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Russell Barling

'We all know the logistics sector has enormous potential ... we will take nothing for granted and will work doubly hard to ensure those prospects become reality.'

Stephen Ip Shu-kwan

Secretary for Economic  Development and Labour

July 22, 2003, at the  opening ceremony for  Container Terminal 9

Maybe memory fails, but it seems to have been a long time since the venerable Mr Ip or any of his senior government colleagues  have uttered anything bullish about Hong Kong's logistics industry.

Granted, the volume of high-value trade moving through the cargo terminals at the airport is growing at a healthy rate. But the maritime trade - the foundation on which this city's economy initially was built - looks set to migrate across the border, fulfilling the predictions of a series of reports over the past five years.

Judging by the goods and services tax proposal and the action of officials, the Tsang administration appears to have resigned itself to a diminished contribution from the logistics industry, dubbed not so long ago by the then chief executive Tung Chee-hwa as 'one of the four pillars of our economy'.

Officially, the port operators here handled 17.7 million 20-foot equivalent units in the first nine months, up 5.9 per cent on last year. In reality,  those boxes are counted at least twice - once off the delivery vessel and once on to the destination vessel - giving the statistical perception of growth as their proportion of the overall trade grows.

In addition, each box the port 'relays' contributed about 30 per cent less to Hong Kong's overall economy than the direct trade that is increasingly handled in Shenzhen.

According to a report released by consultants McKinsey in June last year, the migration of sea trade and the knock-on effects it has on the supporting industries will put 183,000 jobs and 8.2 per cent of the gross domestic product at risk - HK$97 billion at that time - within two years.

The higher cost of trucking goods to Hong Kong than to ports in Shenzhen - US$200 per box - continues to take its toll on the volume of direct cargo the port handled this year.  Some terminal operators, whose margins are shrinking from handling more lower-value trade, have spearheaded efforts to lessen the  disparity. But by refusing to take part, Customs in March largely scuttled the three-years-in-the-making express 'green lane', which would have cut some of the cargo transport time - and costs.

Privately, the government has told people involved in the project that there were 'concerns'  the special lane would have disproportionately benefited a specific member or sector of the logistics community. Asked to elaborate, officials declined to say who would benefit or even reveal which party had raised the concerns.

In short, an agent of the government, customs, and perhaps the self-interests of a few influential people, have derailed the green lane and left its founders struggling to get it back on track.

As if local logisticians needed further evidence that the administration's economic priorities lie outside theirs, it proposed the goods and services tax last month. If it goes ahead, it will undermine one of the local logistics industry's last competitive advantages over its cross-border rival - our status as a free port.

No wonder Mr Ip has kept quiet.



Officials silent as   logistics business  sails across border