Singapore is the best shipping hub in the world, with Hong Kong and Shanghai also in the top 10, according to a new report on international shipping centers released last week.
The 2014 Xinhua-Baltic Exchange International Shipping Center Development Index Report, which is the first report of its kind, was a joint project by the Baltic Exchange and the China Finance Corporation.Asian ports took six places in the top 10, which comprised of Singapore, London, Hong Kong, Rotterdam, Hamburg, Dubai, Shanghai, Tokyo, New York and Busan.
The index assessed 46 shipping hubs around the world against three fixed criteria, namely maritime services such as insurance, engineering and brokerage (50 percent), overall environment (30 percent) and port facilities (20 percent).
“An outstanding international shipping center requires more than a just big port. Today, it requires various services that help smooth business and operations, such as insurance, compliance and management, which may be more important than just infrastructure,” said Marcus Lee, the Baltic Exchange’s chief representative in China.
In terms of the total number of twenty-foot equivalent units (TEUs) transported, Shanghai, Singapore and Hong Kong are the three busiest container ports in the world, with a throughput of 33.6 million, 32.6 million and 22.4 million TEUs respectively in 2013. Shanghai surpassed the container traffic of Singapore in 2010, ending the city-state’s five year reign at the top. The Port of Hong Kong was previously the world’s busiest container port between 1999 and 2004.
Against a background of rapid economic growth in China, and reflecting how this impacts upon global trade patterns,Shanghai has grown quickly to become the busiest container port in the world. Only nine years before its container traffic surpassed that of Singapore in 2010, Shanghai was shipping less than half of the number of containers handled by the city-state.
Shanghai is accompanied by six other Chinese cities in the world’s 10 busiest container ports: Hong Kong, Shenzhen, Ningbo-Zhoushan, Guangzhou, Qingdao and Tianjin.
However, despite Shanghai’s impressive progress as a shipping hub, there is still a lot of room for improvement, particularly in the provision of maritime services and the strengthening of legal structures.
The establishment of the Shanghai Free Trade Zone (FTZ) will help to improve service standardsand is an important step towards reaching the goal outlined by China’s State Council in 2009 of building Shanghai into one of the world’s leading financial and shipping centers by 2020.
The Port of Hong Kong, which serves over 80 international shipping lines, should prepare for increased competition from Shanghai in the long term. Hong Kong has long presented itself as the gateway to mainland China, due to its location, free port status and efficiency, and about one-fifth of China’s international trade is currently routed through Hong Kong.
However, as Shanghai simplifies restrictions on trading, shipping and logistics, as well as improving these areas to meet international standards within the next few years, the overall competitiveness of the shipping hub will increase.This could have a negative impact on Hong Kong, in particular as the Shanghai FTZ allows many of the value-added services that were previously performed in Hong Kong to now be carried out in Shanghai.
Nevertheless, despite the possibility that the rise of the Port of Shanghai will erode Hong Kong’s status as a key shipping hub in the region, Shanghai is unlikely to be an imminent threat to the city due to the flexibility and productivity of its shipping industry.
“With our friendly business environment, a judicial system practicing common law and the free flow of capital and information, Hong Kong is often the ideal Asian city to look for different kinds of maritime services for international shipping companies whose business operations involve China or other parts of Asia,” said Professor Anthony Cheung Bing-leung, Hong Kong Secretary for Transport and Housing.
“Looking ahead, we will strive to assume the strategic position of a maritime services and talent hub, as well as becoming the springboard for more maritime companies in the Mainland to enter the international market, and vice versa,” Professor Cheung added.
In February, the Hong Kong government announced its plans to set up a new maritime bureau. The one-stop shop for the shipping industry is tasked with developing the Port of Hong Kong and promoting its services in an attempt to gain back some of the ground that has been lost to Shanghai and Singapore in recent years.
The Hong Kong government had previously been criticized for not doing enough to incentivize companies to choose Hong Kong over Singapore, where some business owners say it is easier to do business.
“In Singapore, if you talk to the Maritime Port Authority, they will coordinate everything you need in various departments, [be it] tax or immigration. Hong Kong is different. Unless the ship-owner knows what the tax [requirements are] for shipping, you may get into the wrong hands,” said Peter Cremers, the chief executive of the Anglo-Eastern Group, in February.
Like Hong Kong, Singapore has also faced worries that it would lose business to Shanghai. However, analysts tend to remain more optimistic in Singapore, in part because Shanghai and Singapore are usually competing for different sorts of business, with Singapore being primarily a transshipment hub whereas Shanghai largely depends on domestic consumption. Singapore is likely to retain its status as key transshipment hub for the foreseeable future, especially when one thinks of the boost in business that will accompany the economic growth of nearby ASEAN countries.
“We don’t need to be the largest or the busiest. What is important is that we are managing our port resources effectively – providing maximum connectivity at lowest cost,” said Leong Wai Ho, Senior Regional Economist at Barclays, in 2010.
“It is more important that we remain a vital global node for manufacturing and logistics and get these policies correct. Once that is done, shipment volumes and economic activity will follow.”
Singapore may even benefit from Shanghai’s rise as a shipping hub as some of the city-state’s transshipment depends on China. Singapore’s throughput has continued to grow over the past few years despite Shanghai surpassing it in 2010, with the city-state’s throughput growing 2.9 percent year-on-year in 2013 to reach a record high of 32.6 million TEUs.
Singapore was ranked first in the 2014 Xinhua-Baltic Exchange International Shipping Center Development Index Report not only due to this high physical throughput, but also due to the wide range of maritime services that it has on offer.
In all likelihood, there will be more than enough demand for Shanghai, Singapore and Hong Kong in the foreseeable future as Asian economies continue togrow.Shipping in these three hubs, as well as other locations in Asia, will thrive in the coming years as increasing inflows of raw materials to China and India, as well as growing outflows of goods manufactured in the region, will mean the shipping industry must focus ever more attention on Asia.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
The Gateway to ASEAN: Singapore Holding Companies
In this issue of Asia Briefing Magazine, we highlight and explore Singapore’s position as a holding company location for outbound investment, most notably for companies seeking to enter ASEAN and other emerging markets in Asia. We explore the numerous FTAs, DTAs and tax incentive programs that make Singapore the preeminent destination for holding companies in Southeast Asia, in addition to the requirements and procedures foreign investors must follow to establish and incorporate a holding company.
An Introduction to Development Zones Across Asia
In this issue of Asia Briefing Magazine, we break down the various types of development zones available in China, India and Vietnam specifically, as well as their key characteristics and leading advantages. We then go on to provide a snapshot of the latest development zones across the rest of Asia. With several hundred development zones operating in the region, it is impossible to cover them all in the pages of just one publication. However, we hope that this issue will provide the basic fundamentals to understanding one of the most important business tools available to international businesses operating in Asia.
Adapting Your China WFOE to Service China’s Consumers
In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.