FSDC report highlights urgent need to address the Singapore factor

Hong Kong’s Financial Services Development Council’s research paper, released on 21 May with a raft of proposals to develop the territory’s maritime cluster, is a brave and direct challenge to arch rival Singapore.

It is hard to deny that Singapore has over two decades lured away many of Hong Kong’s maritime-related businesses and professionals.

When the chairman of Wah Kwong Maritime Transport and former chairman of the Hong Kong Shipowners Association, Sabrina Chao was asked to comment on the purpose of the FSDC’s “Maritime Leasing Paper”, she declared:

“In the past 20 years the majority of owners have left for Singapore. Following them are shipping finance institutes, trading desks and brokers.

“Altogether, these people have shifted the industry’s centre of gravity from Hong Kong to Singapore.” With these comments any pretence that Singapore is not the most dangerous rival to Hong Kong’s pretensions as the region’s maritime cluster vanished in a moment.

In the 34-page Maritime Leasing Paper frequently and some times brutally points out Hong Kong’s current shortcomings compared to Singapore.

The report praises Hong Kong’s approach to taxation of shipping revenue governed by section 23B of the Inland Revenue Ordinance where charter fees earned by Hong Kong registered ships engaged in international trade are exempt from profits tax. The report considers Section 23’s “territorial source” principle of taxation as competitive against comparable jurisdictions, but rues the absence of an arrangement whereby principals can engage in case by case negotiations with government, an arrangement widely practised in Singapore.

Hong Kong may have the larger shipping registry – rated fourth in the world with 113.2m gt entered compared to Singapore’s, rating of fifth with 85.4m gt. But the total tonnage owned by principals of different nationality Hong Kong falls to 12th place with 27.3m gt compared to Singapore’s 41.2m gt in ninth position.

Just 24% or 27.3m gt of the tonnage entered on the HKSR is owned by Hong Kong principals compared to 48% or 41.2m gt on the SSR by Singapore principals.

Addressing Hong Kong’s ability to attract overseas talent the report states:

“Mainland China and international employers have suggested that Hong Kong is comparatively much less friendly than Singapore when it comes to employing overseas staff.”

When discussing the role of ‘various government departments’ the report concludes that thus far Hong Kong has failed to join the dots.

Singapore in the other hand: “…adopts a “single window” approach, through which the Economic Development Board of Singapore acts as a central point of contact to coordinate dealings with various parts of the government (e.g. immigration, labour, tax, Maritime and Port Authority) to facilitate new entrants setting up business and also existing players in conducting their affairs.

“In contrast, the HKMPB plays only an advisory role to the Government and does not involve representation from all relevant government departments.

“As a result, the HKMPB is much less effective than the EDBS in coordinating government efforts to develop the maritime cluster.”

The challenges to Hong Kong’s aspirations as a premier maritime hub have been clearly spelt out. It is now time for industry and government to join together in making the FSDC proposals a concrete reality.

The full version of the report can be downloaded from the FSDC website: www.fsdc.org.hk

 

 

 

 

 

 

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