Well-meaning half-measures won't turn the tide in port's favour

PUBLISHED : Thursday, 21 July, 2005, 12:00am
UPDATED : Thursday, 21 July, 2005, 12:00am

HERE WE GO with the latest example of how officialdom likes to think it can make water flow uphill. Our government wants to lower port charges and build five new anchorages near Lantau Island in order to boost Hong Kong's maritime trade.

The proposals being considered by the Port Development Council include a 5.2 per cent cut in port facility and night fees and an hourly rather than daily fee schedule for anchorage fees, with the first 12 hours free. This would have the effect of cutting these fees by varying amounts depending on how long the anchorage was used.

Not much, you might say, but all in a good cause. Leave alone that Singapore's container throughput has now exceeded Hong Kong's, giving Singapore pride of place as the world's biggest container port, we have that bigger problem of competition from across the border.

All the recent official statements have laid stress on the need to reduce the costs of shipping goods through Hong Kong because, if we do not do something soon, we will find that another mainstay of our economy has gone across the border. Every little bit counts and thus kudos to legislator Miriam Lau Kin-yee for pushing this measure.

Yes, but let us remember first that Ms Lau represents the transport constituency, one of those rotten boroughs in our Legislative Council which so easily make public policy in our town subject to narrow private interests.

I am not saying that Ms Lau does not have the good of Hong Kong at heart but a functional constituency is a functional constituency. Any time that a representative from one takes a stand on anything, you have to ask that basic question: What came first, Hong Kong or the constituency? Take note that the constituency does stand to benefit here.

The real problem, however, is that this measure does not address the bigger question of terminal handling charge (THC) in Hong Kong and it is this, above all, that has shippers moaning about the high cost of shipping goods through our port.

The THC is levied by shipping companies on shippers and is somewhat of a misnomer as it implies that this is what the port operators charge for their services.

What actually happens here, however, is that the port operators present the shipping companies with a container handling charge and they then top it up when billing the shippers, making good use of the subterfuge of calling it a terminal charge when, in fact, a good proportion of it is just a straight freight surcharge.

The shipping companies traditionally claimed that this was justified because ocean freight rates were too low to allow them to recover their costs. They therefore had to make up the difference through other means. The excuse may have been justified years ago but it certainly has not been in recent years of soaring shipping company profits.

I cry no tears for the port operators, however. They all have substantial interests in mainland ports, which means it is no great concern to them if the Hong Kong port loses business to its competitors across the border. You may have noted that this week Modern Terminals announced it would take a 65 per cent stake in five berths to be constructed in Shenzhen.

What matters more to them is that their income remains high from both their Hong Kong and mainland operations, and it does. If we do not want to mention the collusion word, perhaps we can just say that competition between Hong Kong and the mainland ports is not really all that fierce.

They, along with the shipping companies, all charge what they think the market can bear and how surprising it is that their thoughts are so well aligned on this question, surprising indeed.

Thus, if the Hong Kong government decides to reduce its own charges for some elements of this equation, well, that is just so much more room for port operators and shipping companies to generate additional earnings for themselves. Their charges, let me stress, are based on what the market can bear, not on a fixed margin over their costs of anyone else's.

This tinkering around the edges of the basic problem will do nothing to solve it. In fact, it is almost certainly an insoluble problem. It simply makes more commercial sense to ship mainland goods from mainland ports than to do so from the end of another long stretch of traffic-clogged roadway, not to mention that the border crossing on this roadway presents yet more opportunities for grasping hands to dip into the till.

The port operators realise it. They know that Hong Kong's heydays as a port city are past. They are just taking what they can while the transition is made and are happy to take a little more if our government will give it to them. Only governments fool themselves that water can be made to flow uphill.