Ship financing faces competition

The largest finance hubs in Asia Pacific are working hard to attract more shipping companies and ship owners as they seek to become the most important finance centers for the industry in the region.

"It is difficult to say whether Hong Kong is more important than Singapore as a ship finance center," says David Cheng, honorary chairman at Credit Agricole Ship Finance Asia.

No single place generates enough business to make it worthwhile for a bank to focus on shipping finance exclusively, says Cheng. Rather, banks typically take a regional approach.

Hong Kong and Singapore have long dominated the industry, thanks to their role as global hubs and the large presence of shipping companies, ship owners and firms that provide ship financing－like banks, leasing companies and new entrants such as policy banks.

Tokyo and Seoul are also important centers for ship finance.

The competition between Hong Kong and Singapore has intensified and governments have taken steps to benefit from the growth of the industry.

"The Singapore government has been very proactive in terms of attracting ship owners or ship management companies, and they have been very successful," says Cheng.

Singapore has been offering incentives for companies to locate their offices there and has been making it easier to invest. This has attracted 'commercial principals' such as ship owners. In turn, it has also attracted the service providers that fol-low these principals, such as the banks that provide the financing the principals need to carry out their business.

Singapore's efforts have not gone unnoticed.

"The news these days is all about Singapore and all the government there has done to attract ship owners ... it is a very busy hub," said Nigel Anton, global head of shipping finance at Standard Chartered during a recent Marine Money shipping finance conference in Hong Kong.

In the last year, Hong Kong has also started taking steps to give its shipping industry a boost, aware that inactivity could cost it its leadership position in a key sector of the economy, one in which the local ship-ping industry has deep roots. "Hong Kong is home to real ship owners who have lived here for generations," Anton said.

To revitalize the sector, Hong Kong has plans for a new government bureau dedicated to the industry. The government wants to refurbish its port and provide better training and more investment.

Another center for ship finance is Shanghai, where much of the Chinese main-land's industry is focused. Shanghai still trails, but the growth of the industry in the mainland has made it easier for the city to emerge as a finance center for shipping.

Huge amount of overcapacity is curbing profits across the industry, a problem that is hitting Chinese companies in particular.

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