8 minute read
Greater Bay Area
Strength in numbers
Yoking Hong Kong economically with its neighbouring cities ought to provide plenty of opportunities for the local maritime community
First conceived in 2017, the Greater Bay Area (GBA) is up there with the Belt Road Initiative in terms of mega, overarching economic plans laid out during the tenure of Xi Jinping as leader of China. In a way it harks back to previous Communist times, what Deng Xiaoping called: “Crossing the river by feeling the stones” - a way of bridging divides for greater, mutual strength longterm
The Guangdong-Hong Kong-Macao Greater Bay Area comprises the two Special Administrative Regions (SARs) of Hong Kong and Macao, and the nine municipalities of Guangzhou, Shenzhen (pictured), Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong Province. The total area is around 56,000 sq km, population 86m and the combined GDP approaching $2trn, bigger than many G20 economies.
The objectives are to further deepen cooperation amongst Guangdong, Hong Kong and Macao, fully leverage the composite advantages of the three places, facilitate in-depth integration within the region, and promote coordinated regional economic development.
It is a project that excites many in Hong Kong, though there are plenty of people who have their own concerns about this planned integration.
“A closer integration of the economies in the GBA has the potential to make the combined output larger than the sum of the parts,” argues Bjorn Hojgaard, the head of shipmanager Anglo-Eastern.
“If you remove frictions to the free movement of people, of goods, of capital and of ideas, you spur innovation and growth, and with that come new opportunities,” he reckons.
Under the GBA initiative, Hong Kong will continue to be an international financial, maritime, trade, dispute resolution and legal services centre, something Rosita Lau, a lawyer for Ince and member of the Hong Kong Maritime and Port Board, says the city is perfectly suited to carry out. “I say so with full confidence because Hong Kong is the most international component of the GBA cluster of cities, and has long been an international maritime centre,” Lau tells Splash,
INCHCAPE SHIPPING SERVICES GLOBAL SHIP CHANDELING SERVICES
Quality consumables and spare parts at the right price, where you need it and from a name you can trust.
• Service available at different ports around the world • Competitive pricing • High quality • Additional services during the port call, such as logistics, bunkers, and marine surveys • Detailed spend analysis to help you make informed buying decisions • Single point of entry into our network • Single point of remittance • Early payment discount opportunities • Volume rebate opportunities
More locations coming soon
CURRENT LOCATIONS: AMSTERDAM • ROTTERDAM • ANTWERP • SINGAPORE • FUJAIRAH
pointing to the scale and efficiency of the city’s ship registry, the plethora of P&I club offices, and the range of tax concessions on offer to a wide range of maritime businesses.
“I do not see any other component city of the GBA has such strength in these regards,” she says.
Matthew McAfee, who heads up local shipowner Fairmont Shipping, tells Splash that Hong Kong’s maritime and finance expertise will be “vital” in developing the GBA. Angad Banga, chief operating officer at Hong Kong-based trader The Caravel Group, says he is “very bullish” about GBA prospects for Hong Kong’s maritime community.
“The vast population and expected growth in GDP per capita within the GBA means this is a very significant opportunity for businesses both within our industry and those which need our services,” he says.
“We believe the enhanced interconnectivity and exchange of people between the cities will also address the talent shortage issues that the city has been facing,” says Hing Chao, the chairman of local shipowner, Wah Kwong.
“The legacy strengths of Hong Kong in its unique and highly regarded common law legal system and various strengths as a financial and business hub incentives maritime companies to establish operations in Hong Kong, and to raise capital with debt and/or equity financing,” explains Damien Laracy, a partner at law firm Hill Dickinson.
With its integration into the development of the GBA, Hong Kong can optimise the allocation of resources in the region, benefit from the complementary advantages, and focus on the development of high-end shipping services, jointly building a complete and efficient emerging shipping ecological chain with the rest of the GBA, argues Wellington Koo, the chairman of the Hong Kong Shipowners Association.
Outlining what each of the major cities brings to the GBA, Koo says: “Hong Kong has the financing advantages, Shenzhen has the outstanding achievements in technological innovation and manpower training, and Guangzhou has a strong shipbuilding industry. Shipping needs new technologies and new energy to achieve the decarbonisation goals. Hong Kong, together with other cities in the GBA, may create a new shipping industry chain amid the massive changes.”
With a ports perspective on the GBA, Horace Lo, who heads up Modern Terminals, a company with facilities in both Hong Kong and across the border in the Pearl River Delta, has plenty of thoughts on how the economic zone could work out.
The total container throughput in the GBA exceeds 70m teu per annum. Over the years, the port of Hong Kong and other ports in the GBA have developed into an important cluster of ports, each with its own distinctive role and positioning. “We have to efficiently coordinate terminal capacity in the GBA to achieve a proper balance between supply and demand in view of evolving market needs,” Lo advises. Despite the effusiveness above, there are some words of caution for all those that think the formulation of the GBA will be a panacea for Hong Kong maritime. “Performance must be quantifiable,” stresses Gautam Chelleram, the chairman of dry bulk owner KC Maritime. “I do not think the verdict is out yet on the synergy between Hong Kong and the Greater Bay Area from a maritime perspective. Hong Kong has a lot on its plate, and I would not recommend spreading itself too thin on expanding itself regionally,” he advises.
Ince’s Lau also points out that despite the fact the GBA plans have been in existence for five years now, the authorities have yet to stipulate that Chinese shipping companies should use Hong Kong law as the governing law and that Hong Kong arbitration or Hong Kong court proceedings be the governing mode of dispute resolution.
“This is a measure of top priority which has to be taken without delay in order to make the initiative successful,” Lau concludes.
Latest Targeted Tax Concessions set to Grow Maritime Cluster
The Hong Kong Government has high hopes of attracting more maritime businesses to Hong Kong following the enactment of new legislation providing tax incentives for qualifying shipping commercial principals (i.e., ship managers, ship agents and shipbrokers).
These latest incentives are just part of an ongoing campaign by government to enhance Hong Kong’s status as a premier maritime centre for the region.
Under the new Inland Revenue (Amendment) Ordinance, qualifying commercial principals will enjoy a 50% reduction in their corporate tax burden – with a concessionary tax rate of 8.25%.
As expected, the response from these sectors have been generally enthusiastic; as expressed by comments from Fleet Management Limited’s managing director Kishore Rajvanshy:
“This is a positive step towards supporting the ship management sector in Hong Kong,” said Mr Rajvanshy, head of one of the largest ship management companies in the world.
“In the ship management sector, salary costs, office rent and taxes have key impacts on a company’s bottom line. Therefore, this reduced profits tax rate provides an incentive for international ship management companies to either set up or maintain operations in Hong Kong. It also means that companies can allocate the tax savings to other aspects of the business to support growth, such as further staff hiring or innovation.”
Growing the Pie
According to estimates released by a Task Force of the Hong Kong Maritime and Port Board, the new tax regime could bring about cumulative incremental ship agency, ship management and shipbroking business receipts of around HK$32bn. It is also expected that the tax measures would promote additional direct employment of around 27,600 staff and indirect employment of some 50,000 to 55,000 additional employees.
As of 2020 there were 254 ship management and ship agency firms operating in Hong Kong together with 61 shipbrokers. Ship managers and agents collectively employed 6,318 onshore staff. At the same time 219 staff members were employed by shipbroking firms. Commenting on the latest raft of tax concessions,
Abraham van Olphen, managing director of ship agency firm Central Oceans Asia Ltd, said: This is very good news and finally gives the much needed support from the government to, hopefully, retain our status as an international shipping hub.
“We are sure these tax benefits will greatly benefit Hong Kong’s position as an international shipping hub, as it will allow existing companies to invest in expanding their service portfolio and attract more shipowners to call Hong Kong. At the same time, we would expect new maritime businesses, lured by the tax incentives, to realise the advantages of operating in an environment that offers an international finance centre, international trading houses and strong connectivity to the Mainland,” he said.
Benny Wu, managing director at Arrow Shipbroking Group, welcomed the tax incentives the firm can now enjoy from this year. He also suggested the Government could go further by offering incentives to the large international trading houses to attract them to have a presence in Hong Kong. “By attracting the big fish they will certainly attract the fishermen, i.e. the high valueadded maritime services,” he said.
Other Maritime Businesses Benefitting from Enhanced Tax Concessions
The introduction of tax incentives for ship managers, ship agents and shipbrokers, follows swiftly on from a previous Inland Revenue Amendment aimed at offering similar corporate tax relief to ship lessors, ship-leasing firms, which came into effect in June 2020.
The highly attractive tax measures are just one example of the many concrete initiatives the Government has introduced since 2016 to demonstrate its commitment to the development of Hong Kong as a leading maritime centre.
