Hong Kong Shipowners Association
49th Annual General Meeting

Thursday, 17th November 2005

Managing Director's Annual Review 2005

Chairman, Members of the Executive Committee, Members of the Association

Annual Reviews such as this usually highlight significant issues of concern and the work of the relevant Association in protecting and furthering its Members' interests. An uninvolved bystander could gain the impression from such reports that the industry is continually navel gazing, deeply engaged in substantial analysis of our failings and complaining that regulators are taking too much of an uneducated interest in our operations. I will now attempt to take a slightly different tack.

What a wonderful industry we work in, and what a great city to work from! Recently, I was tremendously proud to show off Hong Kong, our shipping industry and the firm and well justified views of our Technical Sub-committee to a visitor from London. In doing so, I realized just how fundamentally strong Hong Kong's maritime sector is. We are extremely fortunate to be able to work in an environment surrounded by owners and operators that have a deep and responsible concern for what they are doing, and firm ideas on how the industry can improve. It is too easy, perhaps, to get so involved in the consideration of new regulations and other policy issues to forget to step back occasionally and remind ourselves just how lucky we are to be working in such a fascinating industry in such a great community, and just how well Hong Kong and our maritime sector are doing.

The Maritime Sector, as if we need reminding, is essential to world trade, which in turn leads to global economic prosperity. Over 50,000 ships carry around 90% of world trade, approximately equivalent, as mentioned by the IMO Secretary-General to the London Seatrade Convention, to one tonne every year for each man, woman and child on our planet. The benefits to the developed country consumer of the steadily decreasing costs of seaborne trade, in real terms, are the year-round availability of our every day products at affordable prices. And the benefits to the developing countries are the ready availability of markets for their products, so assisting in their economic development.

Shipping is the safest and most environmentally benign form of commercial transport. An often quoted estimate from GESAMP is that land based discharge (sewage, industrial effluent and urban/river run-off, etc.) accounts for around 70% of marine pollution generated from human activities. In contrast, maritime transport is only responsible for some 12% of the total, a percentage some in the industry consider is still too high, and which we are continually trying to find ways to reduce.

Despite rapid growth of the world fleet, and corresponding increase in the tonnage of commodities carried, the number of ships and lives lost continue to reduce. Oil pollution, for example, once the scourge of the industry, is now a tenth of what it was 10 years ago. But we are not complacent. We are getting better at listening to public concern and seeking ways to continuously improve what we are doing.

Image

Which leads me to the first issue I would like to address; the image of the industry. There have been numerous conferences and high level declarations to the effect that something has to be done about the image of the industry. By improving our image, we are told, we should be able to alleviate public, and therefore politician, concern, so assisting in the production of sensible and technically possible regulation. A positive image will also assist us in the urgent recruitment of our future shipping staff.

There have been many solutions proposed. There is an extremely well armed website – www.shippingfacts.com – that attempts to broadcast the positive news about the industry. There are various industry initiatives to produce advertisements, brochures and even television shows, in order to bring better awareness of our industry to the general public. All of these are very necessary in our work to reverse the public perception of our industry.

But we also have to ask why we have such a poor image. Is it due to the various unions and environmental groups portraying us as irresponsible employers and polluters of the world’s environment? Or might it be due to our industry’s poor historical environmental and employment record? There have been some practices inherently accepted by our industry in the past that would be frowned on, or much worse, today, and some, even today, who perpetuate those practices.

While compliance with regulation is necessary to be able to operate, there are areas where the standard set by regulation is just not good enough. Those who operate their ships to just meet the minimal regulatory standard are, in many ways, just as sub-standard as those who operate below regulation. The necessity to remain competitive is often given as a reason to 'just comply', even where it is clear that bare compliance with regulation does not meet the standards now being set for us by public opinion and concern.

This Association has tried to identify some of those areas, and generate industry support to proactively introduce 'best practice' guidelines. Of course, we realize that guidelines are not mandatory, and also that there is a risk that our guidelines are adopted into regulation. But isn't this what we really want? Guidelines that are adopted into regulation are regulations developed by the industry, and therefore regulations that we can live with. And although the higher standards will inevitably cost more, it is a cost that will be borne by everyone in the industry, so eliminating any competitive advantage that might occur through not complying.

By improving the performance of our industry to standards developed by our industry to meet public concern, we will be proud of our industry when we stand in front of television cameras, and proud to invite politicians and the general public onto our ships. It is just as much this, to my mind, that will improve our image as advertisements and television shows.

Air Pollution

One of the areas that the Association is trying to get international support for is the reduction of air pollution caused by ships. It is well documented that ships, per ton of cargo carried, are the most environmentally benign form of transport. But it is necessary not to get complacent. Many countries, especially in the West, have introduced air pollution targets for land based industries. If these are met, which looks increasingly likely, the proportion of pollution that originates from ships, if nothing is done beyond MARPOL Annex VI, will increase to become one of the major sources of air pollutants. 

The damage caused to health by air pollution is one of Hong Kong's major concerns. There are other cities that suffer just as much or worse pollution, especially in the mainland, but Hong Kong seems to suffer in a way that is disproportionate to the pollution actually generated in Hong Kong. Our location on the edge of the world’s manufacturing centre assists our trading businesses, but unfortunately brings with it some rather nasty toxic air.

The Association is working with various groups in Hong Kong to study air pollution in order to find ways to urgently address the problem. A ten or twenty year plan, as frequently put forward by our Government, is just not good enough if we are concerned about today's effect of polluted air on our children. 

We are contributing by explaining how the industry is presently regulated, and the work being done into developing new technology to assist us to reduce emissions. We explain why we find it difficult to purchase, for example, low sulphur fuel and how the price differential would make us uncompetitive in the international markets. We also explain the burden that the introduction of SECAs (Sulphur Emission Control Areas) and regional initiatives place on our business, especially in having to convert the tanks on our ships to carry different grades of fuel and to fit equipment so that changeover from one fuel to another can be done safely.

We believe that our willing and extensive contribution not only assists Hong Kong to find solutions for its air pollution problem but also improves our image. But, in order to properly address public concern, more work needs to be done to find economically sensible solutions to reduce the pollution caused by our exhaust emissions. We are frustrated by others in the industry in other parts of the world that do not seem to have woken up to the urgency of the issue, preferring to sit on their hands and wait until new regulation is introduced before doing anything.

Operational Oil Pollution

One area where we have managed to get support is in addressing the issue of operational oil pollution. The 14th Asian Shipowners Forum, held in May this year, adopted a policy of zero tolerance for operational oil pollution, and our Association has been in the forefront of persuading the industry to adopt three specific initiatives in order to achieve that objective.

The first is to study the amounts and type of waste generated by a ship in the engine room and how best to deal with that waste. The system of waste treatment and disposal has to be studied as a whole, in order to develop the most effective and seafarer friendly solution. Equipment presently fitted in many ships, and the accompanying waste disposal systems, are not always effective, making the illegal disposal of waste an option that is, in a few cases, adopted by seafarers looking for a quick way to deal with the problem. It is our intention that the solution we develop is put together as best practice guidelines for new ships, and adopted into regulation at the earliest possible time.

The second initiative is to study existing ships, and develop best practice guidelines that show not only how to operate the equipment effectively and legally but also the dire sanctions for seafarers and company directors that may be imposed by some port and coastal states for illegal operation. With better on-board and company awareness of the limitations of the equipment and the sanctions that may result, we hope that illegal discharges through irresponsible action may be prevented.

The third initiative is to develop thorough MARPOL training for our seafarers. This would deal with the entirety of MARPOL, all six annexes, and would be presented as an amendment to STCW in order to become a separate examination. Awareness has to be fostered, to our mind, by explicit courses and certification. We are also working with Videotel to produce on-board training packages, one for senior officers and another for other officers involved in waste disposal, in order to ensure continual training.

This is an important initiative, and one where we need to show urgent progress. We need to show politicians and the general public, now well aware of the issue through the arrest of ships and prosecution of companies and ship's staff, that the industry recognizes that there is a problem and that we are doing something about it.

Trade Associations

We continue to be an active member of the International Chamber of Shipping (ICS) and the International Shipping Federation (ISF), and many of our members are also members of Intertanko, BIMCO, Intercargo, InterManager and IMEC. Some of our members ask why they need to belong to so many organizations (the 'alphabet soup', as so famously described by Dr. Helmut Sohmen), and many of those we approach for membership ask why they should join the Association.

This Association works on several levels. Locally, we encourage a maritime community through our seminars, lunches and other events. Hong Kong is fortunate that our offices are so close together, and lunches are particularly easy to get to without having to take half a day out of the office. The maritime community is fairly small, and contacts are easily made, so such functions generate business and exchanges that might not ordinarily result. Our seminars provide education and illumination on topics that, for some, might be quite removed from their day to day work, but which add knowledge and understanding that many find particularly useful.

We also work to lobby the Hong Kong government on issues that affect the competitiveness of Hong Kong as an international maritime centre. We have had a few set backs recently, particularly on issues that we feel are not being addressed urgently and properly. Hong Kong is proud of its 'laissez-faire' attitude towards business, but we must continue to press the point with Government that 'laissez-faire' does not mean 'disinterest'.

Regionally, we work with the Asian Shipowners Forum and its member Associations in the various 'S' committees, to both keep up-to-date Asian understanding and knowledge of current issues, as well as to promote an Asian viewpoint in international debate. The ASF's intervention on some recent issues has been particularly important, and has created greater prominence for the Asian voice.

In the International sphere, we work very closely with the ICS and the ISF, as well as the other direct entry owners' organizations. We might be seen, in this respect, as duplicating the work of the direct entry organizations, and it is clear that their circulars sometimes repeat the information we circulate. It is important to bear in mind, however, that the ICS and ISF, because their members are Associations such as this, are able to take a more 'aspirational' view of policy and regulation, reflecting not only owners' immediate desires and concerns but also longer term industry viewpoint. 

The work of the ICS and ISF in contributing to the review of existing regulation and the development of new regulation is essential to the future success of our industry. This Association contributes substantially to the work of the ICS and ISF, both presenting initiatives as well as commenting on the papers submitted to the meetings of the various committees.

What value, then, are trade associations? If you have any interest in the future development of the industry, and believe that industry must contribute to the formation of future regulation, then you must believe that the work of trade associations is essential. Financial support from the industry is, of course, necessary for their continued operation, and is a continuing obligation to ensure a continued presence, not something that can be picked up and dropped as an individual owner's desires and concerns wax and wane.

Conclusion

As in past years, I would like to thank all those who have freely and energetically given up their time to assist us with our various initiatives and generously donated to our various causes. In particular, the members of the Executive Committee and our Sub-committees have been extremely active and supportive over the past year; my work would be impossible without their well informed and well argued contribution.

I would also like to thank Gilbert, Peggy and Harry for their work. We are a small secretariat, but their dedication to the Association is tremendous and greatly appreciated. Particular thanks go to Capt. Lam, who once again has generously volunteered his time to assist in the recruitment and placing of Hong Kong cadets on our members' ships.

Please let us know how you think we should be responding to the increasing number of issues that surround us. This is your Association, and we should reflect your views to a world that increasingly recognizes Hong Kong as Asia’s maritime centre.

Arthur Bowring
Managing Director
17th November 2005