On 1 July 2018, Hong Kong celebrated the 21st anniversary of the end of British colonial rule and its return to the Motherland's embrace.
1 July also marks the beginning of the second half of the year. If Year 2018 were a soccer match, the players are now back on the field, feeling refreshed after the halftime break, and ready to kick-off the second half of the match.
For Hong Kong's maritime industry, the game has so far been tough, just like last year, and the year before that. Team Hong Kong has been playing on defence mode, struggling to hold its ground against strong rivals like Singapore and Shanghai. With this comes the city's realization that laissez faire, the style of governance that had once been a source of pride, may have passed its heyday.
With a bit of luck, though, and barring any contingencies with the US-China trade war, the second half of 2018 may see the tide turn for Hong Kong and its maritime industry, for there is good news to come.
In May 2018, the Hong Kong Government's Financial Services Development Council ("FSDC") published the Maritime Leasing Paper, proposing a series of major reforms aimed at revitalizing Hong Kong's maritime industry. The proposals include:-
- slashing the profits tax rate by half for "maritime and ship leasing management" and "maritime and shipping-related supporting services" activities, to no higher than 8.25%;
- strengthening the powers of the Hong Kong Maritime and Port Board (HKMPB) or, alternatively, creating a centralised Maritime Office;
- improving the services of the Hong Kong Shipping Register;
- offering to qualified investors credit and liquidity enhancement products supported by sovereign-rated financial institutions;
- nurturing talent in the maritime cluster; and
- entering into more double tax treaties with major shipping jurisdictions.
These proposals still need to be officially approved, and many would need to go through the Legislative Council in order to be passed into law or to secure the necessary funding. However, if things go smoothly, we could soon be hearing significant changes being announced by the Chief Executive, possibly at her next Policy Address scheduled for October 2018.
Greater Bay Area ("GBA") Development Plan
Also down the pipeline is the long-awaited Guangdong-Hong Kong-Macao Greater Bay Area Development Plan (the "Development Plan"), due to be announced jointly by Hong Kong, Macau and Guangdong, and the central government, later this year.
The Development Plan is expected to roll out substantive policies implementing the GBA strategy, a grand vision that has recently attracted a lot of public attention, but has so far been a little short on details. Essentially, under the GBA strategy, the 11 cities surrounding the Pearl River Delta (including Hong Kong, Macau, Shenzhen and Guangzhou) will seek closer integration and collaboration by leveraging on the cities' respective strengths and capabilities.
The GBA framework agreement of July 2017 has already identified maritime, finance and trade as Hong Kong's three core competencies to be further enhanced and developed. Earlier this year, the governor of Guangdong province announced the 3-pronged target of turning the GBA into "a globally influential technological innovation centre, financial hub and maritime centre". It is not hard to see why Hong Kong will be a central piece of this jigsaw puzzle, and how the city's maritime industry will benefit.
No doubt Hong Kong will continue to focus on high value maritime services such as ship finance, insurance and dispute resolution. Hong Kong's container port will also cooperate more closely with other ports in the region to form a close-knit cluster, with the three major ports of Hong Kong, Shenzhen and Guangzhou at its core. In May 2018, a working paper of the Shenzhen municipal government went further by suggesting the concept of "Shenzhen-Hong Kong combined port", viewing the pair as an integrated unity.
Some critics say the FDSC's proposals are too little, too late. Others are sceptical about the GBA, and worried that Hong Kong might be marginalized in a "power struggle" with Shenzhen and Guangzhou for regional dominance. But for most of us in shipping, any help is better than none at all, and we need all the help that we can get. Anyway, let's play on and see how the game unfolds!
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