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Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, today (October 1) addressing a reception for the shipping community in Tokyo (English only):

Distinguished Guests, Ladies and Gentlemen,

I am delighted to be here in Tokyo and to have this opportunity to address such a distinguished audience of prominent leaders in the Japanese shipping community today. I must thank you for taking time out of your busy schedule to come here and listen to what Hong Kong has to offer as an international maritime centre.

Following the last visit to Imabari by Mr S Y Tsui, Director of Marine in November 2001, we originally planned to return in April this year. However, the unfortunate outbreak of SARS disrupted our schedule. Today, with SARS under control, I am pleased to tell you that Hong Kong is back to normal. We are now healthier, more competitive, and with new vitality. It is therefore the right time for us to update you on the current status of our port and maritime industry and the opportunities for shipping business in Hong Kong. Mr Tsui will shortly brief you on the rapid growth of the Hong Kong Shipping Register and how you can benefit from the services it provides. I will give you a broader perspective of the business opportunities available in Hong Kong as an international financial, business and maritime centre.

As a business center, Hong Kong lies in the heart of Asia. People from all over Asia can reach us in three to four hours be it Tokyo, Bangkok, Shanghai or Singapore. You will find Hong Kong's business attractions unparalleled in the region. We have a low tax regime - the maximum corporate profit tax and personal income tax are 17.5% and 15.5% respectively; we have a long-established common law system, and world class infrastructure and telecommunication network. As an international financial centre, we have a robust banking system where 73 of the largest 100 banks in the world have established offices in Hong Kong providing all kinds of banking services, including ship financing. We also have business-friendly policies, and a clean and accountable civil service. The cost of establishing an office in Hong Kong has come down considerably over the past few years as both property prices, office rentals and staff costs have dropped substantially. These are the key elements making Hong Kong as Asia's premier base for business.

Hong Kong is fortunate to have a sheltered, deep-water harbour located on the busiest trade route in the world linking Europe and the U.S. with Asia. This has enabled Hong Kong to become a natural hub in the global supply chain as well as the leading gateway port to our vast hinterland of Mainland China. We are an integral part of the Pearl River Delta, or PRD, which is also known as the "factory of the world". Today, 70% of the international container cargo to or from Southern China is handled through Hong Kong. The PRD is the fastest growing, most dynamic, affluent and open economic region in China, which lies just across the boundary from Hong Kong. It is also our key cargo source which propelled Hong Kong's container cargo throughput to a record high of 19.1 million TEUs last year. These containers are carried to over 500 destinations in the world by some 400 liner services per week including many Japanese shipping lines which are a familiar and welcome sight in our harbour.

About 26,000 trucks cross the boundary between Hong Kong and the Mainland each day. To cope with the anticipated expansion in trade and business opportunities since China's accession to the World Trade organization (WTO), we are continuing to strengthen our connectivity and integration with the PRD by upgrading our infrastructure to improve our boundary crossings with the Mainland. These include the Shenzhen Western Corridor, an additional bridge at Lok Ma Chau boundary crossing point and the much talked about Hong Kong-Zhuhai-Macau Bridge.

To enhance the status of Hong Kong as a gateway to the economic opportunities in the Mainland, we signed a Closer Economic Partnership Arrangement (CEPA) with the Mainland in June 2003. When CEPA takes effect on 1 January next year, Hong Kong companies will enjoy greater flexibility and business opportunities when doing business in China. It enables early access for Hong Kong companies and service providers to the Mainland market, ahead of China's timetable for other WTO members.

Under CEPA, Hong Kong companies will be allowed to set up wholly-owned enterprises to provide a wide range of logistics services in the Mainland, international ship management services, storage for international maritime freight, container station and depot services. Hong Kong companies providing freight forwarding, storage and road freight transport services, for example, will be allowed to set up wholly-owned enterprises in the Mainland at least one to two years before other WTO members. To enjoy the benefit in the maritime transport services, 50% or more of the ships owned by the enterprise calculated in terms of tonnage must be registered in Hong Kong. We will provide you with more details later.

Since China has not made any WTO commitments in respect of maritime transport and logistics services, I am sure you would be interested to take advantage of CEPA to gain access to the Mainland market through Hong Kong.

Hong Kong is an international maritime centre. Hong Kong maintains its common law system under the "one country, two systems" arrangement with the mainland of China. I am glad to say that "one country, two systems" has worked very well since the reunification in 1997. The fact that we have our own shipping register and our own air services agreements with other places illustrates the high degree of autonomy we have. Being an associate member of the International Maritime Organisation, Hong Kong is able to influence international discussions on shipping conventions. In addition, by virtue of the Basic Law, Hong Kong is able to make its own legislation in shipping. Indeed, Hong Kong has a comprehensive arbitration law and excels in shipping and commercial law. The Hong Kong Arbitration Ordinance is recognized as one of the most advanced arbitration statutes and provides a maximum of support to the arbitration process.

Hong Kong is the leading international ship finance centre in Asia, providing a comprehensive range of services to the shipping industry. Marine insurance activities continue to expand. As a major loan syndication centre, Hong Kong offers particular expertise to the maritime industry.

All of the major P&I Clubs have representative offices in Hong Kong. International group clubs have been encouraged to set up regional centres in Hong Kong, for both underwriting and claims administration purposes.

Some of the world's largest and oldest ship management companies are based in Hong Kong. Many of them take leading roles in the International Ship Managers Association.

In respect of shipbroking, Hong Kong is the regional base for many of the world's largest shipbroking companies. Several of the largest global players in the shipbroking industry choose to base their Asian operations in Hong Kong is a testament to the importance of Hong Kong as a shipbroking centre. Hong Kong will continue as a leading broking centre for the rapidly expanding markets in China and for new building contracts at Chinese yards.

As regards other services, to provide support for the tens of thousand of vessels that call at Hong Kong each year, there are a large number of agents providing services, booking cargo space on visiting vessels, and providing various logistics services and organising onward distribution of freight. All the better known classification societies are represented in Hong Kong.

Building on its strong maritime community, many international marine service providers have presence in Hong Kong, providing supplies and support services ranging from ship maintenance and repair, bunkering, waste disposal, IT and communication services, auditing and tax advisory as well as education and training services.

There are about 800 shipping-related companies operating in Hong Kong, providing high quality maritime services from marine insurance, legal, arbitration, ship finance, brokerage, management, registration to ship surveying services. Hong Kong is the seventh largest maritime centre in the world with our shipowners managing about 8% of the world's merchant fleet. The Hong Kong Shipping Register has an excellent reputation as a register of high quality. Port State Control detention rates for Hong Kong registered ships are well below the world average, i.e. 2.6% in Paris MOU compare with the average 8% and 1.7% in Tokyo MOU compare with the average 6.7%.

As at August 2003, 18.63 million GT was registered with our Shipping Register, an increase of 20% over the same period last year. Of the 834 vessels registered with us, I am glad to say that 16 of them belong to Japanese shipowners.

The Hong Kong Shipping Register has many advantages and benefits. To name just a few, our registration fees and tonnage dues are simple and competitive. We provide one-stop service for registration and relevant formalities. There is a well-structured and flexible ship inspection system to ensure full compliance with the international maritime conventions. We provide free-of-charge Flag State Quality Control inspection and technical advice to shipowners for complying with the port state control requirements. We have made double taxation relief arrangements with major trading partners to reduce tax burden of shipowners. Last but not least, we have good overseas network for providing support to Hong Kong registered ships by our Hong Kong Economic and Trade Offices and Chinese embassies.

In conclusion, I hope all of you will seriously consider starting your business in Hong Kong and placing your ships on the Hong Kong Shipping Register.

Now, I will hand over the floor to our Director of Marine, Mr S Y Tsui to tell you more about the benefits of registering your ships with the Hong Kong Shipping Register.

Thank you.

End/Wednesday, October 1, 2003

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