Hong Kong’s long fight for maritime reform

Geroeg Chao
The late George Chao, former chairman of Wah Kwong, was prominent in calling for reform in 2010

Ahead of what is expected to be a significant government announcement impacting Hong Kong’s maritime sector, The Sextant looks back over nearly a decade of shipping reform activism.

Following the Hong Kong Financial Services Development Council’s report and recommendations released in May, it would be a fair bet that the Hong Kong Government will shortly announce a reduced tax burden for the vessel leasing sector and maritime-related support services activity. Other recommendations made by the FSDC in its “Maritime Leasing Paper” will be addressed later.

The reasons why Hong Kong’s maritime industry has come to be considered by government as a special case are myriad, and all are relatively recent. Barely ten years ago, any self-respecting Hong Kong-based shipowner would have looked down his nose if somebody were to suggest that the government should support the industry fiscally or otherwise. In those days a shipowners was happy to get on with the job out of sight and out of mind of the government, within a laissez faire environment, particularly during the boom years of 2005-2007.

In 2008, the financial crisis hit global maritime hard including those players in Hong Kong. The industry has arguably been on the ropes ever since, with only tenuous indications they could be back on their feet this year. At around the same time Hong Kong maritime specifically suffered another blow when Singapore’s Maritime Port Authority (a statutory body since 1996) introduced its MSI Approved International Shipping Enterprise Award – a suite of tax incentives aimed at shipowners and operators, maritime lessors and providers of supporting maritime services.

Still, before 2010 the general mood among Hong Kong’s shipping community could be described as somewhat aloof. Mostly of a conservative frame of mind shipowners had big purses gained from record freight rates in the years before 2008, and many viewed Singapore’s bid for maritime supremacy with contempt, a phenomenon that would not last. In later years Hong Kong was to regard the Singapore with resentment rather than contempt.

It was in 2010, when evidence of a change in attitude first emerged in Hong Kong. Highlighting that change was the late George Chao former chairman of Wah Kwong and one-time chairman of the Hong Kong Shipowners Association. In May 2010, Mr Chao launched what Lloyd’s List termed a “stinging attack” on the Hong Kong Government’s failure to support the territory’s maritime industry. In a moment of prescience Mr Chao declared: “The government is not showing enough support for the maritime sector. If we are not careful we will lose our position,” citing the efforts of Singapore and an emerging competitor in Shanghai.

During the same interview Mr Chao called for the splitting up of the government’s Transport and Housing Bureau and the appointment of a secretary for shipping and Ports. To this day Transport and Housing remains firmly one unit overseen by one senior civil servant.

Also under fire at the time was the maritime industry council, a moribund liaison body between the government and council, which Mr Chao described as “ a waste of time” with proposals put forward by the industry largely ignored.

A second wave of protest swiftly followed in December 2010, when 25 representative organisations including the Hong Kong Seamen’s Union held an historic gathering calling for the governments lead reasserting Hong Kong as a premier maritime centre. Among the proposals made by the HKSU was for a policy bureau to take charge of all issues relating to the development of Hong Kong as an International Maritime Centre; an Admiralty court to be set up on a permanent basis; more resources to be dedicated to maritime training and educational courses and the attaining of more privileges for vessels flying the Hong Kong flag from the Central Government.

At the time of the meeting, the executive director of the Hong Kong Shipper’s Council declared: “We can no longer simply rely on our role as a transhipment port and entrepot but must further develop the professional services related to the maritime sector. This cannot be done without government involvement.”

Since those heady days the Hong Kong Government has gradually grown ears and has listened to some of the pleas of the shipping industry. In 2014 government set up the Maritime and Aviation Fund with HK$100m over a five-year period. In 2016, the MIC was dispensed with and replaced by the similarly structured but more dynamic Hong Kong Maritime and Port Board. But today the HKMPB is only a halfway house between the discredited MIC and the statutory body called for in 2010.

The HKMPB has been remarkably active in the field of promotion as seen in two successful Hong Kong Maritime Weeks (2016/17); less successful in policy change, which is unsurprising given that the body can only make recommendations to the government. A recommendation contained in the FSDC report is a call for an enhanced HKMPB, generally interpreted as an upgrade to statutory body similar to Singapore’s MPA.

The MATF’s HK$100m looks paltry when seen in the light of Singapore’s Maritime Cluster Fund which has invested the equivalent of HK$1.67bn into its maritime industry since 2007. The FSDC report also call for more financial resources for talent development. Meanwhile, funds for research and development aimed specifically at a maritime industry that is undergoing a massive digital transformation is largely absent.

The government is to be commended for its efforts thus far but if Hong Kong is to have any hope of regaining its late 20th century position as a maritime centre the time for half measures is over.

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