you have noticed.
On the political level, the relations are excellent.
One other service sector that can be developed is the maritime sector and more specifically shipping and ship management. Apart from that, education and training exchanges should be further developed.
We have started this meeting speaking about how important for this company has been the family values and about how the new generations will take the lead soon. What do you expect from the upcoming generations and what is the legacy that your sons should give to your grandchildren to make Shoham a prosperous, familiar and resilient company?
That is a very difficult question. I will answer to you in a different way but you will get your answer in any case. Family businesses everywhere can pass from the first generation to the second generation fairly easy because of the parents still being in control. The difficult thing is to pass from the second to the third generation, and there the failure rate is around the 80% if you look at the statistics. It’s very difficult to maintain a family business beyond the second generation and much more beyond the third generation. So it is important to find a formula whereby maybe not the child of the third generation will get involved but only the ones interested.
The other characteristic of our particular family business is that this kind of job has to be done by somebody. It is not like a doctor’s practice that stops when the doctor is not there anymore. If my children do not want to take over the business, somebody else will. The business is there and we have to teach our children to work with it and find the right formula to do it. So far so good, and hopefully, this will continue after the parents are gone. And there’s no reason why not. The important thing is to have a good structure and to get people interested.
Remember what I told you? This business, you live it, you don’t work it. You’re not an employee of the business, you’re part of the business and you live it. In order to be able to live in this business you must start from scratch, from the beginning. If you come from the university with your diplomas and you sit in this office thinking that you are the boss, you are wrong. You must first learn the business from the bottom up. Then you are ready for it. This is what we’re trying to do and this I hope we have managed convey to our young generation.