If Singapore is able to centralise planning around marine, maritime, financial, insurance, and legal industries then Hong Kong must follow suit if it wants to maintain a competitive edge in the shipping world
Hong Kong must get to grips with the fact that although cutting taxes and red tape is attractive to international business, if it wants to emulate the success of Singapore, it must mimic its centralised maritime planning to keep luring in shipping-associated industries.
In its latest fiscal budget, the Hong Kong Special Administrative Region (HKSAR) government provided a new round of financial support to consolidate Hong Kong as an international shipping centre.
It plans to provide tax concessions for ship leasing, include the relief of profit tax for qualified ship lessors, to halve profit tax for qualified ship leasing managers, and halve profit tax for eligible insurance businesses, including maritime insurance.
What is more, the government plans to offer other tax-cutting measures in order to attract more international shipping business operators and clients to settle in Hong Kong.
The 2020-2021 budget is an enhancement to accompany the macro measures put in place to support and enhance the development of high value-added shipping services, which were introduced back in the 2018 policy address two years ago.
If it were not for the time spent on the ongoing domestic socio-political obstacles, which has so far occupied more than six months of the government’s time, the long-awaited tax concessions on local and overseas shipping industries would have been gradually implemented as early as last year.
Regardless, over the past year, the Hong Kong shipping industry has achieved a variety of remarkable accomplishments.
In November 2019, the International Chamber of Shipping, one of the world’s most influential international shipping associations, which is headquartered in London, set up its Chinese liaison office in Hong Kong, becoming the first overseas branch of the century-old global shipowners’ organisation.
In addition, the Copenhagen-based international shipping association the Baltic and International Maritime Council confirmed the following month that Hong Kong would be included in the arbitration clauses of various standard maritime contract forms, which can be deemed as an official recognition of Hong Kong as an international maritime arbitration centre alongside London, New York, and Singapore.
Moreover, the Hong Kong Marine Department has established and gradually begun operating overseas support teams of the ship registry in Shanghai, London, and Singapore in order to provide support services for Hong Kong ships among the world’s most important shipping centres.
Objectively speaking, these accomplishments are indispensable to the proactive role of the HKSAR government in recent years. In the process of actively co-operating with the industry, the government has made use of the close relation between ‘facilitators’ and ‘promoters’.
Unfortunately, Hong Kong has been hit by unexpected crises, first devastated after months of social unrest, it has now been jolted by the coronavirus outbreak.
Although the socio-politically charged movement has slowed activity slightly since the New Year, yet another bout of violence occurred last month in Mongkok, proving again that the circumstances around the deep-seated conflict will erupt once the epidemic is contained.
The financial secretary, Paul Chan Mo-po, stated in a television interview on 1 March 2020 that the ongoing violence would raise questions about whether Hong Kong would still be a suitable place for long-term investments. The authorities know the global shipping community may raise further questions about that whether Hong Kong can continue to maintain its status as an international shipping centre.
Efficient governance and a strong rule of law have always been Hong Kong’s main advantages under the ‘one country, two systems’ principle, but the continued social unrest will undoubtedly weaken these advantages. More importantly, the most basic aspect for evaluating the business environment, social stability, now seems like a luxury for Hong Kong. Regardless of how many tax cuts the government may decide to implement, where there is no guarantee of social stability, there is also difficulty in attracting the investment of multinational companies.
Therefore, priority should be placed on being able to reach a mutual understanding through communication, in order to explore and resolve the deep-rooted conflicts at the heart of the socio-political movement. The earlier this can be resolved, the faster Hong Kong can set back on track to move forward and ultimately fully restore its reputation as one of the best business environments in the world.
However, what is more pressing at the moment for Hong Kong shipping industry is the lack of a comprehensive and long-term development strategy. As a result, no matter whether domestic or international in nature, the HKSAR government is clueless about the direction of future development of the shipping industry, thereby making it unable to make practical and efficient long-term investment plans in Hong Kong.
In addition to the proposal of eight measures at once in the 2018 policy address, there was also a proposal to encourage more principal stakeholders (such as shipowners, operators, and shipmanagers) in the maritime industry to choose Hong Kong as the base for their business. This encouraging proposal is undoubtedly a step in the right direction. However, a tree simply cannot grow without its roots.
If the traditional maritime shipping business, or the ‘roots’, continues to stem away from Hong Kong, then the infrastructure of the maritime cluster will be impossible, and the development of a high value-added shipping industry, as the ‘tree’, will be even more difficult to develop.
It is very regrettable that the budget only continues to add more to this idea, that is, to ‘demolish walls’ through tax redemption and exemptions. It continues to fail to put forward any ground-breaking review and real discussion on the future development of the Hong Kong shipping industry.
By contrast, Hong Kong’s regional competitor, Singapore, has in the past decade achieved tremendous achievements in the development of shipping businesses, partially due to its forward-looking policies. In order to build Singapore into the world’s top shipping centre, the Singaporean government has long courted global shipping to shift its focus to the Asia Pacific.
From the very beginning, the Singapore authorities developed and established a complete set of maritime industry development plans, and they have centralised marine, maritime, financial, insurance, and legal industries in their planning.
Singapore has also been developing things such as maritime transportation, then maritime insurance, the shipping industry and then the maritime industry, increasing the port throughput and then introducing talents and improving on human factors, first expanding the shipping industry cluster and then developing high-end services and so on.
It is precisely because of the long-term and comprehensive development strategy that Singapore has ranked first in the Xinhua-Baltic International Shipping Centre Development Index for the past six years, surpassing global competitors such as London, Hong Kong and Shanghai.
The conclusion of the budget, which aims to ‘drive Hong Kong forward’, is indeed an appropriate finishing touch. The slogan of Hong Kong Maritime Week, ‘Propel Hong Kong’, is of the utmost importance for the shipping industry. It is necessary to implement a long-term cohesive and comprehensive development strategy as soon as possible, in order to become a figurative nautical chart to guide the future of the Hong Kong shipping industry.