CONFIDENTIAL
NOTE OF A MEETING WITH THE HONG KONG DIRECTOR OF MARINE IN SUNLEY HOUSE ON 30 AUGUST AT 10.00 AM
1. The meeting continued the discussions with Mr Fletcher, the Hong Kong Director of Marine, on the arrangements for a new Hong Kong register of ships using as a basis draft heads of agreement in principle prepared after the meeting on the previous day, Mr Archer (in the chair), Mr Manson, Mr Madigan and Air Hunt, all of Marine Division, and Mr Frost of Shipping Policy Division were present.
ACCESS TO THE REGISTER
2. Mr Archer explained that the UK shipowners believed that the proposals might lead to a flight to the new register because they presented the advantages of flexible operating conditions under the Red Ensign. But if access were to be limited to Hong Kong companies, UK shipowners would be at a disadvantage with their European competitors because of our more restrictive controls on company migration. For this reason and because Hong Kong would in any case have difficulties in supervising a very large influx of new tonnage, it might be necessary to impose a cordon sanitaire' around the new register so as to admit only bona fide Hong Kong shipowners. The cordon could, however, be lifted after a few years.
3. The UK shipowners had doubted whether it would be possible to impose on effective cordon and the difficulties of this were appreciated. If access were limited to companies registered in Hong Kong in say 1972, foreign owners could still buy up existing shell companies so as to gain access, whilst some Hong Kong ship- owners might encounter difficulties in qualifying because they would be unable to use new-registered companies.
4. It was thought that there was a real risk of a flight from the UK register to.Hong Kong. The lower operational costs resulting from low wage rates in Hong Kong would be very attractive to UK shipowners particularly at a time when there was pressure in the UK for raising the rates for Asians on UK ships. The advantages of Hong Kong registration in overcoming the world-wide shortage of certificated officers would provide a further attraction which was made even greater by the fact that Chinese officers would be prepared to spend longer periods away from home than British ones, Mr Fletcher mentioned that one of Mr Pao's dissatisfactions with British Masters was the time and expense involved in flying them home on leave.
5. Mr Frost explained that although UK controls on company migration might be a hindrance to UK shipowners setting up business in Hong Kong, they would not be a bar. The recent transfer of some of P and O's business to Bermuda through the partial acquisition of Anglo-Nordic was an example of such a migration, To permit migrations to Hong Kong because of more advantageous operating conditions there without imposing an effective cordon was therefore dangerous,
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CONFIDENTIAL
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