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Wealth Marine








He looked down into the water and watched the lines that went straight down into the dark of the water. He kept them straighter than anyone did, so that at each level in the darkness of the stream there would be a bait waiting exactly where he wished it to be for any fish that swam there. Others let them drift with the current and sometimes they were at sixty fathoms when the fishermen thought they were at a hundred.

But, he thought, I keep them with precision. Only I have no luck any more. But who knows? Maybe today. Every day is a new day. It is better to be lucky. But I would rather be exact. Then when luck comes you are ready.

Ernest Hemingway

The Old Man and the Sea, 1952


Modern shipping and shipbuilding are improving in the partner relationship on the basis of economic planning and sustainability. The shipbuilding industry is developing in partnership with the shipping and on the basis of its own investment policy and shipping companies create demand for shipbuilding.
        The technological advances in the maritime commercial shipping are the assets turnover for fleet renovation and replenishment. At the level of each shipping company fleet renewal is conducted using their private capabilities and partnerships, this requires planning.
        Usually to replenish fleet the new ships are of interest. In any case, whether the replenishment is provided by newly constructed vessels or by vessels bought at the second–hand market, shipping companies need to borrow the financial resources as their own funds invested in the vessels in operation, and the repayment of the loan is made at the expense of the profit from operations of the shipping company and the sale of the vessels which are being taking out of service.
        To replenish the fleet, first of all, it is required to evaluate the assets property complex of the shipping company and all short term liquid assets. The estimated values are the benchmarks to get access to credit resources, to guarantee of the leveraged funds liquidity and to show the amount of additional funding for the replenishment of the fleet that the shipping company can spend.
        The value of shipping company is the original data to determine the optimal characteristics of the vessel in order to manufacture (or purchase on the second–hand market). Various options are possible here: either manufacturing of the maximal size vessel within limit of the shipping company financial capacity or the construction of several, more compact batch identical or different vessels – depending on the evaluation of the options from the economic point of view, keeping in mind the interests of investors, i.e. shipping companies.
        This way the order for shipbuilding is generated in open economy and financial resources are promoted of toward moving production of the marine industrial resources– the commercial vessel replenishment or new vessels and the marine engineering. And this interaction takes place not only in shipping and shipbuilding, but also in other sectors in the marine resources development, and, economic activity in these spheres is of the global international nature.
        The number of project subjects for the commercial vessels batch production or the choice of the commercial vessels’ characteristics for the commercial order at the second hand market do not have the systematic approach for their solution only on the basis of the physical concepts.
        For example, if the total sum of investments is set within the limits of financial possibilities of the investor it is possible to define the number of vessels of certain type and their main characteristics for the commercial order only from the economic point of view. And, the set often has such main characteristics, as the vessel size, in particular, deadweight or displacement, capacity of holds, the main engine power or the vessel operational speed, and also the age of the vessel, if purchasing is planned at the second hand market.
        It is clear, that similar subjects can be referred to the vessel designing subject as the results are almost the project characteristics. At the same time used approaches belong to the applied economic.
        To make a choice and decision concerning the commercial order – to build a new vessel, or to get it at the second hand market and, maybe, not one vessel within the set amount of money, or to choose some more compact vessels of certain class, instead of one large–capacity vessel – all subjects from the considered set and similar ones demand the evaluation and economic efficiency estimation and mast be elaborated systematically.
        At the same time, it is impossible to find the solutions with the determining the basic project characteristics only from the point of view of physics laws in the subjects of the main project characteristics determination that are such characteristics on which the other vessel characteristics and particulars depend physically.
        For example, applying only the Archimedes principle it is impossible to determine the vessel size, or, let us assume, displacement as expressly or indirectly the size of commercial vessel is required to be set, preliminary having determined what the vessel size most effective from the economic point of view within the limits of the investor’s possibilities. And whichever there would be a result of the main characteristics determined using the approaches of applied economics, it is no doubt, that Archimedes principle is observed for a vessel of any class and any size automatically and the variety of commercial vessel classes and sizes prove that fact. The same is true to other existing physical principles essential in the process of finding other characteristics and particulars of commercial vessel, which depend on the main characteristics determined on the basis of an economic evaluation.
        If to assume abstractly that there were no possibilities to determine a vessel’s optimal project characteristics for the commercial order in terms of economic efficiency evaluation among possible alternative approaches there only would be the way to determine of the vessel characteristics by analogy on the basis of prototypes or the expert choice of the vessel characteristics. But these approaches are not systematic.
        If to select general technical and special subjects which are required for vocational training of the expert, who are able to participate in vessel designing and in organizing of shipbuilding production, including methodology of the vessel designing, ship theory and seaworthy properties, structural mechanics, vessel structure and technology of shipbuilding, ship engines mechanics and technology with all variety of their sections, the methods of applied economics intended for determining the vessel characteristics, can be considered as generalization.
        Basically, the purpose of the experts’ activity in economy, management and crisis management, including experts dealing with the estimation of value and efficiency of investments, is to provide the advancement of financial funds into the real economy and industry and service of these processes within the limits of the competence. Moreover, presented issues are not only of interests to the naval architects, marine engineers and experts in economic planning of the ocean development, but also contribute to the expansion of the horizons for engineers and economists working in other industrial sectors.
        Not to mention commercial and professional aspects, it is possible to appreciate the social and the economic significance of the applied expert activity in area of the marine industry and economics by the following criteria.
        First, the activity aimed at determining vessels’ value, marine engineering and other real assets in the property complexes of marine companies, promotes an increase in the economic efficiency of the marine companies by saving working assets.
        The asset value is a competitive economic concept and is formed by the parties (the seller and the buyer) on the basis of a compromise of opposite interests.
        The accuracy and the professionalism of evaluation using the expert methods influence reduction of discrepancies of the market value and the price upon the transaction. This way the parties have both the reduction of losses at possible discrepancy of the value and the price, and excessive incomes, which, in the case of regular activity can be considered a risk factors, and the parties, when they receive excessive incomes, have to accumulate a surplus of working assets for covering losses.
        Thus, if the value was estimated insufficiently accurately the surpluses of the working assets are formed in the non–productive sphere and are spent for the losses covering when are formed the discrepancy of the value and the price of the transaction and filled up at more successful transactions.
        Improvement of the evaluation approaches, development of appraising and improvement of accuracy and objectivity of the professional evaluation favor the improvement of macroeconomic indexes and decrease in risks owing to saving of working assets and opening possibilities for transferring of financial working assets into the productive sphere – in real assets.
        Secondly, applied expert activity in the sphere of efficiency of investments evaluation, in particular vessels and other real assets of the marine companies’ complexes and in the subject field of the real assets characteristics economic optimization underlying the investments planning, is the kind of the innovative activity.
        In the terminology of applied economics the innovative activity means the consecutive realization of the innovative projects which are the version of investment projects and investment of the financial assets into the real assets (unlike financial investment projects when the real assets are sold, i.e. invested in the financial assets). Usually all investment projects pass through innovative and financial stages.
        When there are sufficient reasons in the financial stage the crisis managers can also take part in this process and try to transform the financial project of the real assets selling into the innovative project, defining corresponding strategy of the marine company and involving the additional resources, for example at the expense of inefficient assets selling.
        Social and economic advantages of innovative expert activity on to efficiency evaluation of vessels and other real assets of the marine companies’ complexes are that conditions of the financial assets advancement into the industry of marine technology construction and its productive operation for the ocean resources development are formed.
        The basic function of experts in the field of the value and efficiency estimation of vessels, marine engineering and property complexes of vessels and other real assets of marine companies in most general statement is expert service of the financial investments advancement processes into the real assets that are useful for economic development.
        For fulfillment of this function experts would possess comprehensive knowledge in the subject of the applied economics and professional skills in the field of operating company (business) evaluation, and also special knowledge concerning estimation of efficiency and value with respect to definite classes of marine industrial objects made and used with a view of investors’ access to the marine resources.
        The language of applied economics is mathematics, so appraisers and economists would understand it well within the requirements of university economic education. The necessary knowledge of mathematics covers a number of applications of mathematical analysis: lines and sequences, linear derivative equations, probability theory, mathematical statistics. Algebra and theory of numbers in the economic study are applied less than applications of mathematical analysis though there are economy sections to which algebraic matrixes are actively applied.
        Studying of terminology and general concepts of shipping, shipbuilding, fleet maintenance service also is required. In particular, it is necessary for process of collecting data and information used for identification of the evaluated object – the vessel or the asset of the marine company, and also for the adequate mathematical models formalization.
        While presenting methodological foundations of determining optimal characteristics of marine engineering in wide range – from commercial vessels to marine companies property complexes of assets and the industrial development trends with the help of the systematic approach and economic efficiency evaluation, that, in its turn, is inextricably linked with the applied expert activity in the area of creation and development of engineering and technology for ocean research and development, when this activity together with dedication can become wonderful and exciting high–paying profession, which in addition to material well–being satisfies the person’s creative inspiration, one would be warned against the hasty and superficial approach. This activity requires a fundamental education, practical experience and broad–outlook, otherwise, one–sided and fragmentary perception may cause errors with unpredictable consequences, which under certain circumstances could be regarded as large scale financial violations.
        It would be added, that professional grounds of expert activity in value and economic efficiency estimation of investments into development of marine resources (including ocean resources) are insufficiently developed in the scientific and methodological literature and systematization of the given material is beneficial itself.
        The book is aimed at expanding experts outlook in the field of applied economics on the industrial development of marine resources (including the development of the ocean resources) and construction, and also on the productive operation of marine engineering and ocean technology, at developing professional knowledge and forming applied skills in the field of evaluation and economic efficiency estimation of investments in construction of marine engineering, vessels and in creation of the property complex of vessels and other real assets of the marine companies’ complexes, and also evaluation of the investments efficiency into productive operation of these assets.
        The general ideas of evaluation of commercial vessels, marine company’s assets and ocean resources are as follows:
        – Marine resources are not only biological resources or minerals, but the whole set of useful for the investor properties of the marine environment, not only physical properties of the aquatic space but the ocean based activities in the ocean and on the coasts, so marine resource evaluation can be made only in terms of technological and economic opportunities for their sustainable development;
        – Initial data for pricing in shipbuilding, shipping and in other industries of the ocean development serves the evaluation of the ocean resources;
        – Project characteristics for selection a vessel as order for its construction or manufacturing of other marine engineering and optimal structure of the property complex of marine company are the subjects of economic viability within the financial and resource constrains of the investor;
        –  Optimization of project characteristics and particulars of the marine engineering, in particular the commercial vessels, or the structure of marine company’s property complex should be implemented systematically, and the object selected in analyzed as a system of elements taken separately, and there are new features inherent in the system of elements and missing in parts, and for marine engineering, commercial vessel or marine company complex the new properties are connected with the investor’s access to marine resources;
        – Commercial vessels, the company’s property complex or the individual assets regardless of the subject assignment are complex objects of valuation and economic effectively estimation, and they include three groups of elements: marine resources (pricing strategies); the marine technology for the investor’s access to the resources, as well as the set of the investor’s interests and rights – as a separate group of the elements, while the complex structure of marine facility in the temporal dimension means covering general repeatable process cycle – production, including designing, productive operation for the development of marine resources and recycling;
        – Systematic approach and, in particular, the dialectical inexhaustible levels of division of integrated marine facility into the elements, and further division of the elements, as well as emerging of inexhaustible levels of aggregation of elements in the complexes, lead to a hierarchy of design subjects of the lower and upper levels in relation to the task at hand, as well as to definition of the constrains and the systemic concepts of options comparability – a combinations of the vessel characteristics or variations of the marine company complex structure while optimizing by economic criteria;
        – Economic criteria for the choice of project solutions conducted with the minimization of the investor’s expenses are characterized by the social and economic contradictions and with the systemic use can lead to a reduction of partners incomes and oppression of economic environment; the ecological contradiction of criteria based on maximizing incomes and profits, is overspending of marine resources when we take into account the full range of properties of the marine environment useful for the investor;
        – Balance of the expenditures and the savings of marine resources and economic environment in process of designing marine engineering and creating marine companies’ complexes correspond to the application of criteria based on maximizing of the marine resources contribution to the value of the property complex;
        – At the innovative stage of investing in marine industrial activity, particularly at the stages of commercial vessel designing and manufacturing or while creating of marine company’s complex, with the account the excess of marine resources available for the development over the current functional abilities of their development and the excess of the innovative strategy value over the financial resources value the optimality of the projected vessel characteristics or the optimality of the created marine company structure are the own internal properties of that objects.
        It should be noted that in all areas of the marine industrial activities economic estimation of value or efficiency in the modern understanding of the subject would be haphazard without explicitly or implicitly of marine resources factor, as well as in commercial property valuation of buildings it does not make sense without evaluating of built–up area. The same should be taken into account while developing standards, professional regulations, training programs and qualification criteria.
        For creation of economic strategy for ocean resources development, including the planning of investment projects and organization of the maritime enterprise, for conclusion of commercial contracts and investments in marine engineering, particularly in commercial vessels manufacturing, for elaboration of Federal Programs of marine industries development, and for another typical subjects solved by the applied economics approaches, evaluation of marine resources and a systematic approach application are required as the basic methodological assumption.
        Gathering of the initial material was carried out almost during the practical activity while working under contracts with the marine companies operating in the Far East of Russia. At a stage of collecting of initial materials the author co–operated with experts of some companies which carry out the marine industrial activity, such as: JSC Preobrazhnskaya Base of Trawling Fleet, JSC Dalmoreproduct, JSC Aquaresources, JSC South Sea Base of the Fishery fleet, JSC Far East Base of Fishery and Processing of Seafood, Shipping and Fishery Company «Polar» LTD, Fishery Company «Sea» LTD, JSC TURNIF, JSC Dalryba, Vladkristall LTD, JSC Dalrefservice, JSC Shipping Company «Berkut», Sakhalin Rybakkolkhozsoyuz, JSC Port Vanino and a number of others, and also with experts of the commercial banks which are investing into the marine companies and development of ocean resources: JSC Gazprombank, JSC Savings Bank, JSC VTB24, JSC Promsvyazbank, JSC Rosselkhozbank, etc.
        The book is the personal initiative research of the author, generalization of gained in over twenty years practical experience and was not created by the commercial order. The editing of the book was carried out in 2009 and 2010 in the Canadian Victoria. This city is the capital of British Columbia, located in the south of the Vancouver Island and characterized by good development of the marine industry. Besides the geographical location that gives an to rich sources of the various marine wealth, including those that are mentioned in the book, the city has a high level of industry and technology, and also science and education system. The successful industrial organization with the support of the governments of Canada and British Columbia makes it possible the progress of the innovative approaches of the ocean resources and wealth development.
        To study the subject presented in the book, the reader should possess comprehensive knowledge of economy and the theory of an evaluation which are disclosured in the books of the Russian scientists A.G. Grjaznova, M.A. Fedotova [3], S.V. Valdajtsev [1], E.I. Tarasevich [5], etc., and also the American experts: G.M. Desmond, R.E. Kelly [2], J. Friedman, N. Ordway [6], G. Harrison [7], S. Pratt [4] etc.
        With respect to the marine industry the important contribution to the development of applied economics approaches in Russia was made by L.B. Breslav [8, 9],V.I. Krayev, A.A. Pantin [15, 16], V.P. Sokolov [17], N.P. Ljubushin [18] and several other experts.
        The textbook is the author relies on methodical subject and based on the scientific researches and the author’s experience: a number of the general ideas of predecessors in the field of marine engineering designing methodology, among which are Russian professors: V.M. Pashin, B.A. Tsaryev, A.N. Vashedchenko, G.F. Demeshko, I.G. Zakharov, etc.
        When eorking on the book the author was inspired by the experience of the known American expert Dr. J. Friedman, who has published a number of the professional books on applied economics and methodology of real estate evaluation, with whom the professional relationships are maintained.
        The author feels the support of Russian Society of Appraisers administration, in particular vice–presidents I.L. Artemenkov and E.I. Neumann.
        At different stages the author received assistance of colleagues from Far East National Technical University (Vladivostok, Russia) and National University of Shipbuilding (Nikolayev, Ukraine).


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