Tax incentives essential to Hong Kong’s maritime aspirations

 

In the final part of a two-part interview Legislative Council member for the Transport constituency Frankie Yick discusses the future of Hong Kong port and changes at the Marine Department.

Future of the Port of Hong Kong

When, in early April this year, Hong Kong’s secretary of constitutional and mainland affairs, Raymond Tam Chi-yuen set out his vision of Hong Kong’s role in the development of the “Greater Bay Area” he ruffled more than a few feathers among government and industry backers of Hong Kong as a maritime hub.

Mr Tam’s suggestion that under plans for the economic integration of Hong Kong, Macau and nine cities in Guangdong province, Hong Kong would keep its leading financial centre status but should no longer compete in the container terminal business, has annoyed Mr Yick too.

“Next time Raymond Tam wants to make another statement about Hong Kong port I recommend that he consult the shippers council first,” he exclaims.

“We still have 30% of cargo shipping out from Hong Kong direct. Why are they choosing Hong Kong?

“The shippers manufacturing base is in the PRD. Why not ship out from Yantian or Shekou Or Da Chan? Why do they still want to ship out of Hong Kong? Ask them why?

“Why does he not ask the Liner Association or the Hong Kong Shipowners Association why they want to use Hong Kong as a transshipment hub?” he continues.

The Port of Hong Kong may have gone through a decade or more of relative decline. It has fallen from the number one spot as the world’s business container port, to fifth in the league today. But as Mr Yick points out, a throughput of just less than 20 teu in 2016 “is a very respectable number.”

“I think we need to get the role of Hong Kong port into perspective,” says Mr Yick.

“People like to compare Hong Kong Port against Yantian Port or Nansha port. But in fact the ports are so close together they should be considered as a cluster competing against the Yangtze River Delta area headed by Shanghai, and competing with Singapore. This is regional competition. The ports in the PRD must each do their best and try to complement each other,” he adds.

“In a panel meeting recently I asked the Transport and Housing Bureau to clarify the government’s position Vis-a-Vis the future prospects of the Port. The THB has pledged that it will do what ever it can to maintain the vibrancy of Hong Kong Port,” Mr Yick concludes.

Developments at the Marine Department

When the Lamma IV vessel, owned by HK Electric, collided with Hong Kong and Kowloon Ferry’s Sea Smooth off Lamma Island with the tragic loss of 39 lives on 1 October 2012, a wave of shock engulfed the territory. The initial shock turned to anger when an independent inquiry found that “serious systemic failings” in the Marine Department had contributed to the disaster.

When the Director of Marine at the time of the incident, Francis Liu stepped down in early 2014, the move brought about a philosophical change in government strategy. Whereas in the past experienced maritime practitioners had taken the top job, Mr Liu’s replacement was seasoned civil servant Michael Wong, charged with tightening the monitoring of marine safety. After 18 months another government officer, the incumbent, Maisie Cheng, replaced him on 15 October 2015.

Fairly shortly after this rumblings in the shipping community began to emerge to the effect that the Marine Department had, in its efforts to tighten the rules, become sclerotic in the process. In some cases decision-making had become highly centralised, and exacerbated by staff shortages, the response times had slowed.

After frequent discussions between the Marine Department and representatives of the Hong Kong Shipowners Association and other interested parties the Marine Department begun to make changes that will have a positive effect, as Mr Yick explains.

“In the past the industry and the Marine Department worked very well together due to experienced shipping personnel being at the helm,” he says.

“This worked very well because the Department were prepared to exercise a little discretion. But following the ferry disaster nobody was prepared to exercise any discretion. That created a lot of issues, which was exacerbated by the shortage of experienced manpower at the Marine Dept.

“I am pleased to say that there have been two changes that have now come in to address these issues. Before, ship inspections had to be carried out by Marine Department personnel. This has been relaxed so that independent inspectors authorised by the Marine Department may be employed to conduct inspections,” he adds.

On the subject of manpower shortages at the Marine Department, Mr Yick says The Marine Department is acting on this by relaxing the age of retirement, a move that applies to the pilots too. Also for certain posts – Marine Officer grade and Surveyor of Ships grade – the Department is easing the entrance requirements while ensuring the move will not adversely affect safety.

The Marine Department has introduced adjustments to the entry requirements on the applicants’ post-qualification working experience and Chinese language proficiency in recent recruitment exercises for these two grades with a view to widening the pool of eligible candidates while maintaining the quality of the professional services of the Marine Department at the same time.

The Hong Kong Shipowners Association remains discontented that inspection or accident reports are only provided in Chinese because of the difficulties this may lead to when dealing with authorities outside of Hong Kong. Mr Yick has been assured that this too will be dealt with in the fullness of time.

Tax incentives needed to fulfil hub aspirations

Finally, Mr Yick returns to the all-important subject of how Hong Kong can reclaim it position as the region’s premier maritime hub. It was a subject touched upon in part one of this interview yesterday when discussing promotion.

“Most people will tell you, and I agree, that Hong Kong has a lot of competitive advantages. But Singapore has one big advantage; tax incentives,” he says.

“The Hong Kong Government says you can’t pick winners. I don’t believe this is true. Look around the world; So many governments are doing it.

“You identify your strength. You build on that strength. Develop that industry. This is how you create jobs and wealth,” he adds.

“The HKSOA has suggested to the government if it wants to follow the direction of Mainland China’s 12th and 13th Five-Year-Plans [including recommendations that Hong Kong be developed as a maritime hub] you have to attract shipowners shipmanagers and commodity traders to come to Hong Kong. Once you have done that lawyers, insurers, bankers and other marines services providers will follow.

Mr Yick insists that to offer tax incentives to maritime related businesses would not amount to exceptionalism. He offers one example. “This year the Government suggested there was a future for aircraft leasing in Hong Kong. There is of course a huge demand on the mainland for aircraft. Hong Kong would be an ideal location to do aircraft leasing. But if the Government is going to offer tax incentives to that business why not apply the same approach to vessel leasing?” he insists.

“It’s the same. Vessel leasing is also capital intensive. We are number four in the world as far as the Shipping Register is concerned. There could be huge pent up demand,” he concludes.

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