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Keynote Address to the Nautical Institute  
                
2011 Seminar — To the Future  
                
21 October 2011
                
Good morning, President of the Nautical Institute Capt. James Robinson, Hon Chairperson Ms Petty Leung, distinguished guests, ladies and gentlemen,
                 
First I would like to thank the Nautical Institute for inviting me to address such a prestigious audience of maritime experts this morning.
                
Ten years ago, I joined a number of speakers to make predictions for the decade ahead. I am rarely invited to deliver a sequel speech even after 10 years, and those of you who remain awake 15 minutes from now will fully appreciate why. However the Nautical Institute saw fit to ask me to return and reflect on the predictions of 2001, take stock of where we are and to again look into the crystal ball.
                
So let me take you back to October 2001. The world was still in shock from 9/11. Surprisingly, there were some optimistic predictions by a number of speakers with expectations of cargo throughput in  Hong Kong trebling by 2011 and the port continuing to hold the crown of No. 1 container port in the world. We all love optimists, in fact I consider myself one too, but it is one thing to be an optimist, another to be a dreamer. In reality, the average tonnage and TEU growth over the last ten years has been 4.4 and 2.7%, giving a compound growth of just over 50% and 30% respectively. Still decent growth for a mature port, but our forecasters had not recognized that we are a mature port nor the increasing pace of emerging port developments in the Pearl River Delta.
                
Another speaker saw a future city and harbour that delight the eye both day and night, in which breathing and swimming are healthy pursuits. Well, we have just had the first cross harbour swim for 30 years and the swimmers all emerged from the water hale and hearty - and none have grown any extra appendages since their swim. On the other hand, our air quality is still unacceptable and I say that as a smoker. The delightful harbour remains a job in progress. Will it be a delight when it's finished? I will make a stab at that prediction later.
                
Some speakers stayed safe with their predictions - the global economy will get worse before it gets better, then action will be taken to make it worse again. This forecaster was neither a banker nor a government official, so no insider knowledge, honest. I guess we can use this prediction again and again as bankers and governments are as perpetual as the prediction.
                 
An old friend who was then in shipbroking and failed to forecast his move to a prestigious shipowning company, was right on the mark in ridiculing the dot.com fascination with online brokering, bunkering and even boozing.
                 
Which brings me to my forecast, absolutely spot on of course, of a much larger port and shipping community complex covering Hong Kong through Shenzhen to Guangzhou with warehousing and consolidation taking place closer to manufacturing, and financing, legal, insurance and shipowning growing rapidly in Hong Kong.
                 
What I didn't see was the impact of  China, and their recent entry into the WTO, on global trade and the shipping boom that took off because of it. The world shipping fleet expanded and nowhere was this more evident than the Greater China area. That increased demand for new ships heralded  China's rapid climb to the top of the world's shipbuilding nations, and this encouraged ship equipment manufacture to move to                 Asia under licence and with its research and development. This growth in cargo movements, fleet size and ship building has seen the emergence of a host of super ports in  China, none more impressive than  Shanghai. The financial collapse on Wall Street and in Europe in 2008 has encouraged ship financers to look to  Asia too.
                
In this regard the Government of Singapore has been very active in providing incentives for European shipping service companies to test the waters in Asia resulting in  Singapore's recent remarkable growth as an international maritime centre.
                 
For the second part of this talk let us consider the major issues facing  Hong Kong port and maritime today. First the port. We face a growing shortage of experienced people to regulate the port and indeed to operate the ships that use the port. At the same time the industry is moving to larger and more sophisticated ships. The  Hong Kong community are more and more vocal when ships have accidents such as collisions or groundings, and if pollution results the call goes out to punish the crews and any other person deemed to be involved. This serves as a disincentive to bright young people, men and women, to look upon a career in shipping or port management. Hence the shortage of people - it is a vicious circle.
                
                
In  Hong Kong as elsewhere government and industry have woken up to the fact that more effort and resources must be put into recruitment, training and career development for the maritime industry. But are we attracting the best and brightest? More needs to be done to improve the image of our industry amongst today's younger generation. A Maritime Awareness Week took place in  Hong Kong this time last year. It generated much interest, but more remains to be done to bring into focus the important role that our industry plays in the life of the wider community. In terms of navigational equipment, the sextant has long resided in a display cabinet and today we are familiar friends of SATNAV, DGPS, AIS and VTS. Soon ECDIS will progressively be phased in across the world fleet. E navigation is becoming a reality and individuals and bridge teams at sea and entering ports need to maximize the applications and benefits of these combined nav aids. For example Marine Department is just embarking on its third VTS upgrade which will include E navigation concepts on completion in a few years time.
                
What does the captain see when he enters our port.  Hong Kong is one of the truly most impressive harbours in the world, the islands giving way to deep entry channels and then the vibrant hive of activity across otherwise calm waters. The picture is set in a frame of mountains, with the new towering buildings decorating the lower slopes to the shoreline. It is iconic and breathtaking on a clear morning or a bright evening. That's the good bit as viewed from sea. For the poor sods ashore the harbour is, for the most part, a hike over roads, fences and reclamation sites to get to the shoreline. The newly established Harbourfront Commission has done much in its one year existence to show how much needs to be done. Now it needs to show it can do it.
                
                
And what of shipping. For the crews, the big story in 2011 is the escalation of piracy attacks across the  Indian Ocean. In the absence of political will from those navies which claim to rule the seas, to actually deal with the pirates demands that crews sailing the Indian Ocean now include supernumeraries whose skills are in shooting guns rather than stars.
                 
Shipowners are nervously watching freight rates slide as fast as their new ships head down the slipways. It's called the cycle of life in shipping by romantics, boom and bust by company bookkeepers, and eternal bliss by maritime lawyers.
                
                
So what can we expect in the future for shipping in  Hong Kong? I believe the clear statement of support in  China's 12th Five Year Plan for Hong Kong to enhance its role as an international maritime centre underlines the fact that Hong Kong, along with  Shanghai and  Singapore, will continue to grow its maritime services. In 2001, I spoke a lot about port growth in the Pearl River Delta and its impact on  Hong Kong. I still take a helicopter view and believe that demand growth for port facilities in the delta area will be easily met under existing port plans in Guishan and Nansha in the west and the Hong Kong/Shenzhen complex in the East. What will become more important will be the development of transport infrastructure and logistics into the hinterland of South and  West China to support development there.
                 
For shipping, we have seen the Hong Kong Shipping Register grow from 13 million GRT in 2001 to 65 million today, an annual compound growth rate of 17.5%. I do not anticipate such unusual expansion in the decade ahead as growth in the size of the world fleet moderates. Nevertheless, we in Marine Department are committed to continuous improvement of the quality and scope of our services to shipowners and ship managers, and to further developing our strong customer relations. As such, I expect that the Register will continue to expand at a greater pace than the global fleet and, in doing so, draw in more services such as in finance, legal, arbitration and insurance. To make sure that we are providing the best business environment the Maritime Industry Council has just embarked on a wide-ranging study for completion in mid 2012, to recommend measures to meet the sort of changes we see in shipping over the next decade. What are these?
                 
Here I go from what I expect to what I hope for - a subtle difference. There has been much hand-wringing over the poor public image of the shipping industry. Many solutions have been touted - better public relations, get the message out about what we do, how we do it, and what is achieved. I'm afraid that the problem isn't the messenger, its the message. To get the message right I would hope that the shipping industry at last faces up to the need to demand best practices in all it does, and to weed out those unable or unwilling to meet the standards. First, I hope that IMO Flag State Audits become compulsory and that States be permitted to flag only to their capability. The highest standards must be set for full international trading status. Similarly, Port State Control should be better policed by the various Memorandums so that inspections meet their targets, both in terms of professionalism and integrity. Ports that do not meet requirements should be black listed, just as ISPS permits for ports that fail on security. For training of our next generation of officers to man even more sophisticated ships, we must start to enforce the STCW White List and bar those establishments not equipped to provide the necessary high standards of training. This is all action that Governments can and should take in the next decade.
                 
What about industry? On Classification Societies, IACS has been well on track to set strict membership criteria and one hopes that interference from the Competition Commission of the E.U. does not water down those efforts. P&I Clubs should be doing the same and, whilst some mutuals are tightening up, those who do not just carry on and continue to enjoy cover under the International Group. Why? Charterers have established SIRE for tankers and more recently RIGHTSHIP for dry bulk. They should continually upgrade these inspection regimes. Intetmanager have now established their K.P.I. programme for members to meet.
                
                
All of the above industry groups are doing something to set a benchmark on shipping standards below which they will not deal. Hopefully the fledging industry platform, the Round Table of Trade Associations consisting of owner groups ICS, Intertanko, Intercargo,
                
BIMCO, IACS and Intermarine can together formalize a set of quality standards with charterers and insurers. The message to the public would then be clear - that the entire industry has transparent and credible standards for international trades that meet public demands for safety, environmental protection and security, that the industry is committed to the standards and that government regulators are capable of policing them in a thorough and honest manner. Then we will have the image and respectability that much of the industry does deserve.
                
                
And if we manage to drive the cowboys out, owners can demand improved rates for better and more efficient services and pay their highly skilled crews good wages.
                
                
Now isn't that something worth hoping for in the decade ahead.
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