Boutique yachts refloat age-old shipping industry

TURKEY - When the Maltese Falcon, a ship hailed as the world's largest sailing yacht, slipped into international waters this northern summer from shores near Istanbul, it created a benchmark for Turkish shipbuilding.

Gliding through the Bosphorus Strait, the 88-metre ship, the largest sailing yacht in terms of deck length, displayed 15 square sails on three free-standing computerised carbon masts that rotate to catch the wind.

Giancarlo Ragnetti, chief executive of Perini Navi, the Italian firm that built the yacht in Turkey for venture capitalist Tom Perkins, said: "The Maltese Falcon is a clear example that the Turkish yachting industry is today among the first in the world."

In Tuzla, where the Maltese Falcon was built, cranes crowd out the sky and ships jostle for limited space.

The construction of luxury yachts, chemical freighters and petrol carriers doubled Turkey's shipbuilding export revenues last year to US$1.25 billion ($1.95 billion) from US$685 million in 2004. The lion's share of the revenue came from yachts and transport vessels.

And the industry is expecting another record year in 2006: Turkish shipyards are building 100 ships in the first seven months, compared with 79 in all of last year.

Unable to compete with the sheer volume of Asian shipbuilding giants - South Korea's cheap assembly-line ships account for 35 per cent of all ships made worldwide - Turkish shipwrights have latched on to two advantages to secure their place.

Turkey offers cheaper labour than European countries and it has carved a niche for itself in boutique shipbuilding, providing high-value, made-to-order ships for rich European and American customers.

"Turkey is providing the flexibility of a Western shipyard but at a cost closer to that of China," said Vidar Smines of Ulstein Group, a shipbuilding consultancy.

Exports are on the rise - of the 79 ships made in 2005, 44 were exported and 41 have already been exported this year. But the industry, which has its roots in the Ottoman Empire, has had to overcome some initial reservations and financing hurdles.

Kahraman Sadikoglu, who owns the largest shipyard in Tuzla, said a lack of trust towards Turkish shipbuilding had hampered European investment.

"In the beginning, they didn't believe we could build a ship and we couldn't provide a guarantee."

It used to be difficult for many medium-sized shipbuilders to secure capital for a 10 per cent guarantee of the estimated value of the ship - a condition required by most investors. But that has changed with private credit becoming available.

"It's gotten much, much easier," said Sadikoglu, who restored and leases from the state one of the world's largest yachts - the 136-metre Savarona, once owned by the founder of modern Turkey, Mustafa Kemal Ataturk.

The tradition of building boats along the Bosphorus has its roots in the naval might of the Ottoman Empire, which stretched across seven seas at the height of its power.

Istanbul alone produced 1000 ships a year during the height of the industry around the late 17th century.

The empire's fleet of wooden, wind-powered ships outpaced the naval forces of other powers before losing out to more advanced technologies.

' When the Turkish Republic was established in 1923, shipbuilding was nationalised and reduced to producing ships for a scaled down navy.

Even today most shipyards are too small to make major profits, said Sadikoglu, forcing some companies to go beyond Tuzla.


Ancient mariners

* The tradition of building boats along the Bosphorus has its roots in the naval might of the Ottoman Empire, which stretched across seven seas at the height of its power.

* Shipyards in Istanbul alone produced 1000 ships a year during the height of the industry around the late 17th century.

* The empire's fleet of wooden, wind-powered ships outpaced the naval forces of other powers before losing out to more advanced technologies. Boutique yachts refloat age-old shipping industry

- REUTERS