TNAG-0357-FCO40-393-Registration-of-merchant-shipping-in-Hong-Kong-1972 — Page 108

CONFIDENTIAL

Decisions was critical of flags of convenience:

(c) Flags of convenience are being extensively cri-

ticised in international organisations, notably in

OECD.

This criticism is based largely on assumptions

about low safety standards and working conditions.

We should like further studies to be carried out ob-

jectively; our influence would, however, be diminished

if a flag of convenience were established in Hong Kong;

(a) HMG's opposition to flags of convenience is

of long standing and has been partly based on the

view that such ships provide unfair competition to

our shipping in so far as the profits of their opera-

tions are immune from tax unless repatriated.

At

present, British shipowners pay little tax because of

past losses and flexible depreciation arrangements,

but close companies are at a disadvantage compared to

flag of convenience owners.

10. Mr Pao has also from time to time said that he would

like to see more of his ships built in British as opposed to

Japanese yards. But he has followed this up with a string

of reasons why he finds British shipbuilders unsatisfactory

for his purposes. Most of his criticisms are practical and

to the point and the Prime Minister might find it interesting

to listen to him on this subject.

11.

He recently donated a barque to the Maritime Trust,

which lies in Plymouth.

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CONFIDENT IAL

/12.