Provocatively Splash asked the Hong Kong maritime community what the focus should be to make shipping great again. Attract cargo interests, shipowners, managers, mainland shipping businesses or others?
Whether it its the shipping hub rankings of Norway’s Menon or the joint studies carried out by Xinhua and the Baltic Exchange, Hong Kong still ranks very high among international maritime centres (IMCs). And yet for those who lived or visited the city around the start of the century, fourth place might seem somewhat of a downgrade to past glories.
Splash asked many in the Hong Kong maritime community what would be the best business strand to try and woo in order to bolster the city’s position as a major hub. Some bristled at the suggestion Hong Kong was not as great as in the past, while others quickly pinpointed who should be targeted and how.
Angad Banga, chief operating officer at the Caravel Group, argued that no particular business vertical should be targeted – best to go for everyone, he said.
“Every industry player from the cargo owners to the vessel owners, charterers, managers, and others have a very symbiotic relationship so addressing the needs of just one sub-component of the full ecosystem is not effective,” Banga said.
We should start with the commercial principals
The key, according to Valles Steamship’s executive director, Wellington Koo, is to continue to maintain the growth of the maritime cluster, while not restricting it to business companies or investors of particular backgrounds.
Having said that, Koo does go on to concede that the commercial principals, such as shipowners, managers and traders, are the most important group.
“They are the drivers of the maritime industry and generate business for the service companies. If more of these principals are attracted to Hong Kong, related service providers, such as brokers, insurance companies and maritime law firms, will follow,” Koo points out.
So in this chicken and egg thinking the argument follows that owners tend to want to be near the charterers at the top of shipping’s food chain, the majority of whom quit Hong Kong for Singapore more than a decade ago.
Tim Huxley, chairman of Mandarin Shipping, tells Splash: “We need to encourage more sectors where commercial control and authority is vested in Hong Kong.”
In the early 2000s, Huxley recalls how Hong Kong had a considerable chartering community, but much of that was lost to Singapore. “We need to try and recover some of that,” he says, urging the government to ink plenty more double taxation agreements as a good starting point.
This necessity to lure commercial principals back to the shores of the so called Fragrant Harbour is also an issue picked up by Kenneth Lam, the CEO of Credit Agricole Asia Shipfinance.
We need to encourage more sectors where commercial control and authority is vested in Hong Kong
“We should start with the commercial principals that would make the major decisions on the vessels’ S&P and chartering/employment matters,” Lam says, continuing: “Hong Kong should attract them to come by providing certainty and stability like what the Ship Leasing Bill has done. The rest of the maritime cluster such as shipmanagers, shipbrokers, lawyers, bankers, insurance companies will follow these major commercial principals.”
Hong Kong has already adopted low tax legislation for qualified ship leasing companies and qualified ship leasing managers since June 2020. Similar tax relief legislations are also in the pipeline for shipmanagers, shipbrokers and ship agents.
With the decarbonisation of shipping likely to take up much of the industry’s focus and outlay for the coming decade, there are many in Hong Kong who believe this ought to form a greater plank of the shipping’s maritime offerings. There’s already a hotbed of green tech start-ups in the Special Administrative Region (SAR), but given the trillion dollar-plus bill it will take to clean up shipping the city could cash in if it positioned itself as a serious leader in this field.
Damien Laracy, head of law firm Hill Dickinson’s Hong Kong office, argues the SAR should focus on combining economic development opportunities with a low-carbon transformation.
“The city’s advantages in the fields of finance and shipping mean that it is well-positioned to become a green shipping hub in the Asia-Pacific region. It also has the potential to become the rule-maker in green shipping finance,” Laracy suggests.
Hong Kong’s 2020 policy address highlighted that the city would strive to achieve carbon neutrality by 2050 and develop green finance as one of its economic developments for the purpose of promoting carbon reduction and enhancing resilience to climate change. To support the development of green finance, the government has also put forward the Green and Sustainable Finance Grant Scheme.
Major Chinese ship financing institutions and seven of the world’s top 10 ship financing syndicated loan underwriters have established branches and offices in Hong Kong. In addition, the total amount of green bonds and loans arranged in Hong Kong in 2020 alone reached $12bn. The borrowing ceiling for the new green scheme was raised to HK$200bn ($25.7bn) in 2021, allowing for a total of around HK$177.5bn in green bonds to be issued in the next five years.
“The issuance of green shipping bonds in Hong Kong will become a more attractive financing option for large-scale shipping and shipbuilding and port companies to develop and manufacture new energy ships and other technologies to promote zero carbon emissions in the shipping industry,” Laracy says.
Concluding, Caravel’s Banga tells Splash: “It’s a matter of setting policies and introducing initiatives designed to help the maritime industry thrive – whether that’s about creating new opportunities, fostering innovation and collaboration, or attracting and retaining top talent.”
This article is part of Splash’s Hong Kong Market Report 2021, publishing to coincide with the city’s maritime week, which started on Sunday. Splash readers can access the full magazine for free by clicking here.