About 8,600 ships fly the Panamanian flag. By comparison, the US has around 3,400 registered vessels and China just over 3,700.
Most merchant ships flying Panama’s flag belong to foreign owners wishing to avoid the stricter marine regulations imposed by their own countries.
Panama operates what is known as an open registry. Its flag offers the advantages of easier registration (often online) and the ability to employ cheaper foreign labour. Furthermore the foreign owners pay no income taxes.
Open registries, sometimes referred to pejoratively as flags of convenience, have been contentious from the start.
Critics of the system point to the ease of hiding the true identity of shipowners and the lax enforcement of rules and regulations.
Luis Fruto, representative of the International Transport Workers’ Federation (ITF) in Panama, says the country turns a blind eye to its “responsibilities in order to acquire higher registration”.
The ITF has led a campaign against flags of convenience since 1958. It considers that Panamanian registration is better than some “from a safety viewpoint, but it remains seriously flawed in areas such as oversight, accident investigation and crew assistance”.
Two years ago, Mr Fruto investigated the death of a woman sailor, 22, on her first voyage. She became trapped in machinery that was reportedly faulty and died.
The ITF says that, rather than heading for the nearest port as rules dictate, the ship continued to sail for more than two weeks with her body in a freezer.
Further investigation by the ITF suggested that some of the shipping certificates had been bought.
In 2000, ITF general secretary David Cockroft was able to buy a Panamanian first officer’s certificate for $4,000 to navigate a ship – even though he had no maritime skills or experience.
Despite repeated assurances that the country was cleaning up its act, Roberto Linares, the head of the Panama Maritime Authority, resigned in June after it was discovered that workers were being certified without the proper qualifications.