Mr Chao, Ladies and Gentlemen,

Let me first of all thank the Hong Kong Shipowners Association offering me a free lunch today and the opportunity of speaking to such a distinguished audience. Let me tell you a little secret. I've worked for the Government for nearly 24 years. Before I joined the Government, I had worked in the private sector for four months. Needless to say, the company I joined was a shipping firm. So don't be too surprised if I know something about ships.

Hong Kong was founded as a port. Throughout Hong Kong's history, shipping has been part of Hong Kong's growth and prosperity. In the early days of Hong Kong, shipping played a vital role in transforming Hong Kong from a sleepy fishing village into a flourishing entrepot. As Hong Kong slowly evolved into a regional service centre, the expertise of Hong Kong's maritime industry enabled Hong Kong to emerge as the gateway of goods coming to and out of China, a major shipowning centre, as well as a sophisticated service centre for shipping - related activities. The maritime industry has made a significant contribution to Hong Kong's economic development and I am sure it will continue to play a vital role in future.

The reunification of Hong Kong with Mainland China will provide many new opportunities for Hong Kong's shipping industry. Given its current pace of development, China's economy will become one of the world's largest in the next century. The growth in demand for sea transport, whether it is for goods, raw materials, or fuels and natural resources, will be unparalleled in history. The cultural similarity, the geographical proximity, and the global expertise of the Hong Kong shipowners will give us a head start in serving the transport needs of the growing economy of the Mainland.

But while the opportunities are there, I am sure you all know very well that international shipping is a very tough business. Competition is fierce. To face up to the challenges and to take advantage of the opportunities, we must continue to improve our competitiveness, increase our efficiency and provide a better service to meet the needs of the increasingly demanding customers. As part of our overall effort to promote Hong Kong as a major services centre, the Government will endeavour to provide a conducive environment for investment and doing business in Hong Kong. On the shipping side, our priority is to promote the Hong Kong Shipping Register, lower the cost of doing business in Hong Kong and attract more ship management and related companies to come to set up operations in Hong Kong.

I am very pleased that the Hong Kong Shipping Register has recently received a double boost of confidence. Thanks to the excellent efforts made by the Hong Kong Shipowners Association and, in particular, its Chairman, Mr George Chao, an agreement has been reached to ensure continued shipping links between Hong Kong and Taiwan after the transition. The agreement guarantees that Hong Kong registered ships can continue to call at Taiwanese ports freely and vice versa, and it ensures that our ships can continue to participate in the Hong Kong - Taiwan trade, which is worth more than 150 billion Hong Kong dollars a year.

Another demonstration of confidence in the Hong Kong shipping register is the arrival of OOCL Singapore last week. With a capacity to carry 5006 TEUs, it is the largest container vessel which has joined our register since the Handover, and I understand that a number of locally owned or managed ocean- going vessels will be joining our register shortly. This is very encouraging and I welcome your support for our register. I am sure it will set a very good example and help to attract many more ships to come and register with us.

Promoting the Hong Kong shipping industry requires the joint efforts of both the industry and the Government. While the industry has shown their support, we must of course do our part. George, in his remarks, has mentioned the fees of our register. We have recently received a formal proposal from the Hong Kong Shipowners Association on the question of fees of our register. The Economic Services Bureau and the Marine Department are carefully looking at the proposal. We will review not only the level of fees, but also the ship surveying procedure. The matter will also be considered by the Finance Bureau which is responsible for setting Government fees and charges. Our objective is to streamline the fee structure, to reduce the cost burden to shipowners and to increase the competitiveness and attraction of our shipping register.

Separately, the Marine Department has been taking a number of measures to make our Shipping Register more user friendly. These include the introduction of bilingual certificates, the publication of a user handbook, and the use of the Internet to disseminate information. The Ministry of Foreign Affairs has also issued an instruction for PRC embassies and consulate offices overseas to provide consular assistance for Hong Kong registered ships when required. I hope, through co-operation between the Government and the industry, we will make our register more cost competitive and preserve our position as a high quality, value-for-money, premium register to attract local, mainland and overseas shipowners to register their ships with us. Building on the strength of our shipping register, we are also working with the Services Advisory Committee of the Trade Development Council and the Hong Kong Shipowners Association to promote Hong Kong as a ship management centre.

I understand that another issue of concern to Hong Kong shipowners is taxation. The Hong Kong Shipowners Association has put forward a submission to us concerning the freight tax imposed by some overseas countries which puts Hong Kong registered ships in a disadvantageous position. The issue is being looked at in the context of the Government's current review of profits tax. As you all know, tax is a very complicated and technical issue and it is under the purview of the Finance Bureau, but you can rest assured that we will seriously consider any proposal which will help to create a level playing field for Hong Kong shipowners and promote Hong Kong as a major international shipping centre.

Let me now turn to a common problem facing shipowners all over the world, that is, the shortage of seafarers. International conventions have imposed stricter requirements in terms of competence and training of seafarers and this has increased the cost to shipowners. The Mainland has a huge source of potential seafarers at competitive costs, but they lack quality training facilities. Hong Kong has first class seafarer training facilities, but the younger generation in Hong Kong is not interested in making a career at sea. Clearly an opportunity exists here for making better use of Hong Kong's facilities and expertise to train Mainland seafarers to help Hong Kong shipowners overcome the problem of the shortage of qualified seafarers.

The Merchant Navy Training Board of the Vocational Training Council (VTC) has been keen that accommodation should be provided for trainees at the Seamen's Training Centre. This would facilitate training for both local people as well as non-permanent residents from the Mainland. I am pleased to say that the Government has made available funds in the region of $10 million for the VTC to undertake this worthwhile project. The accommodation is likely to be ready by June 1998.

Apart from basic seamen training, the changing career aspirations of the younger generation and Hong Kong's position as a modern international maritime centre also require us to widen the scope of maritime training in Hong Kong. The port and shipping industry constitute one of Hong Kong's major economic sectors. To support the growth and development of the industry, we need to provide a continuing supply of quality workers and we must promote local interest in taking up a career in port and shipping services.

The Education and Manpower Bureau, together with the VTC and the Marine Department, is reviewing the role and functions of the Seamen's Training Centre. Clearly, the skills and disciplines now required by a modern port like Hong Kong are much wider than basic seafarer training. One of the concepts being considered is to convert the Seamen's Training Centre into a "Hong Kong Maritime Centre". The Centre will consolidate the maritime training programme currently provided by the VTC, promote local interests in the port and shipping industry, and provide training to meet the modern needs of Hong Kong as a world class maritime centre.

Another issue which affects shipowners is the high cost of handling cargoes in Hong Kong. This is an issue of considerable concern to both the shipowners and the shippers as it would erode our long term competitiveness. Hong Kong is the only major international port which is fully owned and operated by the private sector. Quality of service and level of charges are regulated by market forces. The strong export growth in Southern China has created a huge demand on Hong Kong's terminal facilities. When demand exceeds supply, it is not unexpected that charges would increase.

The solution lies in providing more capacity to meet demand and to enable market forces to operate more effectively. In this connection, the coming into operation of Container Terminal 9 (CT9) in late 1999 or early 2000 will provide an additional handling capacity of 2.6 million TEUs. To maintain the long term competitiveness of the Hong Kong port, we must ensure that we have sufficient terminal capacity to meet forecast demand. We must continue to plan for new terminal developments beyond CT9 to meet the forecast growth in demand and bring more competition in port operation.

Given its current momentum of economic development, the Mainland demand for sea transport in the next century will be unparalleled in history. The reunification of Hong Kong with our Motherland will give Hong Kong a unique opportunity to take advantage of and to contribute to this development. But we must seek to improve our competitive strengths by increasing the attractiveness of our shipping register, promoting maritime training and lowering the cost of doing business in Hong Kong for the shipping industry. Hong Kong's expertise in maritime affairs and port management is unrivalled in the world. With our superior location, the huge economic hinterland in Southern China, our highly efficient port service and advanced shipping management, Hong Kong will continue to play a most important role in China's economy. I am confident that Hong Kong's traditional entrepreneurial spirit and the high degree of autonomy stipulated in the Joint Declaration and the Basic Law, combined with the huge market opportunities offered by the rapidly expanding Mainland economy, will stand us in good stead to maintain our position as the busiest port and an international maritime centre.

Thank you very much.