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Dragons vs Lion

Hong Kong is still the region’s main centre of shipmanagement, despite growing challenges from Shanghai and Singapore

Benefits of tradition: HK’s advantages include an established record in shipping services

It has been suggested that Hong Kong has had its day as the leading Asia-Pacific shipmanagement hub. To the south, Singapore has been stealing much of the shipmanagement limelight. To the north, Shanghai is blossoming into a significant business centre, attracting overtures from many established shipping service companies wanting to expand their interests in China. So is the game up for Hong Kong? No.

Lion’s share
Singapore is Hong Kong’s long-established regional rival in many areas of shipping, especially shipbroking, container operations and shipmanagement. Some of the most respected names in the management business have a presence here. V. Ships, Thome, ASP and Executive are all based in the city state – and for good reason.

Australian-headquartered ASP says in its most recent Aspects newsletter that its Singapore office has experienced a “surge” in business, while an editorial in Lloyd’s List in late September 2002 highlighted the increasing attraction of Singapore for shipmanagers due to the prominence of its port and its proximity to a key global shipping lane.

However, Peter Cremers, CEO of Hong Kong-based Anglo-Eastern Group, feels that Hong Kong can be relaxed about competition from Singapore.

“I have not seen any significant move from any of the major shipmanagers to establish their headquarters in Singapore,” he says. “The bigger shipmanagers remain in Hong Kong and have a branch office in Singapore. For the immediate future, we see Hong Kong remaining as the shipmanagement centre of the Asia-Pacific region.” However, he does concede that, “Newer shipmanagement companies seem to locate in Singapore rather than Hong Kong mainly because of the proximity of the ships and the ship repair.”

Shanghaied: some doubt that China will displace established seafarer sources, given its own growing domestic fleet

Shanghai’s challenge
Shanghai, too, can offer proximity to ships and repair, and it is tipped to take on the mantle of the region’s leading port, shipbuilding and shipping services hub. Yet it doesn’t pose a significant threat yet either, according to established Hong Kong managers.

“Yes, Shanghai is gaining importance,” says Kishore Rajvanshy, MD of Hong Kong-based Fleet Management Limited. “But as far as I see, this is more in the shipbuilding, ship repair and container trades, and not in shipmanagement. I do not think it is going to challenge Hong Kong in the foreseeable future. For shipmanagement I feel Hong Kong will continue to have an edge.”

He cites four benefits Hong Kong still offers over its domestic rival: the availability of trained personnel (both local and expatriate); the ease of getting work visas for qualified expatriates; the excellent communication and banking infrastructure; and the existing shipping-related businesses such as insurance, shipbroking and surveying. In short, Hong Kong has everything that ship operators and shipmanagers are looking for. It has it in spades, and it offers quality to boot.

These views are echoed by Peter Cremers, who adds that Hong Kong has the added benefit of being more centrally located than Shanghai. Nor is he certain that a city whose economy is soaring is an ideal place for a shipmanager to operate, given the wafer-thin margins in the business.

“Costs are higher,” he explains. “A booming economic environment is no place for an international shipmanagement industry serving the rest of the world.”

Anglo Eastern Group’s Peter Cramers: “We see Hong Kong remaining as the shipmanagement centre”

In another respect Shanghai’s soaring economy, and China’s rapid economic growth in general, may also prove a hindrance to the development of a shipping services sector. Shipmanagement hinges greatly on the ability of management companies to attract personnel with the right skills, preferably taking on former mariners. At first glance, Shanghai-based shipmanagers would appear to have an advantage, given the rise in the employment of Chinese seafarers. A few years down the line, these are going to be a valuable source of employees for shore-based service providers, providing Shanghai companies with a ready-made pool of expertise. But first glances can be deceptive. Peter Cremers, for one, is sceptical.

“At Anglo-Eastern, we do not think China will take over from the Philippines as the leading source of seafarers. The Chinese source is drier than one may think. Firstly, one should not forget that the expanding Chinese-owned fleet is a competitor with the rest of the world for manpower. As their fleet grows they will be looking to use more and more of their own crews. Secondly, China is seeing good economic growth and the Chinese economy is constantly being tipped to be among the leading economies, with the resultant increase in personal spending, within a few years. This means that the incentives to become a seaman will not be as great as they are now, with well-paying jobs throughout China’s major cities, unlike the Philippines and India, where going to sea still produces an income well above the average.”

This is not to say that shipmanagers are ignoring China as a source of mariners. Cremers confirms that Anglo-Eastern itself will be expanding its Chinese crew base in 2003.

“[This] will result in increased training facilities within China and the development of our joint venture in crewing with China Shipping,” he says.

Kishore Rajvanshy says that Fleet Management will also be working on the Chinese component of its personnel pool.

“India is our primary crewing source, with the Philippines as a supplementary crewing source,” he says. “Chinese crew are also being tried out and we have a strategic partner in China for crew supply.” Fleet has started using entirely Chinese crew on five of its ships on a trial basis. So far, the results have been encouraging, Rajvanshy says.

ASP’s new crew management operations, Crew Management Services, which was established after the firm’s existing crewing contractor Monsoon could not meet ASP’s growing crewing demands, has also established representation in China, though the company’s key centres are in Singapore, India, the Philippines and Myanmar.

Easy access: Singapore benefits from the prominence of its port and its proximity to a key shipping lane

Crew security issues
One of the most pressing issues facing shipmanagers at present is that of heightened security in the shipping industry. This has made itself felt particular in crewing. Kishore Rajvanshy cites three core problems.

“Carrying out crew changes is be-coming more difficult. Obtaining visas for crew members is becoming more difficult. And crew members are being detained onboard,” he says.

The connection between enhanced security and transparent business structures has been stressed by many regulators. The issue of transparency has also been raised in connection with the drive to raise standards in shipping – the more that is known about ships and the companies operating them, the easier it is to gauge the security risks they pose and the easier it is for transparent, open companies to operate without unnecessary hindrance from the authorities.

In short, mounting international regulation is forcing owners and operators to prove that they are running their businesses in a safe, secure and professional fashion.

Selling transparency and compliance
This provides the most respected shipmanagement companies with an additional selling point: “Leave it to us to run your ships in accordance with growing international legislation.” Many ship operators will wish to avoid the hassle that heightened quality and security requirements bring, and will find the idea of farming out the work to third-party shipmanagers appealing. The knock-on effect for the shipmanagement industry has been substantial. And in the Asia-Pacific region, many Chinese shipowners who are trading their ships internationally may opt to go down this road.

For once, though, Hong Kong may not be the main beneficiary. Peter Cremers concedes that Shanghai may be holding the better cards.

“Joint venture companies serving the domestic market may see a growth potential in Shanghai, and we see a potential growth in local Chinese shipowners giving some of their ships trading internationally to independent third party shipmanagers, especially with the continuing rise in international legislation,” he says.

Whether this is the thin end of a wedge that will topple Hong Kong’s leading position remains to be seen. For the time being, neither Shanghai or Singapore look likely to quell Hong Kong’s fire just yet.

Author: Roger Overall.

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