SHIPPING
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World Wide's 226,000 dwt tanker 'World Baroness” constructed this year by Hitachi Shipbuilding: Liberian registration built in.
BUSINES
REVIE
Hongkong in the Big League
H
́ONGKONG is now in the major league of shipping centres. Rapid increases in the world movement of cargo through the 1960s created heavy demand for tonnage. And Hongkong shipowners moved to meet that demand.
In the early 1960s the Japanese government re-organised its national shipping industry. From this sprung the Big Six among Japanese freight lines - Mitsui OSK, Kawasaki, Japan Lines, Yamashita, Showa and NYK. The government deve- loped an annual shipbuilding programme. Subject to approval it provided finance for new shipbuilding projects at nominal rates of interest. Companies concerned were required to apply to the government for annual tonnage allotments if they wanted low-interest finance.
At this time cargo movements were such that govern- ment-allocated tonnage could not meet the demand. Japan- ese shipping companies began to charter foreign vessels on a longterm basis. Hongkong shipowners were quick to capi- talise on the opportunity. And they had the advantage of being close to Japan as well as being able to operate on a lower tonnage overhead.
in addition, favourable financing was available from the Export-Import Bank of Japan which wanted 5.5% a year only in interest on longterm deferred payments after an initial 20% cash payment. This was a major factor in the Japanese shipbuilding boom - and responsible to a large exten. for the rise in Hongkong tonnage ownership. Japanese companies needed the tonnage but. were unable to extend themselves too far on crewing, management and financing – demand 'r tonnage was growing too fast.
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Epanese seamen's contracts are renegotiated annually, and yearly increases in wages and fringe benefits have been in the der of 15%. This permitted Hongkong shipowners to move at with more cheaply run vessels registered under flags. of convenience. Many of the bigger and more responsibly run companies operate their ships on longterm charters to Japan- ese intersts. Often they contracted even before building stats The charter agreements, in fact, are often the security acceptable to the Exim Bank for loans.
Recent changes in interest rates offered by the Exim Bank for longterm shipbuilding finance have, however, made new building much more expensive. The attractive 5.5% rate was used in 1970 to 6.75% a year even further this year to 7 75%. The advance cash payment is now 40% against 20% pre- 70 The implications of these terms are not yet ap- parent. But their effect must eventually be combined with that of the world monetary crisis and the recession in the US. Hongkong's climb to shipowning fame would not have
FAR EASTERN ECONOMIC REVIEW
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Nancy ma Hongker,
been possible without the use by owners of flags vie venience. Countries operating flags of convenience inci. Panama, Liberia, Somalia (useful for trading with communi countries because Panama and Liberia have not been accep:- able due to strong US influence), and to a small extent Honduras and Costa Rica. Liberia is today the principa e- gistration centre for Hongkong owners. Its fleet is the bigge in the world. In addition, Singapore recently started operat- ing what virtually amounts to its own flag of convenience.
In the past, flags of convenience have been the subject of much misunderstanding. For example, there is a belief that ships which fly flags of convenience are, if not old, generзity decrepit and unseaworthy. A quote from Eric Ambler's Dirty Story is informative but less than truthful:
"Panlibhonco. It is a made-up word used by shipping men when they are talking about 'flags of convenience' countries. and it refers collectively to the republics of Panama, Libei.2,. Honduras and Costa Rica. If you are a big shipowner und you don't happen to like the tax laws or the seamen's una restrictions or the safety regulations of your own country, you transfer your ships' registrations to one or other of the Panlibhonco states. Then, no more taxes, no more about problems and your ships are cheaper to run. Quite simple una absolutely legal . . . Of course, it's highly convenient, too. Je the Panlibhonco countries. They get fat registration fees unu all they have to do for them is issue the registration cere cates. They don't have to bother about the ships themselves. Money for jam."
Many Hongkong-owned ships are registered under the Liberian scheme of registration, the Liberian Maritime Coce. It is more efficiently run than the other countries operating flags of convenience. Liberia is not, in fact, a refuge for untp.- dated and unwanted ships as all its vessels are at least of World War II vintage. The Liberian scheme is run from New York by the Liberian deputy maritime commissioner New York lawyer named Albert Rudick who has, in fact, never been to Liberia.
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On registering a ship with Liberia the Hongkong owner sets up a Liberian company which owns the ship. The parent company, of which the Liberian company is a subsidiary, is generally a Hongkong-based organisation. The owner pay fairly substantial initial registration fee '(US$1.20 per mi ton) to Liberia in New York. And except for an annua corporate registration fee and resident agent's fee totaling $250, plus an annual tonnage tax of $0.10 a net ton in "ş. pect of the ship, pays no further taxes to Liberia. The sub. sidiary companies - generally one ship, one company
art
OCTOBER 23, 19/1
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