In a speech given in an international maritime forum earlier in October, Chief Executive Carrie Lam Cheng Yuet-ngor expressed her concern for the maritime industry facing considerable challenges. She promised she would provide support to the industry in her upcoming Policy Address. Lam kept her promise. The Policy Address announced on Oct 10 discussed the government's strategy for further developing the maritime and logistic sectors, with eight supporting measures aimed at enhancing the high-value-added maritime service sector.
These measures fall into three major directions: (1) to provide more tax incentives to promote and facilitate development of maritime leasing and marine insurance; (2) to provide policy and regulatory convenience for business operation of the maritime transportation and shipping service sectors; and (3) to continuously promote the maritime and port services of Hong Kong.
Providing more tax incentives to maritime, port and maritime-service-related operators such as marine insurance providers is something the industry practitioners, including the author, have been appealing for. Marine insurance is a significant component of the high-end maritime service sector, including cargo insurance, hull and machinery insurance and protection and indemnity insurance. Although, as the Policy Address clearly pointed out, the gross registered tonnage of the Hong Kong Shipping Register ranks fourth in the world, the Hong Kong marine insurance market makes up only 1 percent of the international market. Meanwhile, the branch offices set up by members of the International Group of P&I Clubs (IG Clubs) in Hong Kong generally only undertake insurance claims and marketing, while most of the underwriting is conducted in the London market.
Currently, marine insurance business does not enjoy special tax benefits in Hong Kong and it is subject to the standard tax rate of profits tax (8.25 percent on assessable profits up to $2 million; and 16.5 percent on any part of assessable profits over $2 million). In contrast, Singapore has long been offering a 10 percent special tax rate to hull and machinery insurance and protection and indemnity insurance. Their effort recently has achieved noticeable results. Not only have more than 30 Lloyd's insurance companies been attracted to set up branches there, Lloyd's also set up its first Asian office, Lloyd's Asia, in the Lion City. Moreover, one can find the presence of most of the IG Clubs members in Singapore now. If Hong Kong provides attractive tax benefits, such as adopting a 8-10 percent discounted tax rate, given the significant gross tonnage registered in Hong Kong, the city's strategic location between the Chinese mainland and ASEAN countries, and the gradual implementation of other measures for a more favorable business environment, more marine insurance companies will certainly be attracted to start or expand their business in Hong Kong.
Meanwhile, it is also imperative to provide tax benefits to maritime financing and leasing business. To attract more aircraft leasing companies to set up business hubs in Hong Kong, the government decided to amend the related tax legislation last year to offer tax benefits to the aircraft financing and leasing sector. Many marine financing and leasing companies have been fully prepared with high expectation; they can start their business in Hong Kong once the anticipated tax and financial benefit policies are announced. As long as Hong Kong can attract more players to set up their regional headquarters here, it would only be a matter of time for the city to become the maritime financing and leasing hub in the Asia Pacific region.
The Policy Address also proposed adopting business facilitation measures for maritime transportation, port and shipping service industries, Lam and the government must have realized that a sizable and active maritime sector is the foundation for the high-end shipping service industry to grow. If all of the essential measures, including simplifying (instead of relaxing) the regulations on shipowners and the shipping service sector, providing global support to shipping registration, and expanding the comprehensive double taxation agreement of Hong Kong, can be effectively implemented, the potential of the maritime industry will be materialized.
Besides, talents are the foundation for sustainable development of any industry. The government pledged in the Policy Address to inject an additional HK$200 million into the Maritime and Aviation Training Fund. This is to help optimize several maritime and high-end shipping service training programs and to widen the scope of examination fee and internship subsidies. Further, in the Talent List announced by the government in September, three out of 11 categories of talents recognized by the government are maritime-related. If the government can provide more tax and fiscal support to maritime-related companies in recruiting overseas talents and training local talents, not only can we create an hospitable environment for talents to join the local maritime sector, but we can also enhance the scale and influence of the industry.
While it was delightful to see the eight measures announced in the Policy Address, many of them at this stage are merely a general direction. There are still details to be formulated, research to be conducted and deliberations to be gone through before these policies can be put into practice. It is also regretful that the comprehensive development strategy for the maritime sector dawn up in last year's Policy Address has yet to be fully carried out. The latest Policy Address did not even include any relevant content. The key of policies is its actual implementation, as Carrie Lam noted at the beginning of the Policy Address, "the government should act swiftly and boldly on matters which clearly serve the public interest". The new Policy Address has ignited the hopes of the maritime industry. Therefore, the government must have a stronger determination to carry out policies necessary for the maritime industry to take advantage of business opportunities created by the Bay Area and Belt and Road initiatives and help consolidate Hong Kong's status as an international shipping center.
Sources:chinadaily
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