Time for Hong Kong logistics to shine amid supply chain woes

As the neutral Hong Kong shipping flag becomes an increasingly attractive option amid Red Sea attacks, the city should grow its own logistics brand
This would involve seamlessly linking up its maritime and air cargo sectors, and cultivating connections with belt and road countries such as Djibouti

Neville Lai

Published: 9:30am, 7 Mar 2024

Why you can trust SCMP

The geopolitics of the oceans has returned after decades of calm, with recent attacks in the Red Sea raising concerns about the safety of trade routes regionally and globally. As fractures grow in the global governance landscape and amid China’s economic transition, Hong Kong must capitalise on the opportunities presented, including in growing its logistics brand and services.

This can help to ensure sustainable growth and development and boost Hong Kong’s role as a global facilitator.

The Red Sea attacks by Yemen’s Iran-backed Houthi militants, who support the Palestinian cause, have forced major shipping companies to divert or cancel their routes, affecting global supply chains.

Last month, the Houthis announced a “ban” on ships linked to Israel, the US and the UK in the Red Sea, Gulf of Aden and the Arabian Sea. The Financial Times has warned of potentially serious disruptions to the supply of cocoa, coffee and tea to the United Kingdom as shipping interruptions add to climate change pressures.

Against such a backdrop, Hong Kong’s Marine Department could promote the city’s shipping registry as an attractive option for vessels looking to sail under a neutral flag.

03:21

US-led coalition strikes Iran-backed Houthi fighters in Yemen

Hong Kong has a mature maritime and ports industry, and aims to become a leading international maritime centre with a focus on sustainable development. According to UN data, Hong Kong is the world’s fifth largest ship-owning market with more than 2,500 vessels flying its flag, accounting for 2.4 per cent of the world fleet in number and 6.3 per cent in value.

The Hong Kong Shipping Registry is included in the premium white lists of the Paris Memorandum of Understanding on Port State Control and the Tokyo MOU on Port State Control in the Asia-Pacific, as well as in the United States Coast Guard’s Qualship 21 programme, which identifies high-quality flag administrations and ships.

These indicate that ships flying under the Hong Kong flag are safe and have a low detention rate – a confidence boost for shipowners. And the registration fee is relatively low.

The business case for sailing under a Hong Kong flag is known – it has long been a favourable option for shipping companies seeking high quality and lower costs. Given the emerging geopolitical landscape in the Middle East, the attractiveness of the Hong Kong flag can be boosted by strengthening the shipping registry’s global position.

The Hong Kong-flagged container ship Joseph Schulte leaves Odesa port with over 30,000 tonnes of cargo, including food, on August 16 through the temporary corridor established for merchant vessels amid the war in Ukraine. Photo: Ukraine’s Infrastructure Ministry Press Office via AP

Indeed, Hong Kong should work to seamlessly link up its maritime sector with its air cargo industry to cultivate a distinct “Hong Kong Logistics” brand built on greater efficiency and competitiveness.

The government already has plans to develop and connect Hong Kong’s information logistics platforms, such as the Hong Kong International Airport Cargo Data Platform and the Port Community System. This initiative can be expanded to encompass logistics platforms in the region. Big data can also be leveraged to enhance the efficiency and transparency of the supply chain and reduce logistics costs.

Hong Kong also has a world-class airport and the advantage of being within a five-hour flight for half the world’s population. Already one of the busiest cargo airports in the world, Hong Kong International Airport is expanding to a three-runway system that will allow it to handle 10 million tonnes of cargo annually.

Hong Kong can ride waves to once again become top maritime centre

But what Hong Kong really needs is an advanced and all-encompassing development of its logistics infrastructure and the establishment of a “Hong Kong Logistics” brand.

Such a brand would facilitate more efficient, cost-effective and high-quality connections and present Hong Kong logistics as a strong option in the changing geopolitical landscape with the potential to facilitate bridge-building and help ensure the resilience of global supply chains.

This would involve exploring a multimodal logistics supply chain, including the use of railways, land crossings, feeder shipping lines and air routes in the region. Extensive relationships should also be forged with key regional players and beyond.

Much rests upon Hong Kong’s ability to leverage China’s influence overseas, in particular along the Belt and Road Initiative countries. Djibouti, for instance, has plans to develop into a sea‑air freight logistics hub comparable to Dubai.

With global shipping under pressure and the world’s supply chains fraying, Hong Kong logistics could emerge as a solution to ease global transport stresses.

For Hong Kong to achieve this, maintaining friendly relationships with key players in the region would be critical, as are, of course, the city’s efforts to improve and reinvent itself while preserving its identity as a global, open and free city during these trying times.

Neville Lai is an independent international affairs strategist focusing on East Asia

Post