For discussion on 25 January 1999 Legislative Council Panel on Economic Services PROMOTION OF HONG KONG AS AN INTERNATIONAL SHIPPING CENTRE Purpose This paper aims to inform members of a series of new initiatives recently taken by the Government to promote Hong Kong as an international shipping centre. Background 2. The port is one of Hong Kong's most important natural resources. For more than a century, it has contributed to the expansion of our import and export trade as well as to the successful development of our shipping industry. 3. The shipping industry of Hong Kong has a long history and occupies a very important position internationally. At present, ships under the control of Hong Kong shipowners and shipping companies account for 6%, about 35 million tonnes, of the total tonnage of merchant ships in the world. In terms of merchant ship tonnage, Hong Kong ranks fifth in the world, next to Greece, Japan, Norway and USA. 4. In respect of its contribution to the overall economy, the shipping industry represents 1.7% of the GDP of Hong Kong and directly employs more than 50,000 people. The industry is not only important in itself, but also of significance to other sectors in our economy such as import and export trade and the financial, legal and insurance sectors as it supports their growth. According to one estimate, about 20% of Hong Kong's GDP is generated either directly or indirectly by the shipping industry and related businesses. 5. Although the shipping industry of Hong Kong flourished in the past, it has faced some unfavourable developments in recent years including high operation costs, labour shortages, keen competition from other shipping centres and political uncertainty before the reunification, causing many ships and shipping companies to move away from Hong Kong. As a result, the total tonnage of ships registered in Hong Kong dropped from a high point
of 9.1 million tonnes in May 1995 to 5.5 million tonnes in November 1997, subsequently climbing up to the present level of 6.2 million tonnes. 6. To increase the competitiveness of Hong Kong's shipping industry, the SAR government established the Hong Kong Port and Maritime Board in June 1998 to replace the former Hong Kong Port Development Board. The terms of reference were expanded to include more representatives from the shipping industry. The main role of the Board is to co-ordinate and promote a joint effort by the government and the shipping industry to encourage the further development of Hong Kong's shipping industry and to strengthen Hong Kong's position as an international shipping centre. 7. A Shipping Committee has been formed under the newly-established Hong Kong Port and Maritime Board. Its main tasks are as follows : a. To strengthen the communication between the Hong Kong government and the shipping industry, to provide a direct channel for the shipping industry to express their views to the government, and to increase the competitiveness of Hong Kong's shipping industry in Asia and internationally; b. To co-operate with Hong Kong Shipowners' Association, Trade Development Council and other relevant bodies to step up publicity work in the Mainland and overseas, in order to attract more mainland and overseas shipping companies to set up offices in Hong Kong; c. To encourage international maritime organizations to establish their Asian headquarters or offices in Hong Kong, so as to strengthen Hong Kong's position as an international shipping centre, and to co-operate with the Hong Kong Shipowners' Association in organizing more international shipping and maritime activities; and d. To consider making use of the favourable business environment of Hong Kong (e.g. excellent information network and sound banking system etc.) to develop an Asian market for ship insurance, financing and arbitration, to help to promote the economic development of Hong Kong and create new employment opportunities. 8. The Shipping Committee has recently completed a study on the development of Hong Kong's shipping industry. It has observed that while Hong Kong's main weakness in terms of its competitiveness lie in its high operation costs and shortage of skilled labour and professionals, it also enjoys many potential advantages such as a free and flexible business
environment and excellent supporting services in communications, transportation, financing and insurance, etc. Based on the recommendations of the study report, the HKSAR government is taking a series of new initiatives to increase the competitiveness of Hong Kong's shipping industry and strengthen the position of Hong Kong as an international shipping centre. These include : a. Lowering the cost of ship registration in Hong Kong and enhancing the competitiveness of the Hong Kong Shipping Registry to attract more shipowners and shipping companies to register their ships and establish offices in Hong Kong - i. The Marine Department has modified the equipment standards required for ships to be registered in Hong Kong in accordance with International Maritime Conventions. This will help shipowners save costs when they register their ships in Hong Kong. The Department is considering a further reduction in the annual ship registration fee and licence fee for the crew to help further reduce the cost for shipowners and shipping companies; ii. iii. The Marine Department has introduced a new initiative by exempting ships less than ten years old from re-examination by Government ship surveyors when they first registered in Hong Kong. This will help shipowners save further costs; The Shipping Registry has upgraded its computer system to provide bilingual (English and Chinese) registration certificates, including survey certificates and applications for registration, etc. The objective is to facilitate and encourage more local and mainland shipowners to register their ships in Hong Kong; We will continue to explore with the Hong Kong Shipowners' Association the possibility of further simplification of registration and ship surveying procedures and reduction of charges, so as to help to lower the cost of registrating ships and managing ships in Hong Kong. iv. Reducing the overseas tax liability of shipping companies in Hong Kong, so as to increase their international competitiveness - We have signed a memorandum on the avoidance of double taxation on shipping incomes with the Mainland and the United States and will actively discuss the possibility of signing agreements on the avoidance of double taxation and reciprocal exemption of freight taxation arrangements with other overseas places;
v. Strengthening overseas promotion activities to project Hong Kong as an attractive international shipping centre - In November last year (1998), we held a seminar in London on the Hong Kong's shipping industry for the first time. The event was very successful, drawing more than 80 representatives from shipping companies and other related companies in London. We also visited the Ministry of Communication of China and COSCO, the Mainland's largest shipping company, to encourage them to make better use of Hong Kong's shipping registration service and to set up bases in Hong Kong to manage their ships, strengthening Hong Kong's position as an international shipping centre. In addition, we are planning to organize similar activities this year in other overseas places including Europe (Spain), Japan and USA. The Marine Department has also formed a working group to undertake direct promotion to Hong Kong and overseas shipping companies. vi. vii. Training programme - In order to provide a new generation of high quality workforce and professionals to support the further development of the local shipping industry, we are discussing with the Vocational Training Council and universities ways to improve their curriculum, increase academic research relating to shipping, and provide more training programmes to meet the modern needs of the Hong Kong shipping industry. Promoting the development of shipping related markets - To help to provide a comprehensive range of supporting services to the shipping industry of Hong Kong and to strengthen Hong Kong's position as an international shipping centre, and in view of the fact that over 40% of the merchant ships in the world are controlled by Asian shipowners, the Hong Kong Port and Maritime Board is exploring with the Hong Kong Shipowners Association the development of an Asian market for hull insurance, arbitration and other services. Objective 9. The Hong Kong Port and Maritime Board has been established with the aim of putting together the resources and efforts of the government and the shipping industry to maintain and strengthen Hong Kong's position as an international shipping centre, promote Hong Kong's economic development, and create new employment opportunities. We hope that
the new initiatives will increase the gross tonnage of the Hong Kong Shipping Register from the current 6 million tonnes to 10 million tonnes. According to the Census and Statistics Department, this will help to increase Hong Kong's GDP by 0.6% and create 15,800 new posts. If the gross tonnage is further increased to 15 million, GDP is estimated to rise by 1.5% and 43,300 new posts will be created. Economic Services Bureau 25 January 1999 [0046e]