A RESEARCH REPORT from CLSA Emerging Markets is likely to set the cat among the pigeons again in the increasingly vexed dispute about the high fees that our container port charges its users. The 56-page report, written by former legislator Christine Loh Kung-wai of the non-profit think tank Civic Exchange, points out that Hong Kong's terminal handling charges (THCs) are the highest in the world and raises the question of whether the THCs levied by Shenzhen ports are in turn maintained at very high levels in order to support the fee structure in Hong Kong. 'There is evidence that the terminal operators, who have by and large the same interests as those running Hong Kong terminals, keep prices across the border artificially high,' she wrote. 'By keeping Shenzhen prices high, they are in fact propping up their Hong Kong profit, which remains considerable. In other words, they are maximising earnings at both ends.' The publication of this report coincides with pleas from Liberal Party legislator Kenneth Ting Woo-shou that the government intervene to monitor charges and help set reasonable pricing levels. He argues that port operators and shipping lines turn a 40 per cent net profit margin on the annual HK$24 billion in fees that shippers pay. 'Terminal handling charges are really high and unreasonable, even the Consumer Council says so,' he told a Legco meeting last week. 'Shipping lines always rip off shippers, who have no bargaining power.' All this follows an earlier acrimonious debate between Hopewell Holdings chairman Sir Gordon Wu Ying-sheung and Hutchison Whampoa managing director Canning Fok Kin-ning on the proposed building of a bridge to Hong Kong across the Pearl River estuary. Sir Gordon wants a new port at the end of the bridge to compete with the Kwai Chung container port, which is dominated by Hutchison. The underlying complaint in all this is that the Kwai Chung container port is run by a private sector cartel without any control of fees by government and that its monopoly is now working to the detriment of exporters everywhere within its catchment area because of the high fees. A quick glance at the accompanying table shows that there certainly appears to be grounds for the complaint. You would expect that an efficient port with a high level of throughput could operate on fees much more competitive with other ports across the region. You would also expect that ports across the border, which are rapidly increasing their throughput and should overtake Kwai Chung within 10 years, would very soon give it that competition. But this once again raises the question Ms Loh has posed. As these Shenzhen ports are controlled by essentially the same interests that control Kwai Chung and as they have also set their THCs at high levels, the competition that we might otherwise expect may never materialise. And that would be a very good reason for the Hong Kong government to consider some form of competition policy or other measures to ensure that shippers get a better deal. A free market works when it is free. There are good reasons to suggest that this one is not. Graphic: jake21gbz
