Q4.

Discuss the advantages and disadvantages of flagging out

Advantages
First advantage of ship flagging out is it only requires initial registration fee.
This allows the shipping company to cover its cost and to make profit. The only fee/tax
has to be paid annually is the annual tonnage tax.
Second advantage is no taxes on the shipping companys profit or fiscal control
by the flag state. The only tax the flag state receive is the subscription tax per net ton
registered.
Third advantage is the shipping company is free to recruit foreign crew which is
lower in laboring cost and hence, maximize the companys profit and revenue.
Fourth advantage is it does not require the shipping company to disclose its
stakeholders and companys audited account. It is to safeguard the company from having
its financial status leaked.
Disadvantages
First disadvantage of ship flagging out is the shipping company is not entitled
for navy protection. If any incidents happened, the company has to settle by itself with its
instruments and staff with no emergency response experiences.
Second disadvantage is cannot fly the flag of state that the ship is built by it. As it
is not home-based registry, it may bring discredit to the naval services and also to the
country.
Third disadvantage is the shipping company may face difficulty in applying the
enforcement of some international convention such as Safety of Life at Sea (SOLAS), as
the requirement or standard may not have been reached at par with their level.
Fourth disadvantage is it may affect the shipping industry economy for a certain
country. As flagging out increase the competitiveness of the industry, the economy will
be fluctuated.

http://www.uni-mannheim.de/edz/pdf/dg4/SOCI107_EN.pdf
https://www.itfglobal.org/flags-convenience/sub-page.cfm
Q5. Explain how could maritime nations overcome the growing trends of flagging out?
Firstly, it can be overcame by increasing the competitiveness of the ship owner
through negotiation and competition in term of manning scale in crew condition,
expertise level, and so on.
Secondly, leeway or freedom to choose between registries should be given so that
the shipping company may not need to be restricted and main registry is not bound to
compulsory.
Thirdly, government can give shipping company some bounty or on grants so that
the operating cost is lowered and letting the shipping company to make profit. These are
all in term of utilities such as electricity, equipment, facilities and so on.
Fourthly, government should revise its taxation on registered ships of the registry
instead of having it fixed and on high charges, for example, introducing tax deduction for
loyalty to the registry for 5 years.
Fifthly, government can introduce long term loan with low interest to help the
shipping company for investing and upgrading its assets or quality in services as shipping
industry is capital intensive.
Lastly, additional/second registration out of main registry should be established
for certain condition. It can be given to the shipping company to have dual benefits while
generating profit to the nation.