Panama, a small country of less than three million people, has the largest shipping fleet in the world, larger than the fleet of the United States and China combined! As most commercial cargo ships fly the Panama flag on them while crossing the oceans and international water!
This leads us to wonder why commercial ships from different countries fly the flag of Panama specifically without others during their voyage in the waters!
Why do so many merchant ships fly the Panama flag on them without their national or other flags?
Because of its area and slim figure, Panama is the gatekeeper of one of the world's most significant sea shipping lanes, which associates the Pacific and Atlantic Oceans. For a hundred years, the Panama Canal provided a shortcut for ships wishing to avoid the more dangerous route through Cape Horn.
One of the Seven Wonders of the Modern World, the canal is about 77 kilometers (48 miles) long, an engineering feature that handles 14,000 ships every year along its complex locking system.
Many of these ships fly the Panamanian flag, but the country itself has a limited history of trade. In Panama, there is one small shipping line in addition to a number of companies providing complementary marine services around the ports and canal.
Cheaper foreign labor
Most of the merchant ships flying the Panama flag belong to foreign owners who wish to avoid the stricter maritime regulations imposed by their countries. Panama runs what is known as the open registry. Its science provides the benefits of easier registration (often online) and the ability to hire cheaper foreign workers. Moreover, foreign owners do not pay income taxes.
About 8,600 ships fly the Panamanian flag. In comparison, the United States has around 3,400 registered ships and China a little over 3,700. Under international law, every merchant ship must be registered with a state known as its flag state. That state has jurisdiction over the ship and is responsible for verifying that it is safe to sea and verifying the crew's working conditions.
The first transfer of ships to the Panama register in 1922 involved two American passenger ships wishing to serve alcohol to passengers during the prohibition. More followed, as shipowners sought to avoid higher wages and improve guaranteed working conditions through US legislation.
After World War II, Panama's record grew more quickly as American shipowners sought to cut overheads while non-Europeans changed flags to avoid higher tax rates. With the demand for open registration soaring, other countries in the developing world have formed their own country. The United States used Liberia's registry to build a fleet of neutral ships during the Cold War.
Today Panama has the largest record in the world, followed by Liberia, the Marshall Islands, Hong Kong and Singapore. By last year, nearly three-quarters of the world's fleet were registered under the flag of a country other than one. The record is profitable for Panama, as it brings half a billion dollars into the economy in fees, services and taxes. However, critics of the regime point to the ease with which shipowners are truly anonymous and lax in enforcing rules and regulations.
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