Hong Kong’s geographical location and proximity to the mainland has given its sea freight business an advantage for more than a century. But while the city’s status as a major sea freight centre is in decline, industry leaders are optimistic the trend can be reversed with the right policies to help promote the maritime business. Hong Kong’s maritime and port industry made up 1.4 per cent of the city’s GDP in 2014 and currently employs 2.5 per cent of the working population. Hong Kong port losing market share in south China It is a major economic pillar that is beginning to weaken based on declining container throughput and the loss of its advantage as a shipping hub as the mainland continues to liberalise its trade and shipping policies. Hong Kong was the world’s busiest container port from 1992 to 2004, but now stands in fifth place . Singapore led the rankings from 2005 until 2010, when it was overtaken by Shanghai. “[Hong Kong’s port] has lost its purpose and is looking for a role,” Stephen Davies, maritime historian and honorary University of Hong Kong professor said. “As soon as China got its port act in gear, what Hong Kong had always traded on from 1841 and onwards, which was the fact that it wasn’t China, simply disappeared. China can be its port a lot better than Hong Kong can be.” Davies does not think the government took its waters and the port seriously and left it to business to decide how best to use the city’s maritime assets. Now it is scrambling to stop the decline. “When ship breaking disappeared in Hong Kong because it can be done cheaper in Taiwan, the government was not supporting it,” he said. [Hong Kong’s port] has lost its purpose and is looking for a role Maritime historian Stephen Davies “You can see it when the dockyards disappeared in Hong Kong because shipbuilding was cheaper in Japan, and the government was not prepared to go to the length of the Japanese to subsidise. “The present dilemmas have arisen because Singapore was prepared to go the extra 15 miles to subsidise, encourage, [and] build Singapore as a shipping centre and Hong Kong was not. They woke up very late to this.” One of the government’s responses to address the situation was to establish the Hong Kong Maritime and Port Board in April to study ways to “devise maritime and port-related strategies” and “create a maritime business-friendly environment” in the hope of reversing the downward sea freight trajectory. It is currently looking to enhance Hong Kong’s port to “strengthen its competitiveness”. Some initiatives include deepening the Kwai Tsing container basin and its approach channel, better efficiency of land use around container terminals to accommodate future growth in transshipment and additional barge berths. The board is also organising its first Hong Kong Maritime Industry Week in November to try and attract trading partners to make Hong Kong their “preferred base” for maritime business. Apart from promotion, Hong Kong Shipowners Association managing director Arthur Bowring hoped the board would make policy changes to help the maritime industry. “Policy changes [are needed in] maritime education training ... attracting people to the industry, adopting international legislation, increasing expertise within the various government departments and industries themselves, these are all very important,” he said. In 2014, the government set up a HK$100 million maritime and aviation training fund in an effort to “attract new blood and groom talent for the maritime and aviation sectors”. Hong Kong is no longer a direct shipment port and is now largely focusing on transshipment. However, shipping industry experts and academics agree that so long as the mainland maintains barriers to trade, Hong Kong will retain a role in maritime trade. As soon as the mainland decides to liberalise trade and cabotage rules, Hong Kong’s sea freight business could be in for a rapid decline, leaving the city looking to develop a new role in global shipping. Free trade zones on the mainland threaten the city’s transshipment business. Mainland carriers can use foreign-flagged ships for direct trade to and from home ports, rather than going through Hong Kong. Hong Kong-based container shipping and logistics service giant Orient Overseas Container Line (OOCL) believes Hong Kong will still have a place in sea freight through maritime services – developing what is known as a maritime cluster. These include ship finance, management and insurance. “The strength of the maritime cluster will remain very important to Hong Kong’s competitiveness in the future,” a company spokesman said. Bowring cited London as an example of a place which has lost much of its port business while retaining an “extremely strong” maritime services sector. The strength of the maritime cluster will remain very important to Hong Kong’s competitiveness in the future An OOCL spokesman Hong Kong has the same strengths in maritime services and will continue to have a presence, according to Bowring. But Davies dismissed the optimism displayed by those in the industry: “Hong Kong blew the maritime cluster issue probably five years ago ... They left [building maritime services] too late” giving up its advantage to Singapore. Experts note that all blame should not be placed on the government and the shipping industry for the slowdown in the city’s port business. The global economic slowdown has also contributed to the weakness in Hong Kong’s container throughput. “Throughput all over the world is down. Even Chinese exports are coming down because Chinese manufacturers are finding environmental and labour conditions such that they would rather relocate to Vietnam, Bangladesh and other places,” Bowring said. OOCL also cited the slowdown in the global economy and “rising costs in China’s manufacturing sector” as factors contributing to the decline in Hong Kong as a shipping and logistics hub. Innovations in autonomous shipping have made significant inroads recently, with Danish shipping giant Maersk and British engine maker Rolls-Royce taking the lead with “advanced autonomous waterborne applications”. Davies said this was an area in which Hong Kong could invest. It did not have to be involved in actual ship construction, but could develop parts of a ship or even the software in Hong Kong, similar to Hongkong International Terminals’ port management software used throughout the world, he added. A spokesman for the Transport and Housing Bureau said the government was aware of the research into autonomous shipping and “will continue to monitor its development.”