In international relations, aid is – from the perspective of governments – a voluntary transfer of resources from one country to another. Aid may serve one or more functions: it may be given as a signal of diplomatic approval, or to strengthen a military ally, to reward a government for behaviour desired by the donor, to extend the donor's cultural influence, to provide infrastructure needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial access. Countries may provide aid for further diplomatic reasons. Humanitarian and altruistic purposes are reasons for foreign assistance. Aid may be given by private organizations, or governments. Standards delimiting the types of transfers considered "aid" vary from country to country. For example, the United States government discontinued the reporting of military aid as part of its foreign aid figures in 1958; the most used measure of aid is "Official Development Assistance". The Development Assistance Committee of the Organisation for Economic Co-operation and Development defines its aid measure, Official Development Assistance, as follows: "ODA consists of flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, b) it is concessional in character and contains a grant element of at least 25%."
Foreign aid has increased since the 1960s. The notion that foreign aid increases economic performance and generates economic growth is based on Chenery and Strout's Dual Gap Model. Chenerya and Strout claimed that foreign aid promotes development by adding to domestic savings as well as to foreign exchange availability, this helping to close either the savings-investment gap or the export-import gap.. Carol Lancaster defines foreign aid as "a voluntary transfer of public resources, from a government to another independent government, to an NGO, or to an international organization with at least a 25 percent grant element, one goal of, to better the human condition in the country receiving the aid."Lancaster states that for much of the period of her study "foreign aid was used for four main purposes: diplomatic, humanitarian relief and commercial." Most official development assistance comes from the 30 members of the Development Assistance Committee, or about $135 billion in 2013. A further $15.9 billion came from the European Commission and non-DAC countries gave an additional $9.4 billion.
Although development aid rose in 2013 to the highest level recorded, a trend of a falling share of aid going to the neediest sub-Saharan African countries continued. Official development assistance contributed by the top 10 DAC countries is. European Union countries together gave $70.73 billion and EU Institutions gave a further $15.93 billion. The European Union accumulated a higher portion of GDP as a form of foreign aid than any other economic union. European Union – $86.66 billion United States – $31.55 billion United Kingdom – $17.88 billion Germany – $14.06 billion Japan – $11.79 billion France – $11.38 billion Sweden – $5.83 billion Norway – $5.58 billion Netherlands – $5.44 billion Canada – $4.91 billion Australia – $4.85 billionOfficial development assistance as a percentage of gross national income contributed by the top 10 DAC countries is as follows. Five countries met the longstanding UN target for an ODA/GNI ratio of 0.7% in 2013: Norway – 1.07% Sweden – 1.02% Luxembourg – 1.00% Denmark – 0.85% United Kingdom – 0.72% Netherlands – 0.67% Finland – 0.55% Switzerland – 0.47% Belgium – 0.45% Ireland – 0.45%European Union countries that are members of the Development Assistance Committee gave 0.42% of GNI.
The type of aid given may be classified according to various factors, including its intended purpose, the terms or conditions under which it is given, its source, its level of urgency. Official aid may be classified by types according to its intended purpose. Military aid is material or logistical assistance given to strengthen the military capabilities of an ally country. Humanitarian aid is material or logistical assistance provided for humanitarian purposes in response to humanitarian crises such as a natural disaster or a man-made disaster. Aid can be classified according to the terms agreed upon by the donor and receiving countries. In this classification, aid can be a gift, a grant, a low or no interest loan, or a combination of these; the terms of foreign aid are oftentimes influenced by the motives of the giver: a sign of diplomatic approval, to reward a government for behaviour desired by the donor, to extend the donor's cultural influence, to enhance infrastructure needed by the donor for the extraction of resources from the recipient country, or to gain other kinds of commercial access.
Aid can be classified according to its source. While government aid is called foreign aid, aid that originates in institutions of a religious nature is termed faith-based foreign aid. Aid from various sources can reach recipients through multilateral delivery systems. "Bilateral" refers to government to government transfers. "Multilateral" institutions, such as
Foreign direct investment
A foreign direct investment is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control; the origin of the investment does not impact the definition, as an FDI: the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding the operations of an existing business in that country. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, intra company loans". In a narrow sense, foreign direct investment refers just to building new facility, a lasting management interest in an enterprise operating in an economy other than that of the investor. FDI is the sum of equity capital, long-term capital, short-term capital as shown in the balance of payments. FDI involves participation in management, joint-venture, transfer of technology and expertise.
Stock of FDI is the net cumulative FDI for any given period. Direct investment excludes investment through purchase of shares. FDI, a subset of international factor movements, is characterized by controlling ownership of a business enterprise in one country by an entity based in another country. Foreign direct investment is distinguished from foreign portfolio investment, a passive investment in the securities of another country such as public stocks and bonds, by the element of "control". According to the Financial Times, "Standard definitions of control use the internationally agreed 10 percent threshold of voting shares, but this is a grey area as a smaller block of shares will give control in held companies. Moreover, control of technology, management crucial inputs can confer de facto control." According to Grazia Ietto-Gillies, prior to Stephen Hymer’s theory regarding direct investment in the 1960s, the reasons behind Foreign Direct Investment and Multinational Corporations were explained by neoclassical economics based on macro economic principles.
These theories were based on the classical theory of trade in which the motive behind trade was a result of the difference in the costs of production of goods between two countries, focusing on the low cost of production as a motive for a firm’s foreign activity. For example, Joe S. Bain only explained the internationalization challenge through three main principles: absolute cost advantages, product differentiation advantages and economies of scale. Furthermore, the neoclassical theories were created under the assumption of the existence of perfect competition. Intrigued by the motivations behind large foreign investments made by corporations from the United States of America, Hymer developed a framework that went beyond the existing theories, explaining why this phenomenon occurred, since he considered that the mentioned theories could not explain foreign investment and its motivations. Facing the challenges of his predecessors, Hymer focused his theory on filling the gaps regarding international investment.
The theory proposed by the author approaches international investment from a different and more firm-specific point of view. As opposed to traditional macroeconomics-based theories of investment, Hymer states that there is a difference between mere capital investment, otherwise known as portfolio investment, direct investment; the difference between the two, which will become the cornerstone of his whole theoretical framework, is the issue of control, meaning that with direct investment firms are able to obtain a greater level of control than with portfolio investment. Furthermore, Hymer proceeds to criticize the neoclassical theories, stating that the theory of capital movements cannot explain international production. Moreover, he clarifies that FDI is not a movement of funds from a home country to a host country, that it is concentrated on particular industries within many countries. In contrast, if interest rates were the main motive for international investment, FDI would include many industries within fewer countries.
Another observation made by Hymer went against what was maintained by the neoclassical theories: foreign direct investment is not limited to investment of excess profits abroad. In fact, foreign direct investment can be financed through loans obtained in the host country, payments in exchange for equity, other methods; the main determinants of FDI is side as well as growth prospectus of the economy of the country when FDI is made. Hymer proposed some more determinants of FDI due to criticisms, along with assuming market and imperfections; these are as follows: Firm-specific advantages: Once domestic investment was exhausted, a firm could exploit its advantages linked to market imperfections, which could provide the firm with market power and competitive advantage. Further studies attempted to explain how firms could monetize these advantages in the form of licenses. Removal of conflicts: conflict arises if a firm is operating in foreign market or looking to expand its operations within the same market.
He proposes that the solution for this hurdle arose in the form of collusion, sharing the market with rivals or attempting to acquire a direct control of production. However, it must be taken into account that a reduction in conflict through acquisition of control of operations will increase the market imperfections. Propensity to formulate an internationalization strategy to mitigate risk: According to his position, firms are characterized with 3 levels of decision making: the day to day supervision, management decision coordination and long term strategy planning and deci
Balance of trade
The balance of trade, commercial balance, or net exports, is the difference between the monetary value of a nation's exports and imports over a certain period. Sometimes a distinction is made between a balance of trade for goods versus one for services; the balance of trade measures a flow of imports over a given period of time. The notion of the balance of trade does not mean that exports and imports are "in balance" with each other. If a country exports a greater value than it imports, it has a trade surplus or positive trade balance, conversely, if a country imports a greater value than it exports, it has a trade deficit or negative trade balance; as of 2016, about 60 out of 200 countries have a trade surplus. The notion that bilateral trade deficits are bad in and of themselves is overwhelmingly rejected by trade experts and economists; the balance of trade forms part of the current account, which includes other transactions such as income from the net international investment position as well as international aid.
If the current account is in surplus, the country's net international asset position increases correspondingly. A deficit decreases the net international asset position; the trade balance is identical to the difference between its domestic demand. Measuring the balance of trade can be problematic because of problems with recording and collecting data; as an illustration of this problem, when official data for all the world's countries are added up, exports exceed imports by 1%. This cannot be true, because all transactions involve an equal credit or debit in the account of each nation; the discrepancy is believed to be explained by transactions intended to launder money or evade taxes and other visibility problems. For developing countries, the transaction statistics are to be inaccurate. Factors that can affect the balance of trade include: The cost of production in the exporting economy vis-à-vis those in the importing economy. In export-led growth, the balance of trade will shift towards exports during an economic expansion.
However, with domestic demand-led growth the trade balance will shift towards imports at the same stage in the business cycle. The monetary balance of trade is different from the physical balance of trade. Developed countries import a substantial amount of raw materials from developing countries; these imported materials are transformed into finished products, might be exported after adding value. Financial trade balance statistics conceal material flow. Most developed countries have a large physical trade deficit, because they consume more raw materials than they produce. Many civil society organisations claim this imbalance is predatory and campaign for ecological debt repayment. Many countries in early modern Europe adopted a policy of mercantilism, which theorized that a trade surplus was beneficial to a country, among other elements such as colonialism and trade barriers with other countries and their colonies; the practices and abuses of mercantilism led the natural resources and cash crops of British North America to be exported in exchange for finished goods from Great Britain, a factor leading to the American Revolution.
An early statement appeared in Discourse of the Common Wealth of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them." A systematic and coherent explanation of balance of trade was made public through Thomas Mun's 1630 "England's treasure by foreign trade, or, The balance of our foreign trade is the rule of our treasure"Since the mid-1980s, the United States has had a growing deficit in tradeable goods with Asian nations which now hold large sums of U. S debt that has in part funded the consumption; the U. S. has a trade surplus with nations such as Australia. The issue of trade deficits can be complex. Trade deficits generated in tradeable goods such as manufactured goods or software may impact domestic employment to different degrees than do trade deficits in raw materials. Economies which have savings surpluses, such as Japan and Germany run trade surpluses. China, a high-growth economy, has tended to run trade surpluses.
A higher savings rate corresponds to a trade surplus. Correspondingly, the U. S. with its lower savings rate has tended to run high trade deficits with Asian nations. Some have said. Russia pursues a policy based on protectionism, according to which international trade is not a "win-win" game but a zero-sum game: surplus countries get richer at the expense of deficit
The yen is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro, it is widely used as a reserve currency after the U. S. dollar, the euro, the pound sterling. The concept of the yen was a component of the Meiji government's modernization program of Japan's economy. Before the Meiji Restoration, Japan's feudal fiefs all issued their own money, hansatsu, in an array of incompatible denominations; the New Currency Act of 1871 did away with these and established the yen, defined as 1.5 g of gold, or 24.26 g of silver, as the new decimal currency. The former han became prefectures and their mints private chartered banks, which retained the right to print money. To bring an end to this situation the Bank of Japan was founded in 1882 and given a monopoly on controlling the money supply. Following World War II the yen lost much of its prewar value. To stabilize the Japanese economy the exchange rate of the yen was fixed at ¥360 per $1 as part of the Bretton Woods system.
When that system was abandoned in 1971, the yen was allowed to float. The yen had appreciated to a peak of ¥271 per $1 in 1973 underwent periods of depreciation and appreciation due to the 1973 oil crisis, arriving at a value of ¥227 per $1 by 1980. Since 1973, the Japanese government has maintained a policy of currency intervention, the yen is therefore under a "dirty float" regime; this intervention continues to this day. The Japanese government focuses on a competitive export market, tries to ensure a low yen value through a trade surplus; the Plaza Accord of 1985 temporarily changed this situation from its average of ¥239 per US$1 in 1985 to ¥128 in 1988 and led to a peak value of ¥80 against the U. S. dollar in 1995 increasing the value of Japan’s GDP to that of the United States. Since that time, the yen has decreased in value; the Bank of Japan maintains a policy of zero to near-zero interest rates and the Japanese government has had a strict anti-inflation policy. Yen derives from the Japanese word 圓, which borrows its phonetic reading from Chinese yuan, similar to North Korean won and South Korean won.
The Chinese had traded silver in mass called sycees and when Spanish and Mexican silver coins arrived, the Chinese called them "silver rounds" for their circular shapes. The coins and the name appeared in Japan. While the Chinese replaced 圓 with 元, the Japanese continued to use the same word, given the shinjitai form 円 in reforms at the end of World War II; the spelling and pronunciation "yen" is standard in English. This is because when Japan was first encountered by Europeans around the 16th century, Japanese /e/ and /we/ both had been pronounced and Portuguese missionaries had spelled them "ye"; some time thereafter, by the middle of the 18th century, /e/ and /we/ came to be pronounced as in modern Japanese, although some regions retain the pronunciation. Walter Henry Medhurst, who had neither been to Japan nor met any Japanese, having consulted a Japanese-Dutch dictionary, spelled some "e"s as "ye" in his An English and Japanese, Japanese and English Vocabulary. In the early Meiji era, James Curtis Hepburn, following Medhurst, spelled all "e"s as "ye" in his A Japanese and English dictionary.
That was the first full-scale Japanese-English/English-Japanese dictionary, which had a strong influence on Westerners in Japan and prompted the spelling "yen". Hepburn revised most "ye"s to "e" in the 3rd edition in order to mirror the contemporary pronunciation, except "yen"; this was already fixed and has remained so since. In the 19th century, silver Spanish dollar coins were common throughout Southeast Asia, the China coast, Japan; these coins had been introduced through Manila over a period of two hundred and fifty years, arriving on ships from Acapulco in Mexico. These ships were known as the Manila galleons; until the 19th century, these silver dollar coins were actual Spanish dollars minted in the new world at Mexico City. But from the 1840s, they were replaced by silver dollars of the new Latin American republics. In the half of the 19th century, some local coins in the region were made in the resemblance of the Mexican peso; the first of these local silver coins was the Hong Kong silver dollar coin, minted in Hong Kong between the years 1866 and 1869.
The Chinese were slow to accept unfamiliar coinage and preferred the familiar Mexican dollars, so the Hong Kong government ceased minting these coins and sold the mint machinery to Japan. The Japanese decided to adopt a silver dollar coinage under the name of'yen', meaning'a round object'; the yen was adopted by the Meiji government in an Act signed on June 27, 1871. The new currency was introduced beginning from July of that year; the yen was therefore a dollar unit, like all dollars, descended from the Spanish Pieces of eight, up until the year 1873, all the dollars in the world had more or less the same value. The yen replaced a complex monetary system of the Edo period based on the mon.. The New Currency Act of 1871, stipulated the adoption of the decimal accounting system of yen and rin, with the coins being round and manufactured using Western machinery; the yen
Japan is an island country in East Asia. Located in the Pacific Ocean, it lies off the eastern coast of the Asian continent and stretches from the Sea of Okhotsk in the north to the East China Sea and the Philippine Sea in the south; the kanji that make up Japan's name mean "sun origin", it is called the "Land of the Rising Sun". Japan is a stratovolcanic archipelago consisting of about 6,852 islands; the four largest are Honshu, Hokkaido and Shikoku, which make up about ninety-seven percent of Japan's land area and are referred to as home islands. The country is divided into 47 prefectures in eight regions, with Hokkaido being the northernmost prefecture and Okinawa being the southernmost one; the population of 127 million is the world's tenth largest. 90.7 % of people live in cities. About 13.8 million people live in the capital of Japan. The Greater Tokyo Area is the most populous metropolitan area in the world with over 38 million people. Archaeological research indicates; the first written mention of Japan is in Chinese history texts from the 1st century AD.
Influence from other regions China, followed by periods of isolation from Western Europe, has characterized Japan's history. From the 12th century until 1868, Japan was ruled by successive feudal military shōguns who ruled in the name of the Emperor. Japan entered into a long period of isolation in the early 17th century, ended in 1853 when a United States fleet pressured Japan to open to the West. After nearly two decades of internal conflict and insurrection, the Imperial Court regained its political power in 1868 through the help of several clans from Chōshū and Satsuma – and the Empire of Japan was established. In the late 19th and early 20th centuries, victories in the First Sino-Japanese War, the Russo-Japanese War and World War I allowed Japan to expand its empire during a period of increasing militarism; the Second Sino-Japanese War of 1937 expanded into part of World War II in 1941, which came to an end in 1945 following the Japanese surrender. Since adopting its revised constitution on May 3, 1947, during the occupation led by SCAP, the sovereign state of Japan has maintained a unitary parliamentary constitutional monarchy with an Emperor and an elected legislature called the National Diet.
Japan is a member of the ASEAN Plus mechanism, UN, the OECD, the G7, the G8, the G20, is considered a great power. Its economy is the world's third-largest by nominal GDP and the fourth-largest by purchasing power parity, it is the world's fourth-largest exporter and fourth-largest importer. Japan benefits from a skilled and educated workforce. Although it has renounced its right to declare war, Japan maintains a modern military with the world's eighth-largest military budget, used for self-defense and peacekeeping roles. Japan is a developed country with a high standard of living and Human Development Index, its population enjoys the highest life expectancy and third lowest infant mortality rate in the world, but is experiencing issues due to an aging population and low birthrate. Japan is renowned for its historical and extensive cinema, influential music industry, video gaming, rich cuisine and its major contributions to science and modern technology; the Japanese word for Japan is 日本, pronounced Nihon or Nippon and means "the origin of the sun".
The character nichi means "sun" or "day". The compound therefore means "origin of the sun" and is the source of the popular Western epithet "Land of the Rising Sun"; the earliest record of the name Nihon appears in the Chinese historical records of the Tang dynasty, the Old Book of Tang. At the end of the seventh century, a delegation from Japan requested that Nihon be used as the name of their country; this name may have its origin in a letter sent in 607 and recorded in the official history of the Sui dynasty. Prince Shōtoku, the Regent of Japan, sent a mission to China with a letter in which he called himself "the Emperor of the Land where the Sun rises"; the message said: "Here, I, the emperor of the country where the sun rises, send a letter to the emperor of the country where the sun sets. How are you". Prior to the adoption of Nihon, other terms such as Yamato and Wakoku were used; the term Wa is a homophone of Wo 倭, used by the Chinese as a designation for the Japanese as early as the third century Three Kingdoms period.
Another form of Wa, Wei in Chinese) was used for an early state in Japan called Nakoku during the Han dynasty. However, the Japanese disliked some connotation of Wa 倭, it was therefore replaced with the substitute character Wa, meaning "togetherness, harmony"; the English word Japan derives from the historical Chinese pronunciation of 日本. The Old Mandarin or early Wu Chinese pronunciation of Japan was recorded by Marco Polo as Cipangu. In modern Shanghainese, a Wu dialect, the pronunciation of characters 日本; the old Malay word for Japan, Japun or Japang, was borrowed from a southern coastal Chinese dialect Fukienese or Ningpo – and this Malay word was encountered by Portuguese traders in Southeast Asia in the 16th century. These Early Portuguese traders brought the word
1979 oil crisis
The 1979 oil crisis or oil shock occurred in the world due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher; the price of crude oil more than doubled to $39.50 per barrel over the next 12 months, long lines once again appeared at gas stations, as they had in the 1973 oil crisis. In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, Iraq's oil production was cut as well. Economic recessions were triggered in other countries. Oil prices did not subside to pre-crisis levels until the mid-1980s. After 1980, oil prices began a 20-year decline, except for a brief rebound during the Gulf War reaching a 60 percent fall-off during the 1990s; as with the 1973 crisis, global politics and power balance were impacted. Oil exporters such as Mexico and Venezuela expanded production, it seemed that the United States of America and Norway had much more oil reserves than forecasted in the 1970s.
OPEC lost influence. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests disrupted the Iranian oil sector, with production being curtailed and exports suspended. In November 1978, a strike by 37,000 workers at Iran's nationalized oil refineries reduced production from 6 million barrels per day to about 1.5 million barrels. Foreign workers fled the country. On January 16, 1979, the Shah and his wife left Iran at the behest of Prime Minister Shapour Bakhtiar, who sought to calm the situation; the rise in oil price benefited other OPEC members. When oil exports were resumed under the new Iranian government, they were inconsistent and at a lower volume, pushing the prices up. Saudi Arabia and other OPEC nations, under the presidency of Mana Al Otaiba, increased production to offset most of the decline, in early 1979 the overall loss in worldwide production was about 4 percent. OPEC failed to hold on to its prominent position after Iran and Iraq went to war in 1980 and caused a further 10% drop in worldwide production – and by 1981, OPEC production was surpassed by other exporters like the USA.
Additionally, its own member nations were divided among themselves. Saudi Arabia, a "swing producer" trying to gain back market share after 1985, increased production and caused downward pressure on prices, making high-cost oil production facilities less profitable or unprofitable; the oil crisis had mixed effects in the United States, due to some parts of the country being oil-producing regions and other parts being oil-consuming regions. Richard Nixon had imposed price controls on domestic oil. Gasoline controls were repealed; the Jimmy Carter administration began a phased deregulation of oil prices on April 5, 1979, when the average price of crude oil was US$15.85 per barrel. Starting with the Iranian revolution, the price of crude oil rose to $39.50 per barrel over the next 12 months Deregulating domestic oil price controls allowed U. S. oil output to rise from the large Prudhoe Bay fields, while oil imports fell sharply. And although not directly related, the near-disaster at Three Mile Island on March 28, 1979 increased anxiety about energy policy and availability.
Due to memories of oil shortage in 1973, motorists soon began panic buying, long lines appeared at gas stations, as they had six years earlier during the 1973 oil crisis. As the average vehicle of the time consumed between two and three liters of gasoline an hour while idling, it was estimated that Americans wasted up to 150,000 barrels of oil per day idling their engines in the lines at gas stations. During the period, many people believed the oil companies artificially created oil shortages to drive up prices, rather than factors beyond human control or the US's own price controls; the amount of oil sold in the United States in 1979 was only 3.5 percent less than the record set for oil sold the year previously. A telephone poll of 1,600 American adults conducted by the Associated Press and NBC News and released in early May 1979 found that only 37% of Americans thought the energy shortages were real, 9% were not sure, 54% thought the energy shortages were a hoax. Many politicians proposed gas rationing.
Several states implemented odd-even gas rationing, including California, New York, New Jersey and Texas. Coupons for gasoline rationing were printed but were never used during the 1979 crisis. On July 15, 1979, President Carter outlined his plans to reduce oil imports and improve energy efficiency in his "Crisis of Confidence" speech, it is said that during the speech, Carter wore a cardigan and encouraged citizens to do what they could to reduce their use of energy. He had installed solar hot water panels on the roof of the White House and a wood-burning stove in the living quarters. However, the panels were removed in 1986 for roof maintenance, during the administration of his successor, Ronald Re
Flag of convenience
Flag of convenience is a business practice whereby a ship's owners register a merchant ship in a ship register of a country other than that of the ship's owners, the ship flies the civil ensign of that country, called the flag state. The term is used pejoratively, the practice is regarded as contentious; each merchant ship is required by international law to be registered in a registry created by a country, a ship is subject to the laws of that country, which are used if the ship is involved in a case under admiralty law. A ship's owners may elect to register a ship in a foreign country which enables it to avoid the regulations of the owners’ country which may, for example, have stricter safety standards, they may select a jurisdiction to reduce operating costs, bypassing laws that protect the wages and working conditions of mariners. The term "flag of convenience" has been used since the 1950s. A registry which does not have a nationality or residency requirement for ship registration is described as an open registry.
Panama, for example, offers the advantages of easier registration and the ability to employ cheaper foreign labour. Furthermore, the foreign owners pay no income taxes; the modern practice of ships being registered in a foreign country began in the 1920s in the United States when shipowners, frustrated by increased regulations and rising labor costs, began to register their ships in Panama. The use of open registries increased, in 1968, Liberia grew to surpass the United Kingdom as the world's largest ship register; as of 2009, more than half of the world's merchant ships were registered with open registries, 40% of the entire world fleet, in terms of deadweight tonnage, were registered in Panama and the Marshall Islands. In 2006, up to 20% of high-seas fishing vessels were registered in states they were not connected to. According to IHS Markit, in March 2017, Panama had 8,052 ships on its registry, Singapore had 3,574 ships, Liberia had 3,277 ships, the Marshall Islands had 3,244 ships and Hong Kong had 2,594 ships.
Open registries have been criticised by trade union organisations based in developed countries those of Europe. One criticism is that shipowners who want to hide their ownership may select a flag-of-convenience jurisdiction which enables them to be anonymous; some ships with flags of convenience have been found engaging in crime, offer substandard working conditions, negatively impact the environment through illegal and unregulated fishing. Shipowners may select a jurisdiction with measurement rules that reduce the certified GRT size of a ship, so as to reduce subsequent port of call dock dues; such was a consideration when Carnival Cruise Line changed the flag of the RMS Empress of Canada in 1972 to that of Panama. In 2011, Cunard Cruise line registered all its ships in Bermuda, besides other considerations, enabled its ship captains to marry couples at sea, weddings at sea are described as a lucrative market; as of 2009, thirteen flag states have been found by international shipping organisations to have substandard regulations.
On the other hand, maritime industry practitioners and seafarers from other countries contend that this is a natural product of globalisation. Supporters of the practice, point to economic and regulatory advantages, increased freedom in choosing employees from an international labour pool. Ship owners from developed countries use the practice to be competitive in a global environment; as of 2009, ships of thirteen flags of convenience have been targeted for special enforcement by countries when they visit ports in those countries, called port state control. International law requires; the country in which a ship is registered is its flag state, the flag state gives the ship the right to fly its civil ensign. A ship operates under the laws of its flag state, these laws are used if the ship is involved in an admiralty case. A ship's flag state exercises regulatory control over the vessel and is required to inspect it certify the ship's equipment and crew, issue safety and pollution prevention documents.
The organization which registers the ship is known as its registry. Registries may be private agencies; the reasons for choosing an open register are varied and include tax avoidance, the ability to avoid national labor and environmental regulations, the ability to hire crews from lower-wage countries. National or closed registries require a ship be owned and constructed by national interests, at least crewed by its citizens. Conversely, open registries offer on-line registration with few questions asked; the use of flags of convenience lowers registration and maintenance costs, which in turn reduces overall transportation costs. The accumulated advantages can be significant, for example in 1999, 28 of the American company SeaLand's fleet of 63 ships were foreign-flagged, saving the company up to US$3.5 million per ship every year. Additionally, many national registries allow the government the right to requisition ships for use by the state in war. Whilst the probability of such conflicts are now reduced, it does carry some risk for commercial operators, of inconvenience to commercial interests.
For example, as late as 1982 the British Government requisitioned the luxury ocean liner Queen Elizabeth 2 from the Cunard Line for immediate service as a troop transport in the Falklands War, Cunard's SS Atlantic Conveyor was sunk in the conflict: both ships had been part of the Merchant Navy, the British shipping register. Whilst such requisition has been the case for centuries (where most wooden sailing