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Following is the full text of the speech (English only) by the Secretary for Economic Services, Mr Stephen Ip, at the Ship Registers Conference in London today (Thursday):
Ladies and Gentlemen, I am very pleased to be here, in London, the pre-eminent centre for shipping in the world for centuries past. Coming from Hong Kong I can find a familiarity with London. We both started as ports and around that activity developed supporting business such as finance, insurance, freight forwarding and ship support trades such as ship repair and shipping agencies. Shipowners of course became established, indeed our new Captain of Hong Kong, C. H. Tung was a prominent shipowner. And finally the Hong Kong shipping administration, technical standards and framework of legislation are modelled on those applying here in the United Kingdom.
I welcome the opportunity to address this conference and be able to give you some details of the recent development of the Hong Kong Shipping Register and the steps being taken to promote the shipping industry in Hong Kong.
The Hong Kong Shipping Register
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Of course the world had its eyes on Hong Kong more than two years ago with all the pomp, ceremony and festivities surrounding our reunification with China. Long before then both the Mainland of China and the United Kingdom had recognized the need to preserve the unique status of Hong Kong as an international shipping centre. From the signing of the Joint Sino-British Agreement for Hong Kong in 1984 much work was undertaken to ensure that shipping business would continue to flourish after 1997 as they had before.
The mini constitution of Hong Kong, the Basic Law contains four Articles concerning shipping. It is spelt out clearly in these Articles that the Hong Kong Special Administrative Region shall maintain Hong Kong's previous systems of shipping management and regulation and shall, on its own, define its specific functions and responsibilities in respect of shipping. I emphasise the words previous and on its own since they encompass the continuity of shipping administration and ability for shipping and shipping related business to continue to operate freely and the autonomy that Hong Kong Special Administrative Region exercises in respect of maintaining its shipping register.
With this background the autonomous Hong Kong Shipping Register was established in 1990. One unique feature of the Register was the requirement to hoist two flags, the Red Ensign and the Hong Kong flag before July 1997 and the now familiar Hong Kong Bauhinia flag and flag of China.
Promoting Hong Kong as an international centre
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With the autonomy of Hong Kong and its relationship with the Mainland clearly set out in the Basic Law, Hong Kong's dynamic shipping and port sectors are well protected. Continuous efforts are being made by the Hong Kong Special Administrative Region Government not only to reinforce these qualities which have made Hong Kong the most efficient and the busiest container port but also to further sharpen our competitive edge in shipping.
A package of measures to make the Hong Kong Shipping Register more competitive and user friendly was instituted in April this year. These covered the cost of registration, procedures and safety standards on board ships flying the Hong Kong flag.
Cost
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Cost reduction is not simply a fee reduction. We recognized the need to reduce the administrative cost of registering and maintaining a ship under Hong Kong's ship survey programmes. We need to focus on the cost to shipowners of compliance with our regulatory requirements and to reduce shipowners' tax burden not only in Hong Kong but also overseas. I will tell you how these are being achieved.
Fee Structure
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We have introduced new and simple fee structure through the elimination of all minor fee items. The initial registration fee has been reduced by 85% to a flat rate of HK$15,000 and the maximum annual tonnage fee by 45%. Mortgage registration fee has also been reduced to a flat rate of HK$440, a 96% reduction. The licence fee for overseas certificate holders is also reduced by 76%.
To help shipowners reduce their operating cost we have re-aligned our regulatory requirements and technical standards with those of international conventions. We have also delegated all the survey and issue of certificates to the major classification societies. These measures together with the reduced fees could reduce a ship owner's expenditure by $260,000 in the first year and $570,000 over 5 years for a capesize ship of 78,000 grt.
Owners of Hong Kong ships are not required to pay any tax on profits made overseas. They are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong. We are now in the process of concluding double taxation relief arrangement with Hong Kong's trading partners to exempt owners of Hong Kong ships from paying any freight tax levied on cargo uplifted from overseas. Agreements have been concluded with USA, Mainland China and New Zealand and similar agreements are under discussion with many other tax administrations.
We have recognised that, in addition to competitive charges, the Register must be user friendly and services provided responsive to shipowners' needs. The Hong Kong Register has been made user friendly with the following re-engineered processes :
(a) the delegation of all survey and certification work on cargo ships to recognized classification societies. This will enable Hong Kong ships to be surveyed and certificated abroad without the need to fly our surveyors overseas;
(b) the documentation for ship registration and de-registration has been simplified and streamlined. A ship can now be registered and issued with a certificate of registry in under 3 hours; and
(c) there is no longer any need for the shipowners to attend our office for ship registration. Information about the legal requirements, application forms, merchant shipping notices and related legislation are now available from our website. Ships can soon be registered basing on fax documents.
Flag state quality control system
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The Hong Kong Register recognizes the need not only to be a competitive flag but also to be recognized as a Quality Register. The detention rate of Hong Kong ships under various port state control regimes is among the lowest in the world.
We have recently introduced a flag state quality control system or (FSQC). Under the FSQC we will continuously monitor the quality of surveys carried out by the classification societies. The standards of compliance of Hong Kong ships with international convention requirements will be monitored through a direct access to the classification societies' computers. This will enable us to know the survey and certification status of Hong Kong ships including any outstanding survey items and deficiency. These data will be analyzed along with records of detention of Hong Kong ships held by various port state control secretariats such as the Tokyo and Paris MOU. A quality analysis will be made on all Hong Kong ships based on this data, together with the age and type of the ships, and the track record of the ship managers and shipowners. The worst scoring 10% of Hong Kong ships will be chosen for FSQC inspection by our surveyors each year at our own expenses. An annual report will also be made on the performance of the classification society with regard to their management of survey, certification, and deficiencies on Hong Kong ships together with the number of ships under their classification having been detained through PSC inspections.
I am proud to say that Hong Kong is the first flag administration in the world to adopt such an elaborate quality management system on our ships. This should enable us to improve the quality of our fleet without incurring unnecessary expenditure on the part of the shipowners.
Hong Kong as an International Shipping Centre
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I have spoken of our links with the Hong Kong shipping industry. Actually the Hong Kong Government and the shipping industry are in partnership in strengthening Hong Kong's position as a maritime centre. This is undertaken through the Hong Kong Port and Maritime Board.
The Board was established in June 1998 with members appointed by the Chief Executive of the Hong Kong Special Administrative Region, Mr C H Tung. Members of the Board and its working committees provide expertise from all sectors of the shipping and port industry such as shipowners, ship managers, bankers, brokers, insurers and maritime lawyers.
With Hong Kong Shipowners controlling some 6% of world tonnage, over 31 million gross tons and over 1,000 shipping related companies in Hong Kong, we have a solid base to build upon. In Hong Kong we do recognize the need to continue to improve the business environment for shipping. I have already spoken about the measures to improve the competitiveness and safety quality of our Register. The work doesn't end there. Rather that is where it starts. Hong Kong continues to be an active participant in the work of the International Maritime Organization and other forums to help improve the regulatory and business framework for shipping. To support our human resources development for shipping, the Hong Kong Port and Maritime Board has been focussing on improving the training opportunities for young people entering the shipping industry. The Hong Kong Shipowners Association has been active in supporting the training of seafaring officers in Mainland institutes, such as the maritime academies in Ningbo, Shanghai, Qingdao and Dalian and our International Arbitration Centre has been building up the number of maritime arbitrators to support commercial dispute resolution available in Hong Kong. Indeed, Hong Kong is now the largest arbitration centre in Asia.
Our effort to improve services, safety standards and personnel training aims not only to serve the Hong Kong shipping industry, but also to make the world shipping industry more competitive.
Asia shipowners now control 50% of the world tonnage. They are looking for better services by the classification societies, P&I Club and maritime lawyers. In particular they would like to have access to these services closer at home. With Asia emerging as an important regional shipping centre, we would encourage international maritime services companies, especially those based in London or elsewhere in the West, to seriously consider opening up branch offices in Asia to be close to their clients.
Hong Kong is ideally located to meet this objective, because of the critical mass already there, our strengths in shipping finance and P&I Club, the cluster of local shipowners and maritime administration based on the UK model, and more so, an extremely business friendly environment and Government, not to mention Hong Kong's position as the gateway to Mainland China, one of the largest maritime countries in the world with considerable potential for expansion.
I believe Hong Kong, as an international trading centre and a focus for Asian shipping, is a natural location for expanding shipping activities, especially those related to Asia trade in general and China trade in particular. Our excellent telecommunications network, financial, insurance and legal services, simple and low tax regime are attracting more and more Mainland and overseas shipping companies to Hong Kong. I hope some of you will consider contacting our Port and Maritime Board for more information. You will be most welcome and will find out why Hong Kong is Flying the Flag and why it is in your interest to fly the Hong Kong Flag!
Thank you.
End/Thursday, September 23, 1999
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