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At the present time Mr. Pao's total fleet consists of forty ships, registered as follows: nine in Hong Kong, three in London, twenty-seven in Liberia, one in Panama. You say he told you that all his Masters are of British nationality (and that his difficulty arises with other appointments), but I am told that he has in fact thirty-five British Masters and five from Taiwan. None the less we have little doubt that he would prefer them all to be British. The Director of Marine thinks that his failure to obtain British Masters for all his ships is due not to any shortage of supply but rather to the fact that up to the present he has not been prepared to offer attractive enough conditions of service; and that this point would also apply to his recruitment of more junior officers, which he says is his chief difficulty. However, there are now indications that he is realising the advantages of having reliable and long serving crews and is starting to improve conditions on his ships. In particular I understand that he is seriously going into the question of long term contracts for his officers.
Mr. Pao may be right in his suggestion that the restrictions, about which he is complaining, were intended "to provide employment opportunities for British mariners". The Department of Trade and Industry would know more about that than we do. The position is that our merchant shipping legislation generally follows yours and so, whatever the original reasons for the restrictions, we have the same ones as you do.
It may be that there is a case now for re-examining the restrictions but we don't think that they are the principal reason for Mr. Pao and other Hong Kong shipowners choosing not to register their ships here. On the other hand we are also doubtful if they adopt "flags of convenience" for taxation reasons. Tax liability depends generally on the country of management and from this point of view Hong Kong is attractive. This seems to us likely to be one of the reasons why Mr. Pao is based here rather than in, say, Singapore, which, by lowering standards, is attempting to build up a merchant marine based on a flag of convenience.
To put it quite bluntly, our belief is that Mr. Pao would like to be able to avail himself of the privileges and advantages of British registry, such as good world-wide consular services, without applying British standards, particularly of safety in its widest sense, which includes satisfactory manning standards.
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