PORT
Hong Kong and the Greater Bay Area in the 2020s Defining a role or a declining role? Dr Jonathan Beard, a partner at EY Infrastructure Advisory, deliberates on the city’s port fortunes this decade
T
he announcement of the Greater Bay Area (GBA) initiative by the Beijing government in 2017 heralded a new set of challenges and opportunities for Hong Kong’s container port. In truth, the ‘newness’ is perhaps exaggerated – much of the GBA initiative involves accelerating longer standing development trends in the Pearl River Delta (PRD) and hastening the process of regulatory, political and economic integration between Hong Kong, Mainland China and Macau - ‘evolution’ rather than ‘revolution’. Nonetheless, it feels that Hong Kong’s port is at a crossroads – can it maintain its position as a key regional hub for ocean transhipment and a gateway for south China imports and exports, or will it continue to lose absolute volume and market share as the GBA port cluster evolves? To understand the likely future of the territory’s port, it is necessary to understand how it and the GBA port market have evolved.
Box migration Go back 30 years and Hong Kong port was pretty much the only show in town. The city’s container terminal operators were in the enviable position of handling gateway cargo for a booming PRD economy that was reaping the benefits of Deng Xiaoping’s Open Door Policy.There was limited competition from other ports, but space was constrained and this drove a remarkable increase in productivity and densification to expand in situ capacity. Handling rates were relatively high as was terminal profitability, despite paying large upfront premiums to secure concessions and taking on the full development risk for terminal construction.
However, the future direction of travel was clear, especially to the more visionary operators such as Hutchison, which saw the potential for terminal investment across the border in Shenzhen, initially at Yantian, but quickly replicated across the PRD by other operators, including at Shekou, Chiwan, Guangzhou and Nansha. The mainland ports developed high quality capacity at breakneck speeds and rapidly closed the productivity and overall service quality gap to Hong Kong. Whilst in the initial years, Hong Kong could afford to charge a ‘service premium’ this was rapidly eroded. Meanwhile, two key items fundamentally raised the total through costs for PRD gateway cargo routing through Hong Kong as compared
Kong’s position in the ocean transhipment “ Hong market has benefited from the absence of cabotage restrictions” www.splash247.com 9
