Published in Hong Kong Free Press

Acting Chief Executive Carrie Lam Cheng Yuet-ngor was optimistic on Tuesday as she announced the establishment of a new maritime body that will “undertake policy research and development, pursue marketing and external relations and development manpower and training” for the local shipping industry.

“Hong Kong is doing remarkably well,” the city’s second-in-command boasted to delegates at the Asian Logistics and Maritime Conference: “Logistics and trading represent 24 percent of total GDP. Hong Kong Port […] remains one of the busiest in the world.”

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By pointing to the significance of Hong Kong’s shipping industry, Lam spoke an often undervalued truth: Hong Kong’s port has kept the city afloat from its very earliest days until the present. Identified as one of Hong Kong’s four pillar industries, trading and logistics also employs 767,000 Hongkongers, putting the esteemed finance and headline-grabbing tourism industries in the shade.

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Few industry insiders, however, are apt to describe the port’s performance as “remarkably well.” The day before Lam’s speech, figures released by the Hong Kong Port Development Council showed that October throughput volumes at the port fell 12.8 percent over the previous year—the sixteenth straight month of year-on-year decline in both ocean and river cargo vessel throughput.

At the main Kwai Tsing Container Terminal (KTCT) where 80 percent of containerized cargo is handled, double-digit drops have become the new normal.

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Some observers attribute this downward trend to a slowdown in the Chinese economy, but across the border at Shenzhen’s Yantian International Container Terminals throughput has shown a year-on-year growth of 4.4 percent, recording a cumulative increase of six percent for the first nine months of the year.

Once the world’s busiest port, Hong Kong has already been surpassed by both Shanghai and Shenzhen on the list of the world’s busiest container ports; soon, another mainland port, Ningbo-Zhoushan, is projected to pass Hong Kong as well, pushing down the former frontrunner to fifth place globally.

Increasing capacity

A Deutsche Bank study earlier this year warned that Hong Kong’s container throughput could halve in the next decade if drastic action is not taken. The best case scenario, according to the bank, is a further 30 percent slip in container volume, effectively knocking Hong Kong out of the world’s top ten ports.

Kwai Tsing Container Port

Noting that shipping lines have been adding port calls at Shenzhen and Guangzhou while reducing them in Hong Kong, the Deutsche Bank researchers attributed the trend to the shorter distances to cargo sources and lower operating costs at rival Pearl River Delta ports.

“From a cost perspective, the shift of port calls from Hong Kong to PRD ports appears to make a lot of sense,” the bank study noted. “If carriers use Shenzhen Ports to do transshipment instead of Hong Kong, shipping lines can save up to 30 percent in THCs.”

“The future of Hong Kong as a leading container port,” Asia Shipping Media’s Editorial Director Sam Chambers told HKFP, “has never looked more precarious. Ten years ago, the city could boast being the world’s leading container port. Now, it has suffered 15 straight months of throughput decline through to the end of September, likely pushing it into fifth spot in the global rankings. The odds are simply stacked against Hong Kong when it comes to port economics—it is not on the doorstep of the factories, while its terminals are expensive and cramped.”

Mounting competition, however, is not the only factor leading to what Chambers called the “demise” of Hong Kong’s port. Many ships choose mainland ports over Hong Kong’s because of worsening congestion—a long-standing problem that many believe the government has waited too long to address.

“Port operators are begging for more land, ” Chambers says. “Hong Kong Port is among the most cramped in the world in terms of kilometres of quayside to boxes handled. Moreover, as it has changed from a mainline port to more of a transhipment port this has necessitated more spaces—the terminal operators say 70 hectares.”

In a statement earlier this month, even the Transport and Housing Bureau itself admitted that “the problem of congestion is becoming increasingly serious,” prompting concern among container users and port terminal operators, that “the overall competitiveness of Hong Kong Port is at stake.”

The government’s newly announced solution, however, concedes just 15 hectares of adjacent back-up real estate for the construction of new yard space and barge berthing facilities.

To Turloch Mooney, Senior Editor for Global Ports at the Journal of Commerce, these efforts are “too little, too late.”

“One of the greatest problems for the terminal at Kwai Tsing,” Mooney explains, “is the lack of back-up land in the container yards that was identified in a government-commissioned port master plan 12 years ago.” Lam’s speech, he says, shows that the government is “oblivious to the plight of the city’s port.”

At the same government-organised conference where the chief secretary spoke, Eric Ip, group managing director of Hutchison Port Holdings, told delegates that “people always think Hong Kong is marginalised by Shenzhen, but there are still opportunities for Hong Kong. It used to be a gateway port, now it is more a transhipment port. But we need more support from the Hong Kong government.”

Past, present and future
When Britain first took Hong Kong in 1841, a chorus of critics joined Foreign Secretary Lord Palmerstone, who famously bemoaned the acquisition of this “barren island” clinging to the south China coast.

To the colony’s first treasurer, it was not only “worse than folly” to retain “this remote and completely unimportant settlement”—it would lead inescapably to “disappointment and national loss and degradation.”

As punishment for taking Hong Kong rather than the preferred Zhoushan Islands adjacent to the Yangtze estuary, ideally situated to absorb the bounties of inland China, Captain Charles Elliot was stripped of his command. When Hong Kong’s first governor Sir Henry Pottinger arrived to take over, he was expected to simply use Hong Kong as a bargaining chip for greater gains.

When he resolved to keep the island instead, London once again shook its head at this “sad mistake,” unable to comprehend what Pottinger or Elliot saw in this infertile, mountainous settlement of just a few thousand fishermen.

The answer was known only to those who had personally sailed into her waters.

To a career naval officer such as Elliot, the sheer perfection of Hong Kong’s harbour was self-evident. He could easily envision it lined with ships by the hundreds, dropping off and picking up cargo.

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“A port such as Hong Kong,” Elliot wrote, “had the advantages of a large and safe harbour, abundance of fresh water, ease of protection by maritime ascendency, and no more extent of territory or population that may be necessary for our convenience. ”

The Botanist Robert Fortune, famous for transplanting tea from China to British India, also waxed lyrical about the port as he passed through: “Hong Kong bay is one of the finest I have ever seen… Having excellent anchorage all over it and perfectly free from hidden dangers. It is completely sheltered by the mountains of Hong Kong on the south and by those of the mainland of China on the opposite shore[…] so that the shipping can ride out the heaviest gales with perfect safety”

Throughout its history, Hong Kong has owed its riches to this natural deep-water harbour. The city rose to prominence as a Free Port where ships of any nation could store their goods without paying customs duties, making it an ideal location for the many goods sailing in and out of China.

As the challenges faced by early Hong Kong prove, however, the city owes not only its prosperity, but its very existence to its port. Its future, too, may hinge on its leaders’ ability to appreciate the greatest natural asset at their disposal.