Hong Kong needs to join the Asean party

Although this pattern has been evident for some time, it was most recently highlighted at the Asian Logistics and Maritime Conference in the city, where Kerry Logistics Network chairman George Yeo pointed out the stark fact that last year, for the first time, China’s trade volume with its neighbours exceeded that with Europe and the US.

In addition, for 128 countries in the world, China is their top trade partner. This figure, which amounted to $1.2trn, is of “historic significance”, said Yeo. He should know what he’s talking about as a former foreign minister of Singapore, who has spent much time and effort making sure Singapore is a pivotal part of that sea change.

He added in the coming years, a huge transformation is expected to take place between China and Southeast Asia as the former strengthens its ties and pursues both strategic and political objectives. Yeo related how throughout history, whenever China was united and prosperous, Southeast Asia grew with it. China is keen to see the region develop along with it, he said, citing initiatives such as the China-ASEAN Investment Cooperation Fund and the China-Asean Maritime Cooperation Fund as examples of cooperation.

With increasing direct links between China and the region however, Hong Kong is at risk of being left out of the party. While there have been murmurings about the city joining the Asean-China free trade agreement (FTA), not much progress seems to have been made for various reasons, whether it is a lack of desire or interest to do so.

Yeo pointed out that for example Hong Kong’s links with Southeast Asia are weak. These must be built up at individual country level, he said. Offices must be established in each country in the region to build up trade and other links and boost trade flows and relationships. This must be a long-term multi-year effort but will bring big benefits in the future.

Meanwhile others highlighted Hong Kong’s high costs for transhipment and other business costs. These need to be re-evaluated if Hong Kong is to win some of the Asean business back. The city’s traditional role of re-packaging and transferring imports bound for onward shipping may start to be eroded by other developments as well.

World Shipping Council chairman Ronald Widdows highlighted the fact that Asean must move towards greater standardization and resolve its regulatory issues if it is to benefit from the increasing trade relationship with China. Yeo also noted that the opening up of Myanmar was the “last piece in the puzzle” for the rise of China’s external trade relations as it now gives the latter direct access to the Indian Ocean through the country’s ports.

Beijing meanwhile has been going on a charm offensive lately, bearing a combination of investments and trade deal incentives in the region as it floats its vision of reviving the maritime silk route. These are all driven at improving links between Chinese and Southeast Asian ports. Among these is its investment in Kuantan Port in Malaysia and the accompanying industrial zone around it. Other possibilities include investments to boost Indonesia’s famously beleaguered logistics infrastructure.

With all these developments rapidly threatening to isolate it, Hong Kong needs to act fast to ensure it stays relevant to the brave new world emerging at its doorstep.

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